Lots of the work visas approved in the last five years were for occupations starting with C.   There were quite a few carpenters, as one might expect, but when three of the top four categories are chef, cook, and café and restaurant manager it doesn’t have the ring of a strategy well implemented to enhance productivity and the earnings prospects of New Zealanders.  I was also struck by the number of commercial cleaners, commercial housekeepers, and community workers.  And I mentioned the 250 or so checkout operators yesterday.

A skills-based economic lever to lift productivity and living standards for New Zealanders?  Really…….

Not so many people came in with “letter B” occupations, but again the list of occupations with more than 100 approvals wasn’t a great advert for the transformational productivity-enhancing possibilities of our immigration policy.

I won’t get into debates about the possible role of temporary migration in dealing with Canterbury rebuild pressures –  but really, builder’s labourers?  But even setting construction-related roles to one side for now, a list that has the top four places taken by beauty therapists, bar attendants, bus drivers, and baristas isn’t a great advert for the  productivity (and wage) possibilities this programme creates for New Zealanders.

Frankly, I’m surprised by how few of these work visa approvals seem to have been for genuinely highly-skilled roles.  But I led a sheltered life –  the Reserve Bank used to periodically recruit foreign PhD economists.   Then again, even in the Treasury papers I noticed reference to the declining average quality of migrants.

The Treasury papers also note (p 52) that

from a dynamic productivity perspective, we consider that migration shouldn’t provide a “path of least resistance” for growth in certain sectors of the economy.  By this we mean that temporary migration shouldn’t act as a lever that keeps labour costs in certain industries down to the extent that it dulls incentives to invest in capital or increase working conditions to attract local labour.

Perhaps they had the aged-care sector in mind? Or the dairy industry?

Fossicking on one of MBIE’s websites, I found a huge spreadsheet showing all work visas applications for the last five years.  I deleted the ones that were declined and starting to have a look at what occupations the people had who received New Zealand work visas over that period.   Not all of them, by any means, will have gone on to permanent residence, but most permanent residence approvals are of people  already living in the country (eg on a work visa).

This chart is just for occupations starting with the letter A, showing those for which there were more than 100 approvals  over this period.  Given that the focus of the immigration programme is supposedly on highly-skilled migrants, the number of aged care workers was striking (albeit not too surprising).  I’ll assume that most of the actors were genuinely short-term project related (while recognising that the film industry only survives through large taxpayer subsidies), but number 5 on this list was also a bit of surprise.  Skill-based lifts in productivity driving off an influx of foreign accounts clerks?

Some of the approvals I don’t show raised a wry smile.  It wasn’t clear, for example, quite what demand there was in New Zealand for a (single) Aboriginal and Torres Strait Islander Health Worker.   Or for an antique dealer?

I’m not sure my enthusiasm will hold for the rest of the alphabet, but in case not I should mention that as I glanced through the spreadsheet I found that the New Zealand government –  focused on lifting national productivity, according to those Treasury papers –  had granted work visas to 149 checkout operators and 227 shelf-fillers.

Some months ago, I commented briefly on a speech by the Secretary to the Treasury, Gabs Makhlouf (himself a fairly recent temporary immigrant), in which he had lauded the economic gains to New Zealand from our large-scale non-citizen immigration programme.  Makhlouf asserted that:

Migration helps to lift our productive capacity – it enables the economy to grow faster by increasing the size of the workforce, in much the same way that foreign capital allows us to grow faster than domestic savings alone would permit.

Like foreign investment, migrants also bring new skills, new ideas and a diversity of perspectives and experiences that help to make our businesses more innovative and productive.

And perhaps most importantly, migrants often retain strong personal and cultural connections to other parts of the world, which opens up, and helps us to pursue, new business opportunities. We are in a pretty incredible position in this regard, with so many New Zealanders – around 1 million people – living overseas, and so many people who live here having been born in another country.

