Making short-term foreign labour more readily available

There were, and still are, people who thought Labour and New Zealand First went into the last election campaigning on policies to materially and sustainably reduce the very high rates of non-citizen immigration to New Zealand.  (There were no such doubts about the Greens: after James Shaw in 2016 gave a fairly thoughtful and moderate speech on the issue there was a great backlash from his own supporters and he had to recant and do a very public form of penance.)

But what of Labour and New Zealand First?  It seems that under Andrew Little Labour had become quite concerned about immigration and thought there were votes in suggesting that “something should be done”.   But as I pointed out when their 2017 immigration policy specifics were released, whatever impression they wanted to create, any measures they were proposing would have reduced the net inflow for one year only.  Some of those proposals had some merit in their own right, but they were playing at the margin, while allowing Labour to associate itself with numbers of a 25000-30000 reduction in net migration.   Labour is quite correct to claim that they never set that as a target (it was a forecast, about what difference they thought their proposals would make), but they never owned up to the fact that any reduction would be one-off, not permanent.     Either way, even before the election –  after the change of leadership –  they were backing away from even their own published policy (checking old emails, I found one from a week out from the election in which a senior and well-connected journalist told me that Ardern and Lees-Galloway had taken a conscious decision to downplay the issue).

As for New Zealand First, there was occasional talk of reducing net migration to 10000 to 15000 per annum but (a) it wasn’t in their immigration policy, and (b) not much specific was.  Both parties seemed to want to create the impression that they would “do something” (note that National had actually “done something” –  albeit fairly modest – that year) without actually offering much in the way of specific commitments.  NZ First, of course, has 25+ years of form in that respect.    I guess not many voters read the specifics of manifestos (although media should) and so it is hard to have much sympathy for the parties when people now look at what the government is (and isn’t) doing and suggest that it doesn’t really square with the impression they were happy to create pre-election.

At times, it is hard to know quite what they are doing.   Actual residence visa approvals for the year to August were 34863, the lowest annual rate this century.   But that isn’t supported by any high-level policy changes and from all the accounts of massive backlogs of applications at MBIE –  having reduced its processing capacity –  it isn’t clear that it is deliberate (and if it is deliberate, it is a pretty callous way to do things, leaving applicants hanging uncertainly with indefinite delays).  And on the other hand, the number of Essential Skills visas approved in the year to August was a record high, and about twice as many as were being approved five or six years ago.  On MBIE’s figures there are almost 200000 people here with short-term work visas (consistent with that OECD comment that New Zealand has one of the highest –  perhaps the highest –  shares of short-term foreign workers of any OECD country).

But yesterday we got some specifics from the government in the form of a new policy on temporary work visas.  In thinking and writing about New Zealand immigration policy, my focus is on the residence approval programme –  which is what drives the longer-term contribution of immigration to population growth –  rather than the shorter-term visa programmes.  But reading through what the government released yesterday, it was hard not to call it a triumph for the business community (short-term) at the expense of New Zealanders (those two aren’t necessarily in conflict of course, it is just that there is no evidence that New Zealand’s liberal immigration policies have done New Zealanders any good).  As the Newsroom article this morning puts it

As soon as the embargo lifted on the Immigration Minister’s announcement on Tuesday, positive press releases flooded in from industry associations whose employers rely on imported labour, including Federated Farmers, Horticulture NZ, Business NZ and New Zealand Aged Care Association.

They see it as a win for employers who will be able to employ overseas workers with greater ease, after passing the initial tests.

Here is the overview document the government published.

Several things struck me.

First, the government and its advisers appear to have little use for economics (yes, some of you may think that to their credit),  What do I have in mind?     There was this, for example, the very first bullet point in the entire document

Ensure that temporary foreign workers are only recruited for genuine shortages, and that employers across New Zealand can access the skills and labour they need;

When there are incipient shortages of tomatoes or lettuces (storms etc) or even houses, the price goes up.   The market then more or less clears and in most cases at the new prevailing prices there are no “genuine shortages”, rather supply and demand adjust to the signal in the price. We see that this week in global oil markets.

