I wasn’t going to write about immigration  today at all, but a radio station rang up last night and invited me to go on their show this morning to discuss an article in today’s Herald that runs under the headline Top source countries for migrant workers are not Asian.

Since I had to get up early anyway, and since the article gives me the chance to make two points, I thought I’d respond.

Perhaps my key point is that flawed articles like this really should reinforce the message to MBIE, that I made in a post the other day,  that while MBIE’s annual immigration approvals data are good and useful, they are only available with a long lag,  and the monthly data they provide is limited, little-known, difficult to use, and therefore largely overlooked.    If people can’t readily use that – accurate, official, adminstrative –  data they will use what they can easily get.  In this case, that is the permanent and long-term migration data derived from arrival and departure cards, and reliant on the self-reported intentions of people when they cross the border.  It is published monthly and hogs the headlines, but for actual analysis of immigration policy (which affects non-citizens) it just isn’t very good at all.

The Herald builds an article around this opening

A rise in work visas has been the driving force behind record immigration numbers but the main source countries are not from Asia.

A Herald analysis into immigration data found work visa arrivals increased from 16,787 in 2004 to 41,576 last year.

The top five source countries for work visas last year are the United Kingdom, Germany, Australia, South Africa and the United States of America.

They get those numbers not from data on the number of work visas issued, or outstanding, but on the basis of PLT arrivals data.   When people arrive at the airport they complete an arrivals card, indicate whether (at that time) they intend/expect to stay 12 months or more, and the reason for their visit.    The “reason for visit” isn’t tightly mapped to the various different visa classes, and all the non-New Zealand arrivals are grouped under four main headings (Residence, Student, Visitor or Work) and a small “Other” category.

So these data are correctly reported by the Herald, but:

• SNZ only publish the data by previous country of residence, not country of citizenship (although they must have the latter data).   The Herald should have been a little wary when they noticed Australia high up on their list, since Australian citizens don’t need work visas to live and work here.  Published data don’t let us work out which country (citizenship) those people were actually from, but if someone worked in Australia for a couple of years and then came on to New Zealand there is no meaningful sense in which they are “Australian”.
• The PLT data only attempt to capture the visa people held at the point they crossed the border.   Huge numbers of people change their visa while here –  more than 70 per cent of residence visas are granted to people who were already living here.  Perhaps more importantly in this context, many people who come on student visas –  probably almost all of those in the PLT (more than 12 months) category –  now have work rights while they are here.  And when they complete their qualification, many can acquire a “study to work” work visa.  So if we are trying to understand which country the migrants (temporary or permanent) who are working here come from, the PLT numbers are barely any use at all.

In fact, MBIE knows exactly who has an outstanding work visa (which doesn’t include students working while on a student visa), and which country those people are citizens of.  They now publish the data each year.  Here are the top 10 countries as at 30 June last year.

The UK is still important, but it is swamped by people from India, and China and the Philippines aren’t far behind the UK.   We only have this particular data since 2009, but back then the UK was the largest source country for people with outstanding work visas.  Since then the UK numbers have only increased a little, while the Indian numbers have more than trebled.     And all that is so even though these stock numbers include the numbers here on working holiday (work) visas, where European countries (Germany, UK, and France) dominate the annual approvals numbers.

What about approvals data?  Here are the top 10 countries of people granted Essential Skills work visas in 2015/16.

A decade ago, the UK was clearly the largest source country.

And here are the top 10 countries of people granted Family work visas (note, work visas –  these aren’t the residence approvals).

Again 10 years ago the UK was the largest single source country.

MBIE don’t provide this breakdown for those granted “study to work” visas, (even though the number of those visas granted has increased from around 6000 in 2005/06 to around 22000 last year.   And since student visa numbers are totally dominated by people from Asian countries

…we might reasonably assume that almost all of the study to work visas have gone to citizens of Asian countries.

And finally, of course, there is the residence approvals programme.     The overwhelming bulk of these approvals are granted to people already living in New Zealand, who arrived on one or other of the temporary visas programmes and eventually qualified for residence.  Here are the top 10 countries, for 2015/16 and for 2005/06 , 10 years earlier.

Total approvals didn’t change much over that decade, but the composition (by source country) did.  One forgets I suppose, but I was a little surprised to realise that even 10 years ago the UK was still far and away the largest single source country.

