Emissions and immigration policy

Just listened to an RNZ interview with National’s climate change spokesman Todd Muller, around the silly question of whether or not a “climate emergency” should be declared.  Muller called it symbolism, but symbols have a place –  it is much worse than that, just empty feel-good virtue signalling  (whether or not you think our governments should be more aggressive in doing something to lower New Zealand emissions).

But Muller introduced his comments referring back to a sense as early as 1990 that something needed to be done.  And it reminded me of the single worst policy National and Labour have presided over for the last 30 years, in terms of boosting emissions from New Zealand: immigration policy.

New Zealand’s population in 1990 was about 3.3 million.  Today it is almost five million.  And here is a chart, using official data (which has some weaknesses, but the broad picture is reliable) of the cumulative inflow of non-New Zealand citizens since 1990.

PLT 2019

That data series was dumped last year, but you can add another 60000 or so people in the year since then.    Almost all of them needed explicit prior approval from New Zealand governments –  more than 1.1 million of them.

Over such a long period, the cumulative inflow becomes a little misleading.   It understates the impact.  Of course, over 30 years some of the migrants will have died, but many more will have had children (or even grandchildren).  Those children will (mostly) be New Zealand citizens, but that doesn’t change the fact that their presence –  and their emissions (resulting from their life and economic activity) – results from explicit immigration policy choices.

Those who are made uncomfortable by all this but simply wish to dismiss it will say “oh, but emissions and climate change are a global problem, and it doesn’t really matter where the people are”.  Strangely, this is not usually an argument the same people invoke when they favour (say) New Zealand oil and gas exploration bans, or other New Zealand specific actions that will have either no impact on global emissions, or only a trivial impact.

As you will no doubt recall, it is not as if New Zealand is already some low-emissions nirvana.  Per unit of GDP (average) emissions in New Zealand are among the very highest, and per capita (average) emissions are also in the top handful of OECD countries.    The typical migrant to New Zealand is not coming from a country that has higher emissions than we do.    Rather the reverse.  Of course, it isn’t easy to distinguish (empirically) the marginal and average emissions, but it is simply silly to suggest that the policy-driven rapid population growth has not had a material impact in boosting total New Zealand emissions –  migrants drive cars and fly, migrants live and work in buildings (that often use concrete), migrants have even helped maintain the economics of the dairy industry.  On a cross-country basis, I showed in an earlier post the largely unsurprising relationship betwen population growth and change in emissions over decades.  New Zealand’s experience was not an outlier (except perhaps in the sense of much faster –  policy-driven –  population growth, reflected in the emissions growth numbers.  If anything, and at the margin, New Zealand’s immigration policy has probably increased global emissions.

Of course, there would be a reasonable counter-argument to all this if it could be confidently shown that the high rates of immigration –  highest in the OECD for planned immigration of non-citizens over the period since, say, 1990 – had substantially boosted average productivity in New Zealand.  Then the additional emissions, and associated abatement costs (not small), would simply have to be weighed against the permanent gains in material living standards from the immigration itself.  But even the staunchest defenders of high –  or higher still – rates of immigration can’t show those sorts of productivity gains and (since demonstrating it would be a tall order) can’t even come up with a compelling narrative in which large productivity gains from immigration go hand in hand with the continued decline in our productivity performance relative to other advanced economies.

If the government (or the National Party) were serious about “doing our bit” (or just “being seen to do our bit”) about emissions and climate change, and if –  at the same time –  they really cared much about living standards of New Zealanders (‘wellbeing’ if you must), they would be taking immediate steps to cut permanent immigration approvals very substantially.  Not only would that lower population growth and emissions growth relatively directly, but it would result in a materially lower real exchange rate, which would greatly ease the burden on competitiveness that other anti-emissions measures are likely to impose over the next few years, would ease pressures on the domestic environment (and might even, thinking of my post earlier this week, ease the economic pressures on the dairy industry, while providing margins to deal directly with the environmental issues around that industry).

For the country as a whole –  New Zealanders –  it would be a win-win.   That isn’t to pretend there would not be some individual losers –  we’d need fewer houses, potentially developable land would be less valuable, and some industries (particularly non-tradables ones) that have come to rely on migrant labour would face some adjustments.  But, and lets face it, there is no sign the existing model –  in place in some form or another for several decades –  has worked well for the average New Zealander –  the productivity performance has been lamentable, and we’ve created a large rod for our own back on the emissions front.

But our political parties – every single one in Parliament, based on words and on their records in government –  would prefer to pretend otherwise, and keep on with the failed, corrosive, immigration policy, which hasn’t worked for us, is unlikely to ever do so (given our remoteness etc) and is so far out of step with what the bulk of advanced countries do.



I’ve been intrigued by the CANZUK proposition for some time.  In their own words,

CANZUK International was founded in January 2015 …and is the world’s leading non-profit organisation advocating freedom of movement, free trade and foreign policy coordination between Canada, Australia, New Zealand and the United Kingdom (the “CANZUK” countries).

Our campaign advocates closer cooperation between these four nations so they may build upon existing economic, diplomatic and institutional ties to forge a cohesive alliance of nation-states with a truly global outlook.

There is an online petition, and when I checked a few minutes ago 273,872 people had signed it.  Not insignificant numbers, although the total population of the four countries is over 125 million people.

I’m interested for multiple reasons:

  • I’m fascinated by British imperial history, think that in large part it is something to be proud of, and find cross-country comparisons of the experiences of other former British territories helps shed light on our own history,
  • 50 years ago I’d probably have found the CANZUK proposition almost self-evidently sensible (and at least around the movement of people it more or less described how things had been, at least among Australia, New Zealand and the UK since European settlement here),
  • My scepticism around the economic impact of New Zealand’s immigration policies, going back at least as far as the immediate post World War Two period.

On top of which, I discovered recently that one of the more vocal champions of CANZUK is a pro-Brexit British economist (New Zealand born apparently) who is related to my wife.  He takes every opportunity to champion the cause, as this tweet from earlier this morning.


There has been some public opinion polling on the CANZUK idea, and the movement really rather liked the results.    This was the question (for New Zealand)

“At present,citizens of the European Union have the right to live and work freely in other European Union countries. Would you support or oppose similar rights for New Zealand citizens to live and work in Canada, Australia and the United Kingdom, with citizens of  Canada, Australia and the United Kingdom granted reciprocal rights to live and work in New Zealand?”

And this chart summarised the answers.


I wrote about the CANZUK proposal last year, when I observed (of the people-movement element of the proposal)

I’ve never been quite sure what to make of the CANZUK cause. I read a lot of imperial/Commonwealth history, and ideas like this sort of free movement area among the old ‘white Dominions’ are strikingly reminiscent of calls for an imperial federation or, much later, for imperial trade preferences (which became a big thing as the UK moved away from free trade itself). I could be a little provocative and suggest that is wasn’t entirely dissimilar to the sort of immigration policies New Zealand and Australia ran until a few decades ago, that could be – not entirely inaccurately – characterised as “white Australia” or “white New Zealand” policies.   …..even as an example of Commonwealth sentiment, not even South Africa – let alone Zimbabwe, Kenya or Namibia – appears in the CANZUK proposal.

Of course, there is a pretty straightforward answer. Almost invariably, public opinion in almost any country is going to be more open to large scale (or at least unrestricted) migration when it involves culturally similar countries than when it involves culturally dissimilar ones. In fact, there are good arguments that, if there are gains from immigration they could be greatest from people with similar backgrounds (and of course counter-arguments to that). Reframe the question as “would you support reciprocal work and residence rights among New Zealand, France, Belgium and Italy?”, and I suspect the support found in the CANZUK poll would drop pretty substantially – my pick would be something no higher than 50 per cent. Reframe it again to this time include Costa Rica, Iran, and Ecuador (let alone Bangladesh, India, and China – three very large, quite poor, countries) and people will start looking at you oddly, and the numbers will drop rapidly towards the total ACT Party vote (less than 1 per cent from memory).