More recently, I passed on the comment Makhlouf had reportedly made, in an official capacity, that ‘immigration is good, it is as simple as that” (or words to that effect).

Some time ago, I lodged a request with Treasury for copies of any advice they had provided to ministers over the last couple of years on the economic impact of immigration in New Zealand, and on the permanent residence approvals target (currently 45000 to 50000 per annum). I was curious as to see what analysis and argumentation might lie behind their chief executive’s rather gung-ho views, but was really more interested in any economic analysis around the permanent residence approvals target, which I knew had been reviewed last year.

It took quite a while for the papers to be released, but eventually I did get part or all of 21 documents. Treasury suggested that they might put the material on their website, but they do not appear to have done so [UPDATE: a link here], so here is a link to a single pdf which contains all the material they released.  Subsequent page references are to this document.

Treasury immigration OIA results

Perhaps what surprised me most – I’m a starry-eyed optimist at heart – is how little substantive material or argumentation there was. I wasn’t expecting a major essay in each paper, but across the 21 papers there just wasn’t much there, even taken together.  Having said that, I was pleasantly surprised to find that the advice Treasury staff were providing the Minister seemed rather less glowingly optimistic than the perspectives offered by the Secretary.

The government sees (and probably previous governments saw) immigration primarily as an economic lever. If so, we do it mostly because we think it benefits us.  The non-citizen migration programme is certainly large, and Treasury recognises that New Zealand’s non-citizen immigration programme is one of the largest (as a share of population) of any advanced country. An immigration programme of the size and character of the one New Zealand has run over the last 25 years has changed New Zealand very substantially.   Total population continues to increase quite rapidly (not now the case in many other advanced countries), and the ethnic composition of the population has been changing markedly. By sheer scale, it is probably larger than any other aspect of government economic policy in the last 25 years.   Statistics record a net 862000 non-citizen permanent and long-term arrivals in the 25 years to March, and the true scale of the inflow is probably larger than that.

But what is there to show for it?   The idea is, to quote from two of the Treasury papers:

High-skilled migrant labour increases the average productivity of the labour market, and this is the micro-economic channel through which many of the benefits of immigration accrue (p56)

Granting residence to skilled migrants can increase New Zealand’s human capital by helping meet skill shortages in a growing economy, improving productivity by reducing search costs for employers, and increasing the diversity and innovation of the workforce. These effects can improve labour market productivity over time, which contributes to New Zealand’s overall economic productivity. (page 29)

But there is no evidence of it having happened. We’ve had one of the largest targeted migration programmes anywhere, and there is no sign of any improvement in New Zealand’s productivity performance relative to other advanced economies.   In none of these papers is there anything concrete Treasury points to to suggest more favourable outcomes.

An independent economist (and former Treasury staffer) Julie Fry was commissioned by the Treasury’s Macroeconomic Policy team to prepare a paper on links between immigration and New Zealand’s macroeconomic performance. The resulting work last year found its way into a published Treasury Working Paper on the issues. Her abstract read as follows:

New Zealand’s immigration policy settings are based on the assumption that the macroeconomic impacts of immigration may be significantly positive, with at worst small negative effects. However, both large positive and large negative effects are possible. Reviewing the literature, the balance of evidence suggests that while past immigration has, at times, ha significant net benefits, over the past couple of decades the positive effects of immigration on per capita growth, productivity, fiscal balance an mitigating population ageing are likely to have been modest. There is also some evidence that immigration, together with other forms of population growth, has exacerbate pressures on New Zealand’s insufficiently-responsive housing market. Meeting the infrastructure needs of immigrants in an economy with a quite modest rate of national saving may also have diverted resources from productive tradable activities, with negative macroeconomic impacts. Therefore from a macroeconomic perspective, a least regrets approach suggests that immigration policy should be more closely tailored to the economy’s ability to adjust to population increase. At a minimum, this emphasises the importance of improving the economy’s ability to respond to population increase. If this cannot be achieve, there may be merit in considering a reduced immigration target as a tool for easing macroeconomic pressures. More work is require to assess the potential net benefits of an increase in immigration as part of a strategy to pursue scale an agglomeration effects through increase population, or whether a decrease in immigration would facilitate lower interest rates, a lower exchange rate, an more balance growth going forward.

