Two BIMs and a bureaucrat

As I noted last week, government departments’ (and agencies’) briefings to incoming ministers have mostly become a bit of a joke: mostly devoid of any substance, typically specifically tailored to the preferences of the particular incoming government (ie written/finalised after the shape of the new government is clear), and mostly not much more than process pieces.  If one is interested in the actual substantive advice –  the sort of things the Lange government intended to make available when they began publishing BIMs in the mid 1980s –  citizens need to fall back on the Official Information Act, with all its limitations.

There are exceptions –  I wrote the other day about some substance in the Reserve Bank’s BIM.   And even on the little that is released, sometimes tantalising hints sneak through.  The intelligence services, for example, left unredacted a suggestion that governments might need to be concerned about the influence activities in New Zealand of foreign governments –  something neither the current Prime Minister nor her predecessor have been willing to take seriously or address openly.

Of the other economic functions, neither the Treasury nor the Immigration BIMs say much.  But sometimes there is quite a bit even in a few words.  Take immigration for example.    It was only a few years ago that MBIE was telling Ministers of Immigration (and the public) that immigration was a “critical economic enabler” –  a potential catalyst to transform New Zealand’s dismal productivity performance.   There isn’t much in this year’s Immigration portfolio BIM –  mostly process again –  but my eye lit on this paragraph

New Zealand’s immigration system enables migrants to visit, work, study, invest, and live in New Zealand. Economically, it contributes to filling skill shortages, encouraging investment, enabling and supporting innovation and growing export markets. Immigration has contributed to New Zealand’s strong overall GDP growth in recent years largely through its contribution to population growth. However, the evidence suggests that the contribution of immigration to per capita growth and productivity is likely to be relatively modest.

The theory –  dodgy bits like “filling skill shortages” and the more plausible bits –  is there in the first half of the paragraph.  But by the end of the paragraph, even MBIE has to concede that there isn’t likely to be much boost to per capita income or productivity at all –  the effects are “likely to be relatively modest”.  It is hard to avoid that sort of conclusion –  looking specifically at the New Zealand experience –  when (to take MBIE’s list from the second sentence) “skill shortages” have been a story told in New Zealand for 150 years, business investment has been weak by OECD standards for decades, firms haven’t regarded it as particularly attractive to invest heavily in innovation (again by world standards), and the export share of GDP is now at its lowest since 1976.  Still, it is good to see reality slowing dawning on MBIE.  On my telling, they are still too optimistic, but even on their telling when such a large scale policy intervention seems to produce such modest economic results it might be time for a rethink.

And what about the BIMs prepared by Treasury?   There isn’t much in the main Finance document (lots of process stuff, and plenty of talk of diversity and wellbeing and none on productivity).  There is an appendix specifically aimed to address what Treasury understand to be the new Minister’s priorities, but not much about Treasury’s own view of what needs to be done, or the pressing problems.    If anything, reading Gabs Makhlouf’s covering letter to Grant Robertson one might conclude that Treasury didn’t think there was much to worry about at all.

You are taking up your role at a time when New Zealand’s economy is in a relatively strong position.  There is solid forecast growth, complemented by fiscal surpluses and a strong debt position.  And while international markets still present a number of risks and uncertainties, overall the global economy –  as reflected in the IMF’s recent outlook –  presents opportunities for New Zealand to seize, in particular with Asia’s ongoing growth.

Presumably the Secretary didn’t think it worth emphasising five years of no productivity growth, seventy years of pretty weak productivity growth, shrinking exports as a share of GDP, sky-high house/land prices, pretty weak business investment and so on.  Or even the fact that notwithstanding “Asia’s ongoing growth” –  a story now for more than forty years –  nothing has looked like turning around New Zealand’s continuing gradual economic decline.    And perhaps when you are a temporary immigrant yourself –  as Makhlouf presumably is –  the cumulative (net) loss of a million New Zealanders isn’t something that concerns you?

In their BIM Treasury proudly asserts that “We are the Government’s lead economic and financial adviser”.  Perhaps they hold that formal office, but it is hard to be optimistic about the content of what they might be offering the government.

But Treasury also had some other BIMs for other portfolios they have responsibilities for.  The one I noticed was the Infrastructure one.    Buried in the middle of that document was this observation

Auckland’s ability to absorb growth has been reached. Environmental, housing and transport indicators all reflect a city under increasing pressure. Traditionally, Auckland has been more productive than other regions of New Zealand but, on a per capita basis, this productivity premium has been shrinking over time. Auckland is not performing as well as expected for its size and in comparison to other primary cities around the world.  There are opportunities to increase this productivity but only if supply constraints, especially transport and housing, are resolved.

That key middle sentence –  no hint of which appears in the main Treasury BIM –  could easily have been lifted from one of my various posts on similar lines.    They could have illustrated the point with a chart like this.

akld failure

 

Appearing in the standalone Infrastructure BIM, Treasury appear to want to blame these poor outcomes largely on infrastructure gaps –  a conclusion which I think is flawed –  but I’m encouraged to see a recognition of the problem in official advice to the Minister of Finance.   It is all a far cry from the rather lightweight celebratory speech Gabs Makhlouf was giving about Auckland’s economy only 18 months ago, which I summed up this way

[it] might all sound fine,  until one starts to look for the evidence.  And there simply isn’t any.  Perhaps 25 years ago it was a plausible hypothesis for how things might work out if only we adopted the sort of policies that have been pursued. But after 25 years surely the Secretary to the Treasury can’t get away with simply repeating the rhetoric, offering no evidence, confronting no contrary indicators, all simply with the caveat that in “the long run” things will be fine and prosperous.  How many more generations does Makhouf think we should wait to see his preferred policies producing this “more prosperous New Zealand in the long run”?

If the Secretary to the Treasury was going to address the economic issues around Auckland, one might have hoped there would be at least passing reference to:

  • New Zealand’s continuing relative economic decline, despite the rapid growth in our largest city,
  • Auckland’s 15 year long relative decline (in GDP per capita), relative to the rest of New Zealand,
  • The contrast between that experience, and the typical experience abroad in which big city GDP per capita has been rising relative to that in the rest of the respective countries,
  • The failure of exports to increase as a share of GDP for 25 years,
  • The fact that few or any major export industries I’m aware of our centred in Auckland (the exception is probably the subsidized export education sector) –  and by “centred” I don’t mean where the corporate head office is, but where the centre of relevant economic activity is.

There is nothing of economic substance on immigration in the main Treasury BIM this year, but perhaps over the next few years Treasury could start thinking harder about whether it really makes sense to be using policy to bring ever more people to one of the most remote corners on earth, even as personal connections and supply chains seem to be becoming ever more important, at least in industries that aren’t simply based on natural resources.

The one other thing that did catch my eye in the Treasury BIM was this paragraph

The Treasury Board. This external advisory group supports the Treasury’s Secretary and ELT to ensure that its organisational strategy, capability and performance make the best possible contribution to the achievement of its goals. Current members of the Board are the Secretary to the Treasury (Gabriel Makhlouf), the Chief Operating Officer (Fiona Ross), Sir Ralph Norris, Whaimutu Dewes, Cathy Quinn, Mark Verbiest, Harlene Hayne and John Fraser (Secretary to the Australian Treasury).

Now, to be fair, the “Treasury Board” has no statutory existence, and no statutory powers.  It isn’t even clear why it exists at all –  Boards are typically supposed to represent shareholders, and as regards Treasury, the Minister of Finance, Parliament, and the SSC are supposed to do that on our behalf.  But given that there is an advisory Board, what is a senior public servant from another country  –  the Secretary to the Australian federal Treasury –  doing on it?      New Zealand and Australia might be two of the closer countries in the world, but we don’t always have the same interests, and at times those interests –  and perspectives – clash rather sharply.    I gather John Fraser is quite highly regarded, but who does he owe allegiance to, and whose interests is he advancing in his work on the New Zealand “Treasury Board”?  I might not worry if he were a retired former Treasury Secretary from Australia, but he is a serving official of the Australian government.  It seems extraordinary, and quite inappropriate.   Did he, for example, have any involvement in the recent, superficially questionable, appointment of a former senior Queensland public servant to a top position in our Treasury?    Again, close working relationships between the two Treasurys –  each as servants of their own governments –  might be reasonably expected, and perhaps mutually beneficial.   But providing a senior official of another government with inside access to the senior-level workings of one of our premier government departments seems questionable at best.  GIven Makhlouf’s past enthusiasm for China, perhaps the appeasers at the New Zealand China Council will soon be suggesting he appoint someone from China’s Ministry of Finance could join Fraser on the “Board”?

And finally, some kudos for a bureaucrat.  As various people have noted, Graeme Wheeler went for five years as Governor –  as the most powerful unelected person in New Zealand –  without ever exposing himself to a searching interview, or making himself available for an interview on either main TV channel’s weekend current affairs shows.  His appointment might be highly legally questionable, he might be only minding the store for a few months, but yesterday Grant Spencer went one better than Wheeler and sat down for interview on Q&A with Corin Dann.    I thought he did well, but what really counted was just showing up, and being open to questions.

Since much of the interview was about Spencer’s speech last week, which I’ve already written about, there was much in it that I disagreed with.  But I’m not going over that ground again.  Perhaps the one new thing that caught my attention was when Spencer claimed that the Bank is independent for monetary policy, but not around things like LVRs.   That is simply factually untrue.  The Act makes it very clear that any decisions to impose or lift LVR restrictions are solely a matter for the Governor (also a point that the Prime Minister, the Minister of Finance and their predecessors have recognised).   Spencer went on to say that if the then government had not wanted the Bank to impose LVR restrictions they wouldn’t have done so.     That might be fine, but I hope they never apply that standard to monetary policy decisions.  And if LVR decisions really are more political and redistributive in nature, perhaps as part of the forthcoming review, the Reserve Bank Act should be changed so that the Reserve Bank offers technical professional advice, but the Minister of Finance makes the decision?.  We can, after all, toss out elected governments.

 

 

 

The new government’s immigration policy

It was confirmed yesterday that the new government’s immigration policy will be the policy the Labour Party campaigned on (albeit very quietly).  And so we learned that the new government will remain a fully signed-up adherent of the same flawed, increasingly misguided, “big New Zealand” approach that has guided immigration policy for at least the last 25 years.

If that is disappointing, it shouldn’t really be any surprise.     The Green Party approach to immigration is pretty open –  the “globalist” strand in their thought apparently outweighing either concern for New Zealand’s natural environment or any sort of hard-headed analysis of the economic costs and benefits to New Zealanders.  Only a few months ago, they were at one with the New Zealand Initiative, tarring as “xenophobic” any serious debate around the appropriate rate of immigration to New Zealand.  Never mind that population growth is driving up carbon and methane emissions, in a country where marginal abatement costs are larger than in other advanced economies, and yet where the same party is determined that New Zealand should reach net zero emissions only 33 years hence.

