Reopening parent visas

Last week the government announced the reopening applications for parent residence visas.

For a couple of decades, parent visas made up a pretty large chunk –  around 10 per cent – of total residence visas issued.   From 1997/98 to 2015/16, 75000 parent visas were issued.  These were, almost certainly, all people who could not have obtained residence under the more-demanding skills-based segments of the immigration programme.  Most probably, given the overall target/guidance for the number of residence approvals to be issued, issuing parent visas lowered the average quality of those given residence.  Perhaps the effect wasn’t large – since the marginal approvals under the skilled streams often weren’t that skilled at all –  but the direction of effect was pretty clear.

Parent visas weren’t the only such questionable streams, although it was the largest. Over the same period, for example, almost 20000 people got residence under “sibling and adult child” provisions.

All this in an immigration programme that was avowedly primarily about the potential economic gains to New Zealanders.  Of course, the programme has never been all about economics –  there are refugees for example, a strand almost entirely about humanitarianism –  but the rhetoric of successive governments has been that the focus is economic benefit (and given how poor our productivity record, don’t we need better outcomes).  And it has never been obvious how the parent visa (and related family strands) help on that count.

Late in their term, the previous government suspended the parent visa programme and MBIE data suggests there have been very few approvals since then.  But no one had been sure what the future regime would be.  Now we are.

The positive aspect of the announcement last week is that there will only be 1000 places per annum.  By contrast, under the previous rules often in excess of 4000 parent residence visas were being granted each year (although there is an uncapped –  but  more demanding –  parent retirement residence visa on top of that).

Perhaps, then, one shouldn’t be unduly bothered about the new system.  But if we are going to have an economics-focused immigration system, operating on a very scale by global standards, we should be aiming to get the very best from it.     And it is hard to see how the parent visa policy fits that bill.

The fiscal dimensions of the equation are perhaps most obvious.  Sure, these new parent visa residents won’t be eligible for New Zealand Superannuation straightaway. But the median age of people getting parent visas used to be about 60, and you only need to live here for 10 years to get full NZS.  Average remaining life expectancy at age 60 in New Zealand is almost another 25 years.   If these new residents work and pay income tax at all, very few are likely to even come close to making a fiscal contribution approximating the NZS cost.  From some countries, any NZS entitlements have to be offset against pensions from home countries, but not all significant source countries have such systems.  Perhaps as importantly, new residents are entitled to full access to the public health system.  No doubt you have to pass a medical test to get your parent visa, but as for natives so for immigrants, health expenses tend to be materially higher in the last few years of life than in, say, your 20s or 30s.   Health spending is a large and rising share of government spending and, over time, GDP.    There are reasonable arguments –  also open to some debate –  that migration generally may be fiscally positive. For these elderly migrants it is almost inevitably not so.

The government doesn’t even try to pretend otherwise –  although it certainly does nothing to highlight, or limit, the fiscal cost (eg greatly extending the residency requirement for full NZS).  Instead, their argument for parent visas is a convoluted quasi-economic one.  According to the Minister

As part of its work to ensure businesses can get the skilled workers they need, the Coalition Government is re-opening and re-setting the Parent Category visa programme, Immigration Minister Iain Lees-Galloway says.

The move will:

  • support skilled migrants who help fill New Zealand’s skills gaps by providing a pathway for their parents to join them
  • ….
  • Help New Zealand businesses find the skilled labour they need
  • Further strengthen the economy by helping businesses thrive.

You can probably ignore the pure spin in the last line (the economy not being strong, businesses as a whole not thriving, productivity growth being atrocious etc).

As for the rest, recall that the average skill level of the “skilled migrants” just isn’t very high at all (all those retail and cafe managers, aged care workers and so on).  But also that the Minister and his department have never been able to produce remotely conclusive empirical evidence of the economic benefits of migration, and if we can only atract the people Lees-Galloway thinks “we need” by also taking on a big fiscal impost (see above) the gains must have been pretty thin and insubstantial to start with.  Especially when every non-working migrant (ie probably most of the parent visa arrivals) will add to the demand for labour (derived demand from their consumption) without adding to the supply of it.

