UN Compact on Migration

Various readers have commented in recent weeks on the United Nations Global Compact for Safe, Orderly, and Regular Migration, due to be signed next week by as many governments as can be mustered in support.   I’d had a quick skim through it and decided not to write about it here, as not only was it a non-binding political declaration, but most of it seemed more relevant to countries dealing with substantial illegal migration (and with migration mainly from very poor or disrupted countries – again, not the main situation in New Zealand).   And, as I pointed out to various readers, who needs the United Nations for immigration policy and practice to cause problems at home.  We have successive New Zealand governments, cheered on by the business and political “elites”, to do that for us.

But when I saw yesterday that the National Party –  as pro-immigration as they come – had indicated that (a) it would not support signing, and (b) it would withdraw from the agreement when it returned to government, I thought I should take another look.  It would, after all, be unusual to find myself in more of a middle-ground position on immigration issues that the National Pary.  Then it emerged that the current government has still not yet decided whether to sign up.   My suspicion remains that National’s stance is more about positioning relative to New Zealand First –  the contest for provincial votes –  than anything of substance.

Overseas, I was aware that the United States and Australia had decided not to sign, as well as a few eastern European countries – including some places whose democratic credentials are no longer unimpeachable.    But when I went looking, I found this article suggesting the pushback in Europe is spreading.    Austrian and Italy have refused to sign, and governments in Belgium, Germany and the Netherlands are under pretty intense pressure (from within).  In Holland, for example

The government ordered a legal analysis of the text last week to ensure that signing it will not entail any legal consequences. The Cabinet finally decided on Thursday that it would support the pact, but would add an extra declaration, a so-called explanation of position, to prevent unintended legal consequences.

So I reread the document, more slowly this time.  I can’t see any substantive need for the document –  it seems more about political rhetoric and framing than anything else –  and have long been deeply sceptical that the United Nations adds any value to anything much.   And, yes, the document has a pro-migration tinge to it (it talks of wanting to “promote” migration) and a rather “globalist” set of presuppositions (including the demonstrably wrong statement –  especially in the context of remote island states – that “no State can address migration alone”).   But that doesn’t mark it out from dozens of pointless international fora and international declarations.    And there is little doubt that the “elite” mindset, in Europe and its offshoots anyway, is mostly pretty strongly pro-immigration.

But it still isn’t clear to me quite what additional damage would be done by signing up to this pointless agreement.   Sure, even “non-binding” agreements will, at times, be used in domestic and international fora as a rhetorical stick to beat governments with if they ever look like stepping out of line with the mainstream.  But those sorts of arguments rarely deflect a government for long if it has domestic public opinion behind it in some direction or another (for good or ill).

There is some questionable economics in the document.  For example

Promote effective skills matching in the national economy by involving local authorities and other relevant stakeholders, particularly the private sector and trade unions, in the analysis of the local labour market, identification of skills gaps, definition of required skills profiles, and evaluation of the efficacy of labour migration policies, in order to ensure market responsive contractual labour mobility through regular pathways.

Or, alternatively, one could just let the market work it out.  When there are incipient skill shortages, wage rates tend to rise.  Same thing happens when, for example, bad weather creates a shortage of spinach or lettuce.    But, daft as the economics is, this stuff is the mindset of politicians and officials adminstering immigration schemes all over the western world. including New Zealand.  Recall that in New Zealand the current government is trying to get more actively involved in this sort of thing.

There are also totally vacuous bits, like the commitment to support and promote the United Nations International Day of Family Remittances.  Just what the world needs: another United Nations “day”.

Perhaps three clauses troubled me a little more.

There was this one

Enable political participation and engagement of migrants in their countries of origin, including in peace and reconciliation processes, in elections and political reforms, such as by establishing voting registries for citizens abroad, and by parliamentary representation, in accordance with national legislation.

I guess I can see what they are probably driving at (diasporas helping the reconstruction of the country of origin after say a protracted civil war). But, normally, we should expect migrants to commit themselves to their new country and its processes and political values and not be creating doubts about where their loyalties lie.  But in a country in which Jian Yang and Raymond Huo are MPs –  while still closely associating themselves with political interests in their country of origin –  and people like Yikun Zhang appears encouraged to play both sides –  it is hard to see how this particular provisions make things here any worse than they already are (around a small handful of our migrants).

And then there was this one

Promote mutual respect for the cultures, traditions and customs of communities of destination and of migrants by exchanging and implementing best practices on integration policies, programmes and activities, including on ways to promote acceptance of diversity and facilitate social cohesion and inclusion.

Which presents the issues as symmetric when they really should be asymmetric: the focus should be on encouraging the assimilation of the migrants, and ensuring their respect for the “cultures, traditions and customs” of the destination community –  just as when you go to someone else’s place for dinner you respect their practices, table manners etc.   One could also argue that encouraging “acceptance of diversity” and facilitating “social cohesion” are two contradictory, often mutually inconsistent, goals.  But again, flakey as all this stuff is, it is the way our bureaucratic and political “leaders” think and act anyway.  If the behaviour is a threat, it is hard to see that the UN agreement would be more of one.

Relatedly

Support multicultural activities through sports, music, arts, culinary festivals, volunteering and other social events that will facilitate mutual understanding and appreciation of migrant cultures and those of destination communities.

Quite what business this is of the UN –  or even of national governments actually – one has to wonder, but there is the “globalist” mindset for you.   And, again, it is pretty much what central and local governments do anyway.  I was interested that “religion” wasn’t on the list

And then, of course, there is Objective 17 (of the 23 in the document) which I have seen people express more serious concern about.

OBJECTIVE 17: Eliminate all forms of discrimination and promote evidence-based public discourse to shape perceptions of migration

We commit to eliminate all forms of discrimination, condemn and counter expressions, acts and manifestations of racism, racial discrimination, violence, xenophobia and related intolerance against all migrants in conformity with international human rights law. We further commit to promote an open and evidence-based public discourse on migration and migrants in partnership with all parts of society, that generates a more realistic, humane and constructive perception in this regard. We also commit to protect freedom of expression in accordance with international law, recognizing that an open and free debate contributes to a comprehensive understanding of all aspects of migration.

