Another perspective on the New Zealand Initiative report

I will be resuming today my own series of posts on aspects of the New Zealand Initiative’s report on immigration.    However, some readers might also be interested in a new 29 page paper reviewing the New Zealand Initiative’s report by my former colleague Ian Harrison, now of Tail Risk Economics.

Ian focuses his comments on some of more formal research papers the New Zealand Initiative authors cite in support of their case.  There is some overlap with the material I’ll be presenting here, but in some areas Ian takes a more specifically technical approach to his critique.   On the other hand, sometimes his approach is a little more “in your face” than one I might typically adopt.

Here is some of the Introduction to his paper

Recently the New Zealand Initiative has released a report ‘The New Zealanders’ on the immigration issue.  The stated purpose is ‘To give the most up-to-date information to the public. To stack up these social, economic and nationhood fears against the available data and research.  It is claimed that the evidence on the economics is positive and fairly conclusive.

By and large, economists favour immigration as migrants benefit the countries they move to through knowledge spill-overs and global connectedness. Growing the population through immigration also produces ‘economies of agglomeration’ (i.e. the abilities of larger, denser populations to support more commerce and knowledge exchange).
All this is presented as a solid, objective assessment “While we could deduce the objective economic effects ….’

We disagree.  The economic ‘facts’ had a distinct ‘alternative’ whiff to them.  The arguments were at best thin, and the paper did not seriously engage with some of the key issues. It is easy to cherry-pick the (mostly) foreign literature to find an article that supports an assertion. It is much harder to convey a fair overall sense of the state of the economics of immigration, and critically, its relevance to New Zealand. The report does not do this, and the reader is left with the impression that nearly all economists support high levels of immigration, and that there is compelling support for this in the literature.

This paper presents an alternative view. But first let us define the scope of the debate. First, It is not about stopping all immigration or reversing what has happened. Most people are relaxed about genuinely high skilled immigration.  And we can continue to enjoy the ‘soft benefits’ of diversity from the existing stock of migrants.  The debate is about whether we continue the policy of large-scale medium/low skilled immigration. Second, it is not about whether immigration will generate a bigger economy. It will.  The issue is whether it will make current New Zealanders better off. The ‘New Zealanders’ is somewhat ambivalent on this point, but it is the broadly accepted test.

Our alterative economic narrative addresses the major shortcoming in the paper. It did not seriously engage with the critical structural features of the New Zealand economy.   That is, New Zealand economy is, more than any other advanced economy, land based and isolated. Other things being equal we would expect a large influx of immigrant labour to drive down average incomes as a larger labour force has to seek out more labour intensive low income jobs.  Thus the foreign literature, even if robust, may not be a good guide to New Zealand outcomes

And, on the other hand, this from his conclusion

To be fair, we found much in the report that was very useful, in particular the taxonomy of beliefs about migration. The report certainly challenged some of our preconceptions and it provides a good starting point for a debate that has to include what people really feel and believe about some sensitive issues.

The taxonomy of possible beliefs about immigration appears quite late in the report.  I agree that it provides a useful framework for helping to think carefully about the issues, and will be discussing it later in my series.

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