Reducing non-citizen immigration by “tens of thousands”

Debate around New Zealand immigration policy continues to heat up.  That is what one should not only expect, but hope for, in an election year, especially in a country where non-citizen immigration is such a significant economic instrument, contributor to population growth etc, and even more so where –  despite all the talk of a skills-led immigration programme to lift overall New Zealand productivity – our productivity performance remains woeful.   And it isn’t as if the Think Big immigration experiment is a new thing, so that the gains might be just over the horizon (“the cheque is in the mail”).  Rather, the last few years have just been a somewhat intensified version of a strategy adopted for almost 30 years now.   Serious debate is long overdue.

Of course, some want to pretend that to pose any questions, raise any doubts, propose any cutbacks, about one of the most aggressive immigration programmes anywhere in the world is somehow “xenophobic”.  That’s just nonsense.  No doubt there are all sorts of reasons why some are in favour of large scale migration –  I’ve read New Zealand perspectives along those lines from libertarians and  from Marxists –  and all sorts of reasons why different people might now have some significant doubts.    Lack of any good robust evidence that New Zealanders have benefited economically from the large scale non-citizen immigration is only one of those reasons.     But when an experiment hasn’t shown clear signs of working after almost 30 years, it is almost a definition of insanity to expect different outcomes in future from keeping on doing the same thing.  And, while house prices shouldn’t be the main issue, for all the talk from the pro-immigration people that we should just “build more houses” (or free up the land) –  which I happen to agree with –  there is no sign at all of it happening to any great extent.  And it hasn’t in other places that got themselves into the mire of “town planning” and land use restrictions.

The government is keen to suggest that much of the high net migration numbers is about a return of New Zealanders from abroad.  In fact, of course, all that has happened is that the net flow of New Zealanders has slowed down (to near zero) at present.    Basically, all the 71000 or so net arrivals over the last year have been non-New Zealand citizens.   Here is the chart I’ve run many times before.

plt by citizenship apr 17

Over the last three months there has been an annualised net inflow (seasonally adjusted) of 75280 non-citizens, on a PLT basis.    (Relative to history it isn’t quite as high as it looks –  later SNZ research showed that in the 2002/03 boom there were more net permanent and long-term arrivals than the self-reported arrival/departure card estimates suggested –  but it is a large number, and large as a share of the population). That is around 35000 per annum more than were coming in, on average, in the decade prior to around 2012/13.       Almost all those non-citizens who come here require a discretionary decision by the New Zealand government (the exception being Australian citizens, for whom there is a long-term New Zealand government decision to allow free access).

Too few commentators focus on these non-citizen numbers.     Each of the main opposition parties seem to talk in terms of targeting the overall net PLT inflow.  NZ First talk in terms of, I think, 10000 to 15000, the Greens talk of 1 per cent of population, and now it appears that Andrew Little is talking of a target net inflow of around 20000 to 25000.      As I’ve noted before, and as many others have also argued, it is all but impossible, and not very sensible, to try to target the net PLT flow, and certainly not on a year to year basis.  The decisions of New Zealanders –  in turn heavily influenced by the state of the Australian labour market –  often play the largest role in fluctuations in the PLT numbers, and we don’t, can’t and shouldn’t try to control what New Zealanders do.

It is relatively straightforward, as a technical matter, to materially reduce (even by “tens of thousands”  –  Little’s language)  the net and gross inflow of non-citizens.  I outlined my own preferred approach in a post a week or two back.    Frankly, I’m a little sceptical that you could make quite that much difference if one focused narrowly on work visas, but even they offer a lot of potential.

The centrepiece of our medium-term immigration policy is the residence approvals programme.    Current policy is to offer around 45000 residence approvals each year.   Most of those approvals are offered to people who are already in New Zealand –  either on work or student visas  –  but over time it is the number of residence approvals on offer that largely determines the contribution of immigration policy to population growth (and, in the absence of good supply side policies) and to the pressure on roading infrastructure, house prices etc.    Many people only seek work or student visas to help them get points for residency.  If fewer residency places were on offer, there would be many fewer applicants for short-term positions.

The residence approvals target was reduced a little (from a range centred on 47500) last year.  But if I’ve done my calculations correctly on MBIE’s very unwieldy spreadsheet, 57623 people were approved for residence in the year to end of March 2017.     (UPDATE: I hadn’t done the calculations correctly, and the actual number seems to be 49991.  Readily accessible summary statistics – as we have in the rest of the economy –  would avoid such slips.)