As for New Zealand First, they talk a good talk.  But that’s it.   As I noted a few months ago, reading the New Zealand First immigration policy (itself very light on specifics)

If one took this page of policy seriously, one could vote for NZ First safe in the expectation that nothing very much would change at all about the broad direction, or scale, of our immigration policy.     Of course, there would be precedent for that.  The last times New Zealand First was part of a government, nothing happened about immigration either.

Even so, I was just slightly surprised that there wasn’t even a token departure from the Labour Party’s immigration policy that New Zealand First could claim credit for.   The New Zealand Initiative’s report on immigration policy earlier in the year was largely (and explicitly) motivated by concerns about what New Zealand First might mean for immigration policy.

Six months ago, when we started scoping the Initiative’s immigration report, we had a very specific audience in mind: Winston Peters. Our aim was to assemble all the available research and have a fact-based conversation with New Zealand’s most prominent immigration sceptic.

Turns out that, perhaps not surprisingly based on the past track record, that they needn’t have bothered.

And so Labour’s election policy will be the immigration policy of the new government.    The policy documents themselves are here and here.   I wrote about the policy here at the time it was released in June, before the Ardern ascendancy.   It was notable how little attention Labour gave to immigration policy during the campaign –  perhaps it didn’t fit easily with the “relentlessly positive” theme –  and I understand there was a conscious decision by the new leadership to downplay the subject.    It will be interesting to see now whether they follow through on their manifesto, but very little about immigration policy requires legislative change so, in principle, the changes should be able to be done quite quickly.  In fact, as the biggest proposed changes affect international students one would assume they will be wanting to have those measures in places in time for the new academic year.

What also remains quite remarkable is the extent to which Labour’s policy has been taken as a substantial change.  Serious overseas media and intelligent commentators have presented Labour’s proposals as some sort of major sustained change in New Zealand approach to immigration, and thus to expected immigrant numbers.    To read some of the Australian and American commentary you might have supposed, say, that in future New Zealand’s immigration approvals might be cut towards, say, the sorts of levels (per capita) that prevailed in the United States under Bush and Obama.

Labour’s policy is, of course, nothing of the sort.  Under the proposed policy, New Zealand will remain –  by international standards –  extraordinarily open to non-citizen migrants, with expected inflows three times (per capita) those of the United States, and exceeded only (among OECD countries) by Israel in a good year (for them).

What determines how many people from abroad get to settle permanently in New Zealand is the residence approvals programme.   Under that programme, at present the aim is to grant around 45000 approvals to non-citizens each year (Australians aren’t subject to visa requirements, but in most years the net inflow of Australians is very small).  The outgoing government reduced that target (from 47500) last year.   Labour’s immigration policy document does not, even once, mention the residence approvals programme.  That was, no doubt, a conscious choice.  They are quite happy with the baseline rate of non-citizen immigration we’ve had for the last 20 years; quite happy to have the highest planned rate of non-citizen immigration anywhere in the OECD.  Medium-term forecasts of the net non-citizen immigration inflow will not change, one iota, if Labour proceeds with their policy.  For some of course, that will be a desirable feature.  For others it is a serious flaw, that results from failing to come to grips with the damage large scale immigration is doing to the economic fortunes of New Zealanders.

Of course, there are planned policy changes.    There are various small things:

  • an increased refugee quota,
  • steps to increase the utilisation of the existing Pacific quotas,
  • more onerous requirements for investor visas (including requiring investment in new “government-issued infrastructure bonds”),
  • a new Exceptional Skills visa,
  • a KiwiBuild visa

Taken together, these won’t affect total numbers to any material extent.

There is also a (welcome) change under which they will

Remove the Skilled Migrant Category bonus points currently gained by studying or working in New Zealand and standardise the age points to 30 for everyone under 45.

All else equal, these changes won’t affect the number of people getting residence, or materially affect the average quality (skill level) of those getting residence.   That is a shame: at present, too many migrants aren’t that skilled at all, and maintaining such a large approvals target (in such a remote, not very prosperous, country) makes it hard to lift the average quality.

The bigger changes are under two headings.    The first is around temporary work visas.   Here is what they say they will do.

Labour will:

• Actively manage the essential skills in demand lists with a view to reducing the number of occupations included on those lists

• Develop regional skill shortage lists in consultation with regional councils and issue visas that require the visa holder to live and work within a region that is relevant to their identified skill

• For jobs outside of skills shortages lists, Labour will ensure visas are only issued when a genuine effort has been made to find Kiwi workers

• Strengthen the labour market test for Essential Skills Work Visas to require employers to have offered rates of pay and working conditions that are at least the market rate

• Require industries with occupations on the Essential Skills in Demand lists to have a plan for training people to have the skills they require developed together with Industry Training Organisations

• Review the accredited employers system to make sure it is operating properly.

The broad direction seems sensible enough –  after all, the rhetoric has been about lifting the average skill level of the people we take.   But as I noted in my comments in June, the policy is notable for its touching faith in the ability of bureaucrats to get things right, juggling and managing skills lists, and now extending that to a regional differentiation.   There is no suggestion, for example, of letting markets work, whether by (as I’ve proposed) imposing a flat (quite high) fee for work visas and then letting the market work out which jobs need temporary immigrant labour, or by requiring evidence that market wages for the skill concerned have already risen quite a lot.  The latter would have seemed an obvious consideration for a party with trade union affiliates.

On Labour’s own estimates, these changes won’t have a large effect on the number of people here on work visas at any one time, although in the year or so after any changes are implemented, the net inflows that year will be lower than they otherwise would have been.

Much the same goes for the biggest area of change Labour is proposing, around international students.

Labour will:

• Continue to issue student visas and associated work rights to international students studying at Level 7 or higher – usually university levels and higher

• Stop issuing student visas for courses below a bachelor’s degree which are not independently assessed by the TEC and NZQA to be of high quality

• Limit the ability to work while studying to international students studying at Bachelor-level or higher. For those below that level, their course will have to have the ability to work approved as part of the course

• Limit the “Post Study Work Visa – Open” after graduating from a course of study in New Zealand to those who have studied at Bachelor-level or higher.

In general, I think these are changes in the right direction.  Here were some of the comments I made earlier

I’m a little uneasy about the line drawn between bachelor’s degree and other lines of study.  It seems to prioritise more academic courses of study over more vocational ones, and while the former will often require a higher level of skill, the potential for the system to be gamed, and for smart tertiary operators to further degrade some of the quality of their (very numerous) bachelor’s degree offerings can’t be ignored.  …… I’d probably have been happier if the right to work while studying had been withdrawn, or more tightly limited, for all courses.   And if open post-study work visas had been restricted to those completing post-graduate qualifications.

The proposals are some mix of protecting foreign students themselves, protecting the reputation of the better bits of our export education industry, and changes in the temporary work visas rules themselves.     In Labour’s telling –  and it seems a plausible story –  the changes are not designed to produce a particular numerical outcome, but to realign the rules in ways that better balance various interests.  The numbers will adjust of course, but that isn’t the primary goal.

Labour estimates that these changes will lower the number of visas granted annually by around 20000.   That is presented, in their documents, as a reduction in annual net migration of around that amount.   But that is true only in a transition, immediately after the changes are introduced.  The stock of people here on such student and related visas will fall, but after the initial transitional period there will be little or no expected change in the net inflow over time (which is as one would expect, since the residence approvals target is the key consideration there).

To see this consider a scenario in which 100000 new short-term visas are issued each year, and all those people stay for a year and a day (just long enough to get into the PLT numbers).  In a typical year, there will then be 100000 new arrivals and 100000 departures.

Now change the rules so that in future only 75000 short-term visas are issued each year.  In the first year, there will be 75000 arrivals and (still) 100000 departures (people whose visas were issued under the old rules and who were already here).  But in the next year, there will be 75000 arrivals and 75000 departures.    Measured net PLT migration will have been 25000 lower than otherwise in the first year, but is not different than otherwise in the years beyond that.

That doesn’t mean the policy changes have no effect.  They will lower the stock of short-term non-citizens working and studying in New Zealand.    They will ease, a little, demand for housing.  In some specific sectors, with lots of short-term immigrant labour, they may ease downward pressures on wages (although in general, immigrants add more to demand than to supply, and that applies to students too).   But it won’t change the expected medium-term migration inflow.

Oh, and the student visa changes will, all else equal, reduce exports

Selling education to foreign students is an export industry, and tighter rules will (on Labour’s own numbers) mean a reduction in the total sales of that industry.   Does that bother me?  No, not really.  When you subsidise an activity you tend to get more of it.  We saw that with subsidies to manufacturing exporters in the 1970s and 80s, and with subsidies to farmers at around the same time.  We see it with film subsidies today.  Export incentives simply distort the economy, and leave us with lower levels of productivity, and wealth/income, than we would otherwise have.   In export education, we haven’t been giving out government cash with the export sales, but the work rights (during study and post-study) and the preferential access to points in applying for residence are subsidies nonetheless.  If the industry can stand on its own feet, with good quality educational offerings pitched at a price the market can stand, then good luck to it.  If not, we shouldn’t be wanting it here any more than we want car assembly plants or TV manufacturing operations here.

I participated in a panel discussion on Radio New Zealand this morning on Labour’s proposed changes.  In that discussion I was surprised to hear Eric Crampton suggest that the changes would put material additional pressure on the finances of universities.    Perhaps, although (a) the changes are explicitly aimed at sub-degree level courses, and (b) to the extent that universities are getting students partly because of the residence points that have been on offer, it is just another form of “corporate welfare” or subsidy that one would typically expect the New Zealand Initiative to oppose.      Whether hidden or explicit, industry subsidies aren’t a desirable feature of economic policy.

Standing back, Labour’s proposal look as though they might make a big difference in only a small number of sectors, notably the lower end of the export education market.  If implemented, they will be likely to temporarily demand housing demand –  perhaps reinforcing the current weakness in the Auckland housing market, along with some of their other proposed legislation (eg the extension of the brightline test and the “healthy homes” bill).   But they aren’t any sort of solution to the house price problem either: after the single year adjustment, population growth projections will be as strong as ever, and in the face of those pressures only fixing the urban land market will solve that problem. Time will tell what Labour’s policy proposals in that area, which have sounded promising, will come to.

Two final thoughts.  One wonders if whatever heat there has been in the immigration issue –  and it didn’t figure hugely in the election –  will fade if the headline numbers start to turn down again anyway.   The net flow  of New Zealanders to Australia has not yet shown signs of picking up –  but it will resume as the Australian labour market recovers.  But in the latest numbers, there has been some sign of a downturn in the net inflow of non-citizens.