Which country our temporary or permanent migrants come from isn’t a big concern of mine, and has never been a focus of my analysis of the possible connection between immigration and economic performance.  I don’t much care where migrants come from, but about what skills and talents they bring.   That said, I was interested in the new study by Harvard researchers that I linked to a few weeks ago, suggesting that if there were economic benefits from immigration (and that particular study reckoned there were) they were most evident when the migrants were from countries that are richer than the recipient country, or from countries with a degree of cultural similarity to the recipient country.   Perhaps that result won’t stand up to close scrutiny over time, but it does make quite a lot of intuitive sense.   On that residence approvals list, only the UK and the US are richer than us.

And as a final note, I repeat my plea to MBIE to markedly improve the availability of such summary data on immigration approvals (and outstanding visas).  They hold all the data, and there is no reason why these data could not be available, and easy to use, on a monthly or quarterly basis within a few days of the end of the relevant period.     Debate about immigration policy is often difficult enough, but it is made more so when the good timely data just aren’t made easily available, and people fall back on what they can find, inadequate for purpose as it often is.

Readers might suppose that I have always been sceptical of large scale immigration to New Zealand.  It would be more accurate to say that for most of my life I never gave it much thought.

I first remember being aware of immigration as a political issue when I was at intermediate school in Auckland in the early-mid 1970s  That was a period of very high immigration, and about the time of the big policy change initiated by the Kirk Labour government which removed from British citizens the automatic right they had previously had to settle here.  Pacific island immigration was also an issue.  But despite being a bit of a political nerd even then, my only perspective on it was that of a South Islander reluctantly resident in Auckland: I recall advocating a cap on Auckland’s population and forcing incomers to move elsewhere in the country.

There wasn’t much non-citizen immigration to New Zealand over the following 15 years, although the developing exodus of New Zealanders was an issue.   And even as policy changed in the late 80s and early 1990s, the high rate of unemployment still meant that non-citizen immigrant numbers were low.    As late as 1992 there was a net inflow of only around 13000 non-citizens.    I don’t recall immigration data ever getting much discussion around the Reserve Bank Monetary Policy Committee table, although the modellers had interesting equations to explain, in particular, the trans-Tasman flow.    I was the manager of the Bank’s forecasting team for a while, and I also don’t recall us ever paying much attention to immigration data then either (anyone else who was there can correct me if my memory is faulty).

I went overseas for a couple of years and when I came back we were in the midst of the first big inward wave of non-citizen migrants since liberalisation.     Those flows put a lot of pressure on house prices, especially in Auckland, and also on the economy’s real resources.    We were a bit slow to understand what was going on, but eventually appreciated (as our predecessors had in earlier decades) that the demand pressures from increased immigration typically exceeded the boost to supply, at least in the short-term.  Being the Reserve Bank we didn’t have much interest in (or any responsibility for) the longer-term issues, and certainly didn’t have an institutional view on whether in the longer-term large non-citizen immigration was of economic benefit to New Zealanders.

It was the 21st century before the issue came back to the fore again, with the sharp increase in non-citizen immigration numbers around 2002/03 –  some of it the increase in foreign students in response to the exchange rate.    The Bank was a bit gun-shy by this time, at having made some material monetary policy mistakes in the late 1990s, and I remember arguing (I wince at the memory) that there was a case to “look through” the net excess demand effects of increased immigration, because they were likely to be ‘one-off” in nature.  I certainly didn’t have a view, or much of an interest in, the longer-term issues.    Being a central banker, I was probably only interested in the monthly PLT numbers, and wasn’t even aware there was a residence approvals programme and a numerical target/”planning range”.

To cut the story short, I had little interest in the issues until I was involved with the 2025 Taskforce, set up to advise the government on why the large income and productivity gaps to Australia had opened up, and to recommend a policy programme that might close the gaps over the following 15 years.   I was seconded to Treasury at the time, and there was also quite a bit of interest there in why New Zealand’s interest rates were so high (relative to those abroad).   The 2025 Taskforce did not –  as readers might expect –  come out in favour of high rates of immigration.  One of the Taskforce members was the Australian economist Judith Sloan, who had lead the Australian Productivity Commission’s 2006 report on immigration.   She persuaded the Taskforce to adopt a line, consistent with that earlier report, suggesting that immigration was unlikely to offer much, if anything, in boosting medium-term GDP per capita (or productivity).

