Rethinking immigration policy: the Greens

The Green Party has been rethinking its approach to immigration.

Not that long ago, the Green Party seemed to be pretty stridently in favour of New Zealand’s large scale, fairly liberal, immigration policy.  It was never entirely clear to me why.  They were the party that emphasized the potential environmental damage from more intensive dairy farming, and were usually reluctant to support new infrastructure projects, partly on environmental grounds.  And yet ever more people pretty inevitably means a need for more exports (in a country that has shown little ability to develop large scale exports much beyond the fixed natural resource base) and more infrastructure.  And globally, radical Green supporters are sometimes heard to call for population policies, potentially penalizing people having the number of children they might prefer, all in the “interests of the planet”.  So I was never sure quite why the New Zealand Green Party was so keen on large scale inward migration, when the combination of (shrinking) natural increase and the typical outflow of New Zealanders would have delivered us a fairly flat population if only we’d had a more modest, and internationally conventional, target level of non-citizen immigration.  The only arguments one ever heard were along the lines of “diversity is good”, but then New Zealand is already one of the most ethnically diverse countries in the world, and without a great deal of economic success to show for that very rapid diversification over the last few decades.  Perhaps they just wanted to share the bounty of New Zealand with as many people from other countries as they could?  Perhaps they really didn’t like New Zealand, and New Zealand culture as it was, and had an agenda for breaking that down?

But now the Green Party has had a rethink.   Trying to understand the change, and its implications, I listened to James Shaw on The Nation, and read a couple of substantive articles (here and here) with quotes from Shaw.

If I read the policy correctly, it is to set a target for New Zealand’s population growth of 1 per cent per annum, and to adjust immigration policy settings (each year, or even more frequently?) in light of changes in the rate of natural increase and in the net outflow of New Zealand citizens.  On the Greens’ own calculations that would have meant a targeted net inflow of around 17000 to 20000 this year.    That is not an order of magnitude different from the medium-term target rate of residence approvals I have argued for, of around 10000 to 15000 per annum.

Perhaps it is good short-term politics, but as policy it doesn’t look as though it has been particularly well thought through.

Rates of natural increase don’t change that much from year to year, and although there can be big movements in that series over time there is quite a lot of persistence in the changes (eg the post-war increase in the birth rate last for almost two decades).  But the net flows (usually outflows) of New Zealanders are very volatile, and very difficult to forecast.  Here is the chart of actual net flows of New Zealand citizens.

plt-nzers

Fluctuations of 30000 per annum in just a couple of years aren’t uncommon, and if one had access to (say) all the Reserve Bank and Treasury forecasts the near-impossibility of accurately forecasting those fluctuations would be quite apparent.

Perhaps the response would be “oh, we wouldn’t rely on forecasts, but on actual data”.  But then there would be a serious risk of actually exacerbating overall cycles in net migration.  If the net outflow of New Zealanders had been large in the last six months, perhaps the target for immigration approvals for non-New Zealanders would be increased.  But people (especially able and skilled people) don’t just shift to the other side of the world on a whim, or with no notice.  There are some quite material lags in the system, and by the time the increased number of non-New Zealanders starting actually arriving, it is quite plausible that the net outflow of New Zealanders might have shrunk again.  I don’t agree with MBIE about much, but on this point I agree with them totally: it simply isn’t possible to target successfully the overall net PLT flow (or, hence, population growth) on an annual basis.

Defenders of Shaw might argue that these points don’t matter much and what really matters is the average population increase over time.  But that wasn’t his argument: he explicitly cited concerns  around the extreme peaks in the net PLT series, over the sort we have seen in the last couple of years.

The whole idea here is to try and smooth out the peaks and troughs,” Shaw said

And if one is going to have an official population growth target –  as the Greens appear to be proposing –  why would one set it at 1 per cent per annum?   This chart shows population growth rates for high income countries (UN definitions and data) and New Zealand since 1950.

population-growth-world-and-nz

It has been 50 years since the high income group of countries (including immigrant receiving countries such as the United States, Canada, Australia, and New Zealand) had a population growth rate as high as 1 per cent.  At present, that growth rate is less than 0.5 per cent per annum.   And whether or not one welcomes the population growth New Zealand has experienced over the decades, there is no sign –  no evidence –  that it has produced any economic benefits for us at all.  If people choose to have lots of children that is one thing, but why would Shaw want our government to actively target above-normal (for high income countries) population growth?

But more generally, what is the case for a population growth target?  I can think of a few cases where perhaps one might make the argument: Israel, surrounded by hostile neighbours, probably wants as large as Jewish population as possible for external defence reasons.  They used to mount similar arguments in France a hundred years ago, as they contemplated how few young Frenchman there were relative to the number of young Germans.  But those sorts of arguments are just not relevant for New Zealand (or most other advanced countries).