Sometimes MBIE officials like to tell stories about being overwhelmed with good applicants in good times, whom it might be a shame to turn away.  But we now know, from MBIE’s own data, that that simply isn’t the situation.    Of the people applying for the most skilled stream in the residence approvals programme, more than half weren’t able to command an income as high as $49000 –  roughly what a starting primary school teacher earns – in the New Zealand labour market.    Our migrants might be more skilled than those in many other countries, but they aren’t very skilled at all, and most of them simply aren’t likely to be making a positive difference to the economic fortunes of New Zealanders (as a whole).

So let’s cut the target.  And in my view this is the nettle that the Labour Party really should grasp –  the key on which the whole programme turns.  If they want to look to their own past and their own traditions, it was one of the icons of the Labour movement, Norman Kirk who led the government that sharply cut back on non-citizen immigration, easing pressure on house prices and wider economic performance, in the mid 1970s.  Kirk did it by limiting open access for Britons.  In today’s term, the relevant metric is the residence approvals target (or “planning range”).

I’ve proposed pulling that target down to a range of 10000 to 15000 per annum.   But one doesn’t need to go that far to make a big difference.    For example, an incoming government could direct MBIE to ensure first that residence approvals for a year are capped at the upper end of the range (that would now be 47500 per annum).  Then they could, to provide a degree of certainty all round, announce that the target range would be reduced by another 20000, phased in evenly over a first electoral term, so that by the end of that term, the residence approvals target would be centred on 25000 people per annum.    That would still be getting on for twice as many approvals, per capita, as the number of green cards issued for US permanent residence.   It would be a thoroughly mainstream thing for a responsible centre-left party to do.    (As part of trying to refocus the programme on genuinely highly-skilled people I’d review and probably terminate the Pacific Access categories –  if we are serious about a skills-led economic programme we need to be hard-headed, but I don’t suppose a Labour Party with a big Pacific base could really do that.)

Of course, changing the residence approvals numbers doesn’t affect actual arrivals on day 1.  Even people approved overseas take some time to arrive, and I’m not suggesting cancelling approvals already granted.   But over time the reduced number of approvals will make a lot of difference (“tens of thousands” in fact) to the expected net inflows, even if all other visa programmes were unchanged.

But there are plenty of other changes that should be made.  We put far too much emphasis, in offering residence points, on people already having a job, or a firm job offer, in New Zealand.   Being at the ends of the earth, that isn’t always easy if you haven’t been willing to take the big risk and first relocate yourself and family to New Zealand (it isn’t exactly like moving from Brussels to Paris, or Dublin to London).  We probably do miss out on really skilled and innovative people who might otherwise come.  If we are going to give residence points for people already having a NZ job, or job offer, do it only for pretty highly paid roles –  perhaps those paying $100000 or more (you could age adjust it a bit too –  older people who are likely to be of real value as permanent residents should probably be earning rather more than that; younger people perhaps a bit less).    Again, changes like this will reduce the appeal of New Zealand work visas –  to what they should be (something where there is a specific short-term labour market need –  eg a temporary surge in demand like earthquake repairs).

What of short-term visas themselves?   A lot of government rhetoric has claimed that a huge upsurge in student numbers is a big part of the surge in net PLT immigration.    First, what we’ve seen in the last few years around students is as nothing compared to what saw 15 years ago.   Between 1997/98 and 2002/03 the number of people granted student visas increased by 70000.  Between 2012/23 and 2015/16 the increase was only 27000 (and MBIE data show that the number of valid student visas outstanding didn’t increase over the 12 months to February 2017).    As importantly, no one seriously questions that much of the increase in student visas –  mostly via lower-level PTE courses –  isn’t about the quality (or even cost) of our export education offerings, as about the residence points that such courses offer, both directly, and by providing access to a post-study “study to work” visa, which allows those completing these lower-level courses to work in any job they can find, no matter how relatively unskilled.      Severely cut back the ability of foreign students to work while doing lower-level courses, remove any residence points offered for such courses, and cut back on the “study to work” options and (the export incentives would drop away and) foreign student numbers would quite quickly fall back a long way.   One doesn’t even need to cut for every programme –  one can treat lower-level PTE courses differently to university degree courses, and even within university programmes treat post-graduate courses rather more generously.  We are happy to take –  even want –  really able people.  We shouldn’t be taking people who can’t even command $49000 per annum in the domestic labour market.