I came away from involvement with the Taskforce pretty supportive of the list of measures, and way of thinking about things, that they proposed.     But the more I reflected on the issues, the more it started to seem like a list of measures that, while useful, was unlikely to make a large enough difference to close the gap.   And as our exchange rate rebounded after the 2008/09 recession, I began to focus again on trying to understand why our real interest rates were still so high (relative to the rest of the world), noting that as a result of those high interest rates, the real exchange rate had averaged far higher than relative productivity underperformance might lead one to expect.   I was involved with a Treasury working paper published during this time arguing that the explanation for the high interest rates seemed most plausibly to lie in things affecting aggregate savings and investment preferences (demand for and supply of savings) in New Zealand.

It was only out of all that experience –  mostly down to the good fortune of the secondment to Treasury –  that my current way of thinking started to develop.  That was as recent as 2010.   I was fortunate enough that the Savings Working Group – another government appointed working group –  got interested in an early version of the ideas, and reflected some of them in their report.   And I was able to push them a little further in discussant comments, and then in a paper, in two conferences on macroeconomic and exchange rate issues sponsored by the Reserve Bank and Treasury.    But it wasn’t an issue that was of much interest, or importance, to the Reserve Bank (reasonably enough), and in fact the Bank became increasingly uneasy about my involvement in the area.  Immigration policy inevitably had political dimensions, and it wasn’t an issue the Bank was ever likely to take a preferred policy position on.

Through this period, my focus was very high-level and macroeconomic in nature.  I kept being told –  by Treasury and MBIE – that our immigration programme was one of the best in the world (and there were papers to prove it).   I didn’t have any reason to disagree (I didn’t have the detailed knowledge and my background was macroeconomics), but as I always stressed, if my argument/analysis was valid, it was so broadly speaking regardless of the quality of the individual immigrants.   Persistent excess demand pressures, in an economy with a pretty moderate savings rate, would put pressure on real interest rates and the real exchange rate and skew the economy away from business investment more generally, and that in the tradables sector more specifically.  It was simply cleaner to take as given the received notion among public sector economists that the quality of the immigration programme was pretty high.

The last couple of years, outside the public sector, have certainly been an eye-opener for me, on just how mediocre our immigration programme has actually been.  It may well be that our average non-native born worker has among the highest skills of any of those in the OECD.  It may even be that our immigration programme is better than those of most  –  in many ways it should be, as we have full effective control of our own borders.  But it simply isn’t very good.  Even on those OECD numbers, the average non-native born worker (immigrants past and present) has skill levels below those of natives (the latter being among the most skilled in the OECD).   There have been many very able migrants, but averages are averages, encompassing the excellent and the poor.  The average isn’t impressive.

We’ve seen quite a bit of that over the last few years:

• only around 60 per cent of our residence approvals are to skilled or business migrants (and their spouses/partners/children), and all too many of those granted approvals in recent years have been in occupations that don’t strike most people as particularly highly-skilled –  not what people think of when they hear that MBIE sees our immigration programme as a “critical economic enabler”,
• there were fairly large numbers of approvals granted to middle-aged and elderly parents and siblings of other migrants (people whose skills/qualifications would not qualify them directly), unlikely to make much contribution to New Zealand economic performance.
• then there has been the big upsurge in student arrivals, concentrated in the lower-level private training establishments, the timing not coincidentally related to increased work rights for students in New Zealand.   Again, relative to our universities, the PTEs aren’t typically training the people most people have in mind when they think of highly-skilled foreigners.

And the disillusionment –  stripping away of the old illusions and official stories –  has continued even in the last week or two.

At a broader policy level, MBIE released data last week showing that

The Ministry undertook a random sample of more than 600 Skilled Migrant Category applications being considered as at 1 March this year. We found that 42.5 per cent of applicants earned over the New Zealand median income of $48,859 a year while 14 per cent of applicants earned over $75,000. These results have a margin of error of plus or minus 5 per cent.

