New Zealand Initiative on immigration: Part 2 Introduction

A month or so ago, the business (and Wellington City Council) funded think tank, the New Zealand Initiative released their report on immigration.    They called the report The New New Zealanders: Why Migrants Make Good Kiwis, which seemed to –  perhaps deliberately –  miss the point.  I’m sure most migrants –  or at least they who stay longer-term  – do become “good kiwis”, in some sense or other, and even when they don’t –   adjustment to a new country can be hard –  their children and grandchildren typically do.  But New Zealand government policy is, or should be, primarily about pursuing the best interests of New Zealanders.  Those “best interests” involve assessing the economic impact of immigration, as well as the non-economic dimensions.   But the central question for New Zealand policymakers should be focused on is do we, New Zealanders, benefit from immigration, and particularly do we benefit from one of the largest planned non-citizen immigration programmes run anywhere in the world?  Or perhaps we would benefit more from even more immigration: if this extract from their report is to be taken seriously, the New Zealand Initiative certainly seems to think so.

Free movement of labour is a fundamental driver of the creative destruction process, just like free movement of goods and capital.

I’ve been a bit slow to getting round to commenting on the Initiative report.  A few weeks ago I wrote about the possible implications of continued large scale immigration for the relative place of Maori in New Zealand –  something the Initiative had touched on in their report, apparently found awkward, and then largely passed over in their enthusiasm for continuing, and perhaps even extending, our immigration programme.   But since then I’ve been procrastinating.

Over the next couple of weeks I want to comment on the rest of the report.  I’ll work through it more or less section by section.  My own interests have tended to be predominantly in the economic arguments –  best encapsulated (but not exclusively so) in the question “has our immigration policy been adding, over the medium term, to the level of GDP per capita, and/or GDP per hour worked, of the native population”.     But reflecting the structure of the Initiative’s report, today’s comments are on points in the first couple of chapters, Introduction and Fictions and Facts.

Overall, I was quite disappointed in the report.  When I first heard that the Initiative was going to do something on immigration, I was quite encouraged.  I didn’t really expect that we would end up in agreement, but the Initiative is very well-funded by New Zealand standards, and in the past some Initiative reports (and, more often, those of the predecessor Business Roundtable) had shed fresh light on important public policy issues.   I looked forward to seeing the strongest case that the pro-immigration people could mount.  After all, there is little value in engaging with straw men, or with the weakest arguments of one’s opponents.

Sadly, the finished report wasn’t what I expected.  There wasn’t any fresh research –  except perhaps for some insights on public opinion –  and even on the economics there wasn’t much sign that they had thought hard,  and specifically, about New Zealand’s economic performance, and the way in which large scale, not overly-highly-skilled, immigration had affected, and is affecting, New Zealand medium-term economic performance.  Some time ago, in an exchange on this blog, the Initiative chairman conceded that there were no New Zealand specific studies demonstrating the economic gains to New Zealanders from large-scale non-citizen immigration.  There still aren’t.

I suspect that the Initiative allowed the approach of the election to shape their timetable to too great an extent.  As a result, they ended up delivering something longer on rhetoric than on New Zealand specific evidence.  Indeed, in the Introduction there is a telling comment.  On the one hand while noting that “this report cannot definitively say whether immigration is in and of itself good for New Zealand”, they claim that they “could deduce [emphasis added] the objective economic effects”.     These apparently “objective” effects can’t be demonstrated empirically, rather they are simply “deduced” from some model or set of first principles the authors have in their tool bag.  I’m not averse to models –  we all use them –   but when a large scale immigration programme, that the authors are relatively happy with, has been run for more than 25 years, you really should be able to do better, in making the case for the defence, than deductions from first principles, or some libertarian playsheet.  In this report, they haven’t done so.  That is a shame.