If that is muddled I don’t know what is –  let alone, unrealistic (in no conceivable world are “all forms of discrimination” going to be “eliminated”).

The specifics under that Objective include commitments to

Enact, implement or maintain legislation that penalizes hate crimes and aggravated hate crimes

So-called “hate crime” legislation is almost always bad law and bad policy.  Punish assaults or murders or whatever as that: bad and unacceptable acts, regardless of who they are committed against or why.

And this

Promote independent, objective and quality reporting of media outlets, including internet based information, including by sensitizing and educating media professionals on migration-related issues and terminology, investing in ethical reporting standards and advertising, and stopping allocation of public funding or material support to media outlets that systematically promote intolerance, xenophobia, racism and other forms of discrimination towards migrants, in full respect for the freedom of the media.

Again, muddled at best.  You want to stop any public funding to outlets whose views are “unacceptable”, while having “full respect for the freedom of the media”.   Since I’m not entirely convinced there is a good case for public funding of any media outlets –  and since the publicly-funded outlets in New Zealand are champions of high immigration and all “worthy” leftist causes anyway –  it isn’t clear what difference this might make in New Zealand.    And there seem to be some MPs –  particularly in Labour and the Greens –  who aren’t too keen on allowing free speech on such issues anyway, whether or not we sign up to UN non-binding declarations.

And finally under Objective 17

Engage migrants, political, religious and community leaders, as well as educators and service providers to detect and prevent incidences of intolerance, racism, xenophobia, and other forms of discrimination against migrants and diasporas and support activities in local communities to promote mutual respect, including in the context of electoral campaigns.

All very asymmetric –  nothing at all about engaging with communities that might be uneasy about high immigration, or the immigration of groups with values antithetical to those of the destination community.  Perhaps, in some respects, this commitment troubles me more than most.   “Intolerance” is not an offence (in principle or in law) and it is the perfect right of people to debate –  perhaps especially in election campaigns – the future composition of their society.   A Saudi Wahhabi, a Chinese Communist Party zealot, an American evangelical, and a French secularist are all very different sorts of people. In large numbers, each group transplanted to (say) New Zealand would make a material difference to the society and polity we have here.  Those debates matter –  unless, apparently like the authors of this document –  you regard all differences of culture, politics, religion etc as superficial rather than fundamental.

As I said at the start, there is no obvious need for this document.  And even if there were obvious gaps, the very fact that it is a non-binding political declaration suggests it could meet no substantive need.  But in a New Zealand context, there are policies and practices around immigration that are much more damaging and threatening, particularly to our long-term economic performance, and perhaps in other areas too.  Among them:

  • the immigration policies of the National Party
  • the immigration policies of the Labour Party
  • the immigration policies of the Green Party
  • the immigration policies of ACT, and
  • the immigration policies of New Zealand First

I think that pretty much covers the spectrum.

There is no conceivable universe in which some international declaration –  or even agreement – around immigration would be more liberal and (in our specific economic circumstances) more damaging than what our political parties have done to us all by themselves.

 

 

Thoughts as the immigration data disappear

Last month marked the end of an era.  In a country with larger and more variable migration flows (in and out, New Zealand and foreign) than almost anywhere else Statistics New Zealand released the last ever set of permanent and long-term migration data.  The numbers were only ever approximations –  because people changed their minds –  but they were (a) based on data collected from every person crossing the border, and (b) reported quite quickly (October’s data were released on 22 November).

As I’ve written about here previously, there is a new system being put in place, but the numbers it produces will have (on SNZ’s own reported estimates) huge margins of error each and every month, and it will be at least a year after the event until we can have even moderate confidence in estimates as to what was going in any particular month.   The issue arises most seriously in respect of the outflows of New Zealanders, for which –  of course –  there is no other administrative data, such as (say) visa approvals.  It is cavalier, another step backwards in terms of having timely data  –  whether for economic monitoring, or political and economic debate –  but perhaps convenient for governments and officials who would prefer the issues not to be debated (“just let us get on with our ‘Big New Zealand’ project”).

Even the total movements data –  which was part of understanding tourist inflows and outflows data –  is now going to be worse.  This is from the recent SNZ release

Removing departure cards means changes to the timing and composition of this release. Statistics on short-term movements (including the current report International visitor arrivals to New Zealand) will be published in a new international travel release, and long-term movements in a new international migration release.

Both releases will be published on the same day, up to 30 working days after each reference month. November data, previously published just before Christmas, will now be published in January, and December data in February.

From about 15 working days to 30 working days.  That is SNZ’s –  and the government’s idea of progress?   Then again, these are the people who seem to have stuffed up the latest Census so badly  –  and no heads, political or bureaucratic, have rolled.

But to mark the passing of the PLT data, here are a few charts.  Here is the quarterly annualised data by citizenship.

Last PLT 1

For all the talk in recent years about “New Zealanders coming home”, there was only a single quarter with a (tiny) net inflow.   The net outflow of New Zealanders is still modest by historical standards, but interestingly while there is a net outflow to Australia there is still a small net inflow (the gap between the blue and orange lines) of New Zealanders from the rest of the world.   If leaving for Australia has got harder –  and the headlines about New Zealanders’ rights in Australia more grim –  perhaps it is harder still in the rest of the world?   And, despite the fall in residence approval visa numbers (mostly granted to people already here), the net inflow of non-New Zealanders remains large.

We won’t have this timely data in future.

Migration data by citizenship is available. on an annual basis, back to 1950.  Here are the cumulative PLT numbers since then.

Last PLT 2

In the early period the net outflow of New Zealanders was tiny. For the 16 years up to an including the year to March 1965, the net outflow of New Zealanders was 10576, or an average of under 1000 a year.    In a normal country you expect to see an outflow of citizens: most people obtain citizenship by being born in a place (or naturalised in it), and some proportion of natives will always choose to leave –  whether falling in love, or simply preferring the opportunities some other place has to offer. But in normal countries –  especially normal advanced countries –  those outflows are typically small.   (Estimates, such as they are, of the number of American citizens living abroad, short or long term, come to less than 3 per cent of the total US population.)