57.5 per cent of those applying for residence under the Skilled Migrant category –  the most skilled bit of the residence approvals programme –  were earning less than $48859 per annum.  No doubt some of them would have been turned down, but the rejection rate of applications that get to this stage isn’t high.    On policy to date, a huge proportion of the so-called skilled migrants can’t even command that much income in the New Zealand labour market (and recall that 80 per cent of all residence approvals are granted to people already onshore, and I suspect that share is higher for the SMC category).

Perhaps I’m naively optimistic, but a week or so after these data came out, I’m still shocked at how low a skill level they reveal.   Our ministers and officials have repeatedly grossly misrepresented the programme and the number and sort of “skilled” people New Zealand is granting residence to.   If it were similar data on any other policy or economic topic, I suspect it would be front-page news in our media.

One of my readers (thanks Bob) took the huge unwieldy spreadsheet MBIE releases monthly and produced a summary of residence approvals over the 12 months to March 2017.  This table is in much the same format as MBIE uses in their annual Migration Trends and Outlook publication.

We now know how low the apparent level of skills has been in the skilled migrant category.  And that is the most skills-focused on any of these residence categories.  We can reasonably assume that the average skill levels across the other categories will be, perhaps materially, lower.

Of course, in some of the line items that shouldn’t be a concern.  We take refugees for humanitarian reasons, not domestic economic reasons.  But by and large our immigration programme has been sold as having an economic focus –  intended to lift productivity across the economy and benefit New Zealanders as a whole.    Standard economic theory will tell you that if the skill level of the migrants is low –  typically lower, especially at the margin, than the new native worker –  it could only benefit New Zealanders (on average) by driving down wages for relatively unskilled labour in New Zealand.    The evidence on whether it has done so is contested, but if it hasn’t, New Zealanders simply can’t have benefited.  And if we stand back and look at our productivity performance, business investment patterns, and tradables sector performance, there is no sign of such systematic benefits at all.

It looks increasingly like a costly sham.  New Zealanders have been sold the policy on one basis but –  whatever the merits of the policy they’ve been told we were running –  the actual policy looks to have been far worse than we were told.  And, I suspect, far worse than the people who first designed the more liberal immigration policy thirty years ago would have had in mind.

People will differ on how all this came to pass.  I’m not a conspiracy theorist, and suspect it mostly developed with the best of intentions all round (rather than, say, a deliberate attempt to drive up Auckland land prices and drive down lowly-skilled wages).   But good intentions don’t excuse shocking outcomes.  We simply don’t really have a skilled migration programme at all.  There are, and no doubt always will be, a few very highly-skilled people among the migrants –  and the issue here isn’t the migrants themselves (pursuing the best for themselves and their families) but the policymakers in successive governments –  but all too many have little to offer to benefit New Zealand.  For a country that hasn’t been doing that well economically for 50 years –  although there are cyclical ups and downs –  that simply isn’t an approach we can afford, if we want to offer our people some of the best material living standards in the world.  Perhaps it is partly a reluctance to accept that New Zealand just isn’t that attractive to very many of the sort of extremely able people we might genuinely benefit from.

And perhaps even more shocking than the skilled migrant applicant income data, was the news yesterday that our government is allowing someone who gained residence approval only five years ago, and has since committed several sexual offences, been in prison for them, made little apparent effort to rehabilitate, and remains (according to the experts) at high risk of reoffending, to remain in the country.  I’m not usually strongly sympathetic to “victims advocates” etc, or to those wanting to lock up even more people for longer, but I simply can’t believe that the government had let this chap stay.   Since such offenders don’t usually start offending in their 50s, you have wonder about the initial screening, but even set that to one side, how is this decision at all consistent with promoting the best interests of New Zealanders?   Individual decision it might be, but it looks too like a mentality in MBIE –  and their ministers? –  that simply doesn’t put the interests of New Zealanders first (whether in the economic aspects of the programme design and implementation, or others).      The specific decision might have been made by an official, but that person was operating only under the delegated authority of the Minister of Immigration.  The Minister now claims he’d have made a different decision, but if so perhaps he could release to us the guidelines he had laid down, that his officials were supposed to be working to when they made this egregious decision.    I’m quite sure Afghanistan would be an unpleasant place to be sent back too.    But Mr Akbari made his choices, breaking our law (and not simply traffic offences) not once but several times.  It isn’t clear why we owe him any further consideration, or why our people should be exposed to the risk of his further re-offending.   I don’t suppose Michael Woodhouse personally will be compensating future victims –  and of course with the best will in the world, he won’t be able to  put back together a life shattered by a further instance of such abuse by Mr Akbari.   Deportation then will be scant comfort to the victim.