PLT non citizen

There is a long way to go to get back to the 11250 a quarter that is roughly consistent with the 45000 residence approvals planned for each year.  But, if sustained, this correction would provide at least some temporary relief on the housing and transport fronts.  As above, Labour’s changes will have a one-off effect on further reducing this net inflow in the next 12 or 18 months, but nothing material beyond that.

And in case this post is seen by the new Minister of Immigration, or that person’s advisers, could I make a case for two things:

  • first, better and more accessible data.  The readily useable migration approvals is published only once a year, with a lag even then of four or five months.  The latest Migration Trends and Outlook was released in November 2016, covering the year to June 2016.  It is inexcusably poor that we do not have this data readily, and easily useable, available monthly, within a few days of the end of the relevant month, and included (for example) as part of Statistics New Zealand’s Infoshare platform.  The monthly PLT data are useful for some things, but if you want a good quality discussion and debate around immigration policy, make the immigration approvals data more easily available.    As a comparison, building permits data is quickly and easily available, reported by SNZ.  Why not migration approvals?
  • second, considering referring the issue of the economics of New Zealand immigration to the Productivity Commission for an inquiry.   Perhaps the current policy, as Labour proposes to amend it, has all the net gains the advocates say it does.  If so, the Productivity Commission could helpfully, and in a non-partisan way, demonstrate that.  But there are still serious issues around New Zealand’s unusually liberal immigration policy, in a country so remote and with such a poor track record in increasing its international trade share.  Whatever the economic merits of immigration in some places, it is by no means sure that large scale immigration here is doing anything to improve the fortunes of most New Zealanders.  It may, in fact, be holding us back, being one part of the story as to why we’ve failed to make any progress in closing the productivity gaps with other advanced economies.  It would seem an obvious topic for the Productivity Commission, and a good way of lifting the quality of the policy debate around this really substantial policy intervention.

 

 

 

Debate debased

On the Herald website yesterday morning, I noticed a headine “As an immigrant, I’m terrified of Winston Peters”.    I ignored it, as clickbait.  But it was still there last night, so out of curiosity I opened the story.   The Herald is, after all, one of the main media outlets in the country, sometimes still approximating a serious newspaper, and immigration policy is one of the issues that, in a New Zealand context, I’ve given a lot of thought to.

With such a florid, emotionally overwrought, headline, I had low expectations of the article.  But I still wasn’t prepared for what I found.    The author, Ben Mack, is described as a “lifestyle columnist” for the Herald.   His previous columns include a, borderline offensive, piece on “18 reasons why New Zealand is like North Korea”.

He’s an American citizen, and despite the headline isn’t really an immigrant at all.   He is apparently here on a temporary work visa, having previously been here on a student visa.   Quite how the economic prospects of New Zealanders would have been impaired by an apparent shortage of New Zeaaland “lifestyle columnists” isn’t clear, but set that to one side for the moment.   Apparently he has hopes of eventually being granted New Zealand residency and staying on.  Many do, but it isn’t an entitlement.  When you go to a country to work on a temporary visa, you might well have to go home again –  I know, I’ve done it three times.   It is up to New Zealanders, and the New Zealand government, to decide how many people, and who, it allows to settle permanently among us.  That’s not unusual.  It is how pretty much every country in the world operates.  I suspect Barack Obama might have been too conservative to Mr Mack’s tastes and preferences, but under the Obama Administration –  as under the present US government –  the United States grants one-third as many residence visas, per capita, as New Zealand does.

But, as a temporary resident in New Zealand, Mr Mack is apparently “terrified” by Winston Peters – a long-serving democratically elected member of a long-established Parliament.   Why?  Well, that isn’t really clear.

His article begins

Winston Peters is gaslighting the entire country. Sound extreme? If anything, I think it’s an understatement, actually.

The Oxford Dictionary defines “gaslighting” as to “manipulate (someone) by psychological means into doubting their own sanity.”

That’s exactly what Mr Peters is doing. And it’s long past time we did something about it.

I’m glad he provided a dictionary definition because I’d never heard of “gaslighting” myself.   I still can’t say I recognise the phenomenon,   And as for “it’s long past time we did something about it”, surely (a) it is called democracy, freedom of expression etc etc –  all that stuff they don’t have in North Korea, and (b) the relevant “we” here is New Zealand citizens and voters (the latter category, even under our unusually liberal law, not including people on temporary work visas).

I get that Winston Peters isn’t everyone’s cup of tea (he isn’t really mine).  In fact, only 7.2 per cent of voters opted for his party.  92.8 per cent didn’t.  That’s almost as many as the 93.7 per cent of voters who didn’t opt for the Green Party.   But, you know, it is democracy.  I’m sure MMP is a strange concept to visiting Americans –  and I’m not a fan of it myself – but it was the freely chosen system adopted by New Zealand voters. If you get 5 per cent of the vote, your party gets seats in Parliament.  Personally, I think the threshold should be lower, but again the rules are the rules and one shouldn’t tamper with them lightly.  New Zealand First has now been around for almost 25 years, and the high point of its electoral support was 1996, when the party got 13.4 per cent of the vote.  And in a proportional representation system –  and such systems are pretty common –  it is rare for a single party to win a majority of seats in Parliament, and in the absence of a taste for “grand coalitions” –  arrangements that undermine the potency of political opposition, a vital part of a parliamentary democracy – that means that at times smallish parties that could readily work with either main party can get to exercise quite a bit of clout.

But –  and here is where a bit of perspective and experience of New Zealand might have come in handy to Mr Mack – not usually that much at all.   New Zealand First was in coalition with National in the mid 1990s –  Winston Peters as Deputy Prime Minister and Treasurer –  and it was in partnership with Labour for a few years from 2005 –  Winston Peters serving a Foreign Minister, and generally accepted as having done a reasonable job.   And what changed?  1996 is a while ago now, but I can recall:

  • a small increase in the inflation target, never subsequently reversed,
  • free doctor’s visits for kids under six, never subsequently reversed, and
  • a referendum on reform of New Zealand Superannuation, in which the cause Peters was advocating lost decisively.

Oh, and I think there was a Population Conference.

The 2005 to 2008 term was even less memorable, unless you were a Ministry of Foreign Affairs bureaucrat: their Minister secured them a great deal of additional money and the prospect of various new embassies.

I’m sure there was other stuff, but none of it was transformative.

Whether New Zealand First never made much difference because of Peters’ own limitation as a government politician or because he was always a minority party and legislation actually requires 61 votes, or some combination of the two, or other reasons altogether is an interesting question.  But even if the opposition bark was in some way genuinely “terrifying”, the track record in office has been such as to not leave much trace.

Mack continues

Let me get this out of the way: I have zero respect for a man who, for decades, has made populist xenophobia his stock-and-trade, and who seems to delight in causing misery for entire groups of people (his abuse of the press – people simply doing their jobs like everyone else – is unacceptable enough).

I’m sure in journalism school they do – or did –  encourage people to use words carefully.   And when young journalists didn’t, grizzled sub-editors did it for them.  But perhaps that discipline no longer exists?    The Oxford dictionary –  Mack’s own source –  defines “xenophobia” as a ‘deep-rooted fear of foreigners’.    Perhaps Peters does have that fear –  I’ve never met the man –  but I doubt Mack could produce any serious evidence for it.  Instead, as with many pro-immigration people –  be it the Greens, or the New Zealand Initiative –  “xenophobia” has become a substitute for “thinking that, just possibly, one of the highest rates of immigration in the world might not always be benefiting New Zealanders”.

And I can’t say I have much time for how Peters handles the media but…..it is a free country.

Mack continues

What’s worse is his red herring that he’s “looking out for New Zealanders”, trotting out all kinds of nonsense about how us immigrants are supposedly pushing this great nation to breaking point.

He’s ignoring that it’s immigrants who have helped build this country. It’s thanks to immigrants New Zealand punches far above its weight on the international stage than a nation with fewer people than most big cities has a right to.

Actually, I suspect “breaking point” is Mack putting words in Peters’ mouth.   But I really hope that all the politicians we elect –  and those who sought office but missed out –  could comfortably put their hand on their heart (although I guess that is more of an American idiom) and declare that they are, first and foremost, “looking out for New Zealanders”.   A pretty basic expectation surely?  Reasonable –  and unreasonable –  people might differ on what is in our best interests.  That’s the stuff of politics.  But I’m only interested in voting for parties that are interested in pursuing our best interests.   I suspect all of them fit that bill, even if none align very well with what I personally think of as our best interests.

As for the second paragraph in that little excerpt, I have no idea what he’s talking about.  I’m sure that some of those who’ve immigrated to New Zealand in the last 25 years or so –  the current wave of large scale non-citizen migration –  have made a great contribution.  Most will have done well for themselves (if they hadn’t presumably they’d have gone home again), but in what way does Mr Mack think we now “punch above our weight” more than we were doing in 1990 (say)?  In economic terms, we’ve slipped a bit further down the international league tables in that time.  Hundreds of thousands more New Zealanders have left for the better opportunities they find abroad.  Are our universities better ranked internationally? Our media more influential?   Mostly, what has happened is that our population has grown rapidly and that, compounded with our crazy land use laws, have made housing ever more unaffordable.  And New Zealand firms have found it ever harder to compete internationally.

It’s absolutely gaslighting when you look around and have no idea who is infected with New Zealand First’s noxious anti-immigrant extremism: Co-workers, classmates, friends, family, fellow shoppers at the supermarket, the clerk at the post office, the teller at the bank, the bus driver, the usher at the movie theatre …

Oh, no…..ordinary New Zealanders might share some unease about the rate of immigration in New Zealand.  How unacceptable.  Some economists do too.  And here I’m not just talking about myself.  Gareth Morgan-  who seemed to draw his votes mostly from pretty left-liberal places and professional people –  was expressing some unease too.

When you’re an immigrant like I am, you start to get a bit paranoid, wondering who might secretly want to see you forcibly removed from the country you now call home. Believe me, always having to be suspicious is incredibly damaging to your health and quality of life.

When you come on a temporary visa, you have no entitlement to stay. I quite get that worrying that the rules might change could be unsettling.  But elections are like that, not just in respect of immigration but, for example, pension ages, water rights, taxation of capital assets and so on.  Countries –  their citizens and voters –  get to make choices, and every choice has people on the other side of it.

And then the rhetoric rises to new levels of absurdity

It’s even more frightening when people with influence – like Duncan Garner recently – spout the same extremist views as Peters, then bizarrely claim it’s not xenophobic to say things like “immigration is great, but I’m not sure our traditional standard of living is enhanced by it”.

Yeah, nah bro. That’s dog-whistle politics 101. It’s the same kind of thing Hitler and the Nazis said during their rise to power. It’s the same thing the likes of Richard Spencer, Marine Le Pen, Alternative für Deutschland, Alex Jones, Milo Yiannopoulos and others spout with sickening regularity. It’s the kind of hateful rhetoric that has caused real harm.