There were 25000 valid student visas outstanding earlier this year for PTE courses (and another 13000 or so for polytechs).  Halve those numbers and you make a material contribution to reducing the inflows of people (many of them working in quite lowly-skilled roles) by ”tens of thousands”.   It will be tough for those running the providers (the PTEs etc).  It was tough for many firms in the 1980s when export incentives and import protection were stripped away.  But they are changes that really need to be made.  Give some notice, sure, but many of the rule changes that facilitated the big inflows are themselves quite recent, so there shouldn’t be any sense of obligation to phase these concessions out very slowly.

I could go on, but won’t.   But as one last immigration thought for the day, I was rather puzzled by Fran O’Sullivan’s column in the Herald this morning.  Headed Forget immigration –  let’s talk wages, it was something of a mixed bag.    She seemed to recognise that immigration historically mostly raised total GDP and total population, and hadn’t been any sort of answer to New Zealand’s long-term productivity underperformance.    But her alternative was one that I suspect both pro-immigration economists like Eric Crampton, and sceptical ones like me, would both look at rather askance (to put in politely)

But if New Zealand is to evolve as a highly skilled economy it needs to set the bar higher, and pay decent wages which will also spur employers to take initiatives to drive greater movement on the productivity front.

This requires a major reset of the NZ economy – not simply using immigration to spur economic growth, then screwing the taps down when the cost of running things too hot becomes a political negative.

Where Labour is on point is with addressing the “Future of Work”.

Raising wages –  whether by government fiat (as in “pay equity” deals, or simply from employers swayed by the rhetoric) without the pre-conditions for growth in productivity is just a recipe for more unemployment (for New Zealanders), and the sort of insider/outsider bifurcated labour market that has given Spain what has long been one of the worst unemployment records anywhere.     We all want a high-wage high-productivity economy, but for everyone not just those who keep their jobs, and there is little evidence that putting the cart before the horse in the way O’Sullivan appears to suggest has ever worked on any sort of widespread basis.   The structural problems New Zealand faces aren’t mostly about bad choices by New Zealand firms (or indeed, foreign firms investing here) –  mostly they do their very best in the environment governments deliver to them –  but about that wider macro environment.

Higher real wages is a highly desirable outcome –  and on offer from policies that lead to closing the gap between New Zealand and world real interest rates (which, to be clear, has nothing to do with monetary policy) and allowing the real exchange rate to finally fall back to the sorts of levels that our dismal productivity performance suggests should have been warranted.  I hope that whatever Labour has in mind on the “future of work” it doesn’t involve leading with higher wage increases.  Rather, when they happen, consistent with low sustainable unemployment rates, it will be sign that we’ve got right much more of the rest of the policy mix.

 

40 thoughts on “Reducing non-citizen immigration by “tens of thousands”

  1. It is easy to say anything is easy from a purely academic perspective afterall you don’t need to be at the front end of having to implement it. It is not about what government wants and it is also not about what bookworm economists want. It is about what industries need in order to grow their businesses and to make a margin.

    Migrants don’t just get granted a residency Visa at the whim of a government official. They need to get a job. Industry employs them.

    International students studying in NZ get only a 1 year general work visa automatically after they complete their studies. This is mainly to help them get a more rounded education with some work experience. The 2nd and 3rd year work visa needs to be very much more specific to your study and with one employer. They need the employer to support their application.

    My recent advertisement at $55k to $60k attracted 150 applications. Only 1 kiwi lady was shortlisted but with only a 40% match to the position description of which half her CV had social activities listed instead of her job achievements. It is not easy to hire a local kiwi. The boss is already in a panic as he does not want a 40% match. He is prepared to raise his salary now to $65k to attract one of the Asian migrants with a 90% match.

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    • As I said it is easy technically, albeit harder in practice.

      But the real question is what basis do we choose who (and how many) we will allow to live here. Personally, I think that is a societal choice, about the sort of country we want to be, and businesses that operate here make use of, and pay accordingly, the talents, skills etc that are here. We shouldn’t organise our population around the “needs” of business – perhaps especially when business has been singing the same siren song (“more people, skill shortages etc”) for many many decades.

      Your own employment choice sounds obvious. But that is my point about the difference between an individual firm perspective (for whom the rest of the system is a given) and a whole economy perspective.

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    • Not that obvious. I am more inclined to try and get more profit and lower costs. My actual personal preference is to hire the local kiwi and train the individual because I can then get a cheaper person and a higher margin. Slower output initially but cheaper in the longer term. I just have to be careful not to get into accusations of gender bias. It is actually easier to keep salaries lower for longer when you train someone. Of course the risk is that the person is difficult to train then the 90 day probation contract becomes quite useful. But of course a wrong selection could mean huge disruptions to the business before the right candidate comes along to get the job done.