As I like to stress, I try to be an equal opportunity sceptic.  Immigration policy has, for 30 years, been pretty much common ground between National and Labour.     The Donghua Liu case shouldn’t be quickly forgotten.

MBIE does a pretty good job of releasing annual immigration data, albeit with quite a long lag.   Their Migration Trends and Outlook publication is full of interesting charts, and the accompanying spreadsheets have a rich array of data about people applying for visas to live in New Zealand, temporarily or permanently.     But the 2015/16 issue, covering the year to June 2016, was released in late November last year.    But it is now late April 2017 and we won’t have any official data made generally available until, presumably, late November this year.   Given the significance of immigration in the New Zealand economy, let alone in the political and social debate, it is staggering that only annual data are available, and even then with quite a long lag.     I’m surprised that, for example, Statistics New Zealand does not put more pressure on MBIE to bring its immigration statistics up to the sort of standard we expect in other areas of the economy.  Apart from anything else, nature abhors a vacuum, and in the absence of good timely (readily useable) immigration approvals data, people fall back on using the Statistics New Zealand permanent and long-term migration numbers, which (a) aren’t that accurate, as SNZ research itself has found, and (b) aren’t a good basis for analysing immigration policy developments (immigration policy affecting only non New Zealanders).

And in this day and age, the data must be quite readily available internally –  it isn’t, presumably, as if they are using paper-based systems and only compile the aggregates once a year.   I’d urge MBIE to look at upgrading their publication of statistics.    Key data –  approvals under each visa stream and main category –  should be able to be made available monthly, within days of the end of the month, and should (as relevant) be published on a seasonally adjusted basis (as most other official economic data are).   The sorts of detailed tables published with Migration Trends and Outlook should be published quarterly, and again it is difficult to see why we should expect, or tolerate, a lag of more than four weeks after the end of the relevant quarter.  It takes SNZ much longer than that to calculate GDP, of course, but immigration approvals data is all generated inside MBIE.    All this data should, in turn, be made available on the Statistics New Zealand platform  Infoshare.    To the usual complaint, when better data is sought, that “there is no money” my response is twofold: first, this is a really major component of New Zealand and social life, and timely information would inform a better debate and analysis, and second, immigration (including the associated research and analysis) is supposed to be self-funding.  If the fees aren’t quite high enough to cover the regular production of good data (all from internal systems) put them up (a very little surely).    In the meantime, it is tempting (but would be tedious) to lodge an OIA request for the data on the last day of each month, which would at least ensure it was available 20 working days later.

As an inadequate, but perhaps convenient for them, substitute for good generally-available data, MBIE does seem from time to time to provide bits and pieces of data to selected journalists.   That is no way to run a democracy.

A small example leapt out at me as I read today’s Herald over lunch.   In an article on yesterday’s announcement we find that:

In figures released exclusively to the Herald, a Ministry of Business Innovation and Employment sample of more than 600 skilled migrant category applications being considered as at March 1 found more than two in five would not have met the new income threshold.

Just 42.5 per cent of applicants earned over the New Zealand median income of $48,859 per year and 14 per cent earned over $75,000.

The figures are staggering.  Recall that skilled migrant principal applicants make up only about half of those granted approvals for residence.  These are (the bulk of) the “best and brightest” of those we bring here –  others are partners, children, family members, refugees, and Pacific Access people, who themselves wouldn’t get over the Skilled Migrant category thresholds.

Now, sure, it is a small sample (600 of the SMC applications being considered) –   and there seems to be a potential contradiction between the two sentences in that paragraph –  but at best it seems that only around half of the skilled migrant applicants earned more than the new, quite modest, income threshold.   Sure, the median income numbers cover people of all ages, and most SMC principal applicants are between 20 and 40, but….these have been the transformative skilled migrants MBIE and successive governments have been counting on to help transform the economy, and lift our dismal productivity, and that is all they can command in the labour market?  Really?

