Sometimes it can be hard to keep up with the flow of pro-immigration articles in the Herald.  At the moment of course, even they tend to be written with a defensive, more than celebratory, stance.

On Monday, the academic sociologist, Paul Spoonley –  who leads CaDDANZ the MBIE-funded academic immigration advocacy and research programme –  was out with a piece headed Xenophobia not welcome in migrant debate.     Hard to disagree with that.  Of course, not all fears are irrational, and political debate rarely occurs at the rarefied level of the fabled academic seminar room, but “deep-rooted fear towards foreigners” (the OED definition) doesn’t seem a particularly good basis for New Zealand’s immigration debate.  But what was a bit puzzling when I read the article, and then re-read it, was that Professor Spoonley offered no evidence that “xenophobia” was what was at work here.  And that’s good.  Presumably if there was such evidence he’d have mentioned it.

And despite generally being a champion of New Zealand’s non-citizen immigration policy, Spoonley himself has come to the conclusion that current immigration levels are “unsustainable” and some changes are needed.  Presumably he didn’t reach that conclusion based on “xenophobia”?

As it happens, most of the proposals he puts forward are pretty mild, or not even policies at all.

There is a case for revising aspects of the recruitment and approval of immigrants. The low value courses and qualifications offered by some educational providers puts New Zealand’s reputation at risk.

One could add that it is, in effect, an industry granted big export subsidies.   We’d sell more of any specific good or service, if doing so came attached with work rights or residence points.     Curiously, export education isn’t even that successful a subsidised industry.  The total number of people granted student visas in 2015/16 was only around 4 per cent higher than at the previous peak in 2002/03.

A more proactive regional focus. Canada and Australia allow regions to set their own targets and to recruit the skilled immigrants needed locally – without undermining local workers or wages. Up to a third of the points required for approval for permanent residence can be granted by regions.

This is even more daft, and dangerous, than the existing (quality-diluting) policy of giving additional points to people with jobs outside Auckland.  And since most local councils can’t even do well stuff they are already responsible for –  not making urban land unaffordable – I’m not sure I’d want to trust them with immigration policy.

Social cohesion. Positive settlement outcomes for both immigrants and host communities would benefit from a greater investment in helping transition immigrants to life in New Zealand – more generous provisions for English language acquisition, for example, would help.

Of course, we could spend even more taxpayers’ money, or we could simply require that people settling here –  refugees aside –  actually speak pretty good English.  These days, most really highly-skilled people –  the ones we might actually benefit from –  do.

And his final proposal

Let’s have a debate about population – its growth and distribution – as a context for decisions about immigration. And let’s not see immigration as a single causal factor or as a simple solution.

This is rhetoric rather than policy, but by all means have the debate.  I’m pretty wary of “population policy” myself, but some serious study of whether policy-driven rapid population growth over most of the period since World War Two has helped lift the material living standards of New Zealanders, or productivity in the New Zealand economy, would be a worthwhile subject for academic researchers.

In the end, Spoonley is mostly playing distraction.  He flings around the charge of “xenophobia,” without any substantiation, and then his own suggestions would make little useful difference in responding to the economic challenges, except by some tightening of rules around student visas (something the government has not yet addressed at all).

But the column that really grabbed my attention was one from the Herald business editor Liam Dann, headed Let’s lead the world on immigration debate.  A worthy aspiration no doubt.  But not, unfortunately, one the column contributed to. Instead, it is riddled with questionable claims and false comparisons, and at one point represents another example –  this time not from a government minister but from an acolyte –  of just making things up.

There is the weird opening.

It looks like immigration is going to be a big election issue.

That’s a shame.

He doesn’t like the way the debate has occurred in some other countries, so seems to think we should take some sort of self-denying ordinance, and not debate one of the larger government economic and social policy interventions there is.   Non-citizen immigration is, after all, far bigger here than in the UK, the US, or France.  Has been for a long time.