And thus my own ambivalence about the CANZUK proposition. If I were a Canadian (of otherwise similar Anglo background to my own) I’d say yes. The historical and sentimental ties across these four countries – less so Canada – mean something to me. I’d probably even add the US into the mix. And across Australia, Canada, and the UK incomes and productivity levels are pretty similar – although the prediction would still presumably be that there would be an increased net flow of people from the UK to Australia (in particular) and Canada.

But I’m a New Zealander, and for us it would appear that there are two forces in conflict.  The ability to move freely to the UK or Canada might be a real gain to some New Zealanders –  as the ability to go to Australia has been over the decades –  but the quid pro quo could be that a lot more Brits could move here.

As it is, I’ve repeatedly noted that my economics of immigration argument doesn’t distinguish between whether the migrants come from Birmingham, Brisbane, Bangalore, Buenos Aires, or Beijing. We’ve made life tougher (poorer, less productive) for ourselves by the repeated waves of migrants since World War Two – in the early decades, predominantly from the UK, and in the last quarter century more evenly spread. Even though we are now materially poorer than the UK, enough people from the UK still regard New Zealand as attractive, that free movement – the CANZUK proposition – would probably see a big increase in the number of Brits moving here (big by our standards, not theirs). That might be good for them – that’s up to them – but wouldn’t be good for us. Perhaps the effect would be outweighed by more New Zealanders moving to the UK long-term, but I’d be surprised if that were so.

The CANZUK proposition is an interesting one, and is worth further debate. Apart from anything else, it might tease out what people think about nationhood, identity, and some of the non-economic factors around immigration.  ….at present public opinion appears to be strongly in favour, but on the specific question asked in isolation. It would be interesting to know, if at all, how responses would change if the option was free CANZUK movement on top of existing immigration policy, or (to the extent of the new CANZUK net flow) in partial substitution for existing immigration policy. The two might have quite different economic and social implications.

The CANZUK movement does appear to have an element about it – at least among some British advocates –  of an outward-oriented replacement for the EU.  But there are supporters elsewhere.   Most notably, the main opposition political party in Canada –  currently leading in the polls –  has CANZUK as one of its principal foreign policy platforms.     Closer to home, David Seymour has expressed support and –  somewhat to my surprise – I learned from the CANZUK website that Simon Bridges had done so too (pretty lukewarmly I suspect?).  The CANZUK people point out that even the Labour-New Zealand First coalition agreement has a provision that might be thought to have something to do with CANZUK (emphasis added).

Work towards a Free Trade Agreement with the Russia-Belarus-Kazakhstan Customs Union and initiate Closer Commonwealth Economic Relations.

What of the other dimensions of the proposal (free trade and foreign policy)?  My own position is that free trade is a good thing, and should try it.     We should remove all remaining tariffs, but not just on imports from Canada and the UK (we already have CER with Australia), but from anywhere and everywhere.  Doing so would benefit consumers.  And I’m sceptical of preferential trade agreements, and see little reason (sadly) to suppose that Canada (in particular) or the UK would be at all keen on open access for New Zealand agricultural exports.

And what of foreign policy?  I’d like to think that the four countries would stand together on many issues (bearing in mind that the North Atlantic and Arctic aren’t terribly important to New Zealand) but for now the four governments show little ability (interest?) in a common approach to, for example, the People’s Republic of China. In New Zealand’s case, not even any support when the PRC authorities abduct Canadia citizens.

Fairly or not, there is quite a sense about the CANZUK cause that is redolent of the 1950s.  I don’t mean that in a particularly negative sense –  there was, after all, a great deal to like about New Zealand’s relative economic performance in the 1950s, and about the still mostly quite close ties among the four countries, including the considerable freedom of movement (then again, Suez was hardly a great advert for NZ/Australia/UK foreign policy coordination).    As a citizen and voter, I feel a considerable affection for each of those countries –  probably more so than for any other countries, decent, worthy and prosperous as many of them are –  but it is the 2010s (almost the 2020s) not the 1950s.

And, at least from a New Zealand perspective, we’d be better off  –  economically, and probably on other dimensions – with materially fewer migrants, not with schemes that might only increase our average net non-citizen migrant flow (and reduce our ability to manage the flows, in a country where the housing and urban land market in particular is badly dysfunctional).


Advanced countries with flat/falling populations seem to do just fine

In my post on Monday I was critical of various aspects of Liam Dann’s Herald pieces in praise of New Zealand’s high rates of immigration.  Part of his story was that we simply had to keep on with high rates of immigration or our population would stop growing and……well, there lies dragons, or at very least “economic stagnation” and some existential threat to “New Zealand’s economic and social wellbeing”.

A casual reader might have supposed that there were no examples of countries with flat or falling populations, no straws in the wind we could look at and see how likely it was that a stable or even modestly falling population would represent a serious threat to the living standards (material and otherwise) of New Zealanders.

There was a new wave of Conference Board Total Economy Database data out a couple of weeks ago.  It has wider coverage than the OECD databases and the economic estimates are a bit more timely too.  I’ve used Conference Board data in numerous posts over the years, with a particular focus on the 40 or so advanced countries (OECD members, EU members, plus Singapore and Taiwan).

Over the last 20 years, 10 of those countries have experienced a fall in the total population, and another two have had almost no population growth.

population falls.png

If one takes a more recent period –  just the current decade –  all the countries with falling populations are still falling, and they’ve been joined by Portugal. Spain’s population is also now flat.

Of course, the economic performance of one of these countries –  Greece –  has been truly atrocious.  Real GDP per capita is still about 20 per cent below 2007 levels, and even the average level of labour productivity has fallen.  But no one supposes that Greece’s economic woes are because the population is flat or falling: if anything plummeting living standards and high unemployment have prompted Greeks to look for better opportunities elsewhere.

Here is the productivity growth (real GDP per hour worked) performance of those countries with flat or falling populations, again over the 20 years to 2018.

population 2.png

A flat or falling population is, of course, no guarantee of economic success (Greece and Portugal are what they are), but it certainly doesn’t seem to have been a major roadblock in the way of strong economic performance over the last 20 years.   Even Japan –  already rich 20 years ago, and often a poster-child for the alleged economic problems of a falling population – has had productivity growth outstripping that of the median advanced country.

Where would  New Zealand fit in that picture?  New Zealand –  with rapid population growth – managed 24 per cent productivity growth over 20 years, better than Greece and Portugal, but well below the median, let alone the median of the flat/falling population countries.

20 years ago falling populations really were a new phenomenon.  And 20 years ago, many of those countries really were rather poor, just a few years out of Soviet domination.  Perhaps one needs to look at more recent periods to really see the (alleged) crippling effects of a flat or falling population?  So I had a look at the period from 2007 to 2018 (choosing 2007 so as not to start my comparison in the middle of a severe recession), and over that period the median country with a flat or falling population also did materially better than the median advanced country (or the median of the countries with fast population growth).    New Zealand, once again, underperformed each of those medians.

But the focus of Liam Dann’s article had been on the population/immigration surge New Zealand has experienced since 2012.    I’m very reluctant to put much weight on short-term comparisons (even across a pool of other countries there can be other cyclical factors that muddy the water), but….what the heck, here it is.

You’ll recall my chart showing an estimate of labour productivity growth in New Zealand.

GDP phw may 19

That was basically no productivity growth over the last five years, and perhaps 1 per cent total productivity growth over the period since 2012.

There are various ways of getting an estimate of labour productivity. Mine (in the chart above) averages the two measures of GDP (production and expenditure) and the two hours measures (HLFS and QES).  I’m not sure quite what the Conference Board uses, but their numbers aren’t inconsistent (if perhaps a touch lower) than what is in my chart.

