Immigration and NZ economic performance

Geoff Simmons, the economist who is leader of The Opportunities Party (TOP), invited me to come along to their monthly Wellington event to talk about my views on New Zealand’s immigration and the likely connections between high target rates of non-citizen immigration, extreme remoteness, and New Zealand’s long-running productivity underperformance.    Geoff has run a series of these conversations –  including one fairly recently with Arthur Grimes on the “wellbeing Budget”, and another on aspects of the tax system with Andrew Coleman.   They seem to be the party of policy wonks  (TOP’s own immigration policy –  much of which I’m fairly sympathetic to – is here).

Monday evening’s conversation with Geoff, and the follow-up Q&A session, was recorded and is now available (the title is their own –  I rather winced when I saw it this morning)

I haven’t listened to it again so am not sure how the story comes across in this format.  Like, I’m sure, almost every speaker ever I came away conscious of lines that could have been run better, or useful analogies that I forgot to include.  But for anyone interested, there it is.

I’ve done various presentations, articles, and so on on elements of my story, tailored for different audiences.  Some of those from recent years are

speeches

Links to all those are available here.

For the gist of the story, here are the last couple of paragraphs of one of those speeches.

40 years ago, Sir Robert Muldoon, Bill Birch and the rest of that government launched the series of incredibly costly energy projects known as Think Big.  It was, with the best will in the world, an utter disaster.  But it came to end after only a few years.   By contrast, our immigration programme, which has now run this way for almost 30 years is really much more deserving of the label Think Big: it is bigger, has skewed the economy more, has lasted longer, and has done much more to damage the prospects of New Zealanders living here.  There has been a central planners’ conceit that we can simply ignore what NZers are doing –  leaving, typically in large numbers –  and bring in lots of (modestly skilled) foreigners, and concentrate them in Auckland.  Do so, so the implicit story goes, and new highly rewarding industries and opportunities will arise –  the wonders of what economists call agglomeration.   It has proved to be an incredibly flawed strategy.  In successful big cities abroad, GDP per capita far exceeds that in the rest of the respective countries, and the gaps are growing.  Think London, or Paris or Shanghai, or San Francisco or Amsterdam.  But just don’t think Auckland.  Despite really rapid population growth over decades, Auckland’s GDP per capita exceeds the New Zealand average by only a modest margin.  And worse, for the 15 years for which we have data, that gap has been shrinking, not widening.    British exports are London-based, but it is hard to think of a material export industry that is based in Auckland (or Wellington).

We need to start taking more seriously the terrible disadvantages our distant location imposes.  That means it is time to give up the big (population) ambitions that have guided –  probably subconsciously –  most political leaders since at least Julius Vogel, and instead make the most of the strengths we already have: smart and energetic people and strong institutions.  Perhaps one day we’ll have exceptional productivity growth, and so many opportunities here that we simply can’t make the most of with the people we have.  For decades, it hasn’t been that way.  It isn’t now.  So we should stop the mythmaking, and revert to being a normal country –  one that makes its own prosperity, with its own people –  rather than endlessly hankering (as our officials and ministers constantly seem to) after some better class of people over the water who, if only we could get them, in enough numbers, might finally reverse our century of decline.  It simply won’t happen.  We need to change course.

37 thoughts on “Immigration and NZ economic performance

      • Lets all be very clear about the racist Treaty of Waitangi settlements at $400 million a year are definitely racist social welfare payments. Only the Maori race have this special entitlement. Our race relations commisioner, Meng Foon should stop his racist rants and start acting in a neutral capacity instead of sowing the seeds of racial disharmony.

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      • They aren’t full and final either GGS they are on a what we can get for now basis. Helen Clark admitted that and several iwi leaders have said so.