Here is the same chart starting from the year to March 1966 and coming all the way forward to the year to March 2018 –  53 years of data.

last PLT 3

Over that period a net 968000 New Zealanders are estimated to have left –  from a country that in 1966 had a population of just under 2.7 million.

And, on the other hand, successive governments have brought in (because it increasingly has been a matter of conscious and deliberate policy) almost 1.4 million non-New Zealand citizens.  Even just in the last 30 years –  when it has all been conscious and deliberate policy –  the net inflow of non NZ citizens has been 1.1 million people (in 1989, the total population was only 3.3 million).

Even allowing for the 50 year span, they are staggering numbers (in both directions).   And perhaps what is all but unprecedented is that combination.  There are countries –  even in the modern era of largely controlled immigration –  that have had very large inflows (you could think of modern Israel or Australia in the 1950s. or Portugese settlers flooding back home in the 1970s, or the French settlers back from Algeria after independence).  And you can think of countries that have had very large outflows in modern times –  Cuba, or modern day Venezuela, Syria, or some of the eastern European countries after they joined the EU.  But I can’t think of a single case that parallels New Zealand’s radical population experiment –  a mass exodus of its own people (mostly to better opportunities across the Tasman, quite rationally), accompanied by such active large scale controlled inflows of people from other countries.  Some of the places people leave from en masse are hellholes (each of the first three of my list), but the countries in eastern Europe typically aren’t –  almost all of them now, for example, have average GDP per capita above that of the median country.

As a matter of economics, I think the policies pursued by successive governments have been daft and damaging, embarked on (and, worse, continued) in a cavalier manner that paid no serious heed to the ongoing economic underperformance and constrained opportunities of New Zealand.  Or even to how unusual New Zealand’s approach to population and migration was. I’ve laid the arguments for that case out elsewhere (eg here) and am not going to repeat them here.   I’m pretty confident that –  on narrow economic arguments – material living standards for the average New Zealander would today be better (probably materially better) had governments respected the signal in the behaviour of New Zealanders, and perhaps kept the average annual inflow of non-New Zealand citizens to, perhaps, 10000.  Over the full period that would have meant perhaps 900000 fewer non-NZ immigrants.

We’d have been smaller –  but small countries abroad do just fine –  we’d have worked more within the constraints of our natural resources, we’d have reduced the extent of the disaster that is the housing “market”, and more internationally-comparable real interest rates and a lower real exchange rate would have made firms operating in the tradables sector better-positioned to succeed from here.

But as I was thinking about the issue, another dimension occurred to me that I hadn’t previously given much attention to.  The component of the population that wouldn’t have changed much with a much different immigration policy is the people identifying as Maori.    Those people were 15 per cent of the total population at the 2013 Census, and for the sake of argument we’ll assume it is still 15 per cent now.     With a different immigration policy –  along the lines I sketched above –  the population now might only be about four million, probably less  (a net 900000 fewer migrants, but they have children and grandchildren, filling out a total population effect over several decades).  A Maori population that is 15 per cent of 5 million, would be almost 19 per cent of a population of 4 million.

This is all highly-stylised, and I’m not putting any weight at all on precise numbers, but it is a reminder that immigration policy –  going back many many decades (see Vogel on this point about his immigration policy) –  has been about reducing the relative importance (numerical weight) of Maori in modern New Zealand.  Sometimes that was intentional, and at other times probably mostly not, but effects (especially entirely foreseeable one) matter more than intentions.

Reasonable people might differ on whether this is a good thing, or even a legitimate topic for discussion.  Were one Maori, one might quite easily think it a very bad thing.  You might view the resurgence of things Maori in recent years as a “good thing” and wonder about the “what ifs” around a quite different path of immigration in modern times.  Not only would your people have been clearly the single largest non-European ethnic grouping, but your overall share in the population –  and claim on power, resources, and esteem would have been that much greater.

But it is quite possible that many others would see things differently.  Many other voters –  consciously or not –  might welcome large scale immigration partly because it can be used to relativise and reduce the position of Maori (“just another minority in the cacophony of voices”).  As someone who is sceptical of our immigration policy (over decades) for economic reasons, I’m genuinely curious as to how the liberal strongly pro-immigration voices in our society reconcile their enthusiasm for high rates of immigration and their regard for Maori (the Labour Party itself, with such a substantial Maori caucus, is the most group to wonder about, although one could wonder about the National Party too.)

Of course, if one were being hard-headed about the matter one might wonder what such an alternative society might look like.  A country that was, say, 20+ per cent (identifying as) Maori  –  with higher fertility rates than other ethnic groups –  and just a couple of per cent each Pacific and Asian (a plausible mix if we’d been targeting 10000 net non-citizen migrants for the last 50 years).  That would look and feel very different to today’s New Zealand.  One can see reasons why some –  Maori and non –  would have embraced such a mix.  But, realistically, one can also see reason why for some European New Zealanders it might have been more of an impetus to have followed the economic opportunities and gone to Australia.   Who knows which tendency would have predominated, and what  political dynamics might have emerged in the process, or what the economic implications might have been.  My arguments about the economics of immigration in the New Zealand context have tended to proceed as if there are no ethnic faultlines –  and remember my “for economic purposes, I don’t care in the migrants come from Birmingham, Bangalore, Brisbane or Beijing”.  But that isn’t so, and it may –  genuine uncertainty, at least in my mind –  matter even in thinking about likely alternative economic outcomes.  In my view, it is almost always better to let societies work these thing –  including competing interests and values – out themselves over time, rather than have governments might a heavy hand on the scales (as they do by large scale immigration programmes).

(Some earlier thought on immigration policy and Maori are here.)