Here is productivity growth for the countries with flat and falling populations from 2012 to 2018, with numbers for New Zealand, all advanced countries, and the median of the flat/falling population countries also shown.

popn 3

Using slightly different estimates, we might have done better than Portugal but that is as far up the ranking as you can get New Zealand over this period, one when we have –  on the Dann telling –  been blessed by such a beneficient immigration policy (and associated rapid population growth).  Of these countries, Japan and Slovakia already have higher average labour productivity than New Zealand does, while many of the countries are now also close.   The convergence story in defence of New Zealand (others are just catching up) has long since lost most of its salience: we were supposed to be one of the countries catching up, but we just haven’t been.

For what it is worth, over this particular recent six year window, New Zealand’s productivity growth was not just second lowest on this chart, but second lowest among all the advanced economies.

My main interest is in New Zealand, an incredibly remote set of islands. Over decades now there has been no sign that rapid policy-driven population growth has been helpful to our medium-term economic performance.  But there is no necessary reason why issues that might be relevant to our economic underperformance should also be relevant for countries much closer to major markets, supply chains, networks and opportunities.

On the other hand, there is no sign that countries with flat or falling populations are doing particularly poorly.  In fact, in economic terms, most seem to have been doing just fine.

Simple cross-country correlations can always only take one so far.  After all, the countries with flat or falling populations will include those where people are fleeing underperformance (Greece say) and countries with rising populations will include some of those where people are attracted to economic success (Singapore say): in neither case is it likely that the main direction of causation runs from population growth to economic success.

But, for what they are worth, here is a scatter plot showing population growth and productivity growth across those 40 or so advanced countries over 1998 to 2018 (one dot per country, New Zealand is red).

popn 4

It isn’t a tight relationship, but it is there (and was there is the economics literature decades ago) and isn’t obviously skewed by a single outlier country.  And New Zealand isn’t an outlier either – our productivity growth over 20 years was only a bit less than one might have expected from this crude relationship.

For the much shorter more-recent period (2012 to 2018), the negative relationship is still there but, as one would expect (with other stuff going on), is weaker.    But New Zealand more starkly underperforms.    Perhaps that underperformance –  little or no productivity growth for years –  will eventually be revised away.  Perhaps.

I’m not one of those with any generalised aversion to population growth.  Most population alarmism, at least at the macro level, is misplaced.  Technology, ideas etc keep on allowing for rising material living standards for more people.  But equally, there is little evidence that rising populations –  beyond some critical low thresholds –   themselves work to boost material living standards, and some signs that advanced countries with rapid population growth do less well (in material terms) than countries with less rapid population growth (even with all the sometimes conflicting chains of causation at work).

But across advanced countries as a whole even if all that was simply false, we’d still be left with a picture of New Zealand where policy has fuelled rapid population growth for most of the last 70 years, even as our relative economic performance has kept on declining.   Whatever the situation in Japan or Slovakia, there is decent prima facie reason to be intensely sceptical of the alleged economic gains to New Zealanders from continued high policy-induced immigration to this extremely remote corner of the world.

And few/no signs that countries with flat or even falling populations need to worry about economic underperformance stemming from such population changes.

Championing high immigration

The strongly pro-immigration political and business establishment must have been very grateful to the proprietors of the Herald for making so much space available for lengthy unpaid advertorials for high –  perhaps even higher – rates of immigration to New Zealand.  They even provided a journalist to write these paeans.

First, there was a double-page spread in Friday’s newspaper and then yesterday there was a further gung-ho column (under the heading “New Zealand leading the way on immigration debate”), both by Liam Dann.  When I saw yesterday’s column my first reaction was “yes, and the Pied Piper of Hamelin also found followers –  much good it did them”.

The double-page spread on Friday purported to be journalism: Dann had gone out and talked to various people, but every single one of them seemed to be either keen on high rates of immigration to New Zealand or wanting even more (wanting rules changed to be even more employer-friendly).  He even gave an uncritical platform for Statistics New Zealand, the agency which –  unable to conduct a competent Census – has now delivered us permanent and long-term net migration data that is so bad (in the short-term) that even the Reserve Bank the other day indicated that they were now reduced to forecasting flows starting nine months prior to the publication date of their forecasts (whereas previously they had good indicative data available on a timely basis).

Much of the initial story seemed to be built around a premise that the parties in government had not delivered on promises to lower net migration.     But then whenever he has been in government Winston Peters has never done anything material to make a difference to immigration numbers.   There is no sign he has ever regarded the issue as particularly important.  And, if you check out their 2017 manifesto they didn’t make such promises then either –  there was, for example, no suggestion of cutting residence approvals numbers.  Sure there was some loose talk of net migration numbers falling, but then official forecasts (eg those by the Treasury or the Reserve Bank) also had large cyclical falls projected back then.

What about Labour?   Despite attempts to suggest otherwise, they did not promise to reduce the net migration inflow by 25000 to 30000 per annum.   I wrote about their immigration policy proposals here, prior to the election.   What Labour promised was a series of changes around study and temporary work visas which, if implemented, might have had the effect of reducing the net inflow by those sort of numbers, for one year only.   Nothing Labour proposed would have affected residence approvals numbers at all, and thus nothing would have affected the projected net inflow over, say, a 5 to 10 year period.

Of course, none of this is to deny that both Labour (at least under Andrew Little) and New Zealand First might have been happy to try to create the impression that things would be materially different under them.  But nothing they promised would ever have done so, and (unsurprisingly) nothing they have delivered has.

And yet, amid all the breathless gung-ho stuff in the article, there is no mention at all of the substantial decline in the number of residence approvals granted over the last couple of years, no mention of the recent cut in the target rate of residence approvals, and nothing about the plans the government is now working on to managed residence approvals streams differently in future.  For anyone interested, I wrote about them here last week.

There are lots of small points I could pick up on.  There was the weird statement that “policy plans and population outlooks continue to assume that New Zealand’s net migration will fall back into negative territory”, which simply isn’t true: neither SNZ population projections, nor (say) Reserve Bank or Treasury forecasts assume the net flow turns negative, just that it slows.   Or the odd comparison that noted that our peak population growth rate (in 2017) “was more in line with sub-Saharan African countries like Sierra Leone” than with other advanced countries –  which might have made for some interesting comparisons (eg around economic performance) but was just left hanging.

But I was more interested in two lines in Friday’s article.  First, we had the prominent and doughty academic champion of high rates of immigration, Massey’s Paul Spoonley. who ran this line

More recently we’ve seen issues such as Auckland property prices and the Crafar farms sale. “There are distinct issues that trigger highly negative responses,” says Spoonley.

“What equalises that is the positive economic story and a relatively strong understanding of the role migration plays in that.

“We came through the GFC quite well and have done relatively well since … and what is important in that is the contribution that migration makes.”

I guess if you repeat nonsense often enough some people will believe you.  As a reminder:

  • New Zealand’s economic performance is among the very worst in the OECD, whether one looks back 70 years (about what the post-war immigration surge got going), 50 years, or 30 years,
  • There was nothing particularly attractive about New Zealand’s record in the (so-called) GFC, at least if one compares us to other countries with similar sorts of economic management (floating exchange rate, own monetary policy etc),
  • And, as even the economists who will champion New Zealand immigration policy will concede, there is no evidence specific to New Zealand that our immigration policy –  the most aggressive in the OECD over the last two decades –  has contributed to (an imaginery) economic success, or even mitigated our relative failure.

As for the most recent wave of immigration –  which Spoonley himself (rather exaggeratedly in my view) describes as unprecedented –  here is the chart showing New Zealand labour productivity growth (or near complete lack of it) from Friday’s post.