The Fry paper considers a number of my ideas around the potential adverse effects of high rates on inward migration to New Zealand. I don’t entirely agree with her conclusion, which I think is probably too generous to the immigration programme New Zealand has run over the last quarter century, but even her conclusion is modest enough – any gains, from a very large scale programme, are likely to have been “modest”.   If so, why bother with the programme?

Just before the Fry paper was released, Treasury wrote an aide-memoire to the Minister of Finance, which they have released in full (from p 18). It is interesting because it is a joint product of the macro policy area of Treasury and more micro-oriented labour market and welfare team.   The authors note that “on the whole, The Treasury agrees with the assessment of the evidence in the paper”.  They don’t necessarily agree with the policy recommendations, but the government’s principal economic advisory agency apparently sees no reason to be more optimistic about the economic impact of immigration than Fry’s quite downbeat assessment. It is a very different from the tone of Makhlouf’s March 2015 public speech.

As I have noted on various occasions, with a well-functioning market in housing supply and urban land, immigration should have no material or sustained impact on house prices. But if supply is sluggish – as it undoubtedly is in New Zealand, largely for policy-determined reasons – increases in population will put considerable pressure on house and land prices. All New Zealand’s population growth now results from the large non-citizen immigration programme – without it, we would have a flat or slightly falling population. Against this background, it is surprising that the papers Treasury released make very little mention of the implications of the target level of immigration for house prices, in Auckland in particular, and hence for affordability and inequality issues. The young and the poor, the latter disproportionately brown, pay the price of a government commitment to continued high levels of non-citizen immigration. It is not as if other parts of Treasury are oblivious to the problem – this recently released paper on the housing market treats the issue quite well – but it does not seem to have been factored into immigration policy advice.

In my macroeconomic arguments about the effects of immigration, I have tended to assume the best about the make-up of the immigration programme itself – that it was bringing in mostly well-qualified people. I was willing to concede that there might be some skills gains, but to argue that these were probably outweighed by the macroeconomic pressures (on real interest and exchange rates). But people keep pointing out that even the skills gains are not as clear one might like to think. Apparently, we’ve given 20000   work visas for chefs in recent years.  And Fry points to formal studies showing how disconcertingly long it takes many similarly-qualified immigrants to reach New Zealand native earnings. And, as the Treasury papers show (page 26), over the three years to 2013/14 only around half of permanent residence approvals were to people under the “Skilled/investor” heading (while more than 10 per cent were for the parents of New Zealand citizens or residents).

I had also not paid much attention to the numbers coming under the numerous working holiday schemes that New Zealand is now party to.   But Treasury has, and actually recommended to the Minister of Finance last year that a cap should be placed on the numbers coming to New Zealand under the various uncapped working holiday schemes, highlighted a number of risks, including that the substantial growth in the number of working holiday visas might adversely affect employment opportunities for New Zealand young people.   This is no small point, since standard analysis (to which I largely subscribe) tends to be very sceptical of the idea that immigration undermines employment prospects, whatever it might do (positively or negatively) to productivity or wages. And it is not just one paper. In another, from December last year, Treasury notes that “immigration policy often involves trading off domestic labour market objectives with other policy objectives” (page 52) – a rather different tone, again, from the Makhlouf speech – and observing that “there is reason to be concerned about the impact some of our current immigration policies may be having on the labour market prospects of low-skill New Zealanders.”

And I’ve already highlighted some of MBIE’s own work suggesting that the investor and entrepreneur immigration categories might struggle to provide much net economic benefit to New Zealanders. There is no sign in these papers that Treasury is any more optimistic.