But neither central planners in MBIE nor their political masters –  nor much of the business community, when it comes to inputs –  are keen on that sort of approach.  They prefer a model in which wages don’t rise much because whenever there is an incipient shortage –  which would otherwise trigger wage rises –  the employer can find another migrant worker.   A good deal for firms if they get the system rigged in their favour like that, and compromising, in that any firm that had qualms about whether this was really right, couldn’t really take a stand and refuse to get involved or they really would be rendered less competitive than other firms in their sector.

And there was this in a section on “Why the government is making these changes”

The Government is committed to ensuring that regions are able to get the workers they need to fill critical skill shortages, particularly during a time of low unemployment.

Where they show no sign of realising that –  as economists in New Zealand have known for decades – increased immigration has the short-term effect (perhaps lasting several years) of adding more to demand (including demand for labour) than to supply, thus exacerbating capacity pressures in aggregate, not relieving them.   Yes, an individual firm in a sector heavily reliant on immigrant labour might be made better off, but across the whole economy it is no fix at all.  (And if the intuition of this point isn’t obvious, fortunately we mostly don’t import dirt-poor illegals living 20 to a house, so new immigrant workers need houses, shops, offices, schools, roads etc much as you or I do, and building all those things takes real resources – including labour.)

There is a strange mix of central planner tendences and genuine liberalisation at work in the package.  I guess the government would defend that on the grounds of a strong central government hand around lower-paid migrants and more liberalisation for somewhat higher paid roles (the spin is about “highly paid” or “very highly paid” jobs, but that isn’t really so at all).  On the central planner side, there were things like this

The recently announced Regional Skills Leadership Groups will play a key role in informing government and regional responses to local labour market needs. Each Regional Skills Leadership Group will develop a labour market plan for its region to identify the availability of skills and labour in their region and any gaps that need to be addressed to help drive the region’s economic growth.

Or one could use market price signals and the resulting internal resource flows.  But the government believes bureaucrats and local worthies (business leaders with their own interests to advance?) will do it so much better.

Still on the central planner side, industries that are heavily reliant on migrant labour are to be subjected “Sector Agreements”

Sector Agreements will be negotiated with sectors that have a high reliance on temporary foreign workers (especially in lower-paid occupations). Employers who are recruiting foreign workers for occupations covered by a Sector Agreement will be required to comply with the agreement. Sector Agreements will support facilitated access to foreign workers to meet shortages in the short term by making this a more certain and lower-cost process. In exchange, the sector will be required to make commitments and demonstrate progress towards placing a greater share of New Zealanders into jobs in the sector and reducing the sector’s reliance on temporary foreign workers over time.

But there is a great deal of time-inconsistency about all this.  In the short-term, rest homes, road freight etc, will get “more certain and lower cost” access to migrant workers, and yet the sectors will supposedly be signing up to commitments to reduce future reliance on such workers. It will be interesting to see the details of the first such agreements (due mid-2020) but count me sceptical about whether any government will be willing to follow through and actually insist on reduced reliance on temporary foreign workers, having initially made them even easier to get.  All those lobbies will be moaning and complaining five years hence just as they are now.    Much better to put in place some clear and graduated price signals now.

The other area of central planners’ conceit in the document is the distinction between “the regions” and five of the six largest cities (for some reason Tauranga misses out on promotion to big boy status).  This continues the incoherence of the previous government’s approach, offering more residency points for jobs outside the big cities, in the process (almost as a matter of arithmetic) lowering the average quality of the people given residence visas.

Under yesterday’s package

The requirement to undertake a labour market test will be removed entirely for employers in the regions (outside the major cities) seeking to employ foreign workers who will be paid above the median wage. This gives open access to employers in the regions recruiting for jobs paying above the median wage. This means there is no need for skill shortages lists in the regions and the skill shortages lists will only exist for the five following cities – Auckland, Hamilton, Wellington, Christchurch and Dunedin. If a job in a city is on that city’s skills shortage list there will be no labour market test; if it is not on the list then there will be a labour market test (that is, the employer must advertise the job with the pay rate).

There is no attempt at a justification for this differentiation between, say, Tauranga and Hamilton, or Queenstown and Dunedin, or even between Kawerau and Auckland.   It simply continues the planner mentality –  even if we might count getting rid of (bureacrat-determined) “skill shortage lists” in some places as a modest gain in its own right.