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      • I have a Maori applicant just shortlisted. Excellent CV with a 70%fit to position description. Spoke to her briefly as she was leaving to attend a wedding out of Auckland. Excellent communicator. But 3 jobs in 15 months just got my alarm bells ringing. Does indicate a volatile temperament or easily bored. Also unqualified but has done the hard yards ie very experienced. Already resigned her previous employer but they are her referees. So a in depth reference check is going to be absolutely critical.

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      • I understand about hiring staff; you want the most able/best attitude person you can get for the price you are prepared to pay and that is precisely what MR has been on about. In an absurd race to the bottom we have been displacing some of our most able Kiwis with immigrants from some of the lowest productivity countries.
        Our wage and productivity growth is stifled and there is less incentive for the army of ex-pat Kiwis to return home. It is far from satisfactory that our bright young Kiwis see their future elsewhere. Their wages and prospects have been reduced and our major city has become a gridlocked nightmare with an economy dominated by low value “mowing each others lawns” type of businesses, weak exports and housing bid out of all proportion by a totally unsustainable mass of immigrants. That’s not the country I (or the immigrants probably) want.

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    • 150 job applications for a below average wage job would suggest, unless the advertising was wildly misleading, that there is no shortage of willing workers. Only one Kiwi shortlisted and they’re not even close with a 40% match to the job description but a Maori (not a Kiwi Maori?) has a 70% match.
      Are you making all this up as you go?

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      • $55k to $60k on offer and this are the facts on the ground. Nothing made up mate. My kiwi born boss of UK migrants is shortlisting the 150 applicants for me to do 2nd stage interviews. Of course he will make the final decision. The pakeha kiwi is young, qualified and has only 2 years work experience with the same company but in a different industry and therefore a 40% match. The kiwi Maori has 6 years work experience and with different companies but in a similar industry with her last employer of 8 months and therefore a wider experience and therefore a 70% match. Could be pakeha mixed but a FB search shows her family up north amongst the tribes.

        Of course the percentage match is my personal opinion but then I am paid top wages to keep the operations running at peak efficiency and I have been doing this for 30 years so you could say I am pretty good at what I do.

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      • Fair enough, it does sound a bit strange though and the obsession with race and nationality probably not even legal. Is this in Auckland, perhaps all the qualified Kiwis have headed off to other parts of the country – we are certainly seeing many up here in the Bay of Islands? See Nadine Higgins in today’s Sunday Star.
        BTW thanks for the reassurance but I’m sure there has never been any doubts regarding your opinion of yourself.

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      • This is a website blog that is attempting to link immigration and productivity poverty. I am just giving an example of what an employer on the ground is actually faced with. The reality is I have to make operational decisions on the ground. Decisions are made not solely based on wages. All factors are taken into account.

        Michael is attempting to guide employers who they can hire to get work done and the wage payable, forcing wages up if necessary. But industry makes decisions to make a profit and they will hire the best people that they need to get the job done at the selling price that is competitive.

        When operational decisions are made we hire to put the best team possible at the lowest costs possible in order to make a margin. Race is only a consideration not as a discrimination issue but whether the individual will fit into the culture of the team. Many migrants don’t make the cut because in our industry clear spoken and written English is a necessity.

        Therefore you don’t try and fix the symptom which Michael believes is fixed by reducing the migrant residency visa target. You look at the cause. The cause is the type of industries that we have in NZ and industry drives the type of migrants being employed. You have to try and fix the type of industries we have in NZ. Industry must drive the type of migrants and the skills required. Therefore if you want more skilled migrants you need to create industries that skilled migrants can work in or else they end up driving taxis.

        If our industry serviced a lot of foreigners then our choice of labour would have to be more foreign spoken language and more foreign written language which would have inevitable lead to more foreign migrants.