There has been some criticism that the new income threshold sponsors (the adult children) will have to meet mean that parent visas will be an option only for  “the rich”.  And there are some anomalies there, including the fact that a couple in which both are working part-time are treated much more onerously than a single fulltime income earner, but in the end if you are going to offer only a few places, they need to be rationed somehow, and given the likely financial cost to the taxpayer, it makes some sense to focus on the migrants who are actually earning a fair amount (although a household income of $159000 across two earners –  while well above median –  is hardly “rich).  If there are any encouragement effects for really able younger migrants, they are going to be greatly attentuated if parent visas were handed out by lottery.

parent visa

All that said, the new rules look rather weak, and look as though they will reward those who are prepared to game the system, pushing the boundaries (perhaps beyond breaking point)) and/or who have the capacity to rearrange their declared income across time.   Work in a salaried position in a government department or big corporate and you probably have few options, but for others I’m sure smart accountants and lawyers will soon be advising on how to game the system.   As you’ll see above, the sponsors do need a reasonably high income, but they only need it until the parent gets their visa, and then only for two of the three years previously.  I guess that is supposed to allow for natural variability in eg business income, but it means you only have to find some way of inflating your declared income for a couple of years and your parent can get in, with no ongoing support or minimum income requirements.

I guess parent visas issue looks and feels a lot different to people (like me) whose parents and grandparents were all born in New Zealand than they do to people who’ve migrated, including to couples where a native New Zealander married someone abroad and settled here.    I can even see how someone who migrated here at 25 when their parents were 45 might not have given much thought then to how a widowed parent abroad might cope at age 80.  But the bit I really don’t get, at all, is why there should be any presumption that if you migrate to another country, leaving home and family, that should in short order (and you only need to have been resident here for three years to sponsor a parent) create some expectation that if aged parents have issues they should be able to come here, rather than that you return home.    Migration –  especially that to New Zealand (where the overall productivity gains are so questionable) –  has always mostly benefited the migrant.  We are doing them a favour much more than they, by coming, have done us a favour. But if you have family responsibilities at home, go back and meet them.  Don’t expect the New Zealand taxpayer to support those who’ve never been a part of us, coming only at the end of life.

It would be different if any parent visas were provided only to those with guarantees of income and health support, and thus a rock-solid assurances that these individuals would not be a financial burden on the New Zealand taxpayer.  I’d have no particular problem with an uncapped scheme of that sort –  and the existing uncapped scheme doesn’t have those protections, especially as regards health spending. But it would require, say, evidence that an annuity had been purchased from a rock solid provider, and that rock-solid provision had been made for the purchase of lifelong comprehensive health insurance.   The number of people who could meet that sort of standard would be really small (especially with real interest rates at record low levels).  But in a sense that just demonstrates the difficulty of justifying parent visas on any reasonable economic test.

Perhaps there is a grounds for a weaker compassionate standard, but make that subject to a 20 year residence/citizenship test for the sponsoring child.  But if you’ve been here for only three years, or haven’t bothered to become a citizen, if your parent needs you, go to them (we could even hold open the child’s residence visa for, say, five years while they did).  I saw a a somewhat gung-ho columnist in the Dominion-Post on Saturday championing parent visas on the grounds that

Their children have become economically valuable New Zealanders.  They deserve to have an avenue that responds to family need.

But in many cases (a) the children have not become New Zealanders, and (b) the evidence for the economic benefit to New Zealanders from migration is thin, at best.  When and if, as a relatively new migrant, family needs you, go to them.  They are your responsibility, not ours.  It is a bit like the argument that it somehow isn’t fair that kids grow up without their grandparents –  not only can grandparents visit relatively easily (in most cases), but surely you should have thought about that before leaving home and hearth, and grandparents, and settling in the most remote corner of the earth.

As I say, at 1000 visas a year this isn’t the biggest issue there is around temporary or permanent migration policy.  But that doesn’t mean it shouldn’t be scrutinised and challenged.   If we are to be serious about lifting overal productivity, we need a hard-headed approach to policy, and one that prioritises the interests of New Zealanders.

(On another matter, I see that Stuff’s Kate MacNamara has returned to the fray with another column on the problem that is Adrian Orr.  As I have to spend this afternoon in a meeting with the Deputy Governor and a Board member, I will save my comments on the article and the issues it raises until later.)

Some IMF modelling on NZ

Earlier in the week I wrote about the IMF’s less-than-impressive Article IV report on New Zealand’s economy and economic policy.   As part of the bundle of documents released last Saturday there was the Selected Issues paper – a collection of some supporting research/analysis undertaken by Fund staff to help underpin the Article IV report and Fund surveillance of New Zealand more generally.

