Immigration, the election, and shelf-stackers

Back in February I had coffee with a senior journalist, who was convinced that immigration was going to be a central issue in this year’s election campaign.  The journalist cited the Trump and Brexit phenomena, and I suppose at the time Geert Wilders and Marine le Pen were in the wind.   I was a bit sceptical.  I’d, mostly, have welcomed such a central place in the election campaign for what I regard as one of the key long-term failings in our economic policy settings.   But I didn’t really see any sign of a Trumpian insurgent – or a mood that was just waiting for such a person – or of the fascinating mix of motivations (immigration was only one) that had driven the Brexit vote.  But my interlocutor told me that political party focus groups were picking immigration up as a key issue, and suggested that the media need to attract readers would help fuel an intense focus on immigration.  I think there was a sense back then that National was in such a strong position in the polls that an issue like immigration would, as much as anything, be hyped to help keep things interesting.

As I say, I was sceptical –  although interested in the focus group snippet (which I later had confirmed by one MP).   We had dreadfully high house prices, and a dismal productivity (and exports) performance. High immigration has played a part in both those outcomes.  But those weren’t, it seemed to me, the sort of visceral dimensions that seemed to have played such a part in other countries: our last experience of terrorism was state-sponsored, by France; we don’t have problems with illegal immigration (some upsides to being a remote island), and we haven’t had problems with substantial Muslim immigration.  And for all my concerns about the mediocre quality of the skills of the median migrant, we’ve done less badly on that count that many other OECD countries (again, land borders and an explicit economic focus to the programme both help).

But now we are two days out from the election, and it is clear that immigration hasn’t played a particularly important role in the campaign at all.  New Zealand First –  which might have been a natural recipient of votes if there had been an upsurge in serious concerns –  looks as if it might end up with a smaller vote share than it had in 2014.   The government made some minor tweaks to immigration policy this year, on top of some other minor tweaks last year.   And Labour’s immigration policy didn’t involve much change –  outside the overseas student sector –  and hasn’t (at least that I’ve seen) had any pro-active place in their campaigning.   Oh, and the Greens’ leader ended up abjectly apologising to his base, casting slurs all round, for even having suggested last year a rational debate on the appropriate rate of immigration.

It is interesting to ponder why immigration hasn’t been a key issue.  After all, if one focuses (inappropriately, but as the headline writers do) on the PLT numbers there has been no abatement in the net inflow (whether of non-citizens –  the bit policy bears on –  or the reduced outflow of citizens).  And the “true” net inflow is almost as high, as a per cent of the population, as the previous peak 15 years ago, and it has run on for longer.

One reason is, presumably, the change in the political personalities.  At the start of the year, many thought the campaign might see Labour at or below the vote share it got in 2014, and New Zealand First and Greens perhaps both polling in the teens, and scrapping for second place in a possible left-led government.  Perhaps that might have been a climate in which Labour and New Zealand First in particular might have more prominently battled to capture those who were concerned about immigration-related issues.  But the “Jacinda effect” transformed that outlook and the campaign has mostly been like something from the old days: two big parties, with some minor players struggling for attention and coverage.    And although Labour has stuck with the immigration policy announced under Andrew Little, it is clear that Ardern has made a conscious choice to de-emphasise that policy, even though the focus of the proposed changes was on the deeply-flawed student market.

But I wonder whether some other factors aren’t at least as relevant among voters (and for all the talk of “leadership” a great deal of what politicians do is “followership”).   For one, house price inflation has abated in much of the country, and although house prices in Auckland remain sky-high they’ve gone roughly sideways for a year or so.    Quite why that has happened is still debated, but it isn’t because (a) the rate of growth of the number of people needing a roof over their head has slowed, or (b) because housebuilding in Auckland is now proceeding so rapidly that it has got ahead of population growth, or (c) because regulatory reforms have freed up land use sufficiently that peripheral section prices are now plummeting.     More plausibly, it is some mix of (a) rising domestic interest rates, (b) the tighter LVR controls the Reserve Bank put on last year, (c) tighter credit standards the banks themselves have established, under the influence of parents and of APRA, and (d) reduced capital outflows from China as the regime has tightened-up its controls.  But whatever the precise reason, it has taken much of intense heat out of the house price issue –  imagine if the opposition has still been able to repeat endlessly “house prices in Auckland are up another [x] per cent in just the last six months.   And with it, much of the heat around the immigration issue?