Apart from anything else, it sets up all sorts of odd incentives and undesirable behavioural responses (although not necessarily much dafter than how New Zealand has actually run policy over the decades).  When economic circumstances change, people tend to leave underperforming regions.  That is rational and sensible for them and –  on the whole –  it even helps those who don’t leave. Patea and Taihape were once quite a lot larger than they are today.  Circumstances and opportunities changed and people over time moved away.  It would simply be daft policy for, say, local authorities in those areas to subsidise people to move in from elsewhere, even though the economic opportunities had moved away.

Under the Greens policy, if there is a significant upsurge in the number of New Zealanders leaving –  as, say, happened in the second half of the 1970s –  policy will, semi-automatically set out to replace them. The New Zealanders will have gone because, presumably, knowing New Zealand conditions well, they conclude that the opportunities abroad are better for them and their kids.  And in response the Greens want us to dig even further towards the bottom of the international barrel and find even more non-citizens to come and live here.  How likely is it that that would be a sensible policy?  Not very.  First, actual economic conditions and prospects in New Zealand have deteriorated, suggesting that New Zealand is less able than it was to offer real good incomes to able people.  And, second, to get a whole lot more immigrants, we would presumably have to lower the (economic) quality of those we take –  and perhaps quite a bit if the foreigners themselves do enough research to realise that relative opportunities here are also deteriorating.  It is not as if, on the government’s own evidence, we’ve been that successful in getting many very able people under current policy.

Of course, one could turn the story around, and be more optimistic.  If New Zealand’s prospects improved and suddenly many fewer New Zealanders were leaving, we would have to markedly reduce the non-citizen immigration inflow.  One could argue this as a good thing, in that we could raise the average economic quality of those we approve, but if one really believes in the economic benefits of immigration, why would you want to materially cut back the flow in circumstances in which New Zealand’s relative economic prospects appeared to have improved?

The arguments can also be applied to fertility rates and, thus, rates of natural increase.  If birth rates in New Zealand fell away sharply (to the sorts of rates –  around one child per woman – seen in many parts of developed Asia and some parts of Europe), what would the economic logic be of central government setting out to raise the target migrant intake (lowering the average migrant quality) just because New Zealand families decided to have fewer children?   After all, fertility choices might be partly a response to perceived economic prospects.   What sensible role for central planners is there in face of such fertility rate changes?

Turning back to the Greens, it isn’t clear that they have yet given much thought to how their proposal would work.

He did not give specifics on exactly which parts of the migration mix would be tweaked to achieve the 1% population growth, given the Government now has a planning range for permanent residency of 85,000 to 95,000 for the next two years, but does not have targets or caps for temporary work visas or student visas. Last week it temporarily suspended parental visa applications and lowered the planning range by 5,000. It is also reviewing work testing for work visas and student visa numbers.

A variable migration target implies constant tweaking of targets for permanent residency visas, both for skilled migrants and their families, along with targets for temporary work visas and student visas. Some elements cannot be controlled, including net migration of New Zealand citizens and working holidaymaker visas, given New Zealand has bilateral agreements with many countries that allow unfettered movements of such visas.

Shaw suggested student visas as one area that could be changed.

“We think that the government is actually barking up the wrong tree by putting the pressure on the family category,” he said.

“There’s huge numbers of students that are coming into New Zealand on temporary work visas and that’s actually where a lot of the pressure is coming from, especially on housing and on transport infrastructure.”

I think there is a lot wrong with our student visa policy, and with the liberality with which work visas are granted for fairly lowly-skilled positions, but……you can’t sensibly go making major changes to the parameters of the schemes every few months just because the forecast net outflow of New Zealanders has changed again.  It would put educational institutions in an impossible position, put firms considering hiring migrant workers in a very difficult position, and make the rules of the game so uncertain for potential migrants that you would risk undermining whatever merit the immigration programme has.  Even more than happens now, good people would seek out other countries with more stable and predictable regimes, and we’d be left with the fruit of an adverse selection process –  those sufficiently desperate to get in here that they’d apply despite the variability of New Zealand policy.   And while it is fine to talk about “smoothing out peaks and troughs” many of those pressure arise in specific regions, and it is even harder to practically manage those.  After all, New Zealanders tend to leave for Australia from across the whole country, while non-citizen arrivals (be it permanent or students) tend to disproportionately flock to Auckland.   So even if policy could be run to stabilize the overall rate of population growth from year to year –  and it can’t –  it might well markedly increase the variability of population cycles in Auckland specifically.  That doesn’t seem like an outcome the Greens would be wanting.