GDP phw may 19

On matters economic (and he is sociologist not an economist) Spoonley is making stuff up, which Lian Dann happily channels for him.

And then there was the population issue. On Dann’s telling

One thing is for sure: if New Zealand wants to maintain a growing population it needs positive net migration.

and he even gets Statistics New Zealand’s chief demographer in to try to buttress his case

There are other places such as Korea, China and western Europe where the natural rates of fertility are much lower than New Zealand’s.

“In some ways they’re a harbinger of where we’ll be in future decades,” he says.

New Zealand’s total fertility rate has been below replacement for decades now (since about 1980) but with no trend apparent for further drops (the rate is pretty stable at about 1.8 children per woman) –  nothing to suggest that our birth rate future is that of Korea or Italy.

But even if our fertility rate were dropping, what of it?  Such a drop would presumably be the result of voluntary choices by New Zealand couples.    What is it that leads Liam Dann to be so sure that we need, or want, continued population growth?  He doesn’t say.

(And doesn’t, for example, mention that –  all else equal – more people mean more emissions, not just in New Zealand but (since our emissions per capita are quite high) probably at global level as well.)

And what of Dann’s rather shorter (and thus probably more widely read) column yesterday?

He begins with the tired rhetorical trope

New Zealand has always been a nation of immigrants.The good news is that most of us understand that.

I’m not sure about his background, but I certainly don’t count myself as an immigrant.  But even if in some sense his factual statement was true, what of it?  It tells us nothing about appropriate immigration policy now (any more than, say, it might have in 1840, had Captain Hobson suggested to the Maori chiefs “you know, this land has always been a nation of immigrants”).

But then he tries to get into substance

However even if numbers ease it seems unlikely that we’ll see a return to the migration outflows we regularly experienced through the past 100 years.

The New Zealand story in the 21st century is very different to the 20th.

For starters our economy is more robust. The peaks and troughs have mellowed.

There are concerns about the fairness of the economic changes made in the 1980s and 1990s but they created a more flexible economy that is less vulnerable to external shocks.

There is so much wrong with this it is hard to know where to start.   First, these “significant outflows” were not common at all in our history: net outflows to Australia happened towards the end of the great Australian boom (shortly to be followed by a very nasty bust) in the 1880s, and there were small net outflows in the 1930s (the UK’s experience of the Great Depression was much worse than our own).   Significant outflows have only become a feature in New Zealand since our economic performance started lagging so far behind Australia’s.  Once we and they had similarly high incomes: these days we are very much the poor relation, and if net outflows to Australia are now not what they once were, it isn’t because those productivity or income gaps have narrowed, but because Australia is much less substantively welcoming to New Zealanders (who can still go any time they like) than they once were.  That is probably a wise choice by Australia, but it has further reduced options for New Zealanders.

Second, what about that spin about our economic cycles. Certainly, any boom this last decade has been very (very) subdued –  basically not a thing –  but perhaps Dann has forgotten that rather severe recession that occurred only 10 years ago.  And there is a certain incoherence in the suggestion that the 1980s reforms reduced the likelihood of migration outflows, when many of the large outflows of New Zealanders have occurred in the decades since the reforms.

Ah, but it is not just the economics. We are now such a with-it place that who (decent human beings anyway) wouldn’t want to live in New Zealand.

Then there is New Zealand’s cultural rise on the world stage.

We’re still a minnow but we are visible and our international media stereotype is of a cool, progressive sort of place – rather than a backwater.

The internet and cheap air travel have removed the tyranny of distance. The immigration boom has turned our largest cities into more cosmopolitan places.

New Zealand has become a place that young people are in less of a hurry to leave, a place that those who do leave are more inclined to return to.

It is also a place that potential immigrants are more likely to be aware of.

It is a place those wanting to escape the madness of the wider world aspire to – whether they are Middle Eastern people fleeing war zones, or Brits and Americans seeking more progressive political landscapes.

And yet, as even the Minister of Immigration’s Cabinet paper –  discussed last week – noted, we have struggled to attract many really high-quality immigrants.  There will always be many poor people happy to move to a relatively prosperous country, if that country will let them in, but not many really able people would have a really remote country, with a poor record on incomes and productivity, as their first choice.   Not inconsistent with that, the number of residence approvals has been dropping not rising.

And then Dann returns to the big-New Zealand rhetoric

That’s just as well. New Zealand’s population growth in the 21st century will be tied to immigration.

Our natural birth rate is falling and our population is ageing, following trends in Western Europe and demand.

Without a steady flow of migrants our economy faces stagnation.

With unemployment at historic lows, an international labour pool prepared to drive trucks, pick fruit and work tough, low-paid shifts in factories, rest homes and hospitals is now crucial to New Zealand’s economic and social wellbeing.

As a factual statement, of course immigration policy will have a huge bearing on New Zealand’s population future.  It has almost throughout modern New Zealand history (when immigration was less expansive –  between the wars, and from the mid 70s to the late 80s –  as well as when the doors are fairly wide open).

But the idea that with a flat, or even modestly falling, population we face economic stagnation, or an inability to manage “economic or social wellbeing”, is –  quite simply –  unsubstantiated rhetoric that (for example) pays no heed at all to the experience of other advanced countries with fairly flat, or even falling populations.    One could add in that unemployment isn’t at historic lows, and that countries with little or no immigration still manage to get the jobs done.    It isn’t clear why we should aspire to having more “low-paid shifts in factories” in the first place, but even setting that to one side,  economies have ways of adjusting to differing patterns of population growth: some activities just don’t need to be done as much if the population is flat (housebuilding is a good example), and changing relative prices (wages) will draw people into service roles. Unless, of course, immigration policy – as it seems to around, for example, the rest home sector – acts to stymie such adjustment.

I wonder if Liam Dann has any idea how the dozen OECD or EU countries that experienced falling populations in the last decade maanaged?

Central planner to the end, Dann ends his column this way

There’s room for more people in this country. We just need to invest realistically for population growth.

As a matter of geography, there is room for more people. There is physical room in almost country.  So perhaps “investment” is the operative word here, and yet we know that rates of business investment in New Zealand (share of GDP) have been towards the bottom of the OECD range for decades even though our population growth rate has been at the upper end of the OECD range.  Sure, there are issues about government infrastructure keeping pace with population growth, but the rather bigger issue is that private businesses have not seen the remunerative opportunities to invest here in ways that might have generated the sorts of incomes and material living standards our peers in leading advanced economies –  most of them with rather modest rates of population growth –  have come to take for granted.   That failure –  not just this year or last year (although very obviously through this particular immigration surge) –  is the market test that the boosters just never grapple with.    And before any comes back with a “but housing….New Zealanders invest too much in housing”, recall that (a) conventional wisdom is that there is a shortage, not a surplus, of houses, and (b) that without rapid population growth a much smaller proportion of scarce resources would have to be devoted to building houses.

Recall that the government’s new immigration policy objectives were about improving the wellbeing living standards of New Zealanders.  Current immigration policy is failing on that count.   In Friday’s article, the Minister of Immigration was running the party line

What we’re interested in is having an immigration system that supports the economic transition to an economy that is more inclusive and more productive.”

Sounds like a worthy goal. Just a shame that productivity growth has been so poor, and exports and imports have been shrinking as share of GDP.    Current policy –  and whatever tweaks the Minister has in the works –  seem unlikely to change that for the better.  The policy, in much the current form, has been tried for decades now and has failed.

Big New Zealand –  a sentiment championed by too many all the way back to Vogel at least –  is a costly delusion.  It is past time it was abandoned, and we concentrated on doing much better for the New Zealanders we already have in our remote and unpropitious corner of the world, far from markets, networks, supply chains, and (most)opportunities.