And the other reason –  one of the reasons I was sceptical of the political salience of the issue at present –  is the point I have been arguing for (and that previous generations of NZ economists recognised ) for years.  In the short-term, high and unexpected immigration adds more to demand in the economy than it does to supply.  In other words, it tends to boost economic activity –  measured or headline GDP for example –  and put more pressure on scarce resources.  Migrants don’t take jobs from locals, or add to unemployment; if anything, in the short to medium term, they add more to the demand for labour (all that capital stock that needs to be built) than to supply, and thus migration inflows tend to reduce unemployment.   The sugar-high is a real thing.  The effects might not last long, but when the dose is repeated each year for several in a row, it does have an effect.

There might have been no productivity growth at all for five years, but that sort of concept or measure doesn’t easily get much public resonance.  Exports might be shrinking as a share of GDP, as the need to build to cope with a rapidly-rising population crowds out the tradables sector……but it is a geeky macro statistic, and not one that anyone has successfully built a narrative around.  And perhaps people aren’t feeling good about their wages, but as I’ve noted recently, real wages have been rising consistently faster than productivity for some years now.  It is an unsustainable, unbalanced, mix, but it isn’t one that was ever going to capture the public imagination in any sort of “build a wall” way.  In the short-term, for those (most) with jobs things don’t seem too bad.  And even the Leader of Opposition has repeated on numerous occasions that the economy is doing fine.

And, of course, few of us want to be nasty about individual migrants (and of course, as I argue, the issue is New Zealand policy, not the rational choices of individuals), and no one wants to be subject to the dread “r-word” slur.

In many respects, I’ve long thought that the best environment for a serious public pushback against the out-of-step, failing, immigration policy we have run for a long time, is in the next severe downturn.  I wouldn’t welcome recessions – and remain concerned that the government and the Reserve Bank aren’t doing enough to prepare for the next one – but in a sense it is in periods when things are manifestly not going well that one is perhaps more likely to find a willingness to contemplate serious change in policy.  That’s a shame –  the best time (easiest adjustment) to make changes would be now, when the economic environment globally isn’t too bad –  but perhaps it is unavoidable, especially when (as above) we –  fortunately – don’t have the visceral issues around immigration that some other countries do.

Immigration policy did come up at the local candidates’ meeting last night.   The minor party representatives were predictable –  the Greens candidate was adamant that we “knew” that migrants benefited us economically, while on the other side the most entertaining TOP candidate –  whose opening speech was done in iambic pentameter – made the case for easier access for really skilled migrants, but for fewer migrants overall to ease the (claimed) downward pressure on wages.

Chris Finlayson repeated some of the serious misrepresentations that seem to characterise his party’s view.  We were told of the lots of New Zealanders who were coming back from Australia (when in the year to June 2017, a net 4678 New Zealanders left for Australia) and about how the immigration policy was bringing in the tradespeople wiuth the skills needed for, for example, the housebuilding.  I heard the PM repeat that line –  who will build the houses if we cut immigration – on Radio New Zealand yesterday: I would draw his attention, and that of his minister and local candidate to the data suggesting that the net immigration of building trades people is very small relative to (a) the actual increase in the construction workforce in recent years, and (b) to the total increase in the need for new housebuilding occasioned by the rapid increase in the population.   High immigration is worsening, not easing, those pressures.

But it was Labour candidate –  and near-certain winner –  Deputy Mayor, Paul Eagle whose comments on immigration really caught my attention.  He was obviously feeling on the defensive about the issue, and thus even though Labour’s actual policy proposals focus (numerically) mostly on fixing up some of the rorts around the student visa sector, he never mentioned that issue at all.  Instead, he wanted to stress that Labour welcomed immigration, and that we need immigration in some sectors.  It sounded fine, more or less, until he went on:  “Island Bay New World needs people”.   So can we take it that official Labour policy, enunciated by a candidate likely to be an MP for many years to come, is that we need immigration –  perhaps even more immigration –  so that the supermarket shelves get stacked?  What, I wondered, had we come to?  Once –  in MBIE”s words – a “critical economic enabler”, and now shelf stackers?