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      • GGS it is importantr you understand that this is a Macro Economics Blog-Site
        Michael Reddell in onr of his previous posts re-iterated for the umpteenth time he is a “macro guy” not a “micro guy”

        Frequently many of Michael’s statements do not translate very well into the real-world

        You need to accept that

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      • With regard to industries – an issue not addressed – in the first half of the last century most industries and business participants had an expected lifetime of forever – then about 1980 it was recognised that the lifespan of many industries was shortening – and in some industries it was sudden death – it was by then recognised that many business activities and occupations and skills had a lifetime of 5 years – current experience that we are now seeing has shown that to be true

        Very few businesses today can guarantee to a potential skilled migrant that they will still be in demand in 5 years time and that the business itself will still exist in 5 years time

        In my opinion if WE (the collective we) in New Zealand need to bring in skilled labour or particular sets of skills there should be a time limit of 5 years and then the skilled recruit must leave because the liklihood is their skills will have become redundant or diminished

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  2. If we are going to give residence points for people already having a NZ job, or job offer, do it only for pretty highly paid roles – perhaps those paying $100000 or more (you could age adjust it a bit too –

    Well we have had a few of these types imported for the Public Service and company roles. The public service ones seem to all turn out to be useless and have to be fired after they make great balls ups ( particularly the female ones), and some of them remain doing a not very inspiring effort at their jobs.

    We have plenty of talented people in NZ and ex NZ we just need to be a lot better at selecting them.

    http://www.stuff.co.nz/business/better-business/91787901/what-makes-a-good-ceo-probably-not-what-you-think

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    • Rather difficult to pay a chef $100,000? Not aware of too many talented local talent that can cook a decent yum Cha or a Indian curry or Naan bread? Top of the list of skilled migrants are chefs last year. Clearly needed by industry to feed tourists. You must have noticed that most tourists are actually foreigners?

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      • And therein lies the problem, that you can’t run a high income economy (with all benefits that we want from such) based on a low wage tourism industry. If the supply of chefs was reduced then $100,000PA may be needed to secure a quality chef thus lifting the cost of tourist’s meals and removing the cheap tourists from NZ’s market who, as Sir Paul Callaghan said, make us all poorer anyway.

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      • Tourists are coming whether we like it or not. And it is because they are coming, local businesses are investing to make a margin which means they are setting up restaurants, building hotels in order to meet that demand. Are you saying that afterall that investment in infrastructure they can’t hire a decent chef to make a healthy margin but must hire an expensive chef to run the business at a loss? It may be highly productive but not necessarily profitable.

        Tourists will visit NZ because of the beautiful scenery. It is free to do that. Therefore you will not reduce the number of tourists by reducing the number of chefs. Industry is about increasing their stay period and increasing the spend amount. If we do not give them the food the want to eat then all they do is shop in the local supermarket and cook their own meals which means that we lose out on the add value margin.

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      • The chef example is merely indicative of the low wage tourism industry in NZ. If the cost of labour increased, tourism businesses would become more productive to stay profitable (or fail if unprofitable). Are you suggesting that we should continue to accept low productivity in order to stay profitable?
        If NZ was a much higher cost destination tourist numbers would decrease (due to reduction in ‘cheap’ tourists) and spend amount per tourist per day would increase. And if we really do have such a fantastic product then they will gladly pay more, and more of such high spend tourists will come

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      • The highest productivity would be to have robots do the work of humans. The problem with too much productivity is that as you get more productive you also reduce the spillover discretionary spending in the local communities. Robots do not have to eat so you need fewer restaurants. Robots do not need entertainment so you shut down theatres, pubs, The profits flow into the hands of a few shareholders who become the ultra rich which governments will then have to spend more time on how to tax and redistribute wealth to a population that has no work.

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  3. GGstuff I agree with you. Michael doesn’t know the first thing about the NZ labour market. I bet he has never done any “empirical” research, like ringing any recruitment agencies in Chc, Wellington or Auckland.

    He’s looked at some statistics and thinks he can extrapolate

    The comments he made about primary school teachers and their salaries and abilities had me in fits of laughter. Our education system is in serial decline and you benchmark quality against these people. Its your assumption that this is the minimum, people who have no skills, all they can do is teach.

    Your arrogance that people earning below this benchmark are some how inferior is breath taking.

    The labour party suggestion has been shot down on WhaleOil, posted today, and much of it applies to your thinking too, posted below.

    NZ would simply grind to a halt if any of your “recommendations were attempted.

    You have also failed to look at the demand side of the equation.

