Beware the ignorant

Sitting in the sun, reading the Herald over lunch, I found my own name leaping out at me.

An Auckland immigration lawyer –  I’m going to treat his argument on its merits, but do note the vested interest here –  Alastair McClymont had an op-ed headed Beware ignorant debate on motivated migrants.  I am apparently one of the “ignorant”.

Just who are the migrants supposedly stealing our houses and jobs? There have been plenty of knee-jerk reactions recently about the appropriate number of migrants that New Zealand can absorb each year. There has also been evidence of much ignorance on the subject.

In the 12 months to April, New Zealand received 68,000 net migrants (long-term arrivals minus long-term departures). New Zealand First leader Winston Peters has suggested the number be reduced to a maximum of 15,000 a year and as few as 7000.

Economist Michael Reddell has stated that cutting migration to 10,000 a year would lead to a reduction in house prices.

But the debate about migrant numbers is more complicated than Mr Peters or Mr Reddell would have us believe.

I am not speaking for Winston Peters, who I have never met or talked to.  A fairly prominent person told me this morning that I had changed their way of looking at the New Zealand immigration debate over the last year or so, and noting that he had previously treated immigration as desirable partly because of a reaction against the way Winston Peters had raised the issues 20 years ago.  I can certainly understand that.

But as for me, perhaps Mr McClymont could refer me to any suggestion I’ve ever made that migrants are “stealing our jobs and houses”.  On the jobs front, I’ve been quite clear that I think the evidence is that immigration boosts demand more than supply in the short-term, and hence that increases in immigration at least temporarily lower unemployment.  The Reserve Bank’s research, which I often quote, is consistent with the decades-long experience –  implicit in all macro forecasting frameworks – in which, all else equal, interest rates typically rise here when immigration is unexpectedly strong. That is because of the considerable boost to demand –  new immigrants need houses, road, schools, shops, just as long-term residents do.  As for houses, well I don’t think anyone doubts that increased population pressure –  whether immigrants (foreign or New Zealanders) or natural increase –  increases the demand for housing, and that the new supply of housing is all too sluggish.  So, yes, population shocks tend to boost house prices, and it often takes a long time for supply to catch up.  That isn’t controversial stuff.

But apparently “the debate about migrant numbers is more complicated than [I] would have us believe”.   I’ve written various  lengthy papers and speeches on the issues over several years (for anyone interested, links are here), and have written dozens of posts here over the last 15 months on the issues.  I quite agree it is a complex issue, and especially the connection to New Zealand’s long-term economic underperformance  –  something Mr McClymont does not even mention in his article.  I’ve even taken the time to spell out what, specifically, I think should be done about changing our residency programme.

He goes on

Shamefully, Indian and Chinese migrants have too often borne the brunt of our community’s negative reactions to the high number of migrants, but total net migrants also include your German au-pair, the French or British waitress at your local cafe, the young, Aussie, seasonal worker at the ski field or your friend’s son returning home from work in London.

Well, yes.  But where is the news?  Go back and look at everything I’ve written on this topic, and you’ll find that I have been almost exclusively focused on the economics of the argument.  I’ve been clear all along that all the economic arguments apply even if all the migrants were from Yorkshire and Sussex (as mine mostly were).  In fact, in the post-war decades, the overwhelming bulk of our migrants were British –  and since the new income-earning opportunities weren’t that good here, in fact that rapid population growth seems to have compromised our per capita income prospects.  We’ve been in relative decline for 70 years.

Mr Clymont seems to want to suggest that I’m not even aware of the different classes of arrivals. So we are treated to a brief description of them –  returning New Zealanders, working holiday schemes, foreign students, temporary work visas holders. But barely a mention of the residence approvals programme, with its explicit economic focus (the “critical economic enabler” as MBIE puts it).   As McClymont will know, from having looked at what I have written, I have been focused on the residence programme, and have argued for substantially reducing the size of that programme (to something more like the US scale).  Treasury themselves have had doubts about the working holiday schemes and the use of work visas in some relatively low-skilled areas.  Others have raised concerns around the abuse of the foreign student process.  Those mostly look like reasonable concerns, but they aren’t my focus.  I’m focused on the residence approvals programme, which is what determines the long-term contribution of non-citizen immigration to our population growth.  Perhaps Mr Clymont is focused on the headline PLT immigration numbers –  I’m not, and never have been.

As I said, McClymont barely mentions the residence approvals programme, and doesn’t mention at all the 45000 to 50000 annual target –  a target which is three times, per capita, the number of residence approvals the United States grants.  Instead he falls back on debates around the short-term programmes.