(And for anyone interested in some more observations from our Attorney-General, someone asked from the floor about Jim Bolger’s recent denunciation of “neo-liberalism”.  This senior minister got up and indicated he had talked to Bolger about what he had said, clarifying that he had meant the policies adopted by Labour and National governments between 1984 and 1993.  Finlayson himself went on to characterise that period as one of “extremist economic policies” concluding that “that ideology does not work, and we are not that sort of party”.  One brave member of the audience –  Island Bay is a pretty left-liberal sort of place –  called out “but none of it has been repealed has it?”        Was it floating the exchange rate, removing farm subsidies, removing trade protection, making credit available to ordinary people, lowering maximum marginal tax rates, ending fiscal deficits as a norm, putting in place a good GST, removing union monopolies, privatising state-owned business operating in competitive markets, or what……that the Attorney-General of an allegedly centre-right pro-market government regarded as “extremist”? )

16 thoughts on “Immigration, the election, and shelf-stackers

  1. Winston Peters made the biggest mistake in his campaign when he got rather greedy for votes when it was clear he was stuck at 13% and could not go beyond that. He chose to chase the migrant votes by appointing a Chinese migrant on NZFirst Party List and toned back the anti migrant rhetoric. It has been downhill ever since. A party built on anti migrant slogans and rhetoric wanting to go mainstream just does not cut it with its own redneck voterbase unfortunately.

    Liked by 1 person

    • Certainly Winston Peters’ campaign has not been successful but I disagree about the effect of NZF having visible immigrants on their list. The academic evidence is that it is recent immigrants who suffer most from further immigration. I have meet several recent immigrants who are strongly against our high rate of immigration and some of them will be voting for NZF

      My guess as to why Winston has failed despite his evident political talents is he has just got too old. The discussion was inevitably ‘Winston’ not ‘NZF’. With Bill and Jacinda if they disappeared the pudding would remain the same but with a new sauce whereas Winston is the sauce and pudding and NZF without him is an empty bowl.

      Liked by 1 person

  2. Kathryn Ryan on RNZ did well this morning to trap Jacinda Ardern on the so called Kiwibuild that will churn out 10,000 low cost houses on land that does not as yet exist with phantom workers it does not have with money from Timbuktu which meant that Jacinda was stuck with cutting 20,000 to 30,000 out of only the student sector as you clearly need foreign workers for kiwibuild. That is the entire 12 months international students intake for a year. How totally dumb is that? Unfortunately Kathryn Ryan did not challenge how ridiculous that policy is. Talk about rookie mistakes. She has no specific details on any of Labours proposed policies.

    Liked by 1 person

    • High Immigration & poor Productivity are related.
      We not need any more people to build more houses, what we need is leadership with a some investment to enable us to build twice as many houses with the people we have, which is not remotely technically difficult. The size of NZ means the only organisation in NZ with the scale & money to do this is the Government, develop it as an SOE.

      Liked by 1 person

    • You forget that our largest industries are is now in International students and tourists. You may not have noticed but these are both service businesses contributing $15 billion export GDP. The flow on into domestic GDP is 100% which means the total GDP provided by this service sector could be as much as $30 to $40 billion in flow on into domestic GDP.

      Service business equate to more people. The best service is provided by more people not less. It is a mathematically impossibility to have a great service business run by fewer people. Unfortunately NZ economists can’t add properly. When 7 economists can’t find a problem with Labours budgeting numbers we have a serious problem with economists that can’t do maths.