 

Fortune for the favoured

The coverage in recent days of the first (branded) KiwiBuild houses –  one purchased by a young well-travelled couple, no children, she just graduating as a doctor, he something in marketing –  brought to mind the books I’d had sitting on a pile for ages intended for a post about the first Labour government’s state house building programme (we used to be told that the KiwiBuild vision was modelled on the earlier programme).

As for the KiwiBuild houses themselves, even the purchasers are unashamed in talking up their good fortune (at the expense of the taxpayer).

The owners of one of the new homes have compared their purchase to winning Lotto.

Couple Derryn Jayne and Fletcher Ross paid $649,000 for their four bedroom home, which they said is great value for money, compared to prices elsewhere in Auckland.

They had given up hope of finding a house on the open market after a year-long search.

Which, frankly, is a bit odd.  Of course house prices in Auckland –  and much of the rest of the country – are obscene, but even in Auckland you can pick up a first house for well under $649000.   I googled houses for sale in Clendon Park for example.  It mightn’t be a suburb entirely to everyone’s taste but my in-laws lived there until a decade or so ago.  And it is a first house we are talking about, where it isn’t obvious why the taxpayer should be assisting a lucky young couple into a brand-new four bedroom house.

Defenders of the government are quoted in the media.  There is an article in this morning’s Dominion-Post (which I can’t find online) in which, for example, Shamubeel Eaqub notes that

…the eligibility criteria were broad. “People also may not know how challenging it is to be a doctor without a private practice and with large debts.  I have heard stories of young doctors leaving places like Queenstown because they couldn’t see a way of ever owning a home there.”

Another person quoted in the article observes “even doctors have to start somewhere”.

No doubt. And no doubt it is quite tough for many people starting out, even professionally-qualified couples.  But lets just think for a moment about people rather further down the income ladder, typically without the sort of future income advancement opportunities that (many) doctors have.  Teachers and nurses for example, or motor mechanics, or retail managers, hairdressers, and so on.   If we “need” special lotteries to help favoured young professional couples into homes, how are people further down the income scale ever supposed to manage?  Ah, but, says the minister Phil Twyford, that is to miss the point: apparently KiwiBuild isn’t supposed to help low-income families, even though if there was ever a case for direct state intervention in the market it would surely be for those people rather further down the income scale; the sorts of people who not many decades ago could reasonably have expected to buy a basic first house.

An Auckland University economist (Ryan Greenaway-McGreevy) is also quoted in the article.  He argues, sensibly enough, that “it shouldn’t be a surprise that a new doctor could qualify. ‘Perhaps it speaks to how unffordable housing has become.'”

Which is, surely, the point.  Most people further down the income scale, and especially in Auckland, simply can’t afford to purchase a house at all, at least not without ruinously overburdening themselves. The economist goes on to suggest that KiwiBuild will lower prices for everyone.   Even if that were true, it still wouldn’t justify a lottery in which the favoured few pick up a house below market price at the expense of the taxpayer.  But, of course, there is little sign that it will be true –  many of the early KiwiBuild projects are just rebadging construction that was already going to happen, and over time there is no clear reason as to why we should not expect any specific KiwiBuild construction not to displace private sector activity that would otherwise have taken place.

And surely the evidence against that optimistic hypothesis is in the market prices.   If people really believed that whatever the government was doing –  KiwiBuild or whatever –  was going to lower house and urban land prices over time, then those prices would be dropping already, perhaps quite steeply.  Sure, Auckland prices seem to have gone sideways over the last 18 months or so –  after a huge surge over the previous few years –  but those in many other urban areas are still rising (in both real and nominal terms).   Over the last five years, the REINZ numbers now indicate that Auckland and non-Auckland house prices have risen at around the same rate (on average 8 to 9 per cent per annum).  CPI inflation is, by contrast, averaging under 2 per cent.   When nothing has been done to fix the land market, and most KiwiBuild construction is likely to simply displace private sector construction, none of that should be very surprising.  KiwiBuild is producing photo-ops, and Lotto-like wins for the favoured (and lucky) middle class few, but it is no fix  –  not even any material part of a fix –  to the dysfunctional housing market successive governments have delivered us.

And what of the first Labour government’s state-housing programme?  Actually, it didn’t do a lot for people at the very bottom either.  In the mid 1930s there was much talk of “urban slums”.   Ben Schrader’s history of state housing in New Zealand has a nice quote from a newspaper editorial written just a couple of weeks after the 1935 election, contrasting the newly built National War Memorial Carillion tower with the surrounding neighbourhood (in Wellington’s Mt Cook)

“The Tower was built right in the middle of Wellington’s slum area, and a stone’s throw away from it, men, women, and children are making a different kind of sacrifice.  They live  in squalor and dirt, in little shacks lacking even the ordinary comforts of existence.”

But the state house programme wasn’t for these people. They couldn’t afford the rents.  In fact, as Schrader records, one contemporary critic calculated that a worker would have to earn 20 per cent above “the weekly living wage (the amount the Arbitration Court determined was necessary to support a familiy in “reasonable comfort’) to be able to afford the rent on a state house.    In its defence, Labour argued that people moving into state houses would free up other houses for poorer people –   and in those immediate post-Depression years without the sort of tight land use controls we have today perhaps there was even something to that story (but I’m not aware of any evidence to confirm that conclusion).  But it certainly wasn’t a programme targeted to help those at the bottom (indeed, when later governments offered to sell state house to sitting tenants there was often a material wealth transfer to the fortunate minority).   And for the first decade or more Maori was also explicitly excluded.  Again from Schrader:

“This thinking [around separatism] was challenged in 1944 after the Department of Native Affairs surveyed Maori housing conditions in the industrial Auckland suburb of Panmure.  It found Maori crowding into tents and shacks made from rusting corrugated iron and discarded packing cases. Cooking was mostly done over open fires and sanitary conditions were primitive. Sobered by this and other similar reports, the government agreed in 1948 to build state houses for Maori.”