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  1. John Carran, 2 April 1996
    “Vehement opposition to immigration, particularly from Asian countries, in New Zealand from an ill-informed and xenophobic rabble persists despite overwhelming evidence that immigration will improve our long term economic prospects.
    In 1988 The Institute of Policy Studies published detailed research by Jacques Poot, Ganesh Nana and Bryan Philpott on the effects of migration on the New Zealand economy. The research, which abstracted from the social and environmental impact of immigration, concluded that “…a significant migration inflow can be beneficial to the performance of the New Zealand economy and subsequent consumption and income levels.” The authors point out that this is in general agreement with Australian research on the economic consequences of immigration.


    Of course there is more to life than attaining economic excellence. The social and environmental impact of immigration also needs to be considered. But here the reasons given for restricting immigration range from pathetic to extremely dodgy. Most of the accusations are barely disguised racist piffle backed by tenuous rumours and cloudy anecdotes. Winston Peters’ stirring of the masses has exposed the ignorance and racial biases of a small and distasteful section of New Zealand society. These people yearn for a cloistered, inhibited, white (with a bit of brown at the edges) dominated utopia fondly envisaged by racists and xenophobes everywhere.

    http://www.gmi.co.nz/news/1021/opposition-to-immigration-why-let-the-arguments-get-in-the-way.aspx

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    • I think people on high incomes are unaware of how different their and the lives of the lower classes are – a healthy person versus one confined to a wheel chair. For one thing if you are wealthy you can move neighbourhoods. How would these liberals would like to have people with tattooed heads in their street?
      In fact Local Government NZ says moving from a neighbourhood of high to low social cohesion is “as bad as taking up smoking”.

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      • I notice Jess Berentson-Shaw wrote one of their books The Workshop are into decolonisation so maybe Tops went under the influence. One thing about conservatives is that they are better judges of human nature than liberals who like novelty but anyone who thinks non Maori will be happy standing on a coastal headland and saying “Maori own all this” (as though they are foreigners without a country of their own) will soon get the message. Otherwise I would have supported them.

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    • Funny you should say this – Ohlin being a co-author of the Heckscher–Ohlin model. The model essentially says that countries export products that use their abundant and cheap factors of production, and import products that use the countries’ scarce factors. Sounds like NZ.

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  2. Note the hegemony of the left (theft) on RNZ TVNZ (and Media works). Always Paul Spoonley ($1500/day -every day according to TEU twitter) or Shamubeel Eaqub. That’s why Youtube is essential. We need more of these discussions between heterodox academics.

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  3. Michael,

    Do you have any data on the distributional effects of high immigration? Perhaps wealthier New Zealanders benefit even though it costs the economy as a whole.

    Liked by 1 person

    • I think you are right. And I have read passages by liberal economists Paul Krugman and Herman Daly that say much the same although their points are about the immigrants taking low wage jobs and the effect on the working class and the unemployed.

      If we had an unchanged rate of immigration but all immigrant families had annual earnings over $200,000 I suspect NZ would be thriving – see for example California’s Silicon Valley. But our elite do not want competition for their jobs; what they want are strawberry pickers and uber drivers and care-givers and checkout operators. So long as they can find cheap child care and cheap cappucino they will be content and NZ’s economy can gently keep falling behind the rest of the developed world.

      Liked by 2 people

    • Short answer: no (on data). To answer the question in any formal sense, one needs a fully-articulated model.

      But there are some relatively obvious winners: given the other regulatory restrictions on land use, anyone owning urban or peri-urban land in and around our big cities 20 years ago is a clear winner (artificial scarcity has driven up the price). Beyond that, the effects are often quite subtle because – at least on my argument – the large migration inflows have, all else equal, boosted the real exchange rate (which probably works, on average, to favour the relatively well-off and older segments of the population). Some firms/sectors look as tho they benefit a lot from immigration – dairy and tourism are superficially obvious examples – and yet with much lower immigration the real exchange rate would be materially lower and the competitiveness of those industries would be enhanced.

      One sector that does almost certainly benefit is the aged-care sector, now heavily (in some places almost exclusively) reliant on recent-immigrant labour. Rest-home operators (and their shareholders – not Rymans is one of the fastest-growing companies on our stock exchange) benefit from that, but so do families (purchasing rest home services for ageing parents) and (in particular) the Crown – which would otherwise face much higher rest home subsidies.