The other thing I learned from these papers, which I had not previously been aware of, is that when Cabinet reviewed the New Zealand Residence Programme last year, they agreed to set a two-year target rather than a three year one. That was, apparently, partly to shift future decisions, perhaps still triennial, into non-election years. But they also “directed officials to undertake a review of NZRP and report back to Cabinet by November 2015”. Treasury observes (page 53) “MBIE is currently undertaking a strategic review of immigration policy settings. One particular area of interest that has emerged is the extent to which labour market objectives are balanced against goals like foreign policy, tourism and export education”. It all seems a far-cry from a hopeful vision of substantial productivity gains, and beneficial spillovers to long-term New Zealand living standards, from a large scale inward migration programme.

Twenty five years on there is little or no evidence that our very large scale inward migration programme is producing economic benefits for New Zealanders – which should be the principal criterion guiding what is, after all, sold as an “economic lever”. There are some obvious winners – notably those who happened to be property owners in Auckland –  but that is purely a redistributional effect, at a serious cost to those who are increasingly squeezed out of being able to afford to buy a house in Auckland. And there are serious reasons to worry that actually the immigration programme has made things worse for New Zealanders, by putting pressure on scarce resources, and driving up real interest and exchange rates, and crowding out much of the sort of business investment we might otherwise have expected after the economy was freed-up in the late 1980s and early 1990s.

The Secretary to the Treasury is upbeat on the economic benefits to New Zealanders of the immigration programme. But where is his evidence? His staff don’t seem to have been able to find it.

Notwithstanding the prejudices of the elites, there would seem to be a pretty good case now for substantially reducing the non-citizen immigration programme, rather than just pushing on with a failed strategy –  a huge intervention in New Zealand’s economy and society for which Treasury can point to no material demonstrable benefits.

Of course, MBIE may yet have the answers. At the same time I lodged the original OIA request with Treasury I lodged a similar one with MBIE, the department with prime responsibility for immigration policy issues. That request is still working its way through the system, more than two months after it was first lodged. I’m beginning to wonder what interesting gems it contains, or (perhaps more saliently) which might yet be deleted and withheld.   Two weeks ago I had a friendly email from them telling me I would have the information the following week, and then last week I had another email, from someone further up the hierarchy, telling me that consultation – with the Minister’s office perhaps? – was taking longer than expected, but “we are working to provide a response to you as soon as possible”.   It isn’t an overly urgent issue, but it has now been more than two months, and the basic timeframe under the Act is 20 working days.

The Prime Minister yesterday announced several changes to New Zealand’s immigration policy. This is an extract from the Minister of Immigration’s press release.

New measures to take effect from 1 November include:

• Boosting the bonus points for Skilled Migrants applying for residence with a job offer outside Auckland from 10 to 30 points. [They require 100 points]
• Doubling the points for entrepreneurs planning to set up businesses in the regions under the Entrepreneur Work Visa from 20 to 40 points.  [They require 120 points]
• Streamlining the labour market test to provide employers with more certainty, earlier in the visa application process.

“Unemployment across the Mainland is nearly half that of the North Island, and labour is in short supply,” Mr Woodhouse says.“We’re looking at offering residence to some migrants, who have applied at least five times for their annual work visa. In return, we will require them to commit to the South Island regions where they’ve put down roots.”

Mr Woodhouse says the Government is also considering a new Global Impact Visa to attract high-impact entrepreneurs, investors and start-up teams to launch global ventures from New Zealand.

“I will announce further details later this year, but we envisage this visa would be offered to a limited number of younger, highly talented, successful and well-connected entrepreneurs from places like Silicon Valley,” Mr Woodhouse says.

I can’t see any background analysis to these measures, either on the MBIE website or with the Minister’s press release.  On the face of it, however, this looks like a set of measures that will, on balance, to undermine the quality of New Zealand’s immigration programme.