On this occasion, there are three such papers.  The one that caught my eye was the first: a modelling exercise under the title

TRADE, NET MIGRATION AND AGRICULTURE: INTERACTIONS BETWEEN EXTERNAL RISKS AND THE NEW ZEALAND ECONOMY

In this paper staff took a Fund model carefully calibrated to capture key features of the New Zealand economy and used it in conjunction with their global model to look at several possible shocks New Zealand might face over the coming years.    There is a piece on possible agricultural shocks (pp19-21) which may interest some readers, but my focus was mostly on the other shocks they studied:

  • a significant growth slowdown in the People’s Republic of China,
  • a significant growth slowdown in Australia, and
  • and a significant (exogenous to New Zealand) change in net migration from (a) the PRC, and (b) separately, from Australia.

They illustrate the estimated transitional effects and report the model estimates for the long-term steady state effects.

The PRC growth shock involves (mainly) materially slower productivity in China, such that 10 years hence PRC GDP is 11.9 per cent lower than the (WEO forecast) baseline.  You’ll have heard New Zealand politicians and other lackeys parrot lines about how New Zealand depends heavily on the PRC for its prosperity etc.  The IMF modellers are having none of it.  Here are the New Zealand economy responses (quarters along the horizontal axis).

sel issues 1.png

On this model, a 12 per cent lower level of GDP in China –  largest trading partner, first or second largest economy in the world –  leaves New Zealand…….every so slightly better off in the long run (but treat that as basically zero).  Oh well, never mind…..I don’t suppose it will stop the lackeys doing their thing, but it is a helpful reminder that, to a first approximation, countries make their own prosperity.

The scenario of an adverse growth shock in Australia is of similar magnitude (Australia’s GDP is 9.3 per cent lower than otherwise in the long-term.  I won’t clutter up the post with the same set of charts for the Australia shock, but suffice to say that the bottom-line results aren’t that different.  This time, a 9.3 per cent sustained fall in GDP in the economy that is our second largest trading partner and largest (stock) source of foreign investment is estimated to reduce New Zealand long-run GDP, but by only 0.03 per cent.  I’d treat that as zero as well.  In both cases, a lower real exchange rate is part of the way the New Zealand economy adjusts, so consumption here is a touch lower (it is relatively more expensive) but overall real incomes generated in New Zealand (GDP) are all but unchanged.

That was interesting, but not really that surprising (in truth, even I might have expected a slightly larger adverse effect).   It was the migration shocks, and the Fund’s modelling of those, which should really garner more interest and scrutiny.  Note that these results have already had bureaucratic scrutiny: the paper notes that

The chapter benefited from valuable comments by the Treasury of New Zealand and participants at a joint Treasury and Reserve Bank of New Zealand seminar.

Both institutions have some smart and critical people.

Here is the shock re PRC immigration

Additional Net Migration Effect in New Zealand. There are permanently fewer migrants to New Zealand from China. There is a 0.1 percent reduction in labor force growth for 10 years in New Zealand, so that the New Zealand population is permanently 1.0 percent lower.

This shock is added to the PRC growth slowdown shock illustrated earlier.  As the Fund’s model is calibrated, these are the results.  The additional effect of the migration shock is the difference between the two lines in each panel.

sel issues 2

The Fund writes these results up as “a bad thing”

The fall in net migration would exacerbate the negative spillovers to New Zealand
from China. Real GDP would now be 0.7 percent lower than baseline in the long term.

Which is true, of course, on their model.  But, strangely, not once in the entire paper do they mention per capita GDP.  The population in the long-run is 1 per cent lower, but GDP is only 0.7 per cent lower, implying that GDP per capita is 0.3 per cent higher in this “Chinese migration shock” scenario than in the baseline scenario.  That sounds like a good thing, for New Zealanders, not a bad thing, at least in the longer-term.  (Since labour input and GDP both fall by the same amount, it doesn’t look as if this model can deal with endogeous changes in productivity).  For what it is worth, real wages in New Zealand are also higher in this scenario.)

What about the Australian net migration shock?

Additional Net Migration Effect in New Zealand. There are permanently more migrants to New Zealand from Australia. There is a 0.26 percent increase in labor force growth for 10 years in New Zealand, so that the New Zealand population is permanently 2.6 percent higher.