There is evidence of this rather rushed politics-focused approach.  In the Initiative’s 3 February newslettter, one of the two authors of the immigration report, Jason Krupp wrote as follows:

Six months ago, when we started scoping the Initiative’s immigration report, we had a very specific audience in mind: Winston Peters. Our aim was to assemble all the available research and have a fact-based conversation with New Zealand’s most prominent immigration sceptic.

Now, to be frank, I don’t believe them.  No one writes reports expecting to change the minds of their most vocal opponents –  very few humans change their minds that easily – instead, the aim to typically to influence those potentially wavering and perhaps those leaning towards support for the other side (and in other places Eric Crampton has expressed concern that officials might be losing faith).  But that is what the Initiative wrote about this report, and it certainly seems quite plausible that they were concerned about the apparently growing unease in New Zealand as to just what  large scale non-citizen immigration was doing for New Zealanders.

In the introduction to the report itself, the aspiration seemed to be more modest.

Although we hope this report will win over the doubters, the real success metric will be in elevating the tone of the immigration debate.

Which might indeed be a worthy goal, if the Initiative had set the example.  Well through the report, there is a suggestion that some of those who oppose large-scale immigration are really just equivalent to bad old eugenicists (a cause once favoured by many of policy and political elites around the Western world).  But one doesn’t even have to go that far.  In the same newsletter, Mr Krupp goes on.

Judging by Mr Peters’ comments on Facebook, which were re-published in the Indian News Link community newspaper, we have failed. Not only does it look as if the leader of NZ First failed to crack the cover of the report, but he also appears to be gathering his alternative facts from his local supermarket.

I’m not a big fan of Winston Peters, and have never voted for him or his party, but I thought the Initiative had reached a new low when Mr Krupp concluded his newsletter with this extract

Seen from this perspective, it is obvious why we called the report The New Zealanders: Why migrants make good Kiwis. Based on the widespread media coverage and messages of support we have received over the week, many people agree with this sentiment.

Mr Peters is clearly not a part of this group. But as Upton Sinclair said: “it is difficult to get a man to understand something when his salary depends upon his not understanding it.”

Agree with him or not, Winston Peters has been making his points around immigration in various ways for more than 20 years now (plenty of time for most politicians to have gone through several fresh stances on many issues).  Perhaps he is right in his views, or perhaps not, but I’ve never heard anyone before seriously argue that Peters holds his views on immigration because to do so pays his salary.  Of course, given that Mr Krupp appears to have been in New Zealand himself for only about six years perhaps it isn’t surprising that he doesn’t seem aware of the consistent stance adopted over decades by Mr Peters.  It is just offensive and unnecessary –  and I suspect Mr Krupp and his Initiative colleagues would be (rightly) offended if someone suggested that they held the views they did just because they got paid by a libertarian think-tank.  So much for their goal of elevating the tone of the immigration debate.

What about the report itself?

Mostly, I’m going skip over the Executive Summary now, perhaps to return to it at the end of this series of posts.  But as I was reading through the report again on Saturday, I was struck by one line in particular under a heading “forgotten benefits”.

Immigration can provide New Zealand consumers with a rich array of consumer products that would otherwise not be readily available.

I’ve been puzzling over it for a couple of days, but still have no idea what it is supposed to mean.   Trade in goods and services simply isn’t tied to movement of people.  We can, and do, import French cheese, Danish butter, Spanish olive oil, and Iranian dates with, or without, any material number of immigrants from those countries.  Same goes for clothes made in Bangladesh or Vietnam, electronics from Taiwan, or coffee from PNG or Brazil.

I can only assume this is simply a reference to ethnic restaurants –  a defence of those many hundreds of chefs we give residency approvals to each year.  Large-scale immigration from an increasingly diverse range of countries will increase the range of ethnic eating options.  It is a gain, no doubt about that, but a pretty small one for most people.  Most people, most of time, eat within their own culinary culture.  And people at the bottom, those whose interests policymakers should be particularly looking out for, are unlikely to be frequent consumers of the services of ethnic restaurants.