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  4. The 1988 economic analysis had almost no economic content. they had a model that simply assumed that there were economies of scale with a larger population. So when you run the model, which does not have fixed factors of production GDpPper capita goes up. It is assumed that wishing stocks, more land, and tourist sites simply materialise out of thin air.

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    • Tourist sites can certainly materialise from thin air in places like the Goldcoast and their billion dollar theme parks or an entire city like Las Vegas on gambling casinos are big draw cards for tourism.

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      • GGS But you have people like the Mayor of Westport saying the West Coast has enormous potential .Perhaps the Gold coast and Las Vegas were first movers, but both had sun. The thing is that you might be able to attract local people to lesser attractions to fish or have a picnic but not international tourists?

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      • Hawkes Bay perhaps? Lots of sun there. Also we are warming up nicely due to climate change. The current RMA would not allow the size of the theme parks they have in Goldcoast built in NZ. It is already quite clear to international business that we do not want any sizable building activity. Look at Fletchers bleeding investors cash watching police and protestors stare each other down over a tiny number of houses. Oh well, no wonder house prices keep escalating.

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  5. The No Zealand immigration policy (far greater proportionally than either the US or the UK), if not halted tomorrow, is going to be the primary driver of NZ Wars II.

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  6. There has been a real sea change in Australia in the last 3 months, typified by the reaction to a CIS report saying it was essentially impossible for the nation to build enough infrastructure to cope with the volume of people coming in to the main citiies. (https://www.smh.com.au/politics/federal/sydney-melbourne-coming-to-a-standstill-as-infrastructure-struggles-20190812-p52g9n.html)

    Mainstream politicians, including the PM, are now saying immigration needs to be pegged back (not stopped). The limitation seems to be the direct link between immigration numbers and the revenue line in the budget, which dictates how many federal programs they can fund while meeting their budget constraint. Of course the bulk of the expense associated with servicing the population growth falls on the states, and their revenues are heavily based on stamp duty. I don’t know how this gets resolved. If they want to cut immigration (particularly the most useless “students”) they will have to bail out the universities in some way, plus accept a larger budget deficit.

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  7. The Productivity Commission is Hiring

    “We are looking for an experienced principal/senior researcher for a position within our Economics and Research team. You need to have extensive knowledge of and experience with a range of quantitative research and/or evaluation approaches and methodologies. You would have empirical skills and experience with using large linked administrative datasets, such as the Integrated Data Infrastructure or the Longitudinal Business Database. You should have a postgraduate qualification in economics”
    https://www.productivity.govt.nz/news/join-our-team/

    They should hire 100 – that’ll fix NZ’s productivity – not

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  8. Backdooring and bolt-holing NZ

    Ministry of Foreign Affairs and Trade

    Hong Kong protests: MFAT looking at evacuation of Kiwis in the troubled city

    There are 3,000 NZ citizens resident in Hong Kong, and considerably more when including dual nationals on the NZ passports. Thousands of Hong Kong residents hold NZ passports, and have been since the city was reclaimed by the mainland from Britain in 1997.

    Also, in the last 2 months Australia has experienced a huge upsurge in HK’ers seeking to move to AU

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    • Sounds like it is back into the Auckland ethnic chinese cities like Chowick, Flatbush, Epsom for a explosion in prices, may just kick start another bull cycle in property. Perhaps it is good that we do have the foreign buyers ban in place.

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  9. Meng Foon:
    On increased nationalism and populism around the world, he said: “I am concerned, there are pockets around the world that actually have those extremist type thoughts.”

    https://www.rnz.co.nz/news/political/397572/new-race-relations-commissioner-meng-foon-wants-to-target-hate-speech-phobias-and-isms

    Susan Devoy had a lot to say about Donald Trump. It is as though the Human Rights Commission deems it not o.k to be a nationalist. I wonder when we lost the right to self determination and who was responsible (Helen Clark, Goff, Dalziel, Key)?

