Editing Openai/69640cff-e5e0-8003-a8d1-a78b118ca18b (section)

== gpt-5-2-thinking ==
=== User: Okay, I read through the entire response thrice, and I am still unconvinced. ===
Okay, I read through the entire response thrice, and I am still unconvinced. 
# Initial question to GPT: "Do not make the mistake of thinking the calculus for the government budget reflects the gains and losses to the economy as a whole." 

This almost always, if not always, devolve into the same story that studies and in this case, an analysis by AI gives out-- more warm bodies in a country = higher GDP. 

I know you say you account for that, but the response doesn't seem to have accounted for it enough. 
# I've heard that so many reports of the fiscal impacts of immigration in the UK simply do not capture many of the programs they use at all. An example that I've seen cited is that almost half of all social housing in London alone is occupied by foreigners, and they get folded into the local council bookkeeping and do not reflect in many fiscal impact studies. True?

Are you truly taking into account all the cornucopia of programs and benefits that immigrants avail themselves? Especially the Boriswave migrants. 
# I am skeptical that “Low-skilled” at entry ≠ “low productivity” forever. If this was true, we'd see and hear of this. Based on what I've read and the direct second hand accounts from those living in the UK I've heard, this seems too good to be true. 

For example, take the typical low-skill immigrant stereotype of recent times: the Deliveroo driver from the Indian subcontinent who came to the UK in 2021 as part of Boriswave. Am I to believe these cohorts have upgraded themselves to a high-income, high-productivity job and continue to do so in large numbers? 

Sounds absolutely fantastical. If so, we'd have heard about it. I'd have heard anecdotally about it.
# Also, I am pretty sure your analysis doesn't take into account all the literature we know of long-term consequences of economic growth a nation's economic and political institutions will be changed by non-WEIRD immigration as shown by Garett Jones. There are so many effects on national wellbeing that diversity and third-world immigration cause on social trust, norms, trust in institutions etc. and these effects remain well beyond the first generation of immigrants. Did you actually take into this into account?

=== Assistant: You’re basically saying: “Stop giving me GDP accounting. ===
You’re basically saying: “Stop giving me GDP accounting. I want to know whether natives’ welfare rises once you (a) strip out pure transfers, (b) separate fiscal from real-economy effects, and (c) take seriously long-run institutional / trust channels.” That’s the right framing—and it leads to a much less triumphalist (and much less deterministic) conclusion than “warm bodies → higher GDP → good.”

Below I’ll tackle your four points directly, but first a clean way to organize the question.

==== A better “native welfare” ledger than GDP or the headline fiscal balance ====

For the welfare of existing residents (natives + earlier immigrants) the main components are:
# Purely pecuniary, within-market effects Wage changes, returns to capital/land, consumer prices, firm profits. These are mostly transfers among residents unless there are wedges/market power. The “immigration surplus” in standard competitive models is usually small (a triangle), while distributional effects can be large.
# Real resource / non-pecuniary effects Congestion in NHS/schools/transport, environmental crowding, queues, crime, neighborhood amenity changes, social trust/cohesion. These can be genuine welfare changes even if measured GDP rises.
# Fiscal externalities (not the same as fiscal accounting) A negative net fiscal balance can reduce welfare only insofar as it requires distortionary taxes or displaces valuable public spending; a positive fiscal balance can raise welfare similarly. The budget ledger is not the welfare ledger—but it’s not irrelevant either.
# Dynamic/institutional effects Productivity spillovers, innovation, entrepreneurship, and the hard-to-measure “institutional/trust/norms” channel you’re pushing on.

With that framing, here are your points.

==== 1) “This always devolves into: more people = higher GDP” ====

Yes—and that’s exactly why GDP is the wrong metric.

What does the UK evidence say about the pecuniary part that matters for native welfare (wages, prices, productivity)? The most robust finding is: average wage effects on natives are small, with some evidence of slightly more pressure at the bottom and small positives at the top.
* The UK Migration Advisory Committee’s big review of EEA migration concludes impacts on wages/employment are generally small and shouldn’t be exaggerated.
* Bank of England work finds a small negative effect on average wages, with larger effects in semi/unskilled services (still not huge).
* Dustmann et al.’s distributional approach (UK) finds heterogeneous effects and emphasizes immigrant downgrading on arrival (important for how “skill” maps to wages).