Changing immigration policy with as little publicity as possible

For a government that has proclaimed itself the most open and transparent ever, sometimes it just doesn’t score that well on either count.    Take, as an example, the centrepiece of New Zealand immigration policy –  itself one of the key discretionary tools of economic/social policy –  the New Zealand Residence Programme.

On Friday someone overseas sent me a copy of the latest Immigration New Zealand Policy Amendment Circular, issued on 30 April.  As INZ describes it

We regularly review and update the Operational Manual. We publish these as Amendment Circulars. We publish the circulars when the changes have been approved and incorporate them into the Operational Manual on the day they come into force.

Second on the list of changes in the 30 April circular was this

New Zealand Residence Programme (NZRP) planning range

R6.1 New Zealand Residence Programme
R6.5 Allocation of places within the New Zealand Residence Programme
The NZRP planning range, which sets the upper and lower number for resident visa approvals, has been updated to 50,000 to 60,000 from 1 July 2018 to 31 December 2019.

That was both interesting and a little puzzling.  Puzzling because the new circular was issued on 30 April, already more than halfway through the period from 1 July 2018 to 31 December 2019.  And substantively interesting because the new target (“planning range”) was substantially lower than the previous target.  In annualised terms the previous target had been 42500 to 47500 approvals per annum and this new target was the equivalent of 33333 to 40000 per annum.    It was (is) by far the largest change in the planning range this century (until 2016 the planning range had been unchanged at 45000 to 50000 per annum for a long time).

Here is a chart of annual residence approvals going back 20 years

ann res approvals

As I’ve highlighted in a couple of posts in recent months, it is striking how substantially the number of residence approvals has fallen (a fall well underway before the change of government).   MBIE only publish monthly data for the last decade or so, and so here is a similar graph for that period but this time showing twelve month running totals of residence approvals, the last observation being the year to March 2019.

res approvals 2

Annual approvals in the last 12 months have been lower than at any time since 1999/00.

Broadly speaking, operational policy is supposed to adjust to keep overall total approvals within the planning range (most obviously by varying the points threshold applicants have to meet).  In this case, however, it appears that the target has been adjusted into line with the actual reduced number of approvals.  That, surely, was somewhat newsworthy, especially given the debate at election time on what the various parties (Labour and New Zealand First) were and weren’t promising around immigration.

The open and transparent government was true to its word to some extent.  When I went looking I stumbled on the Cabinet paper that was the basis for the decision.  That Cabinet paper had been released onto the MBIE website on 19 February.   Here is a copy of the paper itself cabinet-paper-new-zealand-residence-programme 2019

The Minister of Immigration appears to have intended that openness and transparency would prevail.  Among the recommendations in the paper were these

58 Subject to Cabinet’s agreement to these changes, I intend to issue a press release announcing the details of the proposals in this paper.
Proactive Release
59 I intend to proactively release a copy of this Cabinet paper under the Official Information Act 1982, with appropriate redactions, at the same time that I issue a press release announcing the details of these changes.

But I had a look at Iain Lees-Galloway’s page on the Beehive website.   There was nothing there.

So I went to the MBIE website (always something of a dog’s breakfast) and looked for any releases in February.  There was nothing there (or for March or April).

I checked Immigration New Zealand’s news releases page.  There was nothing there either.

But, as I kept digging, I did at last find something.  INZ has an email newsletter, called Korero, aimed specifically at immigration advisers

Kōrero is the Immigration New Zealand adviser-specific newsletter sent out as an email. Available every two months, Kōrero brings to you the latest news and information that affects you in your dealings with Immigration New Zealand.

And the February issue of this newsletter did contain the news about the residence programme.

It looks a lot as though Cabinet really didn’t like the idea of letting the general public know that they had been changing immigration policy.

But what of the substance of the policy?

In some respects, what the Cabinet paper is proposing –  and was apparently adopted –  is quite sensible.   The residence approvals programme planning range has always been an odd beast, because it encompasses all sorts of streams under which approvals can be made, each set up for a variety of different motivations.    And whereas when the residence programme was set up most approvals were granted to people offshore (and thus approvals regulated the number of non-citizens entering New Zealand to live), these days most approvals are granted to people already here (eg on temporary work visas, so that the overall planning range, at least on an annual or biennial basis, doesn’t even serve as much of a check on (for example) short-term pressures on housing or infrastructure.

Recognising all this, the government has apparently agreed that from 1 January 2020 each of the streams will be managed (or not) individually, rather than within an overarching planning range.    The residence programme includes, for example, non-citizen spouses (in particular) and children of New Zealanders.  We are never going to cap those flows, and management will mostly just consist of the tests to ensure that the relevant relationships are genuine.  And, on the other hand, if we think that (say) granting 15000 skilled migrants a year residence is sensible that is a decision that probably shouldn’t be materially influenced by how many New Zealanders bring back foreign spouses in any particular year.

On paper all that sounds sensible enough.  But, as so often, details can matter, and at present there are none.  There is nothing in the Cabinet paper giving a hint as to how many residence approvals in total (or by stream) Cabinet expects to be agreeing to for the coming years.   There is also nothing in the Cabinet paper evaluating, or reporting other evaluations, of the economic and social impact (benefits and costs) of the immigration programme to now –  it seems to be a typical MBIE document in which the benefits are more or less taken for granted.  The exception perhaps is this line (emphasis added)

In response to an overall trend of decreasing skill levels and remuneration amongst skilled migrant residence approvals, the previous Government tightened the requirements for the Skilled Migrant Category (ie the points system) and lifted the points level at which applications could be selected.

But even then there is no attempt to assess, or describe, the impact of those changes (or other changes which went in the opposite direction –  more points for regional jobs), and thus no attempt to assess why residence approvals have dropped off so sharply, despite reasonably good labour market conditions at present.

The other substantive part of the paper was a recommendation to change the objectives of the Residence Programme.  The paper reports that

The current objectives for the NZRP were agreed by Cabinet in 2001 and reflect an immigration context that was different from today. The existing objectives are:
24.1 Regulating the flow of foreign nationals wanting to come to New Zealand;
24.2 Prioritising among would-be migrants and avoiding the free flow from demand-driven immigration;
24.3 Trying to produce benefits to New Zealanders; and
24.4 Consistency and stability (market signalling around the number of residence places available in any particular year).

I was struck by the rather weak third objective (“trying to” produce benefits to New Zealanders –  very different from the upbeat MBIE rhetoric of a few years ago in which immigration was a “critical economic enabler” for New Zealand).  That list of objectives is very process-focused, and perhaps not unreasonable on its own term, but it provides no guide at all to ministers in actually setting the residence approvals planning range numbers.

The paper goes on to report that

The Government’s vision for immigration has changed and become broader. We intend to improve the wellbeing and living standards of New Zealanders, including through productive, sustainable and inclusive economic growth, by:
25.1 improving New Zealand’s labour market outcomes, including by filling skills and labour shortages and raising overall skill levels;
25.2 encouraging investment and supporting innovation and exports;
25.3 supporting foreign relations objectives and New Zealand’s international and humanitarian commitments;
25.4 supporting social inclusion, including through family reunification; and
25.5 protecting the security of New Zealanders and the border.

and thus

To better align the NZRP to this vision and focus on how to achieve it, I propose the following, equally weighted new objectives for the NZRP:
26.1 To maximise the contribution of the NZRP to the economic and social wellbeing of New Zealand and New Zealanders by:
 – attracting skilled workers and business migrants;
 – reunifying the families of New Zealand residents and citizens; and
 – meeting international and humanitarian commitments.
26.2 To manage overall residence numbers through controlling each of the individual components of the programme.

I’m pleased to see that the focus is clearly on benefits to New Zealand and New Zealanders, but there is still no sign that they have any idea at all how “attracting skilled workers and business migrants” is going to benefit New Zealanders in future when it hasn’t in the last 20 years (on their own metrics, immigrant skills levels are on average lower than those of natives, exports have been falling as a share of GDP, and business investment has remained weak).