As for the photo-ops in an earlier age, everyone is familiar with the picture of Prime Minister Savage helping to carry the dining table into the first state house in Miramar, but Schrader records

“The Fife Lane function was so successful that a coterie of cabinet ministers repeated the furniture-carrying stunt at the opening of the first state house in each of the main cities.”

I wonder how more photos of Jacinda Ardern and Phil Twyford appearing with new KiwiBuild owners there will be?  And how people further down the income scale –  perhaps mostly Labour voters –  will be feeling about their own prospects of ever owning a modest house (not even a four bedroom brand new one) in one of our major cities.  That only seems likely if the government were to tackle the regulatory constraints on our urban land market, and despite the pre-election talk there is still as little sign of that so far as there was action under the previous government.  Very little.

(On a completely different topic, I’d just add my voice to the long list of those seriously troubled by the government’s decision to give residency to an imprisoned Czech convicter of dishonesty, and convicted and imprisoned for drug importing, and not even to be willing to explain why.   Personally, I can’t conceive any circumstances under which I would support giving such a privilege to a person with such a –  very recent – background, the more so when such a person comes from an EU country –  none of them is perfect, but none is Somalia or the People’s Republic of China.  There are plenty of decent and honest people who would like to live here, and we only take so many: why favour the Czech drug smuggler over any of them?   As with the extraordinary exercise of ministerial discretion under the previous government to grant Peter Thiel citizenship, these sorts of cases point to a need for much more openness and accountability.  If you want ministers to exercise personal discretion in your favour, you should expect all the details of your case to be published routinely, so that ministers can be properly held to account.  It simply isn’t good enough to have the Prime Minister tell us we should “read between the lines” and then refuse to go further.   Why would we be inclined to believe that ministerial discretion is being appropriately exercised in this case –  and that a drug smuggler with gang associations should be free to stay among us – when the track record (under both parties) inspires so little confidence?

I noted that there are plenty of decent and honest people who would be keen to live in New Zealand.  Stuff’s new article on the utter failure of the Immigration New Zealand arm of MBIE to take seriously the scams suggests that many of those who do get to live here probaby do so at the expense of the honest and decent ones.

[head of immigration advisory agency Carmeto] Malkiat believed most visa applications contained some level of exaggeration and misrepresentation, and significant number involved substantial corruption. There was now a generational pattern of exploited migrants in turn exploiting the next wave to arrive, he said.

“The reality is that if all immigration advisers speak up, 80 to 90 per cent of all applications are wrong, and should not be approved – it is a massive number,” he said.

“Most of the industry exists because of fraud. If there was no fraud, many advisers and lawyers would leave the industry [because they wouldn’t be needed].”

It was clear Immigration NZ was not equipped to deal with the widespread fraud that it was encountering, Malkiat said.

Former immigration minister Tuariki Delamere, now an immigration adviser himself, said he too had sent tip-offs to INZ but seen no action. “I sympathise with that adviser [Malkiat] doing that. Senior [INZ] staff have said to me they are understaffed and there are so many [cases to investigate]. I sympathise with them … but I am happy you are exposing it because the only way you stop [these frauds] is by prosecuting them and publicising it.”

Lawyer Alastair McClymont said he “used to tell INZ about them all the time as well – but nothing ever happened”.

Immigration New Zealand declined to comment on the complaints about its service.

That final line says it all really.  It is a disgrace.  Whether through these immigration scams or the political donations process, Labour and National in turn preside over the increasing corruption of the New Zealand system.    And yet their inaction –  and silence –  suggests they just don’t care. )

 

Australia: not even close to the most successful economy

In another useful reminder as to why I don’t subscribe to The Economist –  with a news, politics, and international affairs junkie 15 year old I’m tempted from time to time – it was hard to go past the heading of that magazine’s lead story this week:

What the world can learn from Australia: It is perhaps the most successful rich country

In the text, they make it clear that the “most successful” claim specifically includes economic success.

Okay, I’m happy to grant that Australia has done well around fiscal policy –  government revenue and expenditure as a share of GDP have been stable and moderate, and government debt has been kept low.   But Switzerland does about as well, and Sweden has much lower net government debt (large net assets), and both those countries manage productivity levels that are reasonably materially higher (almost 10 per cent more) than Australia.

Productivity is, in the old phrase, if not everything in the longer-term about economic performance then almost everything.  And here is a simple chart showing two comparisons, using OECD data which start in 1970.   The first line compares Australia’s real GDP per hour worked to the median of the top-tier group I’ve used in various posts and articles this year (the US, France, Belgium, Netherlands, Germany and Denmark).   And the second line compares Australia to Norway.

australia performance

Did anyone in The Economist think of Norway –  not only does it have much higher average productivity (think oil and gas and few people –  and good institutions/smart people) but huge net government financial assets?

Average productivity in that frontier group of six is 20 per cent higher than in Australia.  In Norway it is 50 per cent higher.  And 50 years ago, Australia outperformed the median member of the six, and was level pegging with Norway.   Sure, the last 25 years or so haven’t been too bad, but at that rate of convergence it would take another couple of hundred years  (or more) to catch up again to the top tier group.    And even the very modest convergence has been supported by massive new natural resource developments.  Blessed with those opportunities if a country can’t do better than Australia has done, there looks to be something quite badly wrong.

And here is the ABS measure of real net national disposable income per capita, which takes account of (a) changes in the terms of trade, and (b) the portion of the GDP gains accruing to Australians.

RNNDI

They had a good 15 years, but there has been no growth in this measure of real purchasing power this decade.

What might be so very wrong?   Well, I’m sure there are plenty of micro regulatory things Australia  –  like every country –  could do better.      But what really stands out about Australia, relative to the other countries, is its rate of population growth.   Indeed, this is what The Economist really seems to like about Australia, lauding the country’s “enthusiasm” for immigration.   Whether one looks from 1970, or just over the last quarter century or even the last decade, Australia’s rate of population growth has materially outstripped those of the other countries.   In the last 25 years, Australia’s population (UN annual numbers) increased by 41 per cent, while the population of the median of those high productivity group of six rose by 13 per cent.    The difference isn’t wholly about migration, but immigration is the bit governments make choices about.