    You have also not examined the “quality” side of he supply equation.
    You have also not addressed why 57,000 people wanted to leave paradise to Dec 2016, or continue to want to

    Here’s my solution which would fix a large part of the problem very, very quickly:

    1. With effect immediately the dole is reduced by 50%
    2. With effect immediately it is paid in food stamps or coupons
    3. With effect immediately if you are on the dole and dont accept and work for 9 months on 1 of 3 job choices you stand down from the dole or other benefit for 1 year.
    4. Under 15 the minimum wage is set at $8.50 per hour (aimed at clearing up the 90,000 youth unemployment)
    5 Under 17 the minimum wage is $12 per hour
    6 Under 18 $15 per hour
    7 Over 18 at market rate determined by employer
    8 and I could go on but I suspect it would fall on infertile ground…still enjoy your posts though, testing the real world against a theorist!!!

    From Whaeloil today

    “Andrew Little cannot abolish the essential skills visa category, unless he comes up with a way to rapidly train thousands of Kiwis to work in areas where there are skill shortages.

    If he abolishes the Working Holiday Scheme, then our friend nations will likely retaliate and prevent Kiwis from having working holidays too.

    The Family/Spouse visa could be culled, but he’d be breaking hearts across the globe, and if he abolishes the study-to-work scheme, that would have a serious impact on the number of international students coming to New Zealand universities and polytechnics.

    The seasonal working visas are only five percent of the work category, and are a vital part of our role as a responsible Pacific neighbour.

    Then there’s the ‘other’ category which is so complex, there cannot be a blanket abolition without breaching free trade deals, or regional agreements.

    So, it is a policy that doesn’t stack up, can’t be implemented, is unworkable and is dopey. That’s not a policy, it’s a dog whistle.”

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  4. Suggest you read this post from Economics NZ blog, far more balanced approach to use of statistics

    “If you’re concerned that unskilled emigrants are driving down wages and stealing the everyday battlers’ jobs at the hard end of the labour market, the greatest rise in vacancies in recent years has actually been for unskilled and semi-skilled jobs.

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    • Of course you can use this same graph to argue that immigrants HAVE been holding down wages for the unskilled. I will leave it to you to figure it out – you clearly think yourself the smartest person in the room.

      Bottom line is this graph illustrates nothing. More half-assed empirical analysis from the blogosphere.

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  5. Its Saturday night and I cant go past one more crack at Michael..

    You are straight out of the Helen Clark camp, she loathed McDonalds, and anybody working there, inferior beings. This from a women who has spent her whole life “in the trough” of so called public service,.

    Like her, you don’t understand the bell curve of intellectual abilities, a statistically proven fact you cant refute!
    We cant all be RBNZ economists on $300,000 to write reports

    I don’t want to employ a $49,000 a year 20 year old “boy” installer to put my high quality European PVC window joinery in, because
    1. I have competitors, there are options and different price points
    2. Customers don’t want to pay that rate,

    Point 2 is where your whole model falls down.

    The other point you don’t understand is NZ is a “jobbing” economy, as we only have 4.5m people, unlike Germany with 70m and the USA with 350m

    Oh and by the way most of the people I have met in life earning less than $49,000 have far more skills and abilities than most teachers I have met. They know what hard work is, have to perform every day, and have their performance measured every day, unlike our unionised teachers (most of whom are prime candidates for some of your productivity improvement !)

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    • I’m surprised that you think i have a high view of primary school teachers starting out with a BA. I definitely don’t. I also have no criticism of NZers earning less than teachers do. but we are talking about immigration policy here: the choice to allow people from abroad to settle here, allegedly to lift NZ productivity levels and NZers’ income. On average, salary is a reasonable indicator of skill, and low salary people are simply unlikely to offer the sorts of transformative skills that will benefit NZers. At the margin – and this isn’t a big theme of mine – they are corroding the earnings of relatively lowly skilled NZers. The rest home workers are an excellent example: wages there aren’t low because of systemic sexism, but because really easy access to a large pool of migrant labour has cleared the market at an uncomfortably low wage. I’d pull back on the immigration. Our ostensibly centre-right govt sees the solution as being a massive direct govt interference in market wage setting.

      It is also disorienting to, for the first time, in my life to be put in a category with Helen Clark. I struggle to think of a view that we’d have in common.

