Orr off the record on major policy matters

A reader mentions news that Reserve Bank Governor Adrian Orr was in typically loquacious form at a finance industry “networking event” held in Wellington last night.

Typically loquacious but, so the report suggests, perhaps going rather beyond the Bank’s public lines on monetary policy as articulated in the August Monetary Policy Statement, in a very dovish direction.     And weighing in on what sort of person he wanted (and did not want –  economists apparently not wanted) on the new Monetary Policy Committee –  the one where the Minister supposedly makes the appointment, the one where the legislation has not yet been dealt with by the relevant select committee.

Central bankers need to be very cautious in their communications around monetary policy.  The standard approach has been to communicate primarily via Monetary Policy Statements, where everyone has access to the same information (although I gather the Bank still holds confidential debriefs for bank economists as a group after each release, and if that isn’t potentially market sensitive it is hard to imagine what would be).  That approach is sometimes supplemented with speeches: on-the-record ones where there is anything at all interesting, important, or potentially sensitive being said, and off-the-record ones where it is just repeating the same lines previously made public.

The speeches themselves are not without their problems as the Reserve Bank of New Zealand handles things.  For instance, although the Governor has been in the role for five months now, there has been no on-the-record speech at all.  And even when Governors have spoken in the past, there is often considerable potential for nuance or shades of information in the Q&A sessions afterwards.  At the Reserve Bank of Australia, it is common practice for those Q&A sessions to be recorded and made available on the RBA website.  There is nothing comparable here, and the Bank has often refused to allow media access to events where the Governor –  a senior public official – is speaking.  If you are lucky enough to be there you get information that the market as a whole doesn’t have.  That simply shouldn’t be acceptable.

Perhaps some journalists might like to find out from participants, or from the Governor, what he actually said last night, complete with (potentially market-moving) nuances.  Any other readers who were there who want to flesh out the account I’ve heard feel free to get in touch or comment (anonymously if you like) below.

But as it was relayed to me, it doesn’t sound like the sort of approach we should expect from any serious person holding a major public role.

Work visas for shop managers

We learned yesterday that the firm that owns Burger King in New Zealand has been banned from using migrant labour (ie people on work visas, not resident non-citizens) for a year.

The penalty was imposed on Burger King not, it is reported, because of a migration-related offence, but because the company was founding guilty of breaches of the minimum wage laws in respect of someone (reportedly not on a work visa) working as a store manager.  A company that can’t be relied on to follow some aspects of labour law probably isn’t the sort of firm that should be counted on to treat short-term migrant labour well.  So even though I think our minimum wage is (relative to nationwide productivity and median earnings) too high, I’m not bothered at all by the ban.

But surely the bigger question that should be addressed to the government is why companies are able to use “migrant labour” in such modestly-skilled low-paying roles at all.   As a reminder (and complaining again about the inordinate delays in MBIE releasing timely data), in 2016/17 these were the top four occupations for the principal applicants in the Skilled Migrant category of our residence approvals programme  (in other words, the cream of the crop).

Main occupations for Skilled Migrant Category principal applicants, 2016/17  
Occupation 2016/17
Number %
Chef 684 5.7%
Registered Nurse (Aged Care) 559 4.6%
Retail Manager (General) 503 4.2%
Cafe or Restaurant Manager 452 3.7%

 

And among those who got (so-called) Essential Skills work visas

Number of people granted Essential Skills work visas by main occupations, 2016/17
Occupation Number %
Chef 2,178 6.6%
Dairy Cattle Farm Worker 1,617 4.9%
Carpenter 1,478 4.5%
Retail Supervisor 961 2.9%
Cafe or Restaurant Manager 942 2.9%
Retail Manager (General) 767 2.3%
Aged or Disabled Carer 748 2.3%

Large numbers of people who appear to have no particular qualifications or specialist expertise, doing jobs that often don’t seem to pay much more than the minimum wage (when the law is being followed at all –  and it is widely known that there are much more egregious cases than the Burger King example, where migrant workers are required to pay back, under the table, much of any salary as a ‘fee’ for getting them into New Zealand.)