In a country with an export base almost entirely dependent on a fixed stock of natural resources –  farm products, mineral products, tourism – and actually with foreign trade shares of GDP among the very lowest in the OECD, it is bordering on the insane to be actively importing lots and lots more people (as successive Australian governments have been doing in the last 15 years or so).     It is a quite different matter in countries –  like most advanced OECD countries now –  that are trading the fruit of ideas, or that are tightly bound into sophisticated manufacturing supply chains.  But this is Australia –  one of the most remote countries on that planet which (like New Zealand) has failed over decades to develop many outward-oriented industries that don’t depend largely on natural resources (or immigration subsidies around export education).    The fruit of the (vast) natural resources is, to a first approximation, just spread more thinly.   Being based in a global city –  the ultimate ideas trading location –  in northern Europe I guess these considerations simply never occur to The Economist’s writers, who probably enjoy the beaches and the climate when they jet into Australia without troubling themselves over whether or not the natives are actually earning leading first world incomes.  Hint: they aren’t (any longer).

And thus I end up agreeing with The Economist. 

“Even more remarkable is Australia’s enthusiasm for immigration”

Truly astonishing in fact, in the specific circumstances of Australia.  The enthusiasm of Australian governments for high immigration to Australia is just as wrongheaded –  and more culpable –  as that of The Economist’s editorial writers.  All sorts of daft ideas have had their day over history.   This one –  at least in modern Australia –  seems based more on belief and ideology than any serious evidence that Australians themselves might actually be benefiting from the immigration.

(And that without even considering the house prices, traffic congestion etc –  all of which, immigration advocates will note, could –  in principle – be fixed separately, but of course in practice aren’t. )

UPDATE: A post from a couple of months back that made similar points, but with some different data and a longer time horizon.

 

What’s happening with immigration?

It is a serious question.  MBIE’s immigration data are pretty hopelessly poor –  not published in readily usable formats, not seasonally adjusted etc.   The Migration Trends and Outlook publication for 2017/18 is still not available.  I know they have plans afoot to improve things, but it is past time they did: immigration, after all, being one of the major instruments of economic (and social) policy in New Zealand.

But from time to time, I have a look at what they do publish –  huge tables in small fonts, from which one has to transcribe numbers if you want to do anything with them.  And the other day I had a look at the latest residence approvals data, and was quite surprised by what I found.

This chart shows the number of people approved for residence in each June year.  The 2018/18 number is the annualised number based on September quarter actual data.

residence 1

The “target” rate of approvals was around 47500 per annum for a long time, lowered slightly to something centred on 45000 per annum late in the previous government’s term.  As you can see, give or take 5000 or so people, they more or less meet that target. And so last year’s drop took me by surprise.  I didn’t make anything much of it then, when the numbers finally came to light: after all, announced policy hadn’t changed much, and perhaps it was just noise.

But the early data for the current year suggest something more than noise.  If the September quarter rate of approvals was kept up only about 33000 residence approvals would be granted in 2018/19.  Perhaps there is some seasonality in the series –  did I mention that MBIE don’t publish seasonally adjusted data, or make the raw data available in a form in which I could see for myself? –  but if not, it would represent quite an undershoot relative to the official target.

I don’t usually pay much attention to the nationality of those getting residence –  my arguments about immigration are mostly macroeconomic in nature, indifferent as to whether the migrants come from Bangalore, Birmingham, Brisbane or Beijing.  But as I’d been writing about the PRC and our political parties, out of curiosity I checked the residence approvals granted to people from the People’s Republic.  And finding those interesting, I looked a bit further.

residence 2

That (the blue line) is a staggering drop-off in approvals from China.   Again, perhaps there is some seasonality –  but it isn’t obvious why there should be, given that most residence visas are granted to people already in New Zealand, initially on other visas.

The falls in approvals from India and the Philippines are also pretty large.  And yet clearly the fall isn’t across the board. So far this year approvals from the UK are running at about the same (annualised) rate as last year (as were, more or less, when I checked, those from South Africa another significant source country, and those –  much fewer –  from Singapore and Taiwan).

I’m puzzled by what is going on.  I’d taken the new government at its word when it swore that it wasn’t changing the residence approvals target, but if not it looks as if something is going on that is markedly reducing the number of eligible people (especially from China and India) applying. (In another of the huge, not user-friendly, documents MBIE puts out, it looks as though there are also fewer applications in hand now than usual.) Perhaps it has something to do with the earlier wave of foreign students studying here, but although there has been a significant drop in numbers from India those from China haven’t changed much.  Perhaps there is something in the publicity around foreign investment restrictions –  which don’t of course apply to those who have residence?

I’m puzzled.  And, of course, I’ve spent years calling for a reduction in the residence approvals target, so in one sense I’m not unhappy to see the reduced numbers.  But I also strongly favour open and transparent policy, and there has been nothing announced suggesting that we should have been expecting –  or that the government was seeking –  such a large reduction in the number of residence approvals being granted.

If any officials or industry experts have informed insights on what is going on the comments section is open.

 

Real interest rates

It is a while since I’ve done a real interest rate post, so here goes.

You’ll see stories from time to time about how low the New Zealand government’s borrowing costs are.

But it is still worth reminding ourselves of New Zealand’s long track record of having among the very highest average real interest rates in the advanced world.   Here, for example, are New Zealand, Australia, and the G7 countries for the last five years (the period chosen a bit arbitrarily, but a different set of dates wouldn’t substantially alter the relative picture).  I’ve just used average bond yields and average CPI inflation, from the OECD databases, but using (say) core inflation also wouldn’t materially alter the picture.

bond yields

Among these countries, we have one crisis-ridden hugely indebted euro-area country (Italy), one country with new substantial political and economic uncertainty –  and quite a lot of debt (the UK), one with extremely high levels of public debt (Japan), and one with recklessly large fiscal deficits and rising debt (the US).  And our real long-term government bond rates have been higher than all of them.