I suspect the Reserve Bank and Treasury are now paying freshly minted 21 year old economists, with just an honours degree, at least that $48,859 per annum by now.  And those people will achieve significant pay rises in the following few years.   In fact, on checking teacher salaries, a primary school teacher with a BA starts on $48165 per annum.     These will all be able people, but they are 21 or 22.   How can it make sense –  if our immigration programme is really skill-focused –  to be letting in as residents so many people who at, say, an average age of 30 can’t even command what a starting primary teacher makes?

Even though the official rhetoric has long been skills-focused, it increasingly looks as though we’ve actually been somewhat closer to lower-skills end of the immigration spectrum.   There hasn’t been anything much in the way of productivity spillover –  which could really only come from the very able and innovative, and we’ve not attracted many of them –  and the evidence suggests that the low-skilled migration hasn’t done much for us either.  Recall that the advocates of high immigration both argue that high immigration of relatively low-skilled people hasn’t dampened native wages and that we benefit economically from low-skilled migration.   But if wages haven’t been dampened, it can’t –  under the totally orthodox neoclassical economic model –  have done any good for New Zealanders as a whole either.  And if they have….well, we know that despite all those inflows business investment has been weak (share of GDP) relative to population growth, the tradables sector has been weak, and we’ve seen little sign of any other sorts of gains.

Perhaps the data MBIE provided the Herald aren’t quite as bad as they look.  But we can’t tell, because MBIE provided the information simply to one media outlet and we rely on what their journalists made of it.   As a material piece of background to a major government policy announcement, that really isn’t good enough.

UPDATE: This interest.co.nz article, informed by MBIE, adds a bit of detail

An Immigration NZ spokesman told Interest.co.nz that the department undertook a random sample of more than 600 live SMC applications on 1 March. All applicants were claiming for employment at skill levels 1, 2 or 3 under New Zealand and Australian classifications (ANZSCO).

Of the sample, 57.5% were for roles offering less than the new threshold of New Zealand’s median wage, the spokesman said. That meant 42.5% were for roles with wages above $48,859. Meanwhile, 14% earned above $75,000. The results were given a margin of error of plus or minus 5%, the spokesman said.

Having had some more time to look at the details of the government’s announced changes to the Skilled Migrant category (the main stream under which residence approvals are granted) and the proposals they are consulting on for changes to the Essential Skills (temporary work) visas, I’m perhaps slightly more positive than I was yesterday.   Within the government’s overall vision of what immigration can offer New Zealand –  one that I think is profoundly incorrect, based not on a hunch about what might be,  but on decades of New Zealand’s actual experience with large scale immigration programmes – the changes look as though they will represent an improvement.    Even if one is sceptical about the overall vision, the changes (actual and proposed) are likely to modestly reduce the damage that high levels of non-citizen immigration is doing (holding back real productivity and earnings growth) to the material living standards of New Zealanders.   That is welcome.

What is there to like?     Take the Skilled Migrant category changes first (which are definite, not just proposals for consultation)

In future, applicants with jobs at ANZSCO skill levels 1, 2 and 3 (currently regarded as highly-skilled) will only be awarded points for their employment if they are paid at or above NZ$48,859 per year (or NZ$23.49 per hour).

Bonus points will be awarded for remuneration at or above NZ$97,718.00 per year (or NZ$46.98 per hour)

and, straight from the government’s document,

Work experience

• More points will be available for work experience.
• Points will be awarded for skilled work experience in ANZSCO skill level 1, 2 and 3 occupations.
• Points will be awarded for skilled New Zealand work experience of 12 months or more. There will be no additional points for work experience of two years or more.

Qualifications, age and partner’s qualifications

• Points available for recognised level 9 or 10 post-graduate qualifications (Master’s degrees and Doctorates) will increase.
• Points for people aged 30 – 39 years will increase.
• Partner’s qualifications will only be awarded points if they are a recognised Bachelor’s level degree or higher or a recognised post-graduate (level 9 or higher) qualification.

Which factors will applicants no longer be able to gain points for?