Which brings us back to the target numbers, and the reduced “planning range” for the current period.  There is simply no explanation for why the government has chosen such a substantial reduction in the planning range, except –  and they more or less say this –  that it brings the target into line with forecast actuals.  But “forecast actuals” are a response to things including the rules of the scheme (eg the points granted and points thresholds).  It doesn’t have the ring of a particularly coherent policy.

Moreover, it is worth noting –  the Cabinet paper does –  that when the planning range was last approved around 60 per cent of visas were supposed to be for people in the business/skilled stream (principal applicants and their dependents).  60 per cent of 45000 would be 27000 annual approvals under the skilled/business streams (those which, as the paper itself claims, offer the greatest economic benefit).   But on the revised policy now in place only 51 per cent of the approvals are allocated to the business/skilled stream: 18700  per annum.  In other words, a 30 per cent cut in the number of skilled/business approvals.

Here are actual (12 month running totals) approvals under that stream.

res approvals skilled

In that sense, the new (temporary) policy simply adjusts the target to reflect the very substantial reduction in the number of actual approvals (again, to the lowest level seen since 1999/00).

My overall take?

  • I support, conditional on seeing details, a move to managing individual streams individually (so long as it isn’t a mechanism to obscure overall actual immigration policy),
  • I favour a substantial and permanent cut in the overall number of residence approvals granted, focused first on the (non-refugee) categories where there is no skill requirement, but also on the skilled/business side where (as MBIE themselves note) skill levels just haven’t been that high.  Doing so would be likely to enhance New Zealand’s medium-term economic performance.  The reduced target the government has adopted, if persisted with, looks to be a step in the right direction, but there is no indication as to whether they will persist with it,
  • but I also strongly support open government, and don’t like the idea of substantial reductions in the residence approvals targets being done on the sly, with no consultation and an (apparent) attempt to minimise the visibility of the change,
  • on which note, I hope that the government is planning some proper public consultation (not just, say, with business lobby groups) about the details of the new scheme, including the guidelines they will be adopting to manage the inflows of each of the individual streams and the overall number of residence approvals granted.  Lack of transparency can hardly ever be defended when it comes to the design of major instruments of economic and social policy.


Fruit-pickers, wages, and immigration

I’m not one of those who thinks wage and salary earners as a whole have had some sort of raw deal.  From time to time I’ve run this chart

lci wages vs gdp

suggesting that over the last 15+ years, wage increases in New Zealand (it is different in some other countries)  have outstripped that rate of growth in what I (loosely) term the earnings capacity of the economy: nominal GDP per hour worked, a variable that incorporates productivity growth and gains in the terns of trade.

To the extent there is some sort of “raw deal”, it is one the public has put up with: voting for politicians who, in office, do nothing about removing th roadblocks in the way of fixing our poor rate of productivity growth.  Fix that and we’d be considerably better off.  But across the economy we can’t consistently pay ourselves what hasn’t been earned.

But if wages growth across the economy has been, if anything, surprisingly high given the lack of productivity growth (I say “surprisingly”, but there are decent explanations as to why it has happened), there are still some wages puzzles.

One of them perhaps only puzzles public sector economist types who’ve never themselves had to make a payroll or face a market test for their services.

The Reserve Bank has long run a regular programme of business visits.  I always enjoyed participating (especially in visits well away from Auckland and Wellington) and often came away from the visits with a heightened admiration for the people who have built and maintained businesses, through good and bad economic times.    But there was one question that I never really got a satisfactory answer to.  In periods when the economy was doing well (for example the early 2000s) we would regularly hear from firms we talked to that it was really hard to get decent staff.   We’d nod understandingly, jot that down in our notebooks, and then ask “so what is happening to wage inflation?’ and “so are you increasing the wages you are willing to offer to get people”.  And often there was a look of almost incomprehension (perhaps it was really disdain for Wellington economists), and only rarely would anyone suggest that, indeed, it was really hard to get the right staff, and that they were paying over the odds to get people.  For some reason, a conversation on this issue at a firm in Timaru, probably in 2002, sticks in my memory.

There are strands to a possible good story.  Increase wages materially for new arrivals and before long you’ll have to increase them for everyone.  It is easy to raise wages and hard to cut them (if labour market or business conditions reverse).    Simply bidding more might attract a class of worker more likely to move on quickly if someone else offered a little bit more.  And so on.  So I get that there are reasons why wages move somewhat sluggishly (relative to, say, prices for oil or other commodities).  But I was always surprised at how weak a link managers/owners of private businesses appeared to draw between difficulty hiring and (what an economist would think of as) putative changes in the market-clearing price for such labour.

Which is all by way of introduction to a Stuff story I noticed yesterday about an industry having difficulty getting staff.   I’ve written previously about bus companies and bus drivers, and the bizarre situation in Wellington where the contracted companies get away with endless cancellations (with apparently minimal penalties) because they choose not to pay what it would take to employ the necessary number of drivers.  One might grant that that is a difficult situation –  a government-controlled “market”, in which both fares, operators, and service frequency are all supposed to be simultaneously controlled.

But yesterday’s article was about jobs in a fully private sector industry, with lots of individual employers, and with a significant export orientation: fruit-picking, including “grapes, apples, and kiwifruit”.  The article is quite a substantial piece, including a couple of quotes talking of a “dire” situation finding staff, and repeatedly talk of severe labour shortages.  And, remarkably, not one mention of wage rates.   It must not have occurred to the journalist to ask, let alone to the various employers (and employers’ representatives) to mention it.    Even though, when there is a “shortage” of tomatoes, tomato prices rise –  so that actual quantitity demanded at the going price is roughly equal to the actual quantity supplied.  At present, there is a “shortage” of avocadoes –  it gets a line perhaps somewhere in a newspaper, but prices adjust and so do (potential) consumers.

But not, it seems, in the fruit-picking industry.

The industry seems to think this is a problem for the government (admittedly, this is an approach fostered by successive governments, who also seem to think it is a “problem”, rather than (say) an opportunity for individuals who could capture the premium prices growers might otherwise pay to ensure their fruit was picked).  The article includes a quote from the head of something called the “Central Otago Labour Market Governance Group”, a title that sounds as if it could have been derived from some centrally-planned eastern European economy in the 1950s.

Perhaps there really is some movement in market rates for fruitpicking and the journalist just forgot to tell us. But if so, you’d have thought the industry representatives would have been keen to get the message across –  apart from anything else, it would be free advertising to people in those districts with a bit of time on their hands that there was (unexpectedly good) money to be had.

But again I’m left with a bit of a puzzle –  and perhaps it is only one to city-based macroeconomists – as to why a competitive bidding process isn’t at play.  One can understand the Wellington bus companies not raising wages (temporarily or permanently): they don’t have to, the passengers (mostly) bear the consequences, and entry to the business (Wellington bus routes) is restricted.  But for an individual grower (apples, grapes, kiwifruit or whatever), the situation is surely a lot different.  If there is a incipient shortage of pickers for the whole industry, that doesn’t mean your orchard has to miss out.  Offer better wage rates and presumably people will choose your orchard over another one down the street (on the other hand, choose not to compete and you risk fruit rotting on the tree/vine).  Of course, that invites the other orchards to increase their rates too, but that is how markets work.  And yet, if this Stuff story is to be believed, it doesn’t seem to be happening.  And that is even though much of the picking workforce seems to be itinerant or with no established and committed long-term relationships.  It isn’t obvious why offering more to pickers this year –  if the harvest is particularly early, or particularly good, or labour “shortages” are particularly severe –  need entrench higher rates for all time.