But moving on to the Introduction.

The authors note

Policymakers may repeatedly assure the public they have struck the balance right, and that the benefits of immigration exceed the costs. Judging by the popular discourse, many New Zealanders are beginning to doubt this rhetoric. They are questioning whether keeping the door open to migrants will threaten the very things that make New Zealand special.

This scepticism is understandable. Immigrants account for about a fifth of New Zealand’s population. What does it mean for the nation’s identity and Kiwi culture if foreigners outnumber locals?

Immigrants actually account for just over a quarter of New Zealand’s population –  one of the highest proportions anywhere in the advanced world, and far higher than in, say, the United Kingdom or the United States.  But it was the final sentence that really struck me.

I haven’t run the numbers, and haven’t seen anyone else do so either, but the overseas-born share of the New Zealand population has increased from an already-high 19.5 per cent at the 2001 census to 25.2 per cent in the 2013 census.  Perhaps by next year’s census, given that immigration policy in the last five years hasn’t changed much, that might be getting up towards around 28 per cent (our residence approvals programme is equal to around 1 per cent of the population per annum).    And in another 20 years if current policy continued would it be implausible that a third of our population might have been born abroad?  I’ve heard no one suggesting running immigration policy sufficiently aggressively that the foreign-born might outnumber the locals –  as has happened in various of the Gulf states.  I don’t think there would be much political/public support for such an approach here, but there is little or nothing in the Initiative report that suggests they would not welcome – or think beneficial – such an approach.   The actual list of policy recommendations that they conclude the report with is modest, but the tone of the document is suffused with the sort of open borders/creative destructions thinking, captured in the quote above.

Chapter One of the report is headed “Fictions and Facts”.  I didn’t have too much problem with most of it.  It is important to distinguish between flows of New Zealanders (in and out), which aren’t a matter of immigration policy at all and flows of non New Zealanders, and also to distinguish between short-term flows of non-citizens, and the rate at which non-citizens are approved for longer-term or permanent residence in New Zealand.  Headlines often don’t do that. The report cites what appears to be MBIE polling data that suggests that when the public is told the specifics of the scale of the residence approvals programme,  they are a bit keener on reducing migrant numbers than they are when not given those details.

But it was one of the “spillovers” that caught my eye.  Media commentary on the Initiative report made a bit of their use of a quick literature review done by a couple of pro-immigration academics, commissioned by MBIE (the ministry responsible to the –  increasingly under pressure – ministers for housing and for immigration), which concluded that immigration didn’t have much affect on house prices and housing affordability.  I’ll come back to to that paper in more detail in a later post, but for now I was interested in this comment

The spill-over effects of immigration can be seen in housing, particularly in Auckland. Residential property prices in New Zealand’s biggest city have risen in double digits since 2011, such that the average house price recently breached the $1 million mark. The median multiple, a measure of how many years of the median household income are needed to pay off the median house price, of Auckland shows how far affordability has declined. Economists consider housing to be affordable when the median multiple is 3 or lower. In 2013, Auckland’s median multiple was 6.4, and in 2016 Demographia put it at 9.7.  The Initiative’s housing research blames restrictive planning policy and resistance to urban development. However, against a policy-induced, near-fixed supply, additional demand for housing must contribute to rising prices.

I couldn’t disagree with any of that.  I’m as keen as they are on fixing the supply side, markedly reducing regulatory restrictions on land use.  But there has been little sign of that happening over the last 15 years, and little reason to be optimistic that is about to change, whover wins this year’s election.  And so

against a policy-induced, near-fixed supply, additional demand for housing must contribute to rising prices.

When immigration policy has delivered another 45000 to 50000 people to New Zealand each year, around half of them to Auckland –  a city which accounts for only about a third of the population –  immigration policy “must” be exacerbating the house price affordability problem.  In principle, the problem can be fixed at source –  land-use restrictions –  but if it isn’t, the massive redistributions of wealth and opportunity that result from persevering with large scale non-citizen immigration have to be set against the benefits of those ethnic restaurants.