It’s the kind of hate speech that can get people killed because it can inspire folks to physically attack immigrants.

Lets just state it simply: to prefer a low rate of immigration is not an illegitimate position.  You might think, as I do, that a high rate of immigration to New Zealand has been quite economically damaging to New Zealanders.   You might prefer social cohesion rather than ever-increasing cultural diversity.  You might just prefer to live in a small, sparsely-settled country.  Or you might just fear that politicians will never sort out of the housing market and the only way your kids will get a foothold, under say age 60, is if the population pressures (all policy-induced) are ended.   They are all arguable views –  some about evidence, some just about preferences.  They are conversations societies need to be able to have among themselves, in a mutally respectful way.    As a reminder, there is only one OECD country that actively aspires to take more immigrants than New Zealand does –  and that is Israel, where the door is open to all (but only those) who share the Jewish faith and ancestry.  The New Zealand status quo is exceptional, not normal.  Perhaps it benefits most New Zealanders –  I doubt it –  but that is the issue that should be able to be debated.

Mack continues

You’ve heard it before, but it’s worth repeating again: many immigrants sacrifice literally everything to come to New Zealand for a better life. I am one of them. In coming here, I gave up a well-paying job with serious potential for career advancement at one of the largest news organisations in Europe (an organisation which took a chance on hiring me when I had a woefully skint resume and didn’t speak a word of German at the time).

I had a nice apartment in Berlin, enjoyed the luxuries of living on a continent where I could take a one-hour flight for as little as $30 to experience a completely new culture, and had close friendships with people I’ll never forget (all the more important when you’re like me and struggle with making friends).

To which my reaction is mostly “And……?”     Yes, moving continents on a temporary work visas is a risk.  Plenty of things in life are.  And if you find it difficult to make new friends, sometimes staying at home makes sense.  Recall, that Mack comes from a far richer country than New Zealand, and if by some chance he doesn’t end up getting residence –  something he has no entitlement to –  it isn’t clear why that is our problem.

What truly makes my blood run cold is now Peters has power. Make no mistake: Peters being “kingmaker” is the worst thing to happen to this country in modern times.

I am not exaggerating.

Yes you are.  See 1996 and 2008.    (And personally, I worry a lot more about politicians of all parties who for 25 years, after each election, have done nothing to reverse our slow relative economic decline.)

And he ends – after rants at the unfitness of office of the Prime Minister and Leader of the Opposition

A change in mindset is well overdue. When we watched the 2016 US presidential election with open-mouthed shock, many felt that such a thing could never happen here, that at least a dangerous figure like Trump could never gain power in the Land of the Long White Cloud. Guess what: it’s happened.

We need to galvanise our outrage and fear into action. As much as we might like to, we can’t ignore someone like Peters. His Trumpian style of bigoted nationalism is here, now. Instead, he must be repudiated at every turn. On panels. At press conferences. At political gatherings. At workplaces. At schools. Around dinner tables. Online. Everywhere.

If New Zealand wants to have a prosperous, less hateful future, it’s time to step up, now.

The lives of thousands of people truly depend on it.

The question is: what side of history do you want to be on?

I guess he’s new to the country, a temporary resident at this stage, but has he encountered the difference between a single decision-maker system (all executive authority in the US is vested in the President) and a system of Cabinet government?  In whichever government emerges in the next week or so, members of the National Party or the Labour Party will hold either a majority of the positions, or all the positions.  Perhaps Mr Mack could devote his political energies to securing change in his own country, where he is presumably entitled to vote.

What isn’t clear in any of this is what, specifically, in New Zealand First immigration policy Mr Mack objects to.   I’ve written about it previously, drawing attention to the lack of any real specificity, and the lack of any real change to immigration policy when New Zealand First was part of government.  Personally, I count that as a flaw, but it might be a reason for Mr Mack to consider toning down his hyperventilated rhetoric.   At best –  from the perspective of someone who thinks our immigration policy is much too liberal, whether the immigrants come from Ontario, Oregon, Bangalore, Beijing, Buenos Aires or Birmingham –  we might end up with a system that reduced the average inflow to around the per capita rates Barack Obama was presiding over, in turn more liberal than the systems of many other advanced countries.  But I doubt anything like that will happen, and New Zealand will continue its slow relative decline.  Probably it will always be a nice place to live –  if very remote.  And while I’m not a fan of “what side of history do you want to be on” arguments, I’d prefer to vote for someone –  if there were such a candidate –  who was going to offer a serious prospect of reversing 70 years of relative economic decline for New Zealanders, and on building on the strengths that once made New Zealand one of the very richest and most successful nations on earth.

You might wonder why I bothered devoting so much space to Mr Mack.  His views aren’t, in themselves, very important or, apparently, grounded in much understanding of New Zealand economic history or cross-country comparative experiences.    But his column was published by one of our leading media outlets –  supposedly more than just a portal for any view anyone wants to express.  And it is inconceivable that the same outlet would publish anything so overwrought from someone on the other side of the issue  (  and nor would I encourage them to do so).  It is just the sort of contribution the New Zealand debate doesn’t need.  But, of course, the strong suggestion in Mr Mack’s column is that he isn’t interested in debate, or dialogue…..instead disagreement, in his view, should invite ostracism.

There was a much better piece on The Spinoff last week from Jess Berentson-Shaw of the Morgan Foundation, encouraging serious debate and dialogue on immigration policy issues.   I don’t agree with all of what she has to say – indeed, I suspect that when we got to the details of specific policies we might not agree on much at all –  but it is a much more constructive, eirenic, approach to thinking about how a civilised society can grapple with complex and multi-dimensional issues, in this case immigration.  She was prompted  by the faux furore over Duncan Garner’s recent column

Discussing what we value and what matters in immigration will help. Having a decent framework for the issues that matter is a really good start, so let’s continue along this constructive track. I want to buy my undercrackers in a tolerant society that can talk more reasonably about this stuff.

I might come back to some of his specifics, and her links to a brief paper by Peter Wilson and Julie Fry on a possible framework for evaluating immigration policy.

And finally, when I was responding to David Hall last week –  who objected to any suggestion immigration policy and emissions reduction policy should be linked in New Zealand –  I went back to read his introduction in the BWB Texts book Fair Borders.    Having read that introduction several times, I’m still not quite clear what specific immigration policy he would favour for New Zealand.  But I was struck by this brief comment

To echo an argument by migration scholar Alan Gamlen, if we cannot justify our migration policy while looking into the eyes of those it affects, we need to think again.

And, actually, I agree totally.  But I wonder who doesn’t?  (And actually the same comment could be made for all areas of policy.)   There are many people who are at least emotionally sympathetic to an open borders approach who seem unable to conceive that there might be reasoned, moral, and defensible arguments for –  following the practice of all states –  and putting limits on who might come and settle among us.  But I also suspect that in Hall’s quite “the eyes of those it affects” doesn’t include the New Zealanders who are already here.  Economic prosperity and stable ordered societies aren’t mostly a matter of luck, but of consistent discipline and hard work over centuries.  Successful societies need to guard what they’ve built –  not in some in insular sense, closed to outside ideas, or even in some sense of “our wealth is at the expense of your poverty” (it just isn’t) – but because what is hard- and painstakingly built can be too easily corroded, put at risk, and eventually destroyed.    They are particularly important economic considerations for an extremely remote nation with few obvious economic opportunities, which has already been in relative economic decline for 70 years.

 

 

 

An alternative perspective on emissions and immigration

I’ve now got off my chest my annoyance at some of the “playing distraction” rhetoric David Hall used in his Newsroom piece responding to my column urging that the Productivity Commission inquiry into a transition to a low-emissions economy should at least consider the potential role of immigration (in boosting emissions in the past, and perhaps in offering a lower-cost abatement tool in future). But I wanted to come back to some of the more substantive issues Hall raises.

Bear in mind that my column was based on a submission to the inquiry the government asked the Productivity Commission to undertake.  The terms of reference which the Commission is operating under are focused on New Zealand’s own policy responses, and how to (maximise the benefits and) minimise the costs of meeting the target which the government has set.    The focus is –  rightly in my view – on national interests (costs and benefits to New Zealanders) now that the New Zealand government has already factored in its response to the (actual and perceived) global imperatives, in establishing an emissions reduction target under the Paris climate agreement.    Having determined how much reduction in emissions we will aim for, and made those commitments to other countries in an international context, the challenge now is how best to adjust, and what mix of policy instruments might enable us to deliver on those commitments.

Hall argues that “what matters from the perspective of Earth’s atmosphere is what people emit, not where they emit it”.  Maybe so, but the New Zealand government is not now making policy for the “Earth’s atmosphere”, but around an emissions reduction target it has signed up to for New Zealand.  In that context, where the emissions happen matters.

My submission was firmly set within that sort of framework –  one set by the government and recognised by the Commission.  In fact, in the Terms of Reference the three ministers were using exactly the same sort of analytical framework I was.

New Zealand’s domestic response to climate change is, and will be in the future, fundamentally shaped by its position as a small, globally connected and trade-dependent country.  New Zealand’s response also needs to reflect such features as its hjgh level of emissions from agriculture, its abundant forestry resources, and its largely decarbonised electricity sector, as well as any future demographic changes (including immigration).

The focus of my submission was, in many respects, that the Commission had simply ignored that last phrase.  Population growth matters to emissions, all else being equal, and in New Zealand –  where non-citizen immigration is so (a) important, and (b) fully within government control –  population growth can, via immigration policy, and should be considered as an instrument to reduce emissions.    It might be uncomfortable for MBIE (champions of immigration), or for the Ministry for the Environment, but the point of Productivity Commission inquiries isn’t to make life comfortable for established interests.

Hall is clearly uncomfortable with the idea –  the pretty basic fact –  that increased populations increase emissions, all else equal.   But again, discomfort doesn’t change the stylised facts.  As he acknowledges, “road transport emissions have increased by 78 per cent since 1990”, but…..

But the fault here lies with New Zealand’s over-reliance on private vehicles. Migrants (and citizens) contribute to road traffic by necessity, because alternative means of transport are less available, indeed far less so than many migrants are used to, coming from places where travel by trains, trams, cycles and footpaths is not unusual. If low-carbon alternatives in places like Auckland were more serviceable, migrants would doubtlessly utilise them, as indeed would citizens. And if the excuse for underinvestment is the lack of markets of sufficient scale, then population increase and cultural change will drive progress.