The filling of low-skilled jobs by migrant workers is just a by product of the export education industry. The only low-skilled workers being imported fill jobs in the horticulture, dairy and health care industries.

But hold on, until a few years we didn’t allow foreign students generous work rights here –  and actually had as many foreign students in the previous boom of the early 2000s as we do now.  So it is a choice we make, not a necessary corollary. It isn’t really my issue –  it isn’t something that really affects long-term economic performance –  but it isn’t the choice I’d make  if I were setting policy.

And his final sentence in that quote rather gives the game away. Those are each rather large industries.   But again, my focus is on the residence approvals programme target, something McClymont doesn’t address directly at all.

By the end of the article, he is reduced to anecdote

I regularly speak with employers who are desperate to retain and recruit migrant employees. They all complain about the casual Kiwi attitude towards work and their constant “sick days”, particularly on Mondays.

By contrast, these employers find that migrants are more highly motivated to work and succeed at their jobs.

Many employers testify to the fact that 90 per cent or more job applications come from migrants, so why aren’t Kiwis applying for the jobs?

The condescending attitude to his own fellow citizens is pretty unnerving –  lets trade in our people for another lot.  But even then he seems unaware of the fact that New Zealanders work long hours per capita (longer than citizens of almost any other advanced country), and recently emerged on the OECD’s cross-country skills comparisons as having some of the best developed skills of people in any advanced countries.  Could all of us do better?  Well, quite possibly – even those of us not in the workforce.    And is it any wonder that new arrivals are dead keen to establish themselves and get a foothold in a new country.  But the point of the immigration policy is that it is supposed to boost the medium-term economic fortunes of New Zealanders as a whole –  not just some individual employers.  Somewhat surprisingly, no one has yet been able to produce serious evidence –  or even sustained argument supported by reasonable data –  that New Zealanders are materially better off as a result of the really large immigration programmes we have run for most of the last 70 years, and which we continue to run today.  MBIE hasn’t, the Minister of Immigration hasn’t, Treasury hasn’t, the Prime Minister hasn’t.  And Mr McClymont has not even really addressed the issue.

I argue that New Zealanders have probably been made worse off – our exports still rely almost entirely on natural resources, and yet the fruit of those natural resources is spread over ever more people.  It would be interesting to know why Mr McClymont thinks such a remote place, underperforming for decades, would have one of the faster population growth rates anywhere in the advanced world.  In fact, the “why” is simple: the answer is “policy”, but it doesn’t look like good policy, especially when New Zealanders themselves –  who presumably know the opportunities here pretty well –  keep leaving,

There are real and important debates to be had on the best immigration policy for New Zealand. I’ve argued that experience suggests a very distant country that has struggled to grow its export base isn’t a natural place for policymakers to try to drive up the population And I’ve repeatedly pointed to the troubling data around our:

  • lagging productivity
  • weak business investment
  • weak tradables sector and export activity
  • persistently high real exchange rates, and
  • persistently high real interest rates (relative to those in other advanced countries)

and made a case that our immigration policy is part of what has held our economy back from being able to offer really high material living standards to our people.  It isn’t a criticism of the immigrants, who are simply and rationally pursuing their best interests.  If there is criticism to be levelled, it is at our own officials and ministers.  But it is quite possible that my hypothesis is wrong.  And there are also other –  non-economic –  motivations for immigration (humanitarian, through the refugee quota, or perhaps even a general sense that migrants will be better off even if we aren’t).  Those are respectable arguments, and there are considered alternative perspectives to some of the points I’ve raised –  few issues in economics are ever totally clear-cut.  Lets have the debate –  looking at the data, and the evidence, and trying to develop a compelling narrative of New Zealand’s economic performance, and immigration policy’s role (for good, ill, or not much difference) in it.  But pretending that people raising questions about the programme are simply ignorant, and need it all explained to them once again, this time slowly and clearly, isn’t really likely to be very constructive.

 

 

18 thoughts on “Beware the ignorant

  1. If migrants cause house prices to rise then is it not a transfer of wealth from the newcomer to the incumbent? How many years of graft (GDP growth if you will) would be required to achieve the same level shift in wealth?

    Perhaps NZers are just happy to take the windfall gain and spend it on leisure now, rather than increasing activity over a long time to potentially enjoy that leisure sometime in the future.

    Measurement, and more importantly distributional, issues remain but I suspect most people would take wealth gains by the quickest and easiest method possible.

    Like

  2. yes, possibly, but for most people it isn’t a real wealth gain (they still want to consume one house, and their lifetime consumption possibilities for other stuff haven’t increased) and most NZers have children, who are worse off from higher house prices (at least for the decades until they inherit).