In passing, I was also struck by this under the heading Exploitables

The immigration system is open to abuse by unscrupulous parties. For example, the government is revoking visas issued to a number of Indian students. These students had paid an India-based third party to arrange the process, who then used false information to obtain the visas. Judging by the reaction in the media, this abuse of process clearly offends New Zealanders’ sense of fairness,

Well, yes –  and especially as it now seems pretty clear that many of the students were using New Zealand student visas not to get a first rate education, but as a pathway to residence.   But the report talks –  like some anthropologists studying an alien tribe – of “judging by the reaction in the media, this abuse of process clearly offends New Zealanders’ sense of fairness”.   Did it not, one is left to wonder, bother the authors?

This post has got long enough already.  Tomorrow, I’ll offer some thoughts on their chapter “The New Zealand Way” –  a chapter which starts suggesting that it is all about issues of national identity, and ends stating that it has sought to answer “whether migration is making New Zealand less safe”.

 

25 thoughts on “New Zealand Initiative on immigration: Part 2 Introduction

  1. The “Rich array of products” must be referring to ethnic retailers. There are many in Auckland. Immigrants provide opportunities and economies of scale without which many things would not be imported.

    Regarding the students. Perhaps I live in a progressive bubble, but there seemed to be a lot of sympathy for their predicament. No doubt it was seen as the thin end of a wedge by the government though.

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    • Unfortunately, the government is left with no choice but to take a hard stand. Allowing students on fraudulent documents to stay would have led to setting a precedent and would have encouraged others to do the same. Also there were earlier 129 students of which most returned to India without drama. Allowing a handful of hardcore overstayers would have meant opening up the doors to all the 129 that suffered the same fate. Then having to deal with any other subsequent fraudulent activity would have been far more difficult.

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  2. You may be right about the “ethnic retailers”, altho if so I’d assume they are primarily serving their own ethnic/migrant community – as, I assume, the little NZ shop in behind the High Commission in London presumably mainly served NZers.

    Re students, I suspect there was near unanimous support for closing/restricting the entry path – largely a govt-facilitated rort – and yet at human level sympathy for the individual deportees, who were already here. I’d probably share that sympathy to an extent – since we can never quite know to what extent they were personally culpable, vs being innocent dupes.

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    • I would have thought that the applicant (i.e. prospective “student”) would be required to personally sign off their application. That is standard procedure; my accountant doesn’t sign the return, I do. If that is the case then a fraud has been committed by the student applicant, if the agent can sign it off then immigration NZ are a joke outfit.

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  3. I’m glad you are back on this topic Michael as I too was disappointed in the Initiative report (though I need to confess to not yet reading it in detail).

    The “creative destruction” approach is all very well, but I don’t believe anyone is advocating open borders for NZ. If they are they should be honest about it, and should therefore at the very least be arguing for an INCREASE in migration targets from current levels, on the straightforward basis that if some is good, more must be even better.

    In the absence of open borders, we are left with a public policy problem of deciding how many non-citizen migrants we should seek and on what basis we should seek them.If this is to be good public policy then it has to be based on some sort of substance, and this I believe is what you are looking for but which so far does not seem to exist. I think you are, reasonably, proposing a conceptually simple test: NZ (in some overall sense) must be better off as a result of migration, and even more reasonably asking what evidence we have that such a long-standing policy is working. Sadly it appears the Initiative isn’t able to help with this.