In other words, if governments and people did things differently than they actually did, emissions would have been lower.  No doubt, but that isn’t really the point.   Each of the alternatives Hall proposes would have had both public and private costs –  and the point of the exercise is to keep those costs to a minimum.  Perhaps he’d prefer a world of light rail and trains.  Most citizens don’t seem to, at least when confronted with real world costs –  and the economics of such proposals in New Zealand is generally shocking.    Actual transport emissions would have been a lot lower than they are now if, at the extreme, the population had been constant since 1990.  And if –  and it is a proposition for debate –  the immigration that so substantially boosted the population had few, no, or even negative productivity gains for New Zealanders, those emissions reductions could have been achieved at little or no economic cost at all.    There are plenty of ways to reduce emissions, but the challenge is to find the most cost-effective ones or –  in markets –  to set up the instruments in a way that allows private agents to identify the most cost-effective means of adjustment.

In my column and submission I had noted that it is generally accepted that New Zealand typically faces quite high marginal abatement costs to reduce emissions, relative to those faced by most other advanced economies.  When I wrote that, I wasn’t even thinking of it as a controversial proposition.  But Hall wasn’t happy with the claim.

This contradicts Reddell’s claim that “all informed observers recognise that the marginal abatement costs in New Zealand, through conventional means, are high”. I’ve written for Pure Advantage about the potential of forests – both production and permanent forests – to offset agricultural emissions in a way that isn’t only cost-effective but potentially profitable. This is corroborated by other “informed observers”, such as the Royal Society of New Zealand, the Parliamentary Commissioner for the Environment and Vivid Economics. The latter’s Net Zero in New Zealand report highlights other low-cost opportunities in energy efficiency, heating technologies, agricultural efficiency, and technological advances in methane vaccines and cheaper electric vehicles.

I’m happy to alter “all informed observers” to “most observers”, but I’m not resiling from the basic point.   Warwick McKibbin of ANU, who has done a lot of modelling on climate change and emissions abatement first produced estimates 20 years ago showing that that the “marginal abatement cost in New Zealand amongst the highest in the world”.  I’ve heard him repeat the point in various seminars and lectures over the years.    Why are the costs higher here?  Among other things, because a very large chunk of our emissions are agricultural, and there aren’t yet good technologies for reducing the emissions while keeping the animals.  And because our power generation is already largely hydro-based, so can’t easily be switched to alternative fuels to reduce carbon emissions.   This is an expensive place to reduce emissions –  an equal marginal cost approach would see us adopt a less aggressive emissions reduction target than most countries.    There are papers on the web from government agencies making exactly this point.

The Productivity Commission themselves recognise these points. For example, from their issues paper, on animal emissions.

Moderate emissions cuts are possible from certain agricultural technologies (eg, low-emission feds). However, a low-cost technology that delivers dramatic reductions in biological emissions appears far off, and may not emerge. While a methane vaccine could reduce CH4 emissions by up to 40%, no successful trials of such a vaccine have so far occurred.

Actually, for all the talk of alternative technologies, the Vivid Economics paper Hall links to makes much the same point about the sorts of constraints New Zealand faces.  Here is text from the Executive Summary (of a report funded by various MPS, foreign embassies and other donors).

In meeting this challenge, New Zealand is distinctive in at least three respects: its significantly decarbonised energy sector; its large share of difficult-to-reduce land sector emissions; and its large forestry sector. Elsewhere in the world, more focus has been devoted to reducing emissions from the electricity sector than from any other sector. Huge efforts and costs are now beginning to translate into progress. But for New Zealand, these challenges are of less significance. Its power sector consists primarily of hydroelectric and geothermal resources, providing firm, reliable capacity. Even with the challenge of decarbonising other parts of the energy sector (transport fuels, heat), the resulting relatively low-carbon energy mix provides the country with a considerable competitive advantage in a world that is placing increasing constraints on emissions. Yet, at the same time, the importance of the pastoral agriculture sector to the economy and social fabric of the country creates a huge challenge, although one that is laced with opportunity. Biological emissions from agriculture account for almost half of New Zealand’s gross emissions, a higher proportion than in any other developed country. While other developed countries may choose to not prioritise reducing these emissions in the short term, following suit would have important repercussions for New Zealand in meeting future targets.

Wishing it were otherwise does not make it so.  Marginal abatement costs are typically higher here than in other countries.  Those costs may well be falling –  as eg new battery technologies for example open up new options re transport emissions –  but those technologies are available to other countries too. They don’t change the specific challenges New Zealand faces relative to other advanced countries.   The emissions target we’ve committed to, whether through belief or interest, represent a new constraint on economic performance, and that constraint is more severe for New Zealand than for most, in a country with a long-term history of real economic underperformance.

Against that backdrop it would be irresponsible to simply wave our hands and pretend that immigration isn’t an issue (for us, as New Zealand, and our governments), ploughing on oblivious to the potential real economic costs of doing so.     Immigration policy needs to be considered as one strand in thinking about how best to design a New Zealand policy response, to minimise the net adjustment costs to New Zealanders.

I’d simply taken for granted what seemed like a fairly obvious point (even Hall reluctantly acknowledged it) that increased populations will have tended to increase emissions, all else equal. But until now I hadn’t had a look at the cross-country data to see if the relationship was actually there in the data.  It might not have been –  after all, countries might have responded to the rising populations by finding techniques and market instruments to lower per capita emissions sufficiently that there was no relationship left in the observed data.

Fortunately, we have quite detailed data on gross emissions for almost all OECD countries from 1990 to 2015.  In a few cases, the data are only up to 2013 or 2014, and in all the scatter plots that follow I’ve lined up the population changes with the emissons data (eg if for a country there is emissions data for 1990 to 2014, I’ve used percentage population change over that period).  But for 30 countries there is full data for all the variables I looked at.

None of these relationships are particularly tight –  these are simple bivariate relationships, and lots else was going on in each of these countries (eg in the former Soviet bloc countries, production processes had been extremely inefficiently energy-intensive).

I start with transport emissions (actually to 2015 despite the label). As Hall noted, transport emissions in New Zealand have increased a lot, as has our population.

transport emissions

Unsurprisingly, the relationship is upward sloping.

What about manufacturing and construction emissions?

manuf emissions

(That outlier up the top is Korea, which has still been massively industrialising.)

Total gross emissions?

total emissions

Hall seemed particularly perplexed, or perhaps outraged, by my points about agriculture

As I understand him, he argues that New Zealand’s high living standards depend upon dairy exports, which makes it politically infeasible to impose costs for environmental damages. The greater the population, the greater this reliance upon the dairy sector, and so the greater the reluctance to make polluters pay.

Again it seemed pretty descriptively accurate to me (whether it is an outcome he –  or I –  like or not). But even though agricultural emissions are much more of an issue for New Zealand than for most OECD countries, I was curious as to whether there was a relationship (across countries) between population growth and growth in agricultural emissions.  I didn’t have a prior expectation, but in fact this is what I found.

ag emissions

It is actually one of the tighter relationships, so I’ll repeat the proposition from my submission/column: with fewer people it seems quite plausible that we’d have had (tighter environmental regulation and) fewer cows and fewer emissions.

I could go on showing you charts all day, but I won’t try your patience.   Somewhat to my surprise there is actually even a (weak) positive relationship between population growth and per capita emissions and emissions per unit of GDP.  I’m not quite sure why that would be, although in New Zealand (and Australia’s) case, the migrants are moving to some of the OECD countries with, already, the highest emissions per capita and per unit of GDP.

The bottom line for New Zealand is that our immigration policy, which has very substantially boosted our population, has also substantially boosted our emissions over the last 25 years.   Our experience doesn’t look out of line with that of the rest of the OECD: growing populations are associated with more emissions, whether in transport, agriculture or just in total.   Given that marginal abatement costs, even if falling, are still high here relative to those in other advanced countries, it would frankly be irresponsible for any government, concerned primarily about the interests of New Zealanders, not to have the levers of immigration policy considered when assessing the best approach for New Zealand to take to meet its commitments.   The Productivity Commission should be doing so.

In the end, though, I suspect that the real difference between me and David Hall isn’t about any of these numbers.   He concluded his article

Because when it comes to global warming, it’s the carbon intensive economy, stupid. The only genuine solution is to transform the world’s high-emissions economies into low-emissions economies, so that anyone entering them by way of birth or migration can lead a prosperous low-carbon life. Our national emissions targets are a means to this global end. Focusing on peripheral issues like migration only distracts from the work that needs to be done. But that’s what happens when you tell the story of a global problem through a nationalist lens.

But all policy is national, and there is (fortunately) no supra-national government.  We’ve played our part in the international process with our emissions reduction commitments, which are ambitious given the high marginal abatement costs here.  But Hall’s approach suggests he doesn’t really care if there are cheaper, less costly, ways for New Zealand to meet its commitments, and thus reduce costs to New Zealanders (residents and voters); what he cares about is the global.  It is certainly one perspective, but it isn’t the one the government used in setting up the Productivity Commission inquiry.  In practice, it almost certainly isn’t the one New Zealand residents and voters will be using in assessing how governments handle these issues over the next 20 years and beyond.

My own column ended this way

The aim of a successful adjustment to a low-emissions economy is not to don a hair shirt and “feel the pain”. It isn’t to signal our virtue either. Rather, the aim should be to make the adjustment with as small a net economic cost to New Zealanders – as small a drain on our future material living standards – as possible. Lowering the immigration target looks like an instrument that needs to be seriously considered –  including by the Productivity Commission – if that goal is to be successfully pursued.

I’m probably less idealistic than David Hall. Perhaps 30 years as a bureaucrat does that to one.  But in responding to a comment on my earlier post today I noted

My take is that, as a high cost abater, we should impose as little cost on NZers as possible to be seen by friends and trading partners to be making our token contribution (because obviously in global terms it is only token).

Giving serious consideration to cutting our (unusually large) immigration targets looks as though it  should be good economic policy and good (national) emissions-reduction policy.

 

 

 

A researcher responds to Reddell on emissions and immigration

I’m sitting here a bit puzzled at what approach to contesting or debating policy they now teach and model at Oxford University, or practice at Auckland University of Technology.

A few weeks ago, I posted here a submission I’d made to the Productivity Commission’s inquiry into how New Zealand might make a transition to a low-emissions economy, and arguing that immigration policy should at least be considered by the Commission as one material influence on total New Zealand emissions, and as a potential tool to facilitate a cost-effective pursuit of the goverment’s emissions target.   Late last week, Newsroom published a column of mine based on that submission.       In that column I noted that

New Zealand has committed to a fairly ambitious emissions reduction target as part of the Paris climate agreement.  Of course, some political parties think the target isn’t ambitious enough, but New Zealand faces an unusual set of factors that affect our ability to reduce emissions here at moderate cost.  Appropriate policy responses, and the choice of the mix of instruments we choose to deploy, need to take account of that distinctive mix.

and concluded

The aim of a successful adjustment to a low-emissions economy is not to don a hair shirt and “feel the pain”. It isn’t to signal our virtue either. Rather, the aim should be to make the adjustment with as small a net economic cost to New Zealanders – as small a drain on our future material living standards – as possible. Lowering the immigration target looks like an instrument that needs to be seriously considered –  including by the Productivity Commission – if that goal is to be successfully pursued.