We all know about the infrastructure pressures in Auckland –  largely self-inflicted by central and local government.  Perhaps trying to steer some of the immigrants away from Auckland might temporarily ease some of those pressures a little.  But there is a price to be paid. Providing a significant increase in the number of points available for people with job offers outside Auckland must lower the likely average quality of incoming immigrants.  There is no sign that the permanent residence approvals target (135000 to 150000 on a rolling three year basis) is being increased, so people going to the regions –  taking advantage of the additional points for doing so – will be at the expense of otherwise better-qualified people who would have gone to Auckland.    Under the new policy, people will only have to stay in the regions for a year, so perhaps it will make only a very small difference over time to the number of immigrants who end up in Auckland.  But the ones who do come in, taking advantage of these additional points, will be – on average – less good quality people than the applicants who are squeezed out (people who might have a job offer in Auckland –  our highest paying and –  at least in a statistical sense –  most productive city).    Perhaps I’m missing a significant strand in the reasoning, but I can’t see the likely long-term economic gain for New Zealand.

The Global Impact Visa idea sounds superficially promising. But my impression from the Pathways Conference last week was that existing entrepreneur visa schemes had not worked particularly well.  It will be interesting to see the analysis behind this proposal, including an assessment of how the risks around it will be managed and overcome.  I remain a little sceptical of the attraction of New Zealand to “younger, highly talented, successful and well-connected entrepreneurs from places like Silicon Valley”.  The flow of people in that sector would seem more naturally to be in other direction.  I hope it is not an example of the old derogatory adage used about Britons working in Hong Kong:  FILTH  (“failed in London, try Hong Kong”).

In the biblical book of Hebrews, there is a verse that reads “Now faith is the assurance of things hoped for, the evidence of things not seen”.

It seemed to be rather like that at the Pathways Conference that I attended part of in Wellington yesterday morning.  The Pathways conferences were established back in the 1990s and are held annually “to disseminate publicly funded research on international migration and demographic change”.  I hadn’t been to one before, and it looks like an excellent initiative, at least in principle.  The issues around immigration (here and abroad, past and present)  are fascinating and we (and other countries no doubt) need a “reasoned and deliberate” debate on immigration policy[1].  Funding enables the conference to be held at no cost to the participant, and enables academic and public sector researchers to discuss research results and immigration-related issues.  Given the significance of immigration in New Zealand, and the way it is seen as a significant “economic lever” (in the words of a senior MBIE official at the conference), we need scrutiny and debate.

There were around 120 attendees, but not a single member of the media.  That surprised me.   When I counted up the delegate list. almost 50 per cent were public servants (although I was a little surprised that no one from Treasury was there).

I suspect I may have been the only person present even mildly sceptical about the benefits of New Zealand’s immigration programme.  Certainly, none of the papers I heard, no comments from the floor, and none of the summaries of the remaining papers betrayed a shadow of doubt.      In fact, so certain of the direction of the argument were the organisers that they describe this year’s conference as being about “how New Zealand can better respond to these demographic changes in order to maximise the benefits associated with an increasingly diverse population”.  Perhaps there are such benefits, even net, but it would be better to demonstrate them, than simply assert them.  The tone of the conference –  supposedly about presenting publicly funded research  –  was apparent early on when the Minister of Immigration twice thanked conference attendees for all they (we?) did for “our migrant communities”.   And here I thought immigration policy was undertaken for the benefit of New Zealanders, whatever benefits there might be to the migrants themselves.

The contrast with the Australian Productivity Commission’s inquiry, which I wrote about last week, was striking.   There seemed to be no interest in questioning whether there were benefits, and if so who might be securing those benefits.  Nor much interest in innovative ideas (eg charging for migrant entry).  The Australian inquiry may well lead to no material changes in policy, but at least it should assure the Australian public of a serious and dispassionate analysis of the issues and options.