    I might be naive, but I believe most immigrants (and indeed most people) are good people and none of this is, or should be, about that. It so happens that I do value diversity, but that is just one consideration, and in any case it’s not like we are now mono-cultural, if indeed we ever were. I think even if we had zero net migration policy, we would probably become more diverse over time just because of the relative numbers and mix of people in the potential migrant pool (the world) compared to what is here in NZ.(And any refugees we take are, based on the likely sources, going to add to diversity)

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    • Let’s be clear that the migrants are actually 43,000 work visas and 25,000 student visas issued over the last 12 months. There is a massive rebuilding effort that needs construction workers. Industry is driving the numbers of workers needed to get construction projects completed. Auckland alone has 65 massive construction cranes that dot the skyline. Don’t forget we still have Christchurch and now kaikoura and also Wellington that suffered damage to 16 buildings.

      This years tourist target is 4 million after a record breaking 3.5 million tourists. Chefs, waiters, prostitutes and cleaners will continue to dominate the work visas issued.

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    • “conceptually simple test: NZ (in some overall sense) must be better off as a result of migration”. Can such a test be devised? In the unlikely event that such a test can not only be devised but accepted by the public it still would not be sufficient for policy. There is a moral argument against taking skilled people from developing countries.

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      • I”m more ambivalent on that one: after all, the people leaving developing countries do so because they believe that they will be better off by doing so. And immigration from poorer countries to richer countries has historically tended to narrow the wage differentials between countries – eg there is a large literature on 19th C migration, in which that from Ireland, Italy or Sweden to the US benefited both the migrants, and those left behind (by raising wages at home). if there were losers then, they were the existing workers in the recipient countries.

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      • I am thinking about specific Papua New Guineans of my acquaintance. You cannot stop some movement – my wife for example. But for example it would be easy to attract many qualified nurses to the severe detriment of a country like PNG.
        The majority of blood tests in my part of Auckland are performed by staff educated in the Philippines; are their any studies of the benefits and disadvantages of the Filipino medical diaspora?
        I agree that this is only a side issue of a larger debate.

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  4. Interesting. I follow a bit of the academic scholarship on ‘creative destruction’ by authors in Marxian political economy, and so on seeing this statement you quote, “Free movement of labour is a fundamental driver of the creative destruction process, just like free movement of goods and capital”, I download the report to get the footnoted reference. But there is none. Hmmm – it’s a very strong statement in conclusion, so will be interesting to see whether it’s backed by evidence on a full read. And of course, the point Schumpeter makes in interpreting Marx is that these creative-destructive forces of capitalism will eventually lead to its demise. Not sure where they are going on that one?

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    • I suspect it was mostly just a soundbite. Sort of parallels a piece I saw on reason.com the other day, in which one their senior editors opined that:

      “Free trade and free migration are, then, the core of the true classical liberal (libertarian) vision as it developed in America in the 20th century: if you don’t understand and embrace them, you don’t understand liberty, and you are not trying to further it.” https://reason.com/blog/2017/02/17/trumps-anti-libertarian-ethno-nationalis

      You don’t understand freedom if you don’t embrace free migration. That is certainly one perspective……

      I think the authors are torn. In principle, they probably do favour something quite akin to open borders, but are actually fearful that our, already more open than the advanced country norm, immigration policy might be tightened up sometime soon.

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      • Which begs the question – what do they fear, economically speaking, in respect of tighter controls on immigration?

        If they ‘fear’ (i.e., resist) the very process of creative-destruction that they promote as being a necessary/inevitable/positive consequence of capitalism – then they really are conflicted in their application of economic theory.

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  5. Thanks for doing this work Michael. The Initiative’s report is indeed lightweight and seems politically driven anticipating, probably correctly, that immigration will be a major factor in the coming election. You refer to the negative effect on house prices; the effect on salaries and conditions for New Zealand workers also requires empirical analysis. So does pressure on the environment and access to amenities that New Zealanders value. The fact that there is no solid data to support the claim that immigration raises GDP or living standards after 25 years of the experiment seems pretty damning. Finally, as a ratepayer I’m concerned the Wellington City Council apparently contributes to this ideologically driven exercise.