In fact, of course, much of the article channels an ongoing industry push to avoid paying higher wages to New Zealanders to do the job (not just this year, but permanently) by using the immigration system.  You might think that the case for using immigrant labour at times might be stronger than otherwise if there was evidence that wage rates in this industry had been rising particularly stronly (employers putting their money where their mouth is).  But apparently the industry doesn’t see it that way –  and neither (one deduces from their silence) does our current left-wing government, despite its key support base including workers and trade unions.

We are told

Key visa reforms sought by the industry include removing the need for annual reviews once a three-year visa is granted, giving those on three-year visas a pathway to permanent residency if no New Zealand residents are available for the job, and reworking the labour market test to make it more aligned with the employment conditions faced by employers.

It is fruit-picking we are talking about here, not the most skilled of jobs.  And an immigration system that, we’ve been told for decades, is supposed to be skills-focused, contributing to a lift in overall productivity growth, in ways that would raise wage levels for everyone.

As a reminder, there will be few/no/inadequate numbers of New Zealanders offering to work in a particular sector when wages (and overall conditions) in that sector are no longer particular attractive.  In the 1970s presumably our fruit was picked, our old people’s homes were staffed, our supermarket checkouts were staffed, by New Zealanders (whether those of longstanding or more recent immigrants –  but you couldn’t hire people from abroad specifically to fill these modestly-skilled jobs, and in the process keep down wages in that specific sector).

I presume much of what is going on here is that many of these fruit-based industries just aren’t that internationally competitive at current exchange rates. It probably isn’t the case with, say, gold kiwifruit, but for some of the other industries it seems quite conceivable that the economics is pretty tight and it might not be worth being in business if they had to pay materially higher wage rates to pickers.   There are hints of that in the article

“The growers are starting to think whether they are going to invest money because they need to have assurances about labour. It is a bigger issue than probably it is given credit for.”

To which I guess I have two strands of response:

  • first, there are lots of industries that are no longer viable here based on old production technologies (try making a living milking 50 cows by hand) or running a suburban petrol station (in my suburb there were four forty years ago and there are none now).  There might be issues of scale to consider, and/or investment in technology-based solutions, and
  • second, the real exchange rate (averaging more than 20 per cent higher since about 2003 than it did in the previous two decades, despite feeble economywide productivity growth) is a real symptom of the severely unbalanced New Zealand economy.  As a result, our export/import shares of GDP have been shrinking, not rising.    But however attractive the immigration option genuinely looks (and locally is) to an individual employer, on a large scale it exacerbates the economywide problems, not eases them.   For outward-focused industries in particular, a much lower exchange rate –  which would follow directly from substantial permanent cuts in immigration –  would improve NZD returns, and would also make producers in those industries better placed to bid competitively for New Zealand workers to fill their vacancies (or to invest in technological solutions, or the sort that help lift average labour productivity).

Firms simply shouldn’t be able to use immigration to fill positions requiring only modest skills or training without at least being able to demonstrate that the wage rates they are paying for such skills have run well ahead of other wage rates for several years.  But to get bureaucrats and ministers out of the business of picking favoured sectors/firms –  at present, the rewards to lobbying seem quite high – I continue to commend to anyone interested my model for temporary work visa policy.   It is pretty simple

Institute work visa provisions that are:

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

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

If apple-growers really can’t get workers locally, and are happy to pay a substantial fee to the Crown, on top of a decent wage, I guess I’d be okay with temporary overseas recruitment.  As it is, they seem to simply want to undercut potential returns to New Zealand labour.

Immigration is inherently a political issue

In the few days after the Christchurch shootings, a few of the more rabid on the left appeared to want to rule out of court any discussion – ever –  about immigration policy.  Immigration was good –  was their prior –  and more immigration better, and no correspondence could be entered into.  Decent people don’t discuss such issues, except perhaps to celebrate.

The other day we had a similar sort of voice from another point on the political compass, this time in a column from Kirk Hope, the head of the leading lobby group advocating for the interests of businesses, BusinessNZ.   Despite counting myself pretty strongly pro-market (not at all the same as pro-business) I don’t often agree with Hope (I just googled his name and the name of this blog to remind myself of some of his more-egregious previous claims).  But Stuff seems to think him worth publishing, and he does head a pretty big advocacy group.

Hope’s key assertion?

One of the challenges we must face is for our politicians to stop treating the topic of immigration and immigrants as politics.

What a breathtaking proposition.   One of the most substantial instruments of government economic and social policy and Kirk Hope thinks that it shouldn’t be debated by politicians (let alone, presumably, the rest of us). Politics isn’t a bad thing –  as Hope seems to imply –  but something pretty fundamental, a big part of how we decide (and refine that view) what sort of country this will be.

As it happens, Kirk Hope never actually says how he thinks immigration policy should be decided, if not by politicians, weighed competing interests and claims.  Perhaps by BusinessNZ?   He never even tells us what his own preferred policy is.  Perhaps is he just some open-borders absolutist who thinks the very idea of an “immigration policy” is abhorent?   Probably not (there aren’t really very many advocates anywhere for such a policy).  My guess is that he’d like to keep on with something like our current immigration policy (probably the most aggressive anywhere in the advanced world), and just a bit more.   He doesn’t tell us, just urges that “politics” be removed from the process, all while advancing a mix of threadbare and/or flawed arguments for high rates of non-citizen immigration.

So how does Hope make his case?

First, there is the tired rhetorical trope about “a nation of immigrants”

It is a truth that New Zealanders are immigrants or the descendants of immigrants, and we are ethnically diverse.

Which is pretty meaningless, offensive, and acts to diminish people’s sense of identity with New Zealand.  If all human beings are ultimately descended from people emerging from, say, the Rift Valley, at very least everyone other than perhaps Kenyans and Tanzanians is descended from immigrants.  But what of it?  Closer to home, the ancestors of the Maori population came many hundreds of years ago.  They have no other home.  I’m have no idea of Hope’s ancestry, but I’m one of those (of European descent) with no other home but New Zealand –  I’ve never known an ancestor who wasn’t born in New Zealand.  But again, so what?  It is simply irrelevant to the question of how many people we should import now, on what terms, with what skills or backgrounds.   Like many who run the line, Hope makes no effort to draw out any logical implications from his factual statement –  presumably because there aren’t any.

Then we get another factual statement with few/no implications

It is also true that the demographics for New Zealanders born in New Zealand tell a story of aging and regional depopulation.

And?   People leave regions when the opportunities in those regions aren’t particularly attractive.   There is no obvious role for central planners (like Mr Hope) to argue for policy initiatives to repopulate areas they happen to think aren’t growing fast enough.  I suspect that Hope is also hoping to skate over the evidence that New Zealanders have been leaving the region of Auckland for most of the last 20+ years.   And if great opportunities do exist in particular regions, wage adjustments are likely to act as an effective signal (higher wages never seem to be part of how business lobby groups think markets should deal with incipient “labour shortages”).

Then we get a grab bag of statements inviting a “so what?”

We will soon have more people aged over 65 than under 15 years of age. Auckland and New Zealand will be dependent on immigration for skills. Two out of every five New Zealanders will live in Auckland, nearly a third of them Asian.

Isn’t it great –  something to celebrate –  that life expectancy is improving so much that there is an increasing share of the population aged (well) over 65?  Apparently not to Mr Hope.     Or was his (central planning again?) concern that New Zealand couples aren’t having enough babies?

And what of that strange claim about skills?  Is Mr Hope deliberately avoiding the OECD skills data showing not only that New Zealand workers had among the very highest skill levels in the OECD, but that immigrant workers on average had lower skills than natives (that gap is smaller in New Zealand than most, but still there)?  Let alone the official SNZ data that confirmed again last month how poorly the Auckland economy does (GDP per capita) relative to, say, big cities in many other (overall more successful, typically with less immigration) OECD countries.   Inconvenient I suppose.