Points for the following factors will be removed:

• qualifications in an area of absolute skills shortage
• skilled employment, work experience and qualifications in Identified Future Growth Areas
• close family support in New Zealand

The document is light on detail.  There is no sign of how many more points will be available for things like higher level qualifications,  but as I noted recently it did seem absurd that if one needed 160 points for residence, there was only 5 points difference between what was on offer for a basic qualification (in an age when bachelors degree are a dime a dozen) and those for masters or doctorates.  Academic qualifications aren’t everything –  I always remember a school teacher advising us of his view that “the PhDs are the plodders” –  but if we are aiming for skilled and innovative people, we probably should be more strongly differentiating between higher and lower level qualifications.   Similarly, I like the idea of more points for more highly paid jobs.

And if we considering giving people permanent rights to live here –  which is what the Skilled Migrant category is about –  we shouldn’t be preferencing people who happen to fit current shortages as judged by Cabinet ministers and MBIE officials.  We are taking people who, we hope, will contribute strongly over 30 or 40 years.

On the other hand:

• the additional points on offer for jobs outside Auckland, added in last year, remain.   One understands the politics of those points, but they simply have the effect of lowering the average quality of the people who are granted residence (as people with lower skills etc who can get a job outside Auckland will beat out higher-skilled people with a job in Auckland,
• the minimum wage in New Zealand is now $15.75 an hour.   I reckon that is too high –  it is one of the highest relative to median wages anywhere in the OECD –  but it is the government’s own choice, and they keep increasing it.    But to be regarded as doing highly-skilled work, under the changes announced yesterday, people will only have to be earning $23.49 per hour, or just under 50 per cent more than the minimum wage.    It is good that they have put a threshold in but it is a pretty undemanding one.  Of course, we don’t know how many people it will catch –  and neither apparently does the government –  but if it is many, the system to now has been working even more badly than most have realised.
• relatedly, I’m not really sure why we are giving residence points to anyone with an skill level 4 or 5 occupation.  In fact, if one looks carefully at the ANZSCO skills lists (here – I suggest Table 5 on the first spreadsheet) it isn’t clear why many of the occupations in the skills levels 2 and 3 qualify for points.    Here is just one subset of the level 2 skilled occupations

Plenty of good people do those jobs, no doubt. Such roles all have their place in a modern economy.  But this programme is supposed to be bringing in highly-skilled, able and innovative people who can help lift the overall productivity of the New Zealand economy.  If we were simply interested in getting ever more people then a coarse sifting like this might be fine, but the goal of the programme –  and this is the residence programme, not a short-term skill shortages programme –  is more ambitious, and supposedly transformative, than that.    Simply requiring a beauty salon manager to earn more than 1.5 times the average wage bears no relation to that ambition.

In a sense, the problem with the programme is that New Zealand just isn’t that attractive to very many of the sorts of people who might genuinely make a difference.  It is a nice place to live –  if you don’t mind being far from anywhere else –  and the living standards aren’t bad, but if you are young, energetic, innovative, and genuinely highly-qualified you are more likely to be interested in a lot of other places before New Zealand –  all the other Anglo countries (including Ireland) for a start, and probably most of Europe too (some places in Asia –  Singapore, Dubai – probably attract some too).  Mostly they are richer than we are, mostly they have bigger domestic markets, and all of them are closer to other places (home, other countries, other markets etc).    It is part of the reason why I argue for markedly pulling down our residence approvals target, because it would then help us focus on attracting the small number of people who might really benefit New Zealanders.

What of the proposed changes to the Essential Skills temporary work visa (details at the link above)?

They are a modest step in the right direction.   But –  seasonal roles aside perhaps –  it isn’t clear to me why we continue to grant “Essential Skills” visas for any one in any occupation at levels 4 and 5 on the ANZSCO list?    Perhaps people will be less inclined to come in future, especially if they have partners/spouses who themselves can’t qualify for a work visa.  Perhaps, but New Zealand wages are still well above those in –  say –  the Philippines, and there is a huge number of Filipino workers in a various advanced economies (eg Hong Kong, and various Middle East countries) doing relatively unskilled roles, even though they’ve had to leave families behind.   The proposed three year limit (at any one time) on how long people in these occupation groups could stay in New Zealand seems appropriate, to minimise the risk of people living here long term with no plausible path to residency.   But three years is a reasonable chunk of time for a short-term relocation (in my own career, I did three temporary roles abroad, each for two years at a time).    I’d also be more comfortable if even people in higher-skilled roles were only eligible for three year visas (instead of five years).  I’d happily allow a single three year extension for, say, jobs in skill level 1, but after that either the person should settle here permanently, or return home.