If we look at the situation today, the picture isn’t a lot different.  Italy has gone shooting past us, which should be no consolation to anyone (crisis pressures re-emerging there).  The gap between New Zealand and US real interest rates has narrowed quite a bit, as one might expect from the sequence of Fed interest rate increases in turn driven partly by unsustainable late-cycle fiscal expansion, but a 10 year US government inflation indexed bond was trading this week at 1.04 per cent, and a 10 year NZ government inflation indexed bond is trading at about 1.25 per cent.   Even that gap is substantially larger for 20 year indexed bonds.

As a reminder, our interest rates don’t average higher than those abroad because of:

  • superior productivity growth rates (we’ve had almost none in recent years),
  • macroeconomic instability (we have low stable inflation and low stable public debt),
  • public sector credit risk (see above –  and of the countries in the chart only Australia has comparably strong public finances),
  • weak banking systems (the Australian banks and their NZ subs have some of better bank credit ratings in the world),
  • risk around high levels of external indebtedness (not only is much of the external indebtedness on bank balance sheets –  see above –  but the New Zealand exchange rate has been persistently strong, not a feature you expect to see when risk concerns are to the fore).

Oh, and of the small OECD countries with floating exchange rates, over the last five years only Iceland (recently emerged from serious systemic crisis) and Hungary (IMF bailout programme as recently as 2008) had higher real interest rates than New Zealand.

At the heart of any explanation for this persistent real interest rate gap –  which has been there, on average, for decades –  must relate to factors influencing pressure on resources in New Zealand.   At some hypothetical world interest rate, there is  some mix of more demand for investment (housing, business, government) and a small supply of savings (households, business, government) than in most other OECD countries.    That incipient excess demand on resources is absorbed by having a higher domestic interest rate than in most other countries, and a higher real exchange rate.    That mix of adjustment will then squeeze out some of the incipient excess demand.  Global evidence suggests that overall savings rates aren’t very sensitive to changes in expected real returns.  Governments tend not to be very responsive to price signals, and people have to live somewhere (so although residential investment is highly cyclical, in the end everyone gets a roof over their head).  Much of the adjustment pressure is felt around genuinely discretionary, and market sensitive, investment spending: business investment, and especially that in sectors exposed to international competition.   It is the stylised story of New Zealand: moderate savings rates (overall), quite high rates of government and residential investment, modest rates of business investment, and a tradables sector which has managed little per capita growth for decades, and where international trade shares of GDP are stagnant or falling even a period when world trade blossomed.

And that is where my immigration policy story fits in.   Savings and investment pressures are aggregates of all sorts of forces and preferences, and so one can never say that a single factor “explains” the whole picture.  But if one is looking for areas where government policy – a non-market or exogenous influence –  plays a part, then New Zealand immigration policy over decades seems likely to be a significant part of the story.  Lots more people means lots more demand for investment just to maintain existing capital/output ratios.   New people need houses, and schools and roads and so on.  If this were a country where domestic savings (flow rates) were abundant –  and domestic savings are different from foreign savings because the act of saving domestically takes some pressure off domestic resources (incomes generated here not spent here) – it wouldn’t be a particular issue.  But that isn’t so in New Zealand.  Government policy choices may have influenced those outcomes to some extent –  I certainly favour a different tax treatment of savings –  but my reading of the international evidence leaves me sceptical that reforms in that area would make very much difference to desired savings rates (if only because income and substitution efforts tend to offset).

Instead, conscious and deliberate government policy drives up ex ante investment demand (at the world interest rate), and in the process tends to drive out the sort of investment that might have enabled those of already here to achieve better material standards of living.

(In a very small sample, it is perhaps worth noting that there are four OECD countries where policy is set to favour high rates of immigration.  They are New Zealand, Australia, Canada and Israel.  It should at least prompt a moment’s reflection among the immigration champions, that not one of those countries has been a stellar OECD productivity performer –  Australia and Canada have done better than New Zealand and Israel, but are nowhere near the OECD frontier, despite the abundance of fixed natural resources those two countries have.)

In (reluctant) support of teachers

I’m no great fan of school teachers (at least as found in contemporary New Zealand –  a re-read last week of Goodbye Mr Chips was another matter altogether).  Over ten years now we’ve encountered a handful of very good teachers, quite a few duds, and lots who seemed no better than mediocre.  There was the Principal who, when my oldest child started school, told a gathering of parents of new entrants that it was really quite inappropriate to teach content as almost all of it would be out of date before long.   And when this particular Principal (together with the NZEI) was using the pages of the Dominion-Post to promote my daughter’s teacher –  apparently genuinely excellent –  as an illustration of the case for more pay, I made myself unpopular by noting that in the same school there were less than outstanding teachers, and that most people knew who they were.   Then there was the science teacher at the local intermediate school teaching conspiracy theories around 9/11.      Teachers who want to tell students off for discussing the previous day’s playground incident in which a deeply troubled student was on the loose with a knife and the school was in lockdown.   And then there is the endless “indoctrination”, mostly probably by teachers not quite smart enough to realise there really is an alternative view to their particular right-on views on colonialism, capitalism, homosexuality or whatever, and not apparently trained to the view (common in my youth) that a teacher’s personal political views (let alone sexual preferences) weren’t something to obtrude into the classroom.   If there are any teachers in Wellington sympathetic to a market economy, they must keep rather quiet about it.

So I’m not normally overly sympathetic to teachers.  And mostly we are stuck with them –  the teachers’ unions being among those most strongly opposed to effective school choice.   That said, as a stay-at-home parent, their stopwork meetings and strikes don’t inconvenience, or greatly bother, me.  It can be nice to have a bonus day at home together.

Of course, like any occupation there can at times be difficulty filling particular teaching positions.  When I was young we moved from Christchurch to Kawerau, and either on the day we arrived, or possibly the next day, the Principal of the local high school was on the door step.  He’d heard that the new Baptist minister’s wife had science qualifications and teaching experience (10 years previously) and he was desperate for staff.