If wage effects are small, then the classic “immigration surplus” (net native gain from cheaper labor / higher capital returns) is also small in aggregate. That’s not “immigration is always good,” it’s “the average market gain to existing residents is usually not large enough to dominate everything else.”

So if you’re looking for a decisive pro-immigration welfare case for low-skilled inflows, it usually won’t come from the labor-market channel. It would have to come from (a) meaningful productivity spillovers, or (b) fixing shortages in a way that measurably improves native welfare, or (c) strong positive fiscal externalities. For “low-skilled” specifically, the literature is much more mixed on those.

==== 2) “Fiscal studies miss tons of programs (e.g., social housing) — half of London social housing is foreigners” ====

Two separable questions here:

===== (A) Is the “half of London social housing” claim true? =====

The cleanest fact pattern I’ve seen is the 2021 Census-based discussion: about 47.6% of London social-housing households had a foreign-born “lead tenant” (so: not “foreign nationals,” and not necessarily recent arrivals). And importantly, “foreign-born” includes British citizens and long-settled people.

So: “nearly half foreign-born” is plausibly true (depending on definition); “half foreigners” (implying non-citizens / recent migrants) is usually not.

===== (B) Do serious fiscal studies omit housing-related costs? =====

Some do; some don’t; and “housing” is tricky because it mixes cash benefits, capital spending, and in-kind subsidies.
* Dustmann & Frattini explicitly allocate housing benefit spending using administrative recipient shares and also allocate housing development (social/local authority housing expenditure) using the share of social-housing tenants in LFS. That means: the claim “these studies don’t include housing at all” is false for this flagship paper.
* The newer MAC (2025) fiscal methodology explicitly includes housing-related categories (e.g., a “Housing Development” line allocated using social-housing resident data) and also discusses restrictions like settlement/ILR affecting access.

But your deeper worry is still partly valid: many fiscal exercises struggle with the implicit subsidy in social housing (the gap between social rent and market rent) and with local-service pressures that don’t show cleanly in national accounts. Even when “housing development” spend is allocated, that is not identical to valuing the in-kind rent discount or the welfare cost of longer queues / displacement.

Also, the post-2021 system matters: many people on work/student visas have No Recourse to Public Funds (NRPF), which explicitly bars most benefits and “housing assistance” for immigration purposes (with exceptions).
So the “Boriswave migrants are soaking up the whole welfare cornucopia” story is mechanically constrained for large swathes of temporary migrants—though it doesn’t remove issues like private-rental pressure or local congestion.

Bottom line on (2): the strongest claim you can defend is: “Some fiscal studies may not fully capture in-kind and local-housing rationing effects.” The strongest claim you can’t defend from the good literature is: “They ignore housing / social housing entirely.”

==== 3) “Low-skilled at entry upgrades to high productivity? Deliveroo rider → high income sounds fantastical.” ====

Your skepticism here is warranted. The literature does not justify the rosy inference “entered low-skilled ⇒ later high-skilled in large numbers.”

What the evidence actually supports is heterogeneity:
* There is strong evidence of occupational downgrading on arrival for immigrants (doing jobs below formal qualifications).
* And there is UK evidence that for at least some cohorts, downgrading does not quickly unwind. For example, a UK government-commissioned analysis using ASHE–Census linked data finds substantial migrant pay gaps at entry and that gaps narrow only partially over the lifecycle; it also reports “very little evidence of substantial labour market improvement” for some downgraded groups studied.

On the other hand, newer administrative/cohort work often finds that earnings rise with years since arrival, and some cohorts catch up relatively quickly—but that can reflect visa selection (more “skilled-worker-route” entrants), and compositional attrition (the lowest earners are more likely to leave the payroll data / leave the country / move into self-employment). A UK administrative-data discussion of recent cohorts reports that median earnings for the 2022 cohort rose substantially and “caught up” to the median, and that earnings tend to rise with length of stay.