The backdrop of course –  and a point made in both the submission and my column – was the arguments I have been running for some years now suggesting that immigration policy itself been damaging to our economic performance, and thus has come at some net economic cost to New Zealanders.

But one academic reader decided that rather than engage primarily on the substance of the arguments I’d made –  the bottom line of which, after all, was simply that the Productivity Commission shouldn’t just ignore the issue –  he’d try to muddy the waters with some slurs.

David Hall is a young academic researcher at AUT, having returned to New Zealand relatively recently after doing a D. Phil at Oxford.   While he was in the UK he, for a time, had a regular Listener column.   His academic background appears to be in politics rather than economics, but he has been writing about climate change policy and was the editor of the recently-published BWB Texts book Fair Borders? Migration Policy in the Twenty-First Century, a collection primarily about aspects of New Zealand’s approach to and experience of immigration.  I’ve written previously about a couple of chapters in the book (here and here).  As I noted in the latter of those posts

As much as I can, I try to read and engage with material that is supportive of New Zealand’s unusually open immigration policy.   One should learn by doing so, and in any case there is nothing gained by responding to straw men, or the weakest arguments people on the other side are making.

Newsroom has published a response by Hall to my column (they even illustrated it with a photo of my own suburb, Island Bay).    There are some points of substance in Hall’s response, and I want to come back to them in a separate post.

But it was these two paragraphs that really annoyed me

What’s striking about all this is not only Reddell’s argument is from the perspective of climate change, but also economics. He resists the orthodox view that migration has a modest positive impact on national GDP. I’m no enemy of disciplinary iconoclasm, but it does beg for robust positive arguments. Reddell’s appeals to uncertainty (economists cannot prove definitively that migration increases GDP, therefore it might not be true) do not count. Climate scientists are all too familiar with this kind of denial.

So if economic evidence cannot always carry his arguments, one can only conclude that non-economic reasons are doing some of the work. To Reddell’s credit, he is explicit about his concerns for cultural cohesion, or that “Islam is a threat to the West, and a threat to the church wherever it is found”. These are real reasons for wanting to reduce immigration, but should be debated on their ethical and sociological merits, not couched in an idiosyncratic take on climate policy.

This is frankly pretty scurrilous stuff.

Apparently, when it comes to the economics of immigration, all I’m doing is “appealing to uncertainty” not advancing any “robust positive arguments”.  This is, so he claims, the economics equivalent of “climate change denial”.

First, lets look at what I’d actually said in my column

Of course, if there were clear and material economic benefits to New Zealanders from the high target rate of non-citizen immigration (the centrepiece of which is the 45,000 per annum residence approvals “target”) it might well be cheaper (less costly to New Zealanders) to cut emissions in other ways, using other instruments. But those sort of  gains –  lifts in productivity – can’t simply be taken for granted in New Zealand. Despite claims from various lobby groups that the economic gains (to natives) of immigration are clear in the economics literature, little empirical research specific to New Zealand has been undertaken. And there is good reason – notably our remoteness – to leave open the possibility that any gains from immigration may be much smaller here than they might be in, say, a country closer to the global centres of economic activity, whether in Europe, Asia, or North America.

Even many of those who are broadly supportive of New Zealand’s past approach to immigration policy will now generally acknowledge that any gains to New Zealanders may be quite small. And for some years now, I’ve been arguing for a more far-reaching interpretation of modern New Zealand economic history: that our persistently high rates of (non-citizen) immigration have held back our productivity performance (i.e. come at a net economic cost to New Zealanders).

It isn’t controversial to suggest that there has been little empirical research specific to New Zealand on the contribution of immigration policy to New Zealand’s economic performance.  It is simply an accepted fact –  and the chair of the strongly pro-immigration New Zealand Initiative accepted as much in an exchange here last year.   I also don’t think it is controversial to suggest that any economic gains to New Zealanders may be quite small –  it was, as I recall, the conclusion of Hayden Glass and Julie Fry (both generally pro-immigration) in their BWB Texts book last year.   Remoteness is generally accepted as an issue in New Zealand’s economic performance –  even if reasonable people differ on the implications and appropriate policy responses.

And then there was the reference to “and for some years now I’ve been arguing”.  Since the point of the emissions/immigration column was to argue that the connection should be considered, not to attempt to demonstrate that immigration has been economically costly, I didn’t elaborate in that column.  But it would, to most readers, have been a hint that there was a bit more to the argument than “appealing to uncertainty”.  If Hall himself hadn’t been familiar with my arguments, Google would willingly have helped.   There are, I see, 140 posts on this blog tagged with “immigration”, and there are plenty of speeches and papers, and a lengthy commentary on the New Zealand Initiative’s major piece earlier this year making the case for New Zealand’s immigration policy.  Only last week, in a post where I outlined some specific alternative immigration policy proposals, I linked to a recent speech outlining the economic case –  specific to New Zealand –  for rather lower target rates of non-citizen immigration.  People might disagree with my economic arguments and reading of New Zealand’s economic history, but none of those arguments is a mystery to anyone interested.

(In – very  – short, (a) extreme remoteness makes if very difficult to build many high productivity businesses here that aren’t natural resource based, and (b) in a country with modest savings rates, rapid population growth has resulted in a combination of high real interest rates and a high real exchange rate, discouraging business investment and particularly that in the tradables –  internationally competitive – sectors, on which small successful economies typically depend. I add to the mix how unusually large our immigration target is and how, despite the official rhetoric, the skill levels of the average and marginal migrants are not particularly high.)

But Hall’s rhetorical strategy rests on making as if none of this extensive body of argumentation and analysis exists, that I’m playing distraction, and then falling back on the “Muslim card”.

In parallel to this blog, I maintain a little-read (and these days, little written) blog where I occasionally write on matters of religious faith and practice, and sometimes on a Christian perspective on public policy issues.  If there is a target audience it is fellow Christians and in writing there I take for granted the authority of the Bible, and of church teaching and tradition over 2000 years.  I very rarely link to it here, as there is typically little overlap in subject matter and I know that most of the readers of this blog don’t share those presuppositions.

A couple of years ago, I wrote a couple of posts about refugee policy, prompted by some domestic commentary on the possible economic case for taking more refugees (in particular from Syria).   On this blog, I wrote something fairly short and narrowly focused on the economics, noting that there were unlikely to be net economic benefits to New Zealanders.  I concluded that

None of which is an argument for not taking refugees.  Doing so is mainly a humanitarian choice, not something we do because we benefit from doing so.  I don’t have a strong view on how many refugees New Zealand should take, but I don’t think possible economic benefits to us should be a factor one way or the other.

We do good because it is right to do so, not for what it might do for us.  Whether “doing good” in this case involves taking more refugees, or donating more money to cost-effectively assist in refugee support in the region, is a more open question.

A day or so later I wrote a longer post on my Christian blog on the refugee issue through the lens of the gospel, and included a link to that post at the end of the “economics of refugees” post.   At the end of quite a long post, aimed at Christian readers (and none of which I would resile from now) I included the phrase Hall now seeks to highlight.  Here is the full text

Islam is a threat to the West, and a threat to the church wherever it is found.  Political authorities in the West were right, and well-advised, to resist in the past, and at the Battle of Tours, at Lepanto, and at the gates of Vienna, to begin to turn the tide.    We owe it to the next generations of our own people to resist the creeping inroads of Islam.  If New Zealanders convert to that faith, there is of course little we can do, but neither compassion nor common sense requires, or suggests it would be prudent, for Western countries with any sense of their own identity to take in large numbers of Syrian refugees or migrants.

Frankly, I was a bit puzzled as to how Hall –  an apparently secular academic – was aware of this obscure post, with perhaps 100 readers in total, but not of the substance of my economic arguments.  But in an email exchange overnight, he tells me that he is actually familiar with this blog, and presumably with its economic arguments, and found the Christian post on refugees through this blog.   At least that answered that question, even if it doesn’t explain his attempt to pretend that I’m not raising substantive, or developed, economic arguments.

And as he acknowledges that he is familiar with this blog, perhaps he might have considered looking at the material I’ve posted here on the issues around culture, diversity etc.      There was, for example, this address to a Goethe Institute event on diversity etc.   Or a post earlier this year where I explicitly laid out some thoughts on culture and identity issues in response to one chapter of the New Zealand Initiative’s report.

I began the post by making the point I often use

My focus has tended to be on economic issues –  and thus to be largely indifferent on that count whether the migrants came from Brighton, Bangalore, Beijing, Brisbane or Bogota.  Almost all of my concerns about the economic impact of New Zealand’s immigration programme would remain equally valid if all, or almost all, our immigrants were coming from the United Kingdom –  as was the case for many decades.

Nonetheless, I noted that there were many groups of people who I would not have welcomed large number of migrants from

So long as we vote our culture out of existence the Initiative apparently has no problem.  Process appears to trump substance.  For me, I wouldn’t have wanted a million Afrikaners in the 1980s, even if they were only going to vote for an apartheid system, not breaking the law to do so.  I wouldn’t have wanted a million white US Southerners in the 1960s, even if they were only going to vote for an apartheid system, and not break the law to do so.  And there are plenty of other obvious examples elsewhere –  not necessarily about people bringing an agenda, but bringing a culture and a set of cultural preferences that are different than those that have prevailed here (not even necessarily antithetical, but perhaps orthogonal, or just not that well-aligned).

I went on, talking about the Initiative

They take too lightly what it means to maintain a stable democratic society, or even to preserve the interests and values of those who had already formed a commuity here.    I don’t want stoning for adultery, even if it was adopted by democratic preference.  And I don’t want a political system as flawed as Italy’s,even if evolved by law and practice.   We have something very good in New Zealand, and we should nurture and cherish it.  It mightn’t be –  it isn’t –  perfect, but it is ours, and has evolved through our own choices and beliefs.  For me, as a Christian, I’m not even sure how hospitable the country/community any longer is to my sorts of beliefs – the prevalent “religion” here is now secularism, with all its beliefs and priorities and taboos – but we should deal with those challenges as New Zealanders – not having politicians and bureaucrats imposing their preferences on future population composition/structure.

But the New Zealand Initiative report seems to concerned about nothing much more than the risk of terrorism.

A commonly cited concern in the immigration debate is of extremism. The fear of importing extremism through the migration channel is not unreasonable. The bombing of the Brussels Airport in 2016, in which 32 people were killed, or the Bataclan theatre attack in Paris where 90 people were murdered, shows just how real the risk is.

The report devotes several pages to attempting to argue that (a) the risk is small in New Zealand because we do such a good job of integrating immigrants, and (b) that the immigration system isn’t very relevant to this risk anyway.

The point they simply never mention is that in many respects New Zealand has been fortunate.  For all the huge number of migrants we’ve taken over the years, only a rather small proportion have been Muslim.