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      • Rest Home Workers

        That’s a real worry

        Two points

        1. There are 55,000 rest-home workers according to the news on TV, and each worker on average cares for 10 people which means there are 550,000 NZ’ers in rest homes – thats 12% of the total population – yikes

        2. Rest Home costs are not cheap, in fact from the scuttlebut one hears the costs are seriously high and take a huge slice of rest-home clients income and assets

        So either rest-home operators are exploiting their dependence on migrant labour and are usuriously profitable or if you were to ease back on importation of that migrant labour and rest-home operators had to increase wages to attract locals, or cut back on the service provided, they would have to increase prices in order to maintain profit levels

        Wonder what would happen – for sure there would be howls and screams and the following would be out in force drowning out everyone else

        Peak Bodies, Peddlers of influence, Power Brokers, Rent Seekers, Lobbyists, seekers of Patronage, Influencers, Vested Interests, Urgers and Shysters, Pushers

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      • Rest Home Workers

        I’m picking if you were to ease back on importation of migrant rest-home workers and rest-home costs went up that would force the government to increase the subsidy in addition to the $2 billion the announced wage-increase – this government is riding an expensive tiger and can’t get off

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      • I was just watching a video clip of a lady that has now taken 4 long haul cruise holidays back to back. She worked out that she was saving $65 a week and was still treated like royalty on a cruise ship compared to a rest home.

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      • If word gets around that it is cheaper to live on a cruise ship then rest homes will be losing their clientele and be out of business. I wonder if the government provides accomodation supplements on cruise ships as an option?

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      • I agree with Ryan – kudos.

        Also it is rather concerning the number of New Zealand business owners/managers commenting here and on other sites (such as the NBR) who equate personal experience at the micro level as being indicative of what would make “best policy” at a macro level.

        It doesn’t bode well​ for tackling some of our more intractible issues as a nation.

        Liked by 2 people

      • Rest Home Workers: assume 5 workers needed for 24hour 7days a week that results in 110,000 in rest homes or <2% of the population. I'm surprised it isn't higher and judging by the great care I'm getting with my blood pressure and my wife is getting with her cancer treatment I expect many more citizens to bypass sudden death and proceed to a prolonged decline. In other words a major growth industry with only a minor opportunity for replacing workers with robots.
        Of course we need a definition of a rest home – in North Shore Auckland you enter a retirement village full of life and then party all day every day but if you don't die suddenly on the dance floor in the swimming pool or at the gym you steadily decline in health until you are just about comatose – all at the same location.

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  6. “Severely cut back the ability of foreign students to work while doing lower-level courses, remove any residence points offered for such courses, and cut back on the “study to work” options and (the export incentives would drop away and) foreign student numbers would quite quickly fall back a long way. One doesn’t even need to cut for every programme – one can treat lower-level PTE courses differently to university degree courses, and even within university programmes treat post-graduate courses rather more generously. We are happy to take – even want – really able people. We shouldn’t be taking people who can’t even command $49000 per annum in the domestic labour market.”

    Seems like a no brainer to me. And for skilled migration, I wouldn’t have thought we should be taking anyone on less than $100k, if not $150k (i.e. 2x or 3x the median wage).

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    • Then you just end up with $100,000 migrant chefs and $100,000 migrant front office managers because hotels and businesses do need those migrant labour to service those 3.5 million foreign tourists.who speak foreign languages and eat foreign food. That equates to lower profits for local NZ business owners and richer migrant labourers. It would not change the number of migrant workers coming into NZ because it is the foreign tourist driving the need for foreign labour.

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  7. This blog is invariably erudite and the comments usually informative and thought provoking. Since thinking about immigration is now a popular political matter maybe this blog will also be persuasive to influential politicians.
    However they may like myself be so irritated by a side issue that they will miss the immigration message. The argument stands up whichever middle income job is chosen. If you had written senior librarian instead of primary school teacher then I’d have no problem.
    I’m not and never have been a teacher but having walked my son and then my grandson to a local primary school I can only say the primary schools and their teachers in NZ are superb. We have to admire people who can do what we can’t and never could. probably I’d be a rather poor maths teacher and a very average university lecturer but with effort I would have just about got by. But I could never be a primary school teacher just because of their special combination of talents (mild academic / strong empathy / immense common sense / multi-tasking) and the simple fact that in a classroom they never get an opportunity to relax. In my working career when the brain overloaded it was off to make coffee or just change to another task for a while.
    It seems obvious and also supported by academic research that early learning is more significant than later so logically a grade 1 teacher should be the apex of educational jobs.
    For proof of the abilities of ‘average’ primary school teachers watch my local school on a Wednesday at 9am; they get all the children outside and lined up and dancing to disco music at ‘Jump Jam’ and when it finishes they troop neatly back to their classrooms. Herding cats would be easier. While once a week these teachers achieve the impossible Auckland council has bums on seats earning many multiples of a teachers wage and surely we could all do their jobs with very little effort

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    • Bob

      My impression of the average primary school teacher, over now 9 years of continuous observation with our kids, is probably less uniformly positive than yours. There have been really impressive ones, ones who seemed to be running out the clock (doing little to stretch or extend kids), ……and there also was the one who disappeared so suddenly with no details ever conveyed to parents or kids that one could only surmise he was facing criminal charges with name suppression. Perhaps wrongly, my sense is that the average skill level of primary teachers has fallen over the decades as more other opportunities opened up elsewhere in the market for women.