My own view remains that we should aim for a stable level of non-citizen (net) immigration, and set the stable target around a low level (consistent with the absence of any real evidence of benefits to New Zealanders as a whole).  But even a stable fairly high level of non-citizen immigration might be less bad in some respects than what the Greens are proposing, which assumes a degree of knowledge, and forecastability, that simply doesn’t exist.

I would keep the focus on the residence programme, and in turn keep that focused on the medium term.  If we are offering long-term residence in New Zealand, it shouldn’t be about meeting today’s immediate labour market needs, but about attracting a small group of young able energetic innovative people, who might make a useful contribution over their entire working lives.  I think we should welcome foreign students –  education should be just another export industry –  but without providing them with work rights here, and with only high level qualifications giving them a leg up on the path to residency.   And, as I noted the other day, for short-term work visas, I’d probably favour a salary test.  In all but very exceptional circumstances, simply don’t issue work visas for positions paying less than, say, $100000 per annum, and above that threshold take a fairly liberal approach.  Any employer could hire someone for up to, say, three years, but on a non-renewable visa.  If there are real temporary skills shortages arising from unexpected shifts in demand, such a policy will meet those needs, while over the longer term allowing the domestic labour market to work, as relative wage rates shift and people move from one occupation to another.  The scheme would be used, but there wouldn’t be 200000 approvals per annum.

In a sense the fatal conceit in the Greens new policy is the idea that New Zealand’s population growth rate can be held stable from year to year.  While New Zealanders are fairly free to move –  or not –  to the much larger Australian economy in response to changes in relative economic opportunities –  and while New Zealand incomes are so much lower than those in Australia –  we will almost inevitably have the sorts of swings in the net outflow of citizens I showed in the first chart above.  Trying to manage the inflow of non-New Zealanders year by year to offset those fluctuations would be (a) impossible, and (b) something of a fool’s errand even to try.   Whatever immigration policy we adopt, we really need to focus on the medium-term, in all dimensions.

27 thoughts on “Rethinking immigration policy: the Greens

  1. The Greens have had a long-standing commitment to a sustainable population policy. They also support more refugees and family reunion. Once you read through these many contradictions in its long-standing policy manifesto, the Greens are pretty much against immigration.

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    • The Green manifesto is full of contradictions because it is built out of a consensus process. For example, the Greens worry about runaway global warming and peak oil at the same time.

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  2. I agree with your critique of the Green’s policy, however, I do give James Shaw credit (and I’m sure you do to) for at least getting involved in the debate and recognising that high levels of immigration do carry consequences.

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  3. Russell Norman is a amazing individual that looks a global picture and not just a NZ picture. Therefore it did not matter whether there are more people in NZ or the rest of the world because a gain for NZ is a loss somewhere else. The overall impact to climate is zero.

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    • Um….he has now left Parliament. But re climate change, you’ll note that I didn’t mention it, only the local environment. of course, population growth here does affect how difficult and costly it is to reach NZ’s emissions targets – and abatement is unusually expensive in NZ.

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      • Again it gets back to the actual polluter and that is the 40 million sheep and cows and a fart tax. Our largest pollutant is methane gas and nitrate leaching damaging waterways, lakes and rivers. The waste of people is managed and treated. The waste of animals is not. Lets get back to facts rather than racist innuendo in the guise of immigration impact on the environment because the other significant polluter is also the 3.3 million tourists.

        Not to forget our new space launching center in Gisborne which will blast rockets into space every week. Wonder how many explosions, carbon dioxide gas and other pollutants thats going to spew out into the atmosphere right up to space.

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      • What is racist about raising questions about the appropriate rate of immigration.

        The relevance of immigration to the pollution business is that with a much lower real exchange rate, it would (for example) be more feasible to impose tighter environmental restrictions on livestock farming. Less-intensive agriculture could more readily support high incomes for the smaller number of people who would be here, and also to some extent we would see the development of other, non livestock-based, export industries.

        At least in principle, the tourism issue is quite small. The average tourist is probably here for 10 days, so 3.3m tourists is equivalent to a boost in the stock of people physically in NZ at any one time of perhaps 100000. At present, that is around one year’s (immigration-driven) population growth. And another 100000 next year…

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      • Not correct. Because the number of tourists grow around during 10% each year however their consumption of resources has increased by 30% from last year Very weak arguments you have put up Michael. 100k this year equals to 100k next year is at best a very bad assumption.

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    • I meant to say climate or the environment. Same principle one more here is one less there, therefore the impact to climate or the environment overall is no different.