    Liked by 1 person

    • Proud nationalists like Ghandi, Mandela.and De Gaulle or Hitler, Franco and Kim Jong-Un?

      The trouble with targeting hate speech and any ethnic supremacy is the same as tackling consumption of drugs or alcohol during prohibition – you drive it underground into small groups who are then oblivious to rational argument.

      “”Differing views and solutions to national policy were encouraged based on the famous expression by Communist Party Chairman Mao Zedong: ‘The policy of letting a hundred flowers bloom and a hundred schools of thought contend is designed to promote the flourishing of the arts and the progress of science’ “”. I suppose that concept would not be accepted in our modern universities.

      I find the title ‘race relations commissioner’ rather sad – you cannot find a rational scientist who believes in ‘race’; it should be given a modern name something to do with ethnic affairs or community. It was renamed in the UK some time ago. Note that some muslims are converts and they may suffer discrimination despite being as European as I and of course even some Christians are discriminated against. Clearly a title is needed that covers all discrimination that has the potential to lead to injustice and violence whether religious, caste, skin colour or gender.
      .

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      • I think there is a missing factor in the discussion of ethno-nationalism. At one end it might be about purity – white supremacy, but that is a red herring. The evidence is clear that interbreeding and a degree of “diversity” is good. Governments have gone beyond that to try to stamp out the dominance of the ethnic majority. Racism is just another form of bad behaviour but not when it is resistance to the dissolution of the nation – then it is a form of political dissent [correct me if I’m wrong] The missing factor is the positives of ingroup attraction.

        [08:45]
        Pacman
        So Eric, when it comes to the possible grievances that one could have, um, sort of under the umbrella of right wing populism with this racial shift that we are, are starting to see with the idea of possibly losing status, which we know was a great motivator for some Trump voters in 2016 if you had to sort of steel man as much as possible to make the best possible case that some or one of those grievances is sort of backed in historical
        realities or empirical realities. Do, do any of those grievances stand up?

        Kaufmann

        I actually think they do, and this may be a place we might disagree is this. I think that there’s a real difference in the survey data. For example, in the psychological literature between um, hatred about groups, kind of racism and attachment to own group. Um, now our attachment to own group can also lead to racism if it leads you to discriminate. But I think there’s an important distinction there. So people can be attached to being a member of an ethnic majority group like white American or white British. Um, they can be attached to a particular configuration of nationhood with, uh, ethnic majority and minority groups, but with a particular, um, share for each and want to conserve that. So that’s kind of our conservative orientation based on attachment, which is I think, different from fearing or hating an outgroup or wanting to impress an outgroup but wanting to keep power.

        Um, so I think that’s sort of how I would, would state a lot of the impetus. Now, of course, there are racists in, you know, most of the populous right voters that clearly are going to be people who simply, I hate Muslims or, or hey, uh, Hispanics or whatever.

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      • The bible does record that humans used to speak one language until some global disaster(ie God’s punishment) which isolated groups of people which subsequently led to separate development, separate languages and as a result of differing climates and geography led to different skin tone and skeletal structures creating separate racial ethnic groups.

        Liked by 1 person

      • @ Bob Atikinson,

        It’s not a major issue in this context, but your comment about scientists and race is incorrect. For starters, the geneticists Jerry Coyne, Neil Risch, Armand Leroi, and David Reich are all well-regarded in their field. All will tell you that human races exist. You can generally infer a persons geographic ancestry from their physical appearance or from their DNA.

        The Cambridge geneticist AWF Edwards pointed out that he and Cavalli-Sforza tended to use the term “population” rather than race to avoid the baggage that term carries, but it refers to the same concept of shared geographic ancestry.

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  10. Paul Spoonley at it again
    Spoonley adds that any change in New Zealand’s ability to attract skills from overseas could have serious implications for our economy. “ If you look at the last 20 years, migration has been a huge part of the economic growth of this country… In fact, if you take migration away, you would have literally no growth, no economic growth.”
    https://www.rnz.co.nz/national/programmes/insight/audio/2018722176/forever-home-why-immigrants-chose-new-zealand

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