      But I really only used teachers as an example because they have an easy to find national pay scale, and the starting salary happened to coincide roughly with the new income threshold for claiming residency points. A typical primary teacher with 10 years service no doubt does a pretty good job, but like most 21/22 year olds starting out, new primary teachers still have a great deal to learn (as indeed do new Reserve Bank economists – it is just that i no longer have at my finger tips what they get paid).

      And of course there are plenty of tough jobs paying less than $49000, and the people doing them deserve respect for what they do. But if we are running a policy-intervention based on bringing in highly-skilled able and innovative people, a new entrant salary for someone in a job that needs just a basic degree doesn’t seem a suitable income threshold.

      Having said that, in principle it does depend somewhat on age. A 21 year old migrant is all potential (but it is often hard to know how large that potential is), while a 35 year old should already have established that potential and been able to signal it with a much higher price in the labour market.

      Liked by 1 person

      • If as said above a book-keeper can command $65k then the $49k is too low.

        There is plenty of room for improvement in Education in NZ but given the low salaries I’m surprised by the quality of the primary teachers and admire those I couldn’t emulate. Invert the educational pyramid and give most kudos and salary to those who teach the youngest. Maybe there is a different blog for education.

        Education is a far harder issue than macro-economics and running the reserve bank – with less agreement as to what the objectives actually are, far more dimensions of complexity, greater difficulty in measuring and hardly anybody believes they understand economics but everyone truly is an expert in education (with the possible exception of some ‘education experts’ who probably floated in an academic stream, are devoid of real world experience and have forgotten the lessons learned in the playground).

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      • The education system is almost certainly harder if run as largely a state-monolith. Personally, I’d favour a great deal more effective parental choice.

        I’m not going to start a long debate about teachers, just to note that lots of people have skills I couldn’t emulate (easily if at all) and I admire a job well done. But many of those roles don’t command terribly high remuneration in the market.

        Liked by 1 person

  8. A low limit of about $50,000 will be easy to rort. Just ask to work 70 hours per week for 50 weeks a year. Or agree to return cash to the employer. In other words these jobs need to be with well established responsible employers.

    Liked by 1 person

  9. My apologies Michael, I might have been a bit rough and abrasive, and to anyone else who may have taken offensive to the way I portrayed my ideas, I don’t resile from them as ideas, however.

    Ryan the comment about me, ” you clearly think yourself the smartest person in the room” I only have a third class Economics degree, MA, from Auckland University, there were a lot smarter (academically) people in the class than me, in fact I think I was bottom of the class. You learn in life, later, however that means stuff all.

    Rascally_Rabbit “who equate personal experience at the micro level as being indicative of what would make “best policy” at a macro level” Well you have to know what you are talking about if you want to make Macro theory as it applies to the micro world. If you don’t understand the NZ labour market you can end up with bad Macro policy.

    Restricting supply (immigration) ignores the demand side. These people didn’t just waltz into the country, there was a huge pent up demand.

    So you restrict supply to 25,000 net gain, why are 57,000 people leaving the country?

    And finally, “a rising tide lifts all boats”

    Thanks Michael I enjoy your stimulating posts!

    Like

    • “There is huge pent up demand” I take it that you mean for staff and ergo more immigration yet GGS gets hundreds (and rising) applications for his bookkeeping job, a job with quite specific requirements for experience and English language skills.
      I’m sorry Ross but it seems to me that the only pent up demand is from a whole lot of desperate people trying to get a job. The likely consequence of that will be declining wages and even more Kiwis looking for greener pastures elsewhere. Not so much a rising tide as a sinking ship.
      Auckland looks highly imbalanced (thanks in no small part to the recent waves of poor quality immigration) with a dangerous combination of ginned up, speculative property prices, choking gridlock, a superficial services based economy and masses of soon to be unemployed third world hopefuls in a race to the bottom. We are seeing that already, I don’t know how much clearer it needs to be; just look at the almost daily reports of semi slave $3/hour jobs , tax evasion and immigration fraud. Try running a legitimate business in competition with that and come back and tell us about rising tides.

      Liked by 2 people

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