Sadly, there is also no sign of any real change in how the so-called labour market test is operated.   The most compelling labour market test isn’t that “an employer satisfy an immigration officer that they have made genuine attempts to recruit or train domestic workers” (or even that they have advertised at WINZ), but what has happened to the relative price paid for that sort of role.     If wages for a particular type of skill have risen, say, 10 percentage points more than the market average across the economy in the previous two years, it might be a pointer towards some sort of genuine “skill shortage”.  But in the whole immigration system, and particularly in the Essential Skills category, there is no hint that changes in wage rates should be a material indicator.   We should ue market price indicators more, and bureaucratic judgement (and the employer’s persuasive gift of the gab) less.

I noted yesterday that this announcement made no attempt to deal with the rort that is much of the student visa system.    That still appears to be true, but there might be some beneficial effects  nonetheless.   It may well be that foreign students, using the extensive right to work provisions the government introduced a few years ago,  may be  heavily represented among those doing notionally level 1,2 or 3 jobs are yet getting paid quite low wages (below than 1.5 times minimum wage threshold).  If so, you would expect that this package –  under which such jobs don’t count towards residence points –  might diminish the attractiveness of New Zealand PTEs.     Cutting back export subsidies is always a good thing.

Overall, I think my assessment yesterday was right.  This is a fairly modest unambitious package, that (deliberately) doesn’t attempt to seriously reduce the typical level of non-citizen immigration to New Zealand.  But it does take some steps that will help modestly raise the average skill level of those coming to New Zealand.  But the changes are small, and don’t address the medium-term challenges around non-citizen immigration to New Zealand.   Even given the desire to continue with large-scale non-citizen immigration, the government could easily have gone much further in increasing the focus on the really skilled and able people whom we might be able to attract.      I’m not sure why they won’t.  Probably they are too influenced by short-term employer pressures –  which are real, but which change if overall immigration policy is changed enough (because overall demand abates too) –  and by the siren call of high headline GDP growth.  All while the tradables sector, productivity, and per capita living standards do badly, and –  since the government refuses to do anything serious about freeing up land supply for housing, even when the votes are on offer  – the house price pressures just get worse.  It all works most against the younger and poorer New Zealanders, but isn’t helping most of the rest of us either.

Many readers were probably expecting a post on the immigration announcement this morning.   I did an op-ed for Stuff on those changes, which is now up.

The leaders of our government are still, apparently, believers in the twin fallacies of (a) “big New Zealand”, which has been failing through decades of large scale non-citizen immigration, and (b) that somehow an increased supply of people in New Zealand eases (rather than accentuates) overall labour market pressures.  People generate demand as well as supply, and the New Zealand empirical evidence has long suggested that  –  as one would expect, from the increased capital stock requirements – those short-term demand effects outweigh the supply effects.    Consistent with those beliefs, today’s changes are at the margins only.  In general, they look like baby steps in the right direction, but since even they –  with all the analytical resource at their command –  won’t or can’t tell us how large an impact they expect, it is difficult to believe the effects will be large.

When I read the Minister’s speech I was briefly encouraged to find these words

“Today, I want to look at the benefits migrants bring to New Zealand”.

But I turned the page and found…..well…..nothing.    Still no empirical evidence –  narrative or more formal –  for the claims of benefits to New Zealanders.  And really not much more than the same old implication that more people expand the economy in total (well yes they do but that is hardly the point), no mention of productivity, and the same old firm-level stuff (that ignores overall economy perspectives) about easing labour market constraints.

I concluded my Stuff piece this way

Rapid population growth –  without great new economic opportunities – simply skews the economy inwards.  Successfully making it in global markets is the only reliable path for a small country to get and stay rich, and yet the relative size of our export sector is shrinking.   It is time to give up the “big New Zealand” or “big Auckland” ambitions that seem to have appealed to our political leaders for generations.  Focus instead on maximising what we can achieve with our own limited natural resources and our own abundantly talented skilled hardworking people.

As ever, in election year, the question is whether the main opposition parties will be prepared to offer something materially different.