I went on

They highlight Germany –  perhaps reflecting the Director’s background –  where integration of Turkish migrants hasn’t worked particularly well over the decades, while barely mentioning the United Kingdom which is generally regarding as having done a much better job, and yet where middle class second generation terrorists and ISIS fighters have been a real and serious threat.  Here is the Guardian’s report on comments just the other day from a leading UK official –  the independent reviewer of terrorism legislation –  that the UK now faces a level of threat not seen since the IRA in the 1970s.  Four Lions was hilarious, but it only made sense in a context where the issue –  the terror threat –  is real.

But the Initiative argues that few terrorists are first generation immigrants, and some come on tourist or student visas (eg the 9/11 attackers) and so the immigration system isn’t to blame, or the source of a solution.  I’d largely agree when it comes to tourists, and perhaps even to students –  although why our government continues to pursue students from Saudi Arabia, at least one of whom subsequently went rogue having become apparently become radicalised in New Zealand, is another question.   But there are no second generation people if there is no first generation immigration of people from countries/religions with backgrounds that create a possibility of that risk.  Of course the numbers are small, and most people –  Islamic or not –  are horrified at the prospect of terrorism, or of their children taking their path.  But no non-citizens have a right to settle in New Zealand, and we can reduce one risk  –  avoiding problems that even Australia faces – by continuing to avoid material Muslim migration.

Having said that, I remain unconvinced that terrorism is the biggest issue.  Terrorists don’t pose a national security risk.  Whatever their cause, they typically kill a modest number of people, in attacks that are shocking at the time, and devastating to those killed.  But they simply don’t threaten the state –  be it France, Belgium, Netherlands, the US, or Europe.  Perhaps what they do is indirectly threaten our freedoms –  the surveillance state has become ever more pervasive, even here in New Zealand, supposedly (and perhaps even practically) in our own interests.

The bigger issue is simply that people from different cultures don’t leave those cultures (and the embedded priors) behind when they move to another country –  even if, in principle, they are moving because of what appeals about the new country.  In small numbers, none of it matters much.  Assimilation typically absorbs the new arrivals.  In large numbers, from quite different cultures, it is something quite different.  A million French people here might offer some good and some bad features.  Same goes for a million Chinese or Filipinos.  But the culture –  the code of how things are done here, here they work here –  is changed in the process.

So, Dr Hall, despite your attempts to suggest otherwise, basically none of my concerns about New Zealand’s immigration policy have anything to do with Islam at all.  Very few of the huge number of migrants we’ve taken over the years have been from Muslim backgrounds. It simply isn’t an issue New Zealand has faced (unlike, say, Australia).   As I’ve said previously, my economic arguments are blind to which country, or religious background, immigrants have come from.  We’ve taken lots and lots of people, from wherever, and the numbers are –  on my argument –  the issue, not the origins.   Those arguments apply as strongly to the post-war decades –  when most of the immigration was from the UK –  as they do in the last couple of decades.    And – to revert to the emissions/immigration connection, all those migrants –  wherever they’ve come from –  have added to New Zealand’s greenhouse gas emissions.

(To be clear, I would be uneasy about large scale Muslim immigration, on non-economic grounds.  But I’m quite sure I wouldn’t be alone in that –  in an exchange on his blog earlier in the year, even strongly pro-immigration New Zealand Initiative Chief Economist Eric Crampton noted that his one area of concern might be migrants who would undermine our democratic norms.  Eric seems to be quite strongly anti-Christian (and probably anti all religions) but he acknowledged that large numbers of Wahhabi Saudi immigrants –  not in prospect –  would be a serious concern.)

In reading some more of Hall’s own views on immigration, I found an interview with him in which he notes

But we also need to redistribute power and especially to give Maori greater influence over the ends and means of migration policy. I support Tahu and Arama’s call for tangata whenua to exercise greater influence on border policy as part of an emboldened tino rangatiratanga, not least because Māori have the most to lose from unfair migration.

I don’t agree with him on that, but my own thoughts on the implications of immigration policy for the Maori place in New Zealand are in the Goethe Institute piece linked to earlier and in a fairly-read post here earlier in the year, again prompted partly by the Initiative’s report.  In it I raised, for a general audience, concerns perhaps not a million miles from some of his own.

But don’t try to pretend that (a) there are not serious economic questions to be answered about the impact of our large-scale immigration programme, or (b) that I have not posed them, almost ad nauseum.   I’ll come back to some of the specifics around population and emissions targets, and the place of national policy in a wider world, in a separate post.

Debating immigration

Someone yesterday sent me a link to a column from a Canadian newspaper in which a prominent Canadia academic was calling for a five-year pause in Canada’s high target rate of non-citizen immigration, to let housing (and other infrastructure) catch up to the population-driven increase in demand.  I can see the case when it comes to infrastructure, but I suspect that in Vancouver as in New Zealand the housing issues are mostly about land.  If the land use regulations aren’t fixed then a temporary pause in immigration for just a few years won’t make more than a temporary difference.   And in New Zealand, at least, the real economic problems associated with rapid immigration –  plenty of jobs, but few good economic opportunities to enable us all to really prosper –  have to do with the average level of immigration we target over time, not with the peaks and troughs in individual years.

But in reading that column, my eye lit on another article on the same site, “How to debate immigration without distorting facts and foes” .  It began

Canada is one of the few advanced countries that can’t seem to hold an authentic public discussion about immigration policy.

Canadian boosters of high immigration and those who oppose it are mutually contemptuous. Their verbal boxing matches are dominated by sloganeering and name-calling.

If Ottawa is ever going to take seriously public opinion to fine-tune its immigration policies, the combatants need to follow a few rules. They may need a referee, who acts fairly when others are losing their heads.

I’m not so sure that Canada is that different than other countries, including New Zealand and Australia.  But the article was about a new column by Andrew Griffith, a former senior official in Canada’s immigration bureacracy, who took early retirement, to undergo cancer treatment, and now has a interesting-looking blog Multicultural Meanderings  which touches on issues of culture, immigration, identity and so on.  I get the impression that he is generally rather sympathetic to Canada’s fairly liberal approach to immigration.   But what interested the journalist, and me, was the piece Griffith had written recently for a public policy forum on “How to debate immigration issues in Canada” .

Griffith begins

Given the polarization between those who advocate for more immigration and those who advocate for less, we need guidelines to facilitate more respectful and informative debates. I also suggest some alternative language for both viewpoints, to provoke reflection.

And he summarises his suggestions in two tables, one for those favouring more immigration –  apparently a live option in Canada at present –  but presumably also applicable to those defending the quite high rates of non-citizen immigration Canada already promotes.

and one for immigration critics

Not all of it is directly relevant to New Zealand debates, but much of it probably is.  I’d add, for both sides, “focus on the specifics of your own country’s experiences and constraints, even when informed –  as you should be –  by overseas experiences”.  These are important issues –  about economic performance, but also about culture and society –  and if all sorts of important issues often excite emotion (on both sides of any issue), it is likely to be more productive if the emotions and the analysis can be separated, to allow civil reflection on the arguments and evidence various people bring to the debates.  On the other hand, of course, political discourse and popular debate are never likely to proceed like some idealised academic seminar (and I stress the word “idealised” here).

On a more immediate note, Newsroom has a piece this morning on concerns in some industries about how they will/would cope if immigration to New Zealand was to be cut back.     The focus is particularly on a few industries that have made themselves very heavily reliant on immigrant labour.    If the rules make it relatively easy to recruit labour to particular occupations, and such labour is available from relatively poor countries, it is hardly surprising that the industry concerned will gravitate to a production model in which (a) wages in that sector are pretty low by New Zealand standards, and (b) a large proportion of the workforce is foreign.  New Zealanders become reluctant to seek work in the sector because there are better opportunities in other sectors.  It isn’t a state of nature, or something inevitable, just a product of the regulatory environment –  the rules.

The aged care/rest-home sector seems to be a prime example of this sort of phenomenon.  It is a growing sector –  ageing population and all that –  heavily reliant on government subsidies (and thus cost-restraint pressures), and is a totally domestically-focused sector.

As I’ve noted here previously, if overall immigration flows were sharply cut back, there would be short-term adverse effects on some sectors that have become particularly reliant on immigrant labour.  But there would also be a reallocation of labour within the economy: demand for labour would fall markedly in sectors (often not particularly reliant on immigrant labour, like construction) that depend heavily on population growth, and those workers would need to find work elsewhere.   In sectors like dairy farming and tourism –  previously heavy employers of immigrant labour – employers would be looking for locals to replace the immigrant labour they could no longer hire.   People might be reluctant to take those jobs, in which case employers might have to offer higher wages.  But because the exchange rate would fall –  probably quite a lot –  if immigration was cut back substantially, those employers could afford to pay higher wages.  Business activities in the tradables sector would be more profitable, and in relatively short-order the labour market would adjust (it would take time, and I’ve never suggested changing the rules overnight).

But the rest-home sector is different.  Cut back their access to immigrant labour, and they might have to offer more to attract New Zealanders to do the jobs.   New Zealanders will do the jobs, at a price.  30 or 40 years ago when my grandmothers were in aged-care homes, the bulk of the employers will have been New Zealanders.  The question is likely to be largely one of price (ie wage rates).

But rest homes may not have a lot of pricing power.  They are typically heavily reliant on fixed government subsidies, and if immigration is cut back they can’t suddenly turn themselves into an export industry.  There is no more income to support higher costs.

The industry pushes back in the Newsroom article

“It’s a big issue for us because we are facing over the next 10 years a real spike in the ageing demographic and estimations from the work that we’ve done … is that we’ll need 1000 extra workers a year between now and 2027.”

The notion that the industry could just hire New Zealanders to fill the positions was unrealistic, as caregiving was now a much more highly-skilled position and there were simply not enough locals willing to do the work.

1000 new workers a year –  in an industry that apparently employs 22000 people –  just doesn’t seem that much (there will always be fast-growing and slow-growing industries) and people will do jobs for a price.  In fact, whatever one makes of the recent pay-equity settlement – which seems to have loaded additional net costs on the rest-home sector –  it is likely to increase the number of people willing to do the work.

(And while I won’t rely on anecdotes, as Griffith notes they do sometimes contain insights.  And so the suggestion that care-giving was now “much more highly-skilled” rang a bit hollow when a staff member in a home a relative of mine lives in was trying recently to encourage a room full of dementia patients to vote.)