    Liked by 1 person

    • High house prices is a land and height regulatory issue. Fix that and you fix the supply of property. The demand equation is not easily fixed. Drop real migrants and population goes negative or stagnate. You cannot expect to have fewer and fewer people look after more and more old people. The housing issue won’t be fixed by reducing the government’s 50k migrant target. You continue to ignore the target of 4 million tourists and also the 120k international students. They are not just numbers on a page. They are people and every single one of them need to have housing accomodation. They simply spilling over into residential housing and displacing normal residency tenants.

      Like

  3. Absolutely dissapointed by Alastair McClymont’s opinion piece. Clearly it is Alastair McClymont who is ignorant of your views. I hope that the NZ Herald offers you a right of reply. Or maybe his article was a paid opinion piece to boost his business? – an infomercial if you could call it that.

    Liked by 1 person

  4. Take it as a sign that your writing is having an impact. You are succeeding in changing people’s ideas if someone who directly benefits from the status -quo feels the need to attempt to denigrate and discredit your views. Keep it up

    Liked by 1 person

  5. Totally agree on the sick leave issue. Most Kiwis think it is part of their holiday package. And yes, they like to use it on Mondays. How convenient.

    Like

  6. Michael, thats not true. You do have a tendency to mix it up. I asked you if you have factored in the considerable churn rate on real migrants ie the 14k actual arrivals plus the 36k from international students and foreign workers already here to deliver the government’s 50k target and your reply? Yes it is factored into net PLT. But it is not because PLT includes foreign workers, international students, returning kiwis and long stay tourists so you have deliver the very best non answer but it serves its purpose ie you have an answer that is not an answer to the question.

    Like

  7. Sipping a Sangria on the Yarra and it is clear why Auckland has stuffed up. BRAND NEW apartment tower blocks everywhere. When I was here 35 years ago this place was a mess. The Yarra is still muddy but huge numbers of people traffic. They are 80% Asian. The white oldies are being paid as information officers.

    Like

  8. Lagging productivity can be easily caused by the lack of infrastructure spending with bottleneck traffic jams, the lack of easily accessible mass transport systems, the extensive travel distance of 129km between the top of Auckland to the bottom, the grey power and Nimby groups that prevents highrise, or expansion to port facilities. The lack of fast Internet connectivity.

    Like

  9. Weak business investments could easily be attributed to overly hawkish and overtly aggressive interest rate rises by the poor judgement calls of the various RBNZ governors which has lead to record household savings of $157 billion compared to only $138 billion in household debt. The inclusion of $60 billion in investment property debt into NZ household debt is rather silly as this is really commercial activity related debt. Higher interest rates lead to higher savings. It does not lead to higher investments.

    Like

  10. Weak tradeable and weak exports also due to over hawkish OCR and interest rates higher than most countries which has driven our entrepreneurs either bankrupt or risk adverse. I have personally been a very cautious property investor building a property portfolio based on income yield and debt repayments. I started investing in property after my share investment portfolio and my services company just got too hard with interest rates increases wrecking the economy. Only property was resilient to interest rate rises causing minor corrections in values as builders and developers were decimated immediately lowering the supply.

    Like

  11. Persistent high exchange rate mainly due to the $14 billion purchasing power of the 3.2 million tourists, a 400k increase over last year plus internal fee paying students that now number 120k. Trying to attribute the high NZD to 14k migrants and 36k foreign workers and poor international student that get their PR rubber stamped is just foolish analysis. Firstly foreign workers send money to their home countries. THEY SELL NZD on a regular basis. International students came here 3 to 4 years ago prior to getting their residency visas. Any cash brought in is already spent. They are usually poor and in low paying jobs.

    Like

  12. Persistently high interest rates is driven by the OCR which is driven by massive intervention by the RBNZ. This is evidenced by the 90 day bank bill rate being a mirror image of the OCR. The 90 day bank bill rate is a a key bench mark rate that the banks use to set interest rates in order to earn their margin.

    Like

  13. McClymont says

    “I regularly speak with employers who are desperate to retain and recruit migrant employees. They all complain about the casual Kiwi attitude towards work and their constant “sick days”, particularly on Mondays.
    By contrast, these employers find that migrants are more highly motivated to work and succeed at their jobs.”

    This pure generalisation, disingenuous rubbish and I don’t believe it. My own anecdotal generalisation is that Kiwis workers are highly regarded overseas, with strong work ethics. Most New Zealanders if you pay them reasonably well for doing a good job they will work hard. I don’t believe migrant and New Zealand workers are any different in that regard. They want to work and succeed if given a chance, and they should have first priority for jobs. The employers who moan are those who want to pay and continue to pay peanuts.

    Liked by 1 person

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s