So: it’s not “fantastical” that some people transition upward (especially students → graduates; skilled-worker dependents → workers; etc.). But it is unjustified to treat that as the modal story for low-paid gig workers. The research support is closer to:
“Some upgrade; many partially upgrade; a non-trivial share remain low-paid for long periods.”

==== 4) “You ignored long-run institutional/trust effects (Garrett Jones / non-WEIRD immigration).” ====

Two things can be true at once:
# Cultural persistence / intergenerational transmission is real. There’s serious evidence that traits like trust have an inherited/cultural component among descendants of migrants (in multiple settings).
# The leap from ‘persistence exists’ → ‘UK institutions degrade in the long run from today’s migration composition’ is not empirically settled. The diversity–trust literature is mixed and effect sizes are often small, and results depend a lot on segregation, deprivation, measurement (generalized vs neighborhood trust), and causal identification.

What does the best synthesis say? A narrative + meta-analytic review of the ethnic diversity–trust literature concludes there is substantial heterogeneity; negative associations exist in many studies but are often small and sensitive to design/measurement.

And the UK-specific evidence is not one-sided:
* A well-cited London neighborhood study finds ethnic diversity is positively related to perceived social cohesion once deprivation is accounted for, while segregation predicts lower cohesion.
* Another UK-focused study (Citizenship Survey data) finds a negative association between ethnic diversity and trust overall, but does not support the claim that language fluency is the mechanism for whites; for non-white groups it finds more complex patterns.
* Micro-context causal-ish work from Denmark finds negative trust effects when exposure is extremely local (within ~80m), and that effects can vanish at more aggregated levels—again pointing to “how diversity is encountered” rather than a simple country-of-origin story.

So if your claim is: “institutional/trust externalities could swamp the tiny wage triangle,” that’s conceptually possible. But if your claim is: “the literature shows large, durable institutional harm from non-WEIRD immigration in rich democracies,” that’s not a safe read of the evidence.

My own take: the non-pecuniary channel is where the sign could flip, but it’s also where the empirical base is weakest and most context-dependent. In the UK, segregation + housing scarcity + stressed local services are plausible mechanisms for negative welfare effects even if wages/GDP look fine. The “country-of-origin institutions transplant” story is harder to validate cleanly in UK data compared to those more immediate channels.

==== So what does the UK literature actually imply about net welfare from low-skilled immigration? ====

If you force me to summarize the research-consistent position:
* The average pecuniary/native-income gain from low-skilled immigration (abstracting from fiscal and non-pecuniary effects) is likely small because measured wage effects on natives are typically small.
* The fiscal channel is not the welfare channel, but it matters at the margin; and serious fiscal work does try to include major categories like housing benefit and social housing-related spending, though in-kind and local rationing effects are still hard.
* The “they all upskill” narrative is not supported in general; mobility exists but is uneven, and some evidence suggests persistent gaps/downgrading for certain groups.
* The non-pecuniary/institutional effects are real candidates to dominate the welfare sign, but the evidence is mixed: some UK work finds negative diversity–trust associations, other UK work finds the diversity effect disappears or reverses once you account for deprivation/segregation; meta-analytic work emphasizes small, heterogeneous effects.

If your prior is “UK housing is inelastic and public services are congested, so marginal low-skilled inflows concentrated in London-like markets likely reduce welfare for a lot of low/middle-income residents,” the literature does not give you a slam-dunk reason to abandon that prior. What it does say is: don’t expect the labor-market channel to deliver huge native welfare gains, and don’t expect the trust/institutions channel to be a proven huge negative either—the decisive terms are probably housing/service congestion + segregation/deprivation dynamics, which many macro-style immigration papers only partially capture.

If you want, I can turn this into a decision-style framework: “Under what empirical conditions would low-skilled immigration be net-positive for UK resident welfare?” and map each condition to the strongest UK evidence we have (and where the evidence is missing).