There have been a series of record highs for about a year. The numbers exceed even the great colonial influx into New Zealand in the 19th century.

On a per capita basis they exceed what the UK was experiencing pre-Brexit.

This is all rather misleading.   Considered per capita, the net inflow over the last year (New Zealander and non-citizens) hasn’t even exceeded levels seen 15 years ago, let alone at the peaks in the 19th century.  And, by contrast, every single year the number of non-citizens we let in far exceeds (per capita) the inflows to the UK.  So the analytical and policy issues shouldn’t be about this year’s PLT flow, but about the numbers (and terms on which) we allow non-citizens to settle and/or work here.

According to Dann

So we are vulnerable to populist political hijack.

Any world-leading debate on these topics would recognise that the essentials of our immigration policy haven’t changed much for 20 years at least.  Broadly speaking, we moved back to being a high (non-citizen) immigration country in the early 1990s.

I’m not even sure what “populist political hijack” really means, other “than some politician I really don’t like, responding to an issue of real public concern”.   Sounds like democracy to me, messy as it often is.

Funnily enough, Dann also thinks there are some real issues that need addressing.

Immigration policy of the past decade is not sustainable. Our infrastructure is under pressure and we are woefully behind in building to catch up. That’s not the fault of immigrants, of course. It is the fault of politicians and voters.

Not sure how this is all the fault of voters.   We were never asked if we wanted to have record rates of population growth, even though those in office knew that (say) the urban land markets were dysfunctional etc, so that importing lots of new people was only likely to exacerbate house price problems.

And, of course, the issues aren’t just about house prices or road congestion.  There is the small matter of the continuing poor productivity growth in New Zealand (none in the last five years), the shrinking (as a share of GDP) export sector, or the realities of living in a country at the ends of the earth where, for 40 years (with cyclical ups and downs) the natives have been leaving, pursuing better opportunities abroad.   Oh, and the highly misleading descriptions of the immigration programme –  we’ve repeatedly been told it was a skills-focused programme, helping lift productivity etc, and now MBIE’s own numbers show than more than more than half those applying for residence don’t have skills that command even $49000 per annum in the New Zealand labour market.

Dann continues

In other words, it’s our fault. We have been trying to have our cake and eat it too.

No, it isn’t “our” fault.  Voters didn’t ask for this.  Political leaders –  from both sides, but National is now in office –  made it happen.  And there is no “cake” for New Zealanders as a whole, only some nasty sectoral redistributions, and an overall economic performance that continues to underwhelm.   But apparently

One thing lost in the immigration debate at the moment is how successful the policies have been for New Zealand.

Really?

Economically, we have outshone our international peers. We have skipped the economic pain that most of the world felt after the global financial crisis.

That’s not all down to immigration but it has played a big part.

This is just making stuff up.  As I showed yesterday, we’ve done no better than the United States, which was the epicentre of the crisis –  and that despite having about three times the rate of legal immigration the US has (and other bonuses like a record average terms of trade).   We had a nasty recession, that took a long time to recover from –  and actually immigration policy in the “bust” period wasn’t materially different than it had been in the earlier “boom”.   We’ve underperformed Australia too.

Sure, there are places that are worse still –  much of the euro area most notably –  but there is just nothing to back this claim that we have “outshone our peers”,  let alone that immigration policy has enabled us thus to shine.  Saying it often enough won’t make it true.   In fact, sometimes reality breaks through and even Dann seems embarrassed about channelling this stuff.

When you crunch the numbers on per capita GDP growth it has been far less flash.

Indeed. And it is things like per capita income growth and productivity growth that count.   Even on the labour market side of things, the SNZ release this morning shows that most of the OECD countries that control their own monetary policy have lower unemployment rates than we do.

Culturally, too, New Zealand has grabbed global attention in a way unimaginable a generation ago.

This country used to be largely unknown outside the Commonwealth, where we were acknowledged as a backward British colony