Then claims start getting more far-fetched

The labour market needs to grow by 1.5 per cent to support moderate economic growth of 2.5 per cent, but actual labour market growth tends to be under 1 per cent. Workforce exits are increasing, while workforce entry levels are modest and declining.   Our people shortage is getting worse.

This is just nonsense stuff.  Sure, all else equal, if your population growth rate is faster so will the rate of growth of GDP.  But – unless you are raising an army –  total GDP doesn’t much matter to anyone.  What matters, more closely, is real GDP per capita and the real GDP per hour worked that undermines that per capita growth.   If, say, the population were static –  as it now is in many OECD countries – 1.5 per cent annual GDP growth would be a quite reasonable outcome.    As Mr Hope surely knows, we’ve had almost no productivity growth recently (despite, because of, or just coinciding with very strong immigration).

A central planner apparently to the core –  did he tell the (generally pro-market) people at BusinessNZ this when he was hired? –  Mr Hope is alarmed about “people shortages”.   This just incoherent stuff, and he shows no sign that he has looked, even cursorily, at how countries are managing where the population is flat or even falling a bit?  As a hint –  but he could check the data himself –  most are achieving faster growth in per capita income and productivity than New Zealand is.

He offers some strange arguments about how we need immigrants to “replace” New Zealanders who are retiring and yet a little later on even he acknowledges that  immigrants themselves get old.  If there are fiscal problems associated with increasing life expectancies –  and there are – why wouldn’t you tackle those directly (eg raising the NZS eligibility age)?

We are then get back to some other claims

Immigration contributes to population and economic growth, provides an expanded talent pool, helps us understand overseas markets, and contributes to the diversity and vitality of New Zealand communities.

I’d be impressed –  though still not thinking that immigration policy should be taken out of the realm of politics –  if he’d claimed (and offered New Zealand evidence for) that rapid New Zealand immigration had boosted productivity growth.  We never know the counterfactual, of course, but in our decades of high non-citizen immigration, we’ve made no progress at all in closing the productivity gaps, and have actually fallen further behind.  Oh, and “understand overseas markets”…..well, perhaps, except that New Zealand has one of the very worst exports (as a share of GDP) performances of any OECD country –  levels and changes –  despite all that immigration.

Not content with the evidence-free-zone so far, Hope ups his rhetoric

Our people shortage is critical now because of the opportunities that are opening for New Zealand business.

The successful completion of the giant Pacific trade deal CPTPP and the likely completion of an European-New Zealand trade deal mean 46 more markets will soon be open to enhanced trade with New Zealand businesses.

So, while our markets are expanding our working population is reducing.

So despite having probably the largest (per capita) non-citizen programme in the OECD, it just isn’t enough.    He calls for even more.

Even serious defenders of the New Zealand immigration programme will be embarrassed by this particular line.  After all, no serious analyst claims that CPTPP will be worth more than perhaps a 1 per cent boost to GDP –  and serious analysts would claim those gains would come through terms and trade and higher productivity, not conditioned on even more people.  As for the EU, I know Hope is a big advocate of that possible deal, but as I pointed out in debunking an earlier article containing his over-egged claims (that the EU deal might finally be what transformed our –  already –  “rockstar economy”), the best sober estimate of the GDP gains from Canada’s “free trade” agreement with the EU was about 0.5 per cent.

And wasn’t there the small point that, despite all the various trade deals New Zealand has signed up over recent decades – including those with Australia and the PRC –  and the reduction in global agricultural protectionism, exports and imports have been falling as a share of New Zealand GDP.  Perhaps another million migrants will make all the difference?  But perhaps not.

Hope ends by getting out the violins

We need to ensure that our political thinking more clearly acknowledges that we are an immigrant nation at our core, that we truly value diversity, that we are inclusive and will celebrate and support new New Zealanders as we all grow our economy and standard of living, contributing to our communities and our future.

I could –  and would- reframe this as something along these lines

We need to ensure that our political thinking more clearly acknowledges that after one of the largest-scale immigration programmes undertaken anywhere in recent decades, there is little or no evidence of economic gains for New Zealanders, and at least the possibility that such rapid rates of immigration, to a location so remote, have made us poorer rather than richer.  Responsibility for that rests not with the migrants themselves –  almost all of them as simply pursuing the best for themselves and their families –  but with our own political and business leaders, who have championed an ideological cause (with both globalist and bigger-New Zealand strands) even as the economic evidence in support of their claims has failed to arrive.  Notwithstanding a wider range of ethnic restaurants (and associated consumption diversity), there has simply been no compelling evidence –  as there is none globally –  that “diversity and inclusion” (as distinct from the ongoing contest of ideas) has produced any economic gains whatever.    If anything, New Zealanders at the bottom of the socio-economic heaps have been paying an increasing price for this obeisance to an “elite” ideology.

I’m still left rather gobsmacked that a supposedly serious public figure can, apparently seriously, suggest that immigration is other than a natural and appropriate subject for intensive political debate.   What is more fundamental to a country than the people who make it up, and yet that is what immigration policy influences very heavily, at least when done on the huge scale our politicians have chosen in New Zealand.  Even at a narrowly-economic level, it represents a significant change in the overall resource mix and productive structure of the economy (especially in a country as natural resource dependent as New Zealand or Australia).

Immigration policy doesn’t make that much difference in any particular year, but we’ve been running something like current immigration policy now since the early 1990s.  In 1992, New Zealand’s population was about 3.5 million. In the years from 1992/93, we’ve granted residence status to more than 1.1 million non-citizens.  That is a huge number.   Some, perhaps many, will think it is a “good thing” –  for various possible reasons –  and others will think it a disastrously bad choice (that’s my view, even if more apparent in hindsight than it could have been in 1992).  Even among those who think it a bad choice, some (me) will emphasise overall economic performance arguments.  Others might emphasise real world second-bests around housing, or traffice congestion, or just a preference for being small.  Others again might emphasise environmental pressures.  Others might raise concerns about precisely the sort of “diversity” Kirk Hope and the cheerleaders celebrate, highlighting issues around cohesion, trust, mutual support etc. And others too might be uneasy about large-scale immigration does to the relative place of Maori in New Zealand.  Some might just think that the ideological etc make-up of future New Zealand should be determined by the individual choices of New Zealanders, not by politicians skewing the future population one way or another.  But all those disputes are naturally and appropriately the stuff of politics.   Given our relative economic underperformance, notwithstanding decades of large scale immigration, all these angles should be debated more vigorously, not less.

Most of my own arguments around New Zealand’s immigration policy have been economic in nature.  On its own, the economic track record should have been more than enough basis for a rethink, were it not for the ideological priors of the champions.  Perhaps the most accessible version of my economic story is here, in a speech I did 18 months or so ago.

I have occasionally commented on various social and cultural dimensions, including in two posts sparked by the 2017 New Zealand Initiative report on immigration policy (here and here) and in some remarks on diversity, and its limits in a stable democracy, here.

I was also reading yesterday an  interesting article from the latest issue of The Atlantic by David Frum on US immigration, experience and policy.  Frum is a pretty determined never-Trumper, and yet he concludes his article this way

Reducing immigration, and selecting immigrants more carefully, will enable the country to more quickly and successfully absorb the people who come here, and to ensure equality of opportunity to both the newly arrived and the long-settled—to restore to Americans the feeling of belonging to one united nation, responsible for the care and flourishing of all its people.

Every country is different, but it is worth recalling that US immigration policy –  under all recent presidents – has targeted non-citizens inflow about one third those of New Zealand (in per capita terms).  I don’t agree with everything in his article, and some of the issues are different for New Zealand than for the US –  there is a more plausible argument in the US context that immigration is roughly a wash (in economic terms) for natives than there is here – but I thought it was a piece worth reading and reflecting on.  I wonder what Mr Hope would make of it?