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      • For the sake of other readers I must state that this argument is false. On average 1 person in a developed country has several times the environmental impact of 1 person in a developing country. Therefore increasing NZs population by 100,000 would be similar to increasing the population of an average developing country by 1,000,000 in terms of environmental impact.

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      • And before you come up with accusations of racism etc, all I am stating is that you must compare apples with apples when making such statements. Even within developed nations there is variance, say, on average 1 person from Germany has a significantly lower environmental impact than the average American.

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      • Dave, your rational is rather silly. You are saying effectively that Mr Singh just because he migrates to NZ has become an excessive polluter just because he lives in NZ? Why? He eats the same food and he drives a SUV. In India he would likely have bought an Indian made SUV but in NZ he would drive a BMW SUV so a Indian made SUV is less polluting than a BMW SUV?

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  4. I disagree. Climate change is a global phenomenon and what NZ does or doesn’t do won’t make any material difference to the climate we experience. But the physical environment is different – we can directly control things like polluted waterways, or even the extent to which we dam scenic rivers etc. More population here creates more pressure on the physical environment, either directly or in terms of abatement costs. I’m not suggesting we couldn’t have a pleasant environment with 20m people – wealthy countries can – but that the pressures such population would place would probably mean some quite material differences to our physical environment.

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  5. The only bit I don’t really get in this debate is that theory/policy advice suggests the size of the labour force is a key input for long term growth i.e. capital, labour, and total factor productivity. Given NZ demographics, potentially applying a break to labour input would require offsetting policy initiatives which may or may not have a tangible impact on headline growth indicators (e.g. can the government of the day really target and claim credit for improvements of total factor productivity?). More people typically generate more growth – even if only in absolute terms – and I guess the reality is, any growth typically buys political capital.

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    • But there is no gain in having faster total GDP growth if per capita GDP growth isn’t changed (or perhaps even falls, as I’ve argued in a specific NZ context). Same would, of course, for a massive govt-driven investment programme – such as Think Big – which would give a big short-term boost to demand and even GDP, but leave no one better off (and NZers typically worse off).

      In terms of offsets, my arguments that sharply lower rates of immigration would be accompanied by a lower exchange rate and lower interest rates, so that net external demand would replace the boost to demand that a growing population provides (housebuilding, roadbuilding, prisons building etc), and that in time those stronger international connections and faster export growth would be likely to leave us with faster productivity growth than we’ve had, even though headline GDP growth might be slower.

      Have a look at the chart in yesterday’s post. Japan has had about the same productivity growth as NZ in the last decade, but of course with essentially no population growth it has had much lower headline GDP growth than we’ve had.

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      • ….fair enough; though, the reallocation of resources to the manufacture of widgets post an exchange rate depreciation would likely be a long run outcome and in the short run, the country could be at the mercy of those that fund our NIIP; yes, it has been stable in recent years but we are reliant on the kindness of strangers who may take fright at a government that is keen on pulling up the drawbridge.

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      • actually, I suspect the fall in the exch rate would be a near-term event – we saw hints of that in the fall on the announcement last week. Remember that most of the debt is either long-term government debt (not much rollover risk) or lending to banks. Lenders get nervous only if the quality of bank loan collateral were to fall sharply, and there is no particular reason to think it would with a lower immigration target. But if the lenders did get nervous it would bring about the fall in the exch rate that the economic rebalancing appears to need.

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  6. Re Climate Change
    “.. what NZ does or doesn’t do won’t make any material difference to the climate we experience.. ”
    Can you please explain how this is different from” stuff you, I’m all right jack”
    Your response could highlight a point of profundity. Can you expand and expound? Could we/NZ continue to increase our carbon footprint using the same argument?
    You must be an economist. What will you tell your grand children? ” We were high on the hog… Nekminit. Sorry bubs, it was those folks over there, nothing we could do about it “

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    • my only point was about immigration. if the world’s population will be what it will be, then whether the people are living in NZ or, say, the UK or China doesn’t make any material difference to global climate (or NZ’s climate) so shouldn’t be a relevant argument in discussion of immigration policy.

      By contrast, rapid additional population growth here will put real additional pressures on our rivers and other specific natural features of our environment, and to that extent – esp from a Greens perspective – would seem to be a relevant consideration in thinking about NZ’s immigration policy.

      I don’t have any strong views on climate change response policies, except that generally accepted economic modelling notes that abatement costs are much greater in NZ than in most advanced countries, largely because (a) we already use so much hydro, and (b) the role of animal emissions in our totals and the lack of economic solutions to reduce those emissions (while more or less maintaining output/exports)

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