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  3. Some time ago I asked if you were able to provide a link to a written governmental immigration policy to which you responded there is no such thing but there are a number of interdepartmental targets

    Yet here you are in this current article repeatedly using the term “immigration policy” and “policy” to which my auto-response is I want to examine it so I can assess for myself what the objectives are and whether they have been achieved or updated etc etc

    But, if I believe your earlier response that there is no such thing then it is smoke and mirrors which can never be pinned down and evaluated and commented on nor can the prognosticators ever be held to account because it is not an archival document but simply words that can evaporate

    Then I commented as follows about Strategic-Planning otherwise known as Long-Term-Planning
    https://croakingcassandra.com/2017/09/15/scattered-thoughts-on-tax-and-fiscal-policy/#comment-18431

    If you want to pin anything down that’s where you need to start
    Otherwise you are simply bloviating (beating your gums)

    Beats me how any government can implement a course of action without putting in place systems to measure the (a) economic benefits, and (b) economic dis-benefits, and (c) social benefits, and (d) social costs

    Liked by 1 person

    • Migrant Residence Visa – 16,505
      International Students – 24,167
      Foreign Workers Work – 45,780
      Long Stay Visitor – 6,567
      Returning Kiwis – 38,483
      Other – 651
      Total Arrivals – 132,153

      Jacinda Ardern wants to cut an impossible number of 20,000 to 30,000 out of International students and not foreign workers because she needs them for kiwibuild.

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      • “”Foreign Workers Work – 45,780″” – doesn’t a fraction of them convert to Migrant Residence?

        If Jacinda can cut the rorts and corruption and the worker exploitation I will be delighted. It would be doing the right thing because it is right.

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      • If foreign workers convert their visa to migrants it does not add to the numbers as they have already been counted. Labour already recognises that they will need those foreign workers numbers. There is no intention to take those numbers down she is talking about bringing in even more for Kiwibuild and for Monorail. So she is really on left with taking international students down by 20,000 to 30,000. That is an entire years new student intake for the year. That is a huge lie.

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      • The difference being you can send work visa holders home but not permanent residents. Work visas was a good solution in PNG. However they can up or down the numbers and I won’t complain if only they can eliminate the rorts and exploitation.

        http://www.nzherald.co.nz/front-page-top-stories/news/article.cfm?c_id=698&objectid=11924789&ref=CE-NZH-DND-PM
        “”An Auckland cafe owner who took advantage of migrant workers has been fined just over $30,000.”” How many get away with it?

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      • Giving permanent residency is just a recognition that this foreign worker has done his time, learned the culture and will be a good citizen. There is no guarantee that they will remain in NZ. The churn rate is around, keep 1 out of every 5 residency issued. A target of 50,000 a year will only result in 10,000 migrants that will remain in NZ which is the desired outcome to keep population growing at a rate of 2% per annum which is only a small annual increase.

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      • New Zealand is the size of Japan with 125 million people so an extra 90,000 a year in New Zealand is a very small increment each year.The reason we struggle with having more people is because our investments have been badly misdirected into primary industries which is highly subsidised. Michael keeps harping on about International students getting jobs as a subsidy. This is not a subsidy because employers do pay for them and it increases local business profitability. Farmers are heavily subsidised and it costs taxpayers to clean up the mess of 10 million cows which is equivalent to feeding and managing wastes of 200 million people. No wonder we find problems with 4.5 million people as too many. Its because we have misdirected our resources to 10 million cows But I am not going to fault National for that but we should at least recognise that a focus on primary industries is not a high productivity investment. Our NZ economists have just been badly negligent at forgetting to add cows in the denominator. Again a problem with not being able to do math as a fundamental problem with our economists.;

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      • To be clear, my point about “subsidies” to the international education sector isn’t mostly about the right to work while studying (altho that is an effective subsidy to the industry, as distinct from the student). My point is that a bundled product is on offer: study at a NZ institution and you;ll get preference for a subseqeunt work visa and then for residence points, The industry pays nothing for that advantage, which appears to be a considerable atttraction to many of the potential students. It is, thus, a subsidy to the industry, just as surely as if the Treasury sent them a check.

        I usually choose not to engage you on cows, but since I’m writing anyway, I agree with you about the pollution and the associated subsidy (and I’d favour pricing pollution and water). But your denominator still eludes me: we should care first and foremost about the economic welfare of NZ humans.

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