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  6. Despite very little in the way of objective analysis the NZ initiative report has been lauded by the usual suspects as confirming the prevailing meme that immigration is all to the good and a marvelous thing for NZ and its people. Thank you Michael for your efforts.
    You really do have to wonder when ethnic restaurants and $2 shops are touted as a significant benefit requiring more immigration. Looks more like desperation to me but if those are the positives how about we look at some of the negatives.
    I wonder how the folk of Auckland feel about their fishing opportunities. The Hauraki Gulf fishery is in trouble with snapper and crayfish in serious decline and hapuku now extinct plus all sorts of imbalances appearing in the marine environment due to overfishing and pollution. There was a good chance that the fishery could sustain the needs of a population of a few hundred thousand. With a few million and better fishing technology the fish don’t have a chance. There are now have regular organised trips out of Auckland to plunder our seas here in Northland. I don’t like that!
    These sorts of issues are important to me and many Kiwis.When are we the people ever going to be consulted on what we want for our country?

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    • Frankly very few migrants fish as a hobby. They do love their sea food but inland river fish is not at the top of the menu. Far too smelly like a oil rag. Anyway trout is a protected species and fished under strict licensing. Chinese restaurants would usually have blue cod, salmon or orange roughy at the top of the menu list. Snapper is far too tough for a top menu item. Hapuka is not usually on the menu list. The corner fish and chip shops use hapuka but that feeds the local Maori and Polynesian groups. Thai restaurants do like snapper though but it’s local kiwis that favour the Thai restaurants.

      Unfortunately, you are one of the minority because the type of migrants being allowed in on work visas is clearly driven by local kiwi industry.

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      • I don’t know where to start with that lot but thanks for the kind words re the unfortunate reality that there aren’t more like me; at least I think that’s what you meant.

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      • Well, Latest Roy Morgan poll says 63.5% say New Zealand is ‘heading in the right direction’, as Bill English’s National holds on to its dominant support with increased percentage. Seems everyone has forgotten who John Key was. Hardly a ripple with his sudden departure.

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    • Depletion of fish stock, you’ll have to place that blame on Maori fisheries like Sealord that is exporting to the Asian markets. It was Maori fisheries that objected to the formation of the Kermadec reserve as a fish reserve as it affects their tribal rights to fish anywhere they choose to fish in NZ.

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  7. Thanks for your thoughts on the topic, Michael.

    From what you have said here, the report seems to have a rather narrow focus when it comes to the economic impacts of immigration (GDP per capita).

    To quote Borjas: Immigration is a policy, and like all policies it generates winners and losers. Even pro immigration economists (e.g. Card and Saez) agree with this point. Does the report speak to who the winners and losers have been in the New Zealand context at all? This is where any substantive debate on the topic must begin.

    Also: Sick burn on Jason Krupp there. LOL.

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    • They don’t offer much on the distributional aspects, but then they don’t actually offer much specific on the aggregates (GDP pc or phw) either. They do put quite a lot of emphasis on choice, opportunity, diversity etc, all of which are no doubt good in their place.

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  8. The economic benefits/cost of immigration is a passion of your Michael. Has anyone looked at the converse?
    That is, the economic benefits of Emmigration to country.
    If you can make that economic case for redistribution of people away from NZ, like what has happened rural towns to cities, you may persuade more people.

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  9. Yes, I do touch on that from time to time. There is little doubt that in the 19th century, emigration from the poorer parts of Europe to, eg, the United States helped the people who stayed behind in the poorer countries – raising wages in those countries etc. I suspect the same goes for the NZ emigration to Australia over the last 50 to 50 years – it would have helped to close the emerging income gaps between NZ and Australia, if only we hadn’t decided to actively pursue bringing in lots more people to (more than) replace those who left. We don’t apply that logic to people leaving, say, Invercargill or Taihape for better oppportunites elsewhere. If they’d stayed in Invercargill or Taihape, the best guess would be the per capita incomes (and wages) in those places would be lower than they are now.

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