Perhaps not all such specific vacancy stories tell anything meaningful about salaries and/or working conditions.  But when the stories multiply, and there is evidence of a material gap between demand and supply (demand exceeding supply) at the current price is usually a sign that the price should be rising, perhaps quite a bit.

How confident can we be that there is a shortage of teachers at current salaries?  Principals tell us so, but they –  members of same unions –  aren’t entirely disinterested observers (it was only a few weeks ago that a newsletter came home from one local school in which the Principal urged us parents to get along and support the teacher protest).    And almost every day, at least in the schools I have exposure to (three at present), there is a warm body in front of each class.

But then in this morning’s newspaper we read that the government itself –  the ultimate employer/funder of most school teachers –  recognises the problem.  The Minister of Education “is pledging to find at least 400 overseas teachers for the 2019 academic year”.

Which is rather convenient for the government surely?  As the near-monopsonist purchaser of school teaching services, it deals with shortages by using its power as  controller of the immigration and work visa regime to attempt to meet its staffing problems.

As I’ve written previously, there can be a place for work visas where, for example, there is a sudden and unexpected increase in a demand for a particular skill, or even where a particular skill is very rare (the market for some speciality skills can be very thin indeed).   But there are no real surprises as to how many teachers are needed nationwide –  at bare minimum for people born here there is a five year lead time, and that for new entrant teachers.  And decent teaching skills aren’t, or shouldn’t be, that hard to come by –  the PPTA apparently claims 17000 members.    These should be jobs that can be perfectly adequately filled by local residents –  who will have the added bonus of understanding the local culture –  at least if the labour market was allowed to work.

A few months ago I wrote here (and here) about how the work visa system appeared to be enabling local authorities to keep down bus driver wages and (thus) fares and ratepayer funding by substituting foreign workers in place of locals.    The bus driver case looked particularly egregious –  it being a quite modestly-skilled role into which someone could be trained in 6-8 weeks.   But it isn’t clear to me that the school teacher case is really so different, even granting that the skill levels are higher, and thus the inevitable local training and recruitment lags would be a bit longer.

Of course, like all work visa applications the case for importing teachers will be supported by evidence that locals couldn’t be recruited. But if you keep the wage level down it isn’t overly surprising that New Zealanders with other options will pursue them, and you will be left with an apparent shortage.

And the market in teachers is a pretty dysfunctional one.  We have national pay scales even though it must be a great deal harder to get teachers in Auckland than in Timaru (and that private sector jobs typically pay a bit more, for the same job, in Auckland than in Timaru), the pay scales for secondary teachers don’t differentiate by subject (even though the alternative options for a good science teacher and a good history teacher may be quite different, and we still have something like pay parity between kindergarten teachers and secondary school teachers.   For that we can blame both the teacher unions and successive governments (National-led and Labour-led).

Nonetheless,  there does seem to be a shortage of (good) teachers, and it isn’t obvious that the government should be able to use the immigration system to avoid meeting the market (while no doubt claiming in other fora that heavy use of work visas in particular sectors doesn’t hold down wages in those sectors).

When writing about bus drivers, I suggested adopting this sort of policy

To that end, I’ve argued previously for a system in which Essential Skills visas are granted on these terms:

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, with this provision to apply regardless of skill level).

b. Subject to a fee, of perhaps $20000 per annum.

If an employer really can’t find a local hire for a modestly-skilled (or unskilled) position, they’d be able to get someone from overseas, but only by paying (to the Crown) a minimum annual fee of $20000.  It is pretty powerful incentive then to train someone local, or increase the salary on offer to attract someone local who can already do the job. If you can’t get a local to do a job for $40000 per annum, there might well be plenty of people to do it for $50000 (and still cheaper than paying the ongoing annual fee for a work visa employee).

Even in the context of teacher salaries –  where starting salaries are well above $40000 –  per annum – this looks like the starting basis for a workable model.

More generally, I have argued that

If we are going to have government officials administering something like a mass market Essential Skills visa scheme, and deciding who does and doesn’t get approval, surely a key aspect of any labour market test should be something along these lines?

“has the effective wage or salary rate for this occupation risen materially faster than wages and salaries more generally in New Zealand over the past couple of years?”

If not, how can you seriously use the term “skill shortage”?    Even if wages in a particular occupation have risen faster than the norm, it takes time for locals to respond and shift occupations, so one wouldn’t necessarily want to jump at the first sign of a bit of real wage inflation in a particular occupation, but if after a couple of years the pressures were persistent then some sort of Approval in Principle for temporary migrant labour –  at wages at or above those now prevailing in the domestic market – might make some sense as a shock absorber.  But MBIE seems perennially averse to markets adjusting in ways the generate higher real wages, even though that outcome is one core part of what we look for from a successful economy.

I’m not a fan of the teachers’ union propaganda arguing that some decades ago senior teachers earned as much as MPs, and that they should be again –  MPs seem to have been quite badly underpaid in that earlier period.  But I’d be surprised if the government could show that teacher salaries (and overall working condition-adjusted remuneration) have increased more rapidly than the market generally in recent years.  If not, surely higher salaries –  perhaps regionally differentiated – should be the first part of any adjustment, and if there is any resort permitted to offshore labour markets it should be explicitly temporary, backed by financial incentives/penalties of the sort I outlined above.

It sticks in the craw to stick up for teachers and their unions, but the market indications would appear to be on their side in this particular dispute.   Of course, the fact that there is a shortage doesn’t –  in an administered market like this –  tell one how much salaries should be adjusted (or the onerous paperwork burden eased), or the appropriate balance (starting salaries vs later progresssion) but the direction looks pretty clear.  And the proposal to resort to substantial offshore recruitment looks as if the government has indirectly conceded the case –  even as, again, it continues to preference the interests of offshore people over those of New Zealand workers.  Teachers might be less sympathetic than bus drivers, rest home workers, or shop assistants, but they are New Zealanders too.  Even, as it happens, substantial funders of the Labour Party.