The Conference was described as being under Chatham House rules.  That seemed a little odd, at least in respect of the main presentations (as distinct from comments/questions from the floor), since the purpose was supposed to be about disseminating publicly funded research, to the public.    But the programme is on the web (see link) above.

I found the Minister’s speech rather unimpressive.  The organisers described it as a “keynote” but it was anything but.  Unfortunately, I can’t quote from it, but suffice to say he appeared unimpressed by anyone –  be it the Herald, or perhaps even stray bloggers (with long-outstanding OIA requests in for departmental advice on immigration targets) –  suggesting that waves of migrants were putting pressure on resources or infrastructure.  A keynote actually addressing some of the issues might have been interesting.  And although the Minister and MBIE seem keen to remind people of the weaknesses of the PLT immigration data, they omitted to point out that in recent decades net PLT immigration has understated (not overstated) the net number of people coming to New Zealand.

In fact, what was striking about the morning was how little there was to give a listener any confidence that the “economic lever” (New Zealand’s immigration programme) was doing New Zealand much good.  I went along to listen, and was prepared to be sceptical.  But I didn’t really need to be.  Because what I heard wasn’t very encouraging at all.  Listening to people discussing the problems of designing an entrepreneur visa, for example, I became more sympathetic to the idea of auctioning migrant places.  And anguished talk of concern about how many migrants were going into low productivity sectors, rather than “where we want them to go” had much the same effect, and a desire to reach for my copy of Hayek, on knowledge problems etc.  The central planning tone (no doubt unselfconscious) was quite disconcerting.

One of the MBIE papers is on the web.  It discusses some work on investor migrants –  who already, in effect, buy their way into New Zealand.  The aim of the programme is to import people with business expertise and entrepreneurial skills, presumably to boost productivity in New Zealand.  And yet in these surveys of people at various stages of the investor migrant process  (and  in which respondents must have been at least partly motivated to give the answers MBIE wanted to hear, even if results were anonymised), 50 per cent of the money investor migrants were bringing in was just going into bonds, and only 20 per cent was going into active investments.  We aren’t short of money, but may be of actual entrepreneurial business activity.  And 70 per cent were investing only the bare minimum required or just “a bit more”.  And these people aren’t attracted by the great business opportunities in New Zealand, but rather by our climate/landscape and lifestyle.  It doesn’t have the sense of being a basis for transformative growth.  As even a fairly pro-immigration academic observed, New Zealand isn’t exactly likely to be first choice for the sort of person who might build the next great tech company.

In much of the debate around immigration in New Zealand it seems that people can’t quite make up their minds what sort of immigration we want.  On the one hand there is considerable emphasis on highly-skilled migrants. I can see the logic of that argument, even if I’m sceptical of what difference it might make.  But on the other, there was repeated discussion of the role immigrants play in the aged care sector and in the dairy sector.  Such migration is no doubt good for the migrant (migration usually is) but the basis on which it assists in lifting per capita incomes, and medium-term productivity, for New Zealanders is much less apparent.  As one senior official put it to me recently, the logic of bringing in large numbers of people to work cheaply on dairy farms isn’t obvious.  It may just allow farmers to bid land prices higher, or perhaps compensate for the self-inflicted problem of an overly high real exchange rate.

So there wasn’t much to go on if one wasn’t sure of the benefits of immigration in New Zealand.  But if you went along already convinced then no doubt faith carried you through the accounts of the practical limitations of how our immigration programmes actually work.

And, of course, I know that this was just one conference, and there are lots and lots of papers on immigration.  But few or none of them show, with any confidence, that New Zealanders are securing economic gains from this substantial economic lever that successive governments have sought to deploy.  We need a reasoned and deliberate debate, perhaps with our own Productivity Commission inquiry.

[1] Readers may recall that that was Shamubeel Eaqub’s description of the sort of debate he wanted about immigration, at least before he responded to my analysis with the label “racist”, a slur he has still not withdrawn.