There is an argument that some economists make that we can gain economically by letting in lots of quite unskilled people.  Even economists think such an approach is likely to leave lower-skilled natives worse off.

igm lowskilled

As I noted last year, commenting on one UK academic who celebrated the possibilities of lots of low-skilled migrants (lowering the costs of cleaning, childcare and so on)

What Bateman is in fact arguing for is a policy designed to explicitly help people like her, at the expense of poorer less highly-skilled Britons (in fact, in the roles she talks of typically poorer relatively unskilled British women).  No one person is ever an exact substitute for another, but there is a great deal of overlap.    Even though she never says it, what Bateman is arguing for is a policy designed to increase the differences in incomes between the highly-skilled and the less-skilled –  for the comfort of the highly-skilled (women and their spouses).

Many advocates of a fairly liberal approach to immigration like to downplay the possibility of any costs to low-skilled natives of the recipient country, but Bateman’s argument relies almost entirely on those costs.  Reasonable people can debate how large the actual adverse effects are, but Bateman clearly believes they are large –  that is why, in her view, immigration makes things so much easier for people like her.     And she can’t even be arguing  –  as some might –  that it is just a transitional effect, or otherwise the possibility of outsourcing domestic duties cheaply would soon go away again.  So it seems to be a vision of society that involves repeatedly importing new waves of lowly-skilled immigrants to keep the relative returns to low-skilled labour sufficiently low to make life comfortable for the professional classes.

Whatever the other arguments for and against immigration, it is hardly surprising that citizens might rebel against a proposal to bring in lots of foreigners to widen the income gaps in society –  not just those between nationals and non-citizen foreigners, but those between skilled and unskilled nationals.   Sceptics of other economic reforms will argue that some of those changes also had that effect, but even if so (which I mostly dispute) it was never the intention, or the envisaged long-term effect.  By contrast, Bateman’s argument is in effect for using immigration to maintain a permanent class of helots –  not always the same specific people, but a constantly refreshed pool of people able to earn relatively little, because of the direct competition fron unskilled new arrivals.

Of course, this isn’t the (avowed) approach of the New Zealand immigration programme, which is supposedly mostly about skills –  highly able and talented people, building on what is already here (inadequate as the advocates believe that is) to lift the productivity and incomes of us all.

But that story has long been threadbare.  The evidence for the productivity gains is non-existent (in a country whose productivity continues to drift further behind that of other advanced countries) and instead we import large numbers people with few very obvious skills, too often doing jobs which appear to pay not a lot more than the minimum wage.  It is a rort against New Zealanders.

Now that the government is falling over itself to pander to business interests on anything not central to its own (mostly economically damaging) agenda, there is clearly no chance of any sensible immigration reform under this government (any more than under its predecessor). If anything, talk of regionalising immigration policy would make things even worse.  But for what it is worth I repeat my suggestion around short-term work visas, which would get bureaucrats out of the rationing business, and rely more heavily on the market.

Institute work visa provisions that are:

a. Capped in length of time (a single maximum term of three years, with at least a year overseas before any return on a subsequent work visa).

b. Subject to a fee, of perhaps $20000 per annum or 20 per cent of the employee’s annual income (whichever is greater).

If it is really worth it to a firm to pay a $20000 annual fee on top of a salary to have someone on a work visa, well and good.  But that doesn’t seem likely for very many of the sorts of jobs that top the work visa occupational list.

And recall that markets can and will adjust.  The Canadian federal Minister of Immigration spoke at Victoria University the other day (I hope to come back to his address in greater length later): Canada is in the process of over-leaping New Zealand to claim the dubious crown of largest (per capita) planned migration programme in the advanced world.  The Minister told us lots of stories about skills shortages, and “desperate” needs for workers (in a country with an unemployment rate of 5.8 per cent) –  we heard several times about an apparently desperate need for “50000 truck drivers right now”, and yet never once did the Minister address or even mention the typical market adjustment mechanism: when demand for a resource is scarce, the price will tend to rise to encourage resources to move to meet the demand.      If it is hard to staff fast-food restaurants, or dairy farms, or rest homes, it is a sign –  in an economy that is, at best, only sitting around the NAIRU – that workers in those roles aren’t being paid enough.  It really is (almost) as simple as that.