New Zealand is in rather desperate need of a lower long-term real exchange rate.  That means raising the prices of tradables relative to those of non-tradables, increasing the relative attractiveness of investing in tradables sector firms.  A much lower immigration target is one way to bring about such an adjustment.  For many non-tradable firms, such an adjustment would mean a much lower level – or path of growth for –  demand.   Those sorts of firms would become relatively smaller.   But there are some areas within the non-tradables part of the economy –  and the aged-care sector is a prime example –  where demand wouldn’t be materially affected, and costs might well rise somewhat (and, of course, the value of their extensive land holdings might fall).   There is no point pretending such pressure points won’t exist, but we shouldn’t be orienting a key strand of economic policy around the needs of a highly-regulated heavily subsidised industry, even if it is one that cares for many New Zealanders (our parents or grandparents) in their declining years.   An appropriate rebalancing probably would involve some increased costs for residents and families and some increased costs for the government.   But over time, the stronger productivity path that would be likely to ensue from abandoning the “big New Zealand” strategy, would enable New Zealanders as a whole to be made (considerably) better off.

As Andrew Griffith noted in his tables, sometimes opponents of the status quo feel free to attack what is happening at present without advancing specific alternative approaches that can themselves be scrutinised and challenged.   I’ve previously tried to meet that challenge and be relatively specific in what I’m putting forward as an alternative to our current (package of rules that make up) immigration policy.

Some specifics of how I would overhaul New Zealand’s immigration policy:

1. Cut the residence approvals planning range to an annual 10000 to 15000, perhaps phased in over two or three years.

2. Discontinue the various Pacific access categories that provide preferential access to residence approvals to people who would not otherwise qualify.

3. Allow residence approvals for parents only where the New Zealand citizen children have purchased an insurance policy from a robust insurance company that will cover future superannuation, health and rest home costs.

4. Amend the points system to:

a. Remove the additional points offered for jobs outside Auckland

b. Remove the additional points allowed for New Zealand academic qualifications

5. Remove the existing rights of foreign students to work in New Zealand while studying here. An exception might be made for Masters or PhD students doing tutoring.

6. 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).

More of the associated story for why such changes are needed is in this recent address.

(And as I quoted from a Newsroom story in this post, this is probably the point to disclose that I have recently entered an arrangement with Newsroom in which they will be paying me for occasional columns.  Those pieces will usually be variants of material that has appeared here first.  It will not change my willingness to disagree with other material they run, but in the interests of transparency, I thought I should disclose it.)

Immigration policy and emissions targets

I’ve written a few posts in recent months about the connections between our immigration policy – materially boosting our population growth rate – and New Zealand greenhouse gas emissions (eg here and here).  New Zealand is unusual because, as the Ministry for the Environment (MfE) has highlighted:

• we have a fairly high rate of trend population growth,
• a large chunk of our emissions are from animals, and
• much of our power has long been generated from renewable sources.

I’ve also written here about Official Information Act requests to MfE (responsible for climate change policy advice) and MBIE (responsible for immigration policy advice). It turned out that neither ministry had given any thought at all, or done any work on, possible connections between immigration policy and the economic challenges of emissions reductions target (the MfE response is discussed here).  Perhaps one wouldn’t really expect MBIE to have thought so much about emissions issues, but in MfE the omission looks less excusable, and probably deliberate.

A few months ago, the government asked the Productivity Commission to hold an inquiry into making the transition to a low-emissions economy. In August the Commission published an issues paper, trying to frame the inquiry. That document was notable for almost completely ignoring the possible population/immigration dimension. But they were inviting submissions, and so this morning I lodged mine.

Rather than attempt to excerpt, or summarise, the relatively short submission I’ve reproduced the whole thing below. It does have the feel of the sort of issue where there should be some common ground discoverable between New Zealand First (with concerns about immigration) and Labour and the Greens (proposing more ambitious emissions targets). But, equally, for the National Party it should also be something they take seriously. After all, as I note in the submission, in pursuing an emissions reduction target the goal should not be to don a hair-shirt and deliberately “feel the pain”, but to make the adjustment in a way that has as little cost to the future material living standards of New Zealanders as possible.

Submission to the Productivity Commission inquiry on a possible transition to a low emissions economy

Michael Reddell

29 September 2017 

1.      This submission is in response to the Commission’s issues paper on a possible transition to a low emissions economy, released on 9 August 2017.  

2.      My concern is that the issues paper does not touch on at all the role that immigration policy has played in driving up total emissions in New Zealand nor, relatedly, on the role that potential changes in immigration policy could play in offering a lower cost (to New Zealanders, the appropriate standard against which to measure these things) transition to the proposed low emissions economy. 

3.      As the Ministry for the Environment has noted in its most recent annual document on New Zealand’s Greenhouse Gas Inventory, a growing population represents a significant challenge for New Zealand in meeting the emissions targets the government has set (let alone those proposed in the recent election campaign by other political parties).  In fact, the Ministry included population as the first in its list of challenges. 

4.      New Zealand’s population growth has been well above that of the typical advanced country, even though for some decades now our birth rate has been below replacement level, and even though for some decades the net emigration outflow of New Zealanders (at around 0.5 per cent of the population per annum on average) has been very high by international standards.  The difference is accounted for by immigration policy.   Because of our distance from other countries we have near-complete control over who comes to New Zealand and stays.   And we have chosen to bring in numbers of non-citizens each year that, as a proportion of the existing population, are far in excess of what happens in typical advanced economies. 

5.      As is also widely recognised, the marginal abatement costs for reducing emissions are generally quite high in New Zealand.  First, unlike most advanced countries, animal emissions make up almost half our total emissions and, as yet and as I understand it, science does not offer methods to reduce substantially the emissions while keeping the animals (which, in turn, generate much of the export earnings of New Zealand).  In addition, as I understand it, other countries do not yet include agricultural emissions in their regimes to charge for or tax emissions.  And, secondly, much of our power generation already uses renewable (mostly hydro) sources.  

6.      An increasing population has resulted in additional emissions, all else equal, through at least two channels: 

a.      The direct effects of more people needing more transport, more heating, more energy in their workplaces etc, and

b.      The indirect effects, in which a rapidly growing population and a generally lagging export sector has accentuated pressures for increased intensification in agriculture, with associated pushback against attempts to internalise the effects of environmental externalities (whether water pollution or methane emissions).  With fewer people, it seems quite plausible that we’d have had fewer cows. 

7.      Because the marginal abatement costs of conventional approaches are generally accepted to be particularly high in New Zealand, it is even more important that in undertaking its inquiry, the Commission should be willing to examine the role of immigration policy.  As Official Information Act requests to MfE (responsible for climate change policy advice) MBIE (responsible for immigration policy advice) have shown, core government departments appear to have done nothing at all to look at the possible connections.  There may have been ministerial political constraints on the freedom of either ministry to do so.   Those sensitivities should not hold back the Commission –  a more independent agency – from seriously considering the connection. (In that light, I found it disconcerting that there was no material reference to the topic in your issues paper). 

8.       The argument for using immigration policy as a potential instrument in meeting emissions reduction objectives would not be strong if there were clear and material economic benefits to New Zealanders from the high target rate of non-citizen immigration (the centrepiece of which is the 45000 per annum residence approvals “target”).    But those possible gains –  most notably perhaps a lift in labour or multi-factor productivity – cannot simply be taken for granted in New Zealand.     Despite claims from various lobby groups that the economic gains (to natives) of immigration are clear in the economics literature, little empirical research specific to New Zealand has been undertaken, and there is good reason –  notably our remoteness –  to leave open the possibility that any gains from immigration may be much smaller here than they might be in, say, a country closer to the global centres of economic activity, whether in Europe, Asia, or North America.    Even many of those who are broadly supportive of New Zealand’s past approach to immigration policy will now acknowledge (a) that the New Zealand specific literature is quite limited, and (b) that any gains to New Zealanders may be quite small.  Your staff are, I know, well aware of my alternative approach which interprets modern New Zealand economic history as suggesting that high rates of non-citizen immigration have held back our productivity performance (i.e. come at a net economic cost to New Zealanders).  I would be happy to discuss those issues with you further. 

9.      The overlay of an official emissions reduction target –  a new factor –  adds a new dimension to how best to think about immigration policy.  Even if immigration policy, on its own, was slightly beneficial, in economic terms, to New Zealanders, those assessments need to be redone in the light of the constraints posed by the emissions reduction targets.  In an economy with low marginal abatement costs through conventional price/tax instruments, the effect of any such reconsideration might be small. But in New Zealand, where all informed observers recognise that the marginal abatement costs are large through conventional means, it might well be that a lower immigration target would represent one of the most cost-effective ways to reduce total New Zealand emissions.  And as our emissions reduction target is quite similar to those of a number of other countries that have much lower population growth rates, there would be no serious basis for others to suggest that pulling back our immigration targets, to something more conventional among advanced countries, was in some sense free-riding or engaging in a “beggar thy neighbour” approach to the emissions issue.  New Zealand simply isn’t a cost-effective location to reduce emissions, but having taken on the commitment to a reduction, it doesn’t make much sense to create a rod for our own back by continuing to use policy to drive up the population, thus forcing reliance on even more costly alternative abatement instruments.   

10.   All else equal, lowering expected annual population growth rates by, say, half a percentage point (by, for example, lowering the residence approvals target from 45000 to around 15000 per annum –  in per capita terms, still about as liberal as the current US approach) would make a material difference to the projected path of greenhouse gas emissions.  Over 20 years, all else equal, the population would be 10.5 per cent lower than otherwise.  Direct emissions would, accordingly be considerably lower than otherwise projected, and the inevitable pressures to do little or nothing about agricultural emissions would be eased.   The national benefit/cost ratios look likely to be considerable higher if a lower immigration target was added into the mix of instrument used to meet the commitments the government has made.  At very least, I would urge you to think hard about, and undertake modelling as appropriate, to evaluate that possibility.  Doing so might not be easy.  There probably won’t be off-the-shelf modelling exercises from other countries you can simply look to. But in a sense that is the point of this submission.  The issues facing New Zealand in meeting emissions reduction objectives are different from those facing many other countries and we need analysis that takes specific accounts of the issues, options, and constraints that New Zealand itself faces. 

11.   In conclusion, I would urge the Commission to take much more seriously (than was evident in the issues paper) the role that rapid immigration policy led population growth has played in explaining the growth in New Zealand emissions since 1990, and the possible role that modifications to our immigration policy could play in facilitating a reduction in emissions, consistent with current or possible alternative official targets.   No doubt technological advances will offer options for relatively painlessly reducing emissions to some extent.  But those options will be available to all countries.  As official agencies already recognise, New Zealand faces some specific challenges that are quite different to those other advanced countries will be dealing with.  We make it much harder for ourselves to meet the emissions targets our governments have committed to if we persist with such an unusually large non-citizen immigration programme.    The aim of a successful adjustment to a low-emissions economy is not to don a hair shirt and “feel the pain”.  The aim should be to make the adjustment with as small a net economic cost to New Zealanders – as small a drain on our future material living standards – as possible.  Lowering the immigration target looks like an instrument that needs to be seriously considered if that goal is to be successfully pursued.