And from a Labour-led government –  supposedly focused on “the workers”(especially less well-off), surely it evokes a hollow laugh when they release documents talking of people earning $52000 a year as “highly-paid”.      Such has been the increase in the minimum wage over recent years –  no relationship at all to productivity gains –  that Labour now class as “highly paid” anyone earning only 40 per cent above the minimum wage.

The final bit of the package that caught my eye was this

The Government will reinstate the ability for lower-paid foreign workers to support their partner and children to come to New Zealand for the length of their visa. This was restricted in 2017. The foreign worker will continue to need to meet a minimum income threshold, the purpose of which is to ensure that their income is sufficient to support themselves and their family while in New Zealand.

….Dependent children of a lower-paid worker will have access to primary and secondary education as subsidised domestic students. They will only be able to access tertiary education as full fee-paying international students.

I guess we should be thankful for small mercies re that final sentence.  But really…..the government makes it “more certain and lower-cost” to bring in relatively low-paid migrant workers, and then –  even if there were real economic gains from that particular “trade” –  dramatically erodes those possibilities by allowing such (supposedly) temporary workers to bring spouses and children.   Given the failure of the government to anything serious about fixing the urban land and housing market, that will put further indirect pressure on the housing market (and associated infrastructure) and the (substantial) fiscal cost of any school education for the children of such workers has to be set against the (inevitably modest, in a low-skilled worker) wider economic benefits to New Zealand of the parent being able to work here.

You can see some elements of sense in some of what the government is doing in elements of this package.  Perhaps the “sector agreements” are really well-intentioned, even if they seem most likely to be ineffectual over time in reducing the dependence on these sectors on modestly-paid modestly-skilled short-term foreign workers.    And, in principle, the absence of a “labour market test” for really highly paid or specialist positions makes quite a lot of sense.  But, even in this struggling economy, it is a sick and sad joke to talk of pay rates in excess of $52000 as “highly paid”.  More importantly, there is nothing in the system designed to set a financial incentive for firms to employ locals.

I continue to champion my own model, which I’ve run in various previous speeches and posts.   For work visas, at all levels of skill, in all regions, I would apply something like the following model

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).

Doing so would largely get officials completely out of the approvals process (although not from enforcement), would treat all regions equally, and would provide a strong –  and transparent –  incentive to hire (and develop) locals, and bid up wages for locals, where at all possible, while providing easier access (than any government has allowed) where a short-term foreign worker may really be necessary in the short-term.   And the fee would ensure that even if there were no other benefits to New Zealanders as a whole, at least the public finances would benefit directly.

The much bigger issue, of course, is the residence approvals programme.  The government is supposed to be having announcements on that front before the end of the year,

 

14 thoughts on “Making short-term foreign labour more readily available

  1. I think the backlog is just plainly incompetence. This Labour/NZFirst/Greens government buys “Yes men” working committees(or just just plainly legal corruption) to bulldoze impractical solutions and finds out later that “Yes men” cannot do the job of correct and proper public consultation.

    Liked by 2 people

  2. “” It seems that under Andrew Little Labour had become quite concerned about immigration and thought there were votes in suggesting that ‘something should be done’ “” My interpretation is more charitable; with his trade union background I believe he was concerned about the effect of immigration on NZ workers. Certainly he did not push immigration reform in his campaign while he was leader; at a public meeting in Birkenhead while he was still leader it was the only Labour policy that was left unmentioned. Maybe we could just ask him what his motivation was.

    “” the accounts of massive backlogs of applications at MBIE – having reduced its processing capacity – it isn’t clear that it is deliberate (and if it is deliberate, it is a pretty callous way to do things, leaving applicants hanging uncertainly with indefinite delays) “”. Stop beating around the bush: it is deliberate and it definitely is callous. Is it driving talented potential immigrants who would benefit NZ to go to other countries?

    Liked by 1 person

    • Technically it is incompetence. Nobody goes around saying they can’t get their jobs done because they deliberately chose not to do their jobs and therefore has done a job job. What happened to our Immigration department’s performance matrices?