Again, this shock is on top of the sustained slowdown in Australian growth modelled earlier (and thus is probably best thought of as a reduction in the net outflow of New Zealanders to Australia, the income gap having changed a bit in our favour).   Here is the chart of those results.

sel issues 3.png

In sum, the population is 2.6 per cent higher in the long-run and GDP is 2 per cent higher.   The Fund again spins this as a positive story (it appears under the heading “How Net Migration Could Improve Outcomes for New Zealand”) but again completely overlook the per capita story.  In this scenario, real GDP per capita is 0.6 per cent lower than in the baseline.  New Zealanders are poorer (and in the long-run real wages in New Zealand are lower).  It isn’t even as if there is much of a short-term vs long-term story (the GDP effects just build pretty steadily over the 10 year horizon).

These effects become large if you apply them to the scale of the non-citizen migration we’ve had in New Zealand in recent decades.  Cumulatively, they would not be out of line with the observed slippage in New Zealand productivity relative to other advanced countries over that period.

So the headline out of this particular paper should really be “additional migration makes New Zealanders poorer in the long-run, at least according to IMF modelling”, not stuff about how helpful immigration is.  A focus on GDP might make sense if you are building an army (raw numbers matter) or to silly comparisons politicians make.  Other people know that per capita GDP is much the more important variable, relevant to material living standards etc.  On its better days I’m sure the IMF knows that too.

In a way, even in their report on New Zealand the IMF shows glimpses of recognising that high rates of immigration might not be so good for New Zealand (whatever the possible benefits in some other places).  Both in the main Article IV document and in the Selected Issues paper “a remote location” comes first in the list of factors the Fund identifies as constraining New Zealand productivity.  Combine that glimmer of recognition (and I could also recommend to them this piece) with their own published model results suggesting that, at the margin, immigration makes New Zealanders poorer –  recall that this model is calibrated by the Fund to capture what they see as key features of the New Zealand economy) –  and it might have pointed disinterested observers towards suggesting to New Zealand governments that they consider rethinking their enthusiasm for such high (globally unusual) rates of immigration to a relatively unpropitious location.   Instead of which, the Fund (like the OECD) tends to act as cheerleaders for New Zealand immigration policy.

The IMF, of course, is not a disinterested observer.   It knows little distinctive about New Zealand – and New Zealand’s productivity performance has long been an awkwardness, even a bit of an embarrassment, for the international economic agencies.  And it is a global champion of the idea that immigration is good and more immigration is better.  If you think that an unfair characterisation, check out this post (and this more NZ focused) where I unpicked parts of an official IMF paper which purported to show that

If this model was truly well-specified and catching something structural it seems to be saying that if 20 per cent of France’s population moved to Britain and 20 per cent of Britain’s population moved to France (which would give both countries migrant population shares similar to Australia’s), real GDP per capita in both countries would rise by around 40 per cent in the long term.  Denmark and Finland could close most of the GDP per capita gap to oil-rich Norway simply by making the same sort of swap.    It simply doesn’t ring true –  and these for hypothetical migrations involving populations that are more educated, and more attuned to market economies and their institutions, than the typical migrant to advanced countries.

What do I actually make of the latest IMF paper?  Not that much to be honest.  I’m sure the authors could probably play around with their model – it is calibrated rather than estimated –  to produce results more suitable to the causes of their masters in Washington.  And since productivity isn’t affected, one way or another, by immigration in this model, I’m certainly not attempting to suggest that these results are somehow reflective of the sorts of channels and models I’ve been championing as central to the New Zealand story.

But when even the champions of high immigration to New Zealand acknowledge that there is not much (any?) New Zealand specific research showing that high rates of immigration to New Zealand, in New Zealand’s specific circumstances (eg remoteness, resource endowments, institutions etc) has been beneficial to New Zealanders over recent decades, it should be a little uncomfortable for the officials and politicians who champion the status quo that one of the leading internation economic agencies, pretty sympathetic to their approach, nevertheless (and without really trying) manage to produce research once again casting doubt on whether on this central tool of economic policy –  probably the biggest structural intervention our governments have done over the last 25 years –  is really working for New Zealanders.

Perhaps someone might ask the Prime Minister or the Leader of the Opposition why they act as if they are so convinced that on this count the IMF is wrong.  (Oh, and they might stop parroting the “our prosperity depends on China” line too.  IMF modelling confirms (common sense) that it simply doesn’t.)

 

Making short-term foreign labour more readily available

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

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

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

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

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

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

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

Here is the overview document the government published.

Several things struck me.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Under yesterday’s package

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

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

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

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

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

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

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

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

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

Institute work visa provisions that are:

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

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

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

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

 

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.

 

CANZUK

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.

lilico

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.

CANZUK

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.