If we discovered that a business leader had made his fortune not only by making a large profit on the goods or services he sold, but also by stealing the incomes and savings of innocent members of the public – people who had no connection whatsoever their company – we would be outraged. Demands would be made for justice: compensation for the victims and imprisonment for the perpetrator.
But what if something similar happened every day in our economy, across different companies and sectors? What if, hidden in plain sight, some of the largest and wealthiest companies and institutions profited handsomely by keeping the revenues for themselves – while passing on the costs of doing business to the public?
Take universities, which have been in the news after the government’s Migration Advisory Committee (MAC) reported on graduate visas, which allow foreign students to live and work in Britain for at least two years after completing their studies. Even though the essay question the government posed to the MAC was written to get a positive response – highlighting the importance of the arbitrary target of attracting 600,000 new foreign students to Britain every year – the details of the report said it all.
Twenty-seven percent of graduate visa holders did not work at all. Forty-one percent earned less than £15,000. The largest groups by nationality were Indian, Nigerian, Chinese and Pakistani, and graduates from these groups earned significantly less than everyone else: for example, the average Pakistani earned just £14,402. As Neil O’Brien, the immigration-skeptical Tory MP, notes: “given the full-time minimum wage you get c. £24k – this is not a thesis.”
This is no surprise to anyone familiar with student migration. The vast majority of growth in graduate visas reflects growth in student visas, with 66 percent of all graduate visas coming from students completing postgraduate courses at non-Russell Group universities. As Prof. Alan Manning, the former MAC chairman, explains: “universities not only sell education, but partly also work permits”.
We need to be clear about what this means. Last year, 69 percent of people who applied for graduate visas had studied in the country for a year or less. And 63 percent of those whose graduate visas ended switched to another visa route. In other words, a one-year master’s degree – whatever the subject, whatever the university – automatically brought with it three extra years of living and working in Britain, and without much effort a whole life after that.
The benefits for universities and those who work for them, from the lavishly paid vice chancellors to the armies of lobbyists and PR consultants hired to defend their special interests, are clear. But for society the benefits are questionable and the costs clear. Few graduates who take minimum wage jobs will become net budget contributors in their lifetime, and the increase in immigration caused by the graduate visa route reduces our capital stock. The profits accrue to the university sector, while the costs accrue to the general public.
These types of hidden subsidies also apply to other sectors. Many customers are amazed by the logistical brilliance of fast food delivery services, taxi apps and of course the ubiquitous Amazon. The extent of corporate tax that Amazon has avoided in Britain is well known, but less debated are the ways in which many of these companies keep their revenues for themselves, while leaving the costs to the rest of society.
Three years ago, after a lengthy court case, the Supreme Court ruled that Uber drivers were not independent contractors – as they were previously treated by the company – but employees, meaning they were entitled to various labor market rights. The costs imposed by this ruling, plus a related decision that Uber must collect VAT on travel, have reduced its price competitiveness, demonstrating how its business model depended on offloading its costs and responsibilities to others.
According to an investigation by Transport for London, Uber was responsible for 14,000 fraudulent trips between late 2018 and early 2019 because the company allowed unauthorized drivers to upload their photos to other, authorized Uber driver accounts. This prompted TfL to temporarily revoke Uber’s license to operate in London, which has now been reinstated, but the practice continues at several other companies.
Companies like Amazon, Deliveroo, Uber Eats and Just Eat all have ‘replacement clauses’, allowing couriers to lend their profiles to others. With these clauses, in Amazon’s words, it is the original carrier’s “responsibility to pay your replacement … you agree to it in any case” and “you must ensure that any replacement … has the right to Britain to work”.
Unsurprisingly, this can be a recipe for exploitation and immigration crime. Research has shown that there is a trade in couriers who lend and sell their delivery bills online. More than 100,000 people were found on Facebook groups where these identities are traded, but no one knows how many substitutes are working because few questions are asked and no records are kept. Insurance companies say many unauthorized couriers are involved in fraudulent auto and personal injury claims.
It is hard to deny that many companies are privatizing the profits and socializing the costs resulting from their business models, many of which rely on illegal immigration and work illegally – often by those on student visas – in the black economy.
And whether we’re talking about the private equity funds that have extracted huge sums of money from water companies while avoiding the costs of their pollution, or the mistreatment of workers in warehouses or the fashion supply chain, tax evaders in the Channel Islands or any number of other examples In the modern economy, it is too easy to leave the negative externalities caused by your business model to the general public.
The strange thing is that our technocratic classes – so quick to see and tax the externalities of everything from driving a car to taking a flight – fail to see what lies ahead. They may be instinctively and ideologically bound to the status quo, but we must reject it. Too much profit at the expense of all of us in the long run. We must stop being fools.