      Like

      • Correction: Nobody goes around saying they can’t get their jobs done because they deliberately chose not to do their jobs and therefore has done a good job, pay me a performance bonus.

        Like

      • It is way beyond incompetence. I’m not knocking the INZ employees who have a tricky job; rather like social workers they are invisible until a mistake is made and then they hit the headlines. It is INZ management and the politicians above them that I condemn; they deliberately under resource the department. They do so to avoid a quota that is too politically sensitive to be discussed. Since the cost of running INZ is covered by the Visa processing fees that they can adjust whenever they like without parliaments approval they have no excuse.
        A friend of mine applied for a residents visa at the beginning of the year; the application still has not been assigned to a case worker. Whenever they start processing that application the associated medical, police,. employment and financial data will be out of date. Compare that with the same persons daughter applying for a first NZ passport; that took 23 hours from beginning to end including delivery.

        Liked by 1 person

  3. Corporate growers in Hawkes Bay have been planting hundreds and hundreds of acres of apples when they already cannot get enough labour to harvest the crop.
    There is no ‘supply and demand ‘ appraisal , it is all based on lobbying the government for RSE workers on the minimum wage.
    They have been buying up houses to accommodate workers and I have heard of 10 or more people being placed in these houses. This is another distortion created in the housing market which is already under pressure.
    The new measures sound like a response to lobbying from corporate growers so it will be interesting to see how things work in reality.

    Liked by 3 people

  4. This comment is lifted from a commentator on Interest.co.nz “”I really worry about how Maori are experiencing this. For instance, several of my friends from various iwi lost their lucrative transport contracts with Mainfreight (taken by minimum wage Indian drivers) and high paying telecommunications jobs with Telecom which then became Chorus which contracted out the once highly paid telecom technician jobs (which all seem to have been taken over by immigrants who as the media have highlighted were working for slave wages) its been devastating for them, who is reporting on that?””
    There is a serious problem for the working class that will now get even worse in rural NZ. Wage differentials at the bottom of the pyramid are being narrowed; truck and bus drivers with difficult responsible jobs are paid much the same living wage as cleaners and checkout operators. I am acquainted with a NZ care nurse with 20 years experience; what are her future income prospects? Can she continue to afford living in Auckland?

    Liked by 4 people

  5. I’m astonished that Labour is responsible for actively undercutting the wages of the lower-paid by importing so much unskilled labour. Labour traditionally restricted the supply of labour through compulsory unionism in order to keep upwards pressure on wages but now the government is deliberately undermining the ability of the lower paid to raise their wages by allowing even more competitors for their jobs to enter the country.
    It’s an extraordinary position for a party that is meant to represent labour and not capital.

    Liked by 4 people

    • I agree. There is a problem is with the word ‘skill’. Driving a bus or a truck is a serious skill – I could study forever but never attain the ability to remain focused that a good professional driver has. On the other hand I suspect I could do most academic jobs if I just buckled down and studied really hard for long enough. INZ’s definition of skill is no kiwi will take the job at that pay rate.

      Liked by 2 people

  6. Would you take this on – Fly-in Fly-out 8 weeks work for $8000 assuming the weather is perfect – paid for the hours worked – no way an employer would pay a capitation fee of $20,000 per worker – it’s a wonder anyone is willing to take this on

    Short Term Foreign Labour

    Orchard work – 8 weeks – Pukenui Holiday Park, Kaitaia – Northland

    We need people to help spraying weeding pruning planting pinning and fertilizing on our avocado orchard for 8-10 weeks 8 hours per day 6-7 days per week (weather dependent). You will be staying at the Pukenui Holiday Park located in Pukenui (in the very Far North). You can stay in a tent or in your van cost $14.00 per night or in shared accomodation for $17 per night. You are paid $19.98 per hour (including holiday pay). YOU understand that for the duration of the job you MUST stay at the Pukenui Holiday Park.

    https://www.seasonaljobs.co.nz/main.asp?input=job_detail&jobs_ID=12278

    Liked by 2 people

    • No wonder they can’t get any local workers. Only desperate destitute holiday makers would work under those conditions. Even genuine foreign migrant workers after you take out the airflight costs would not be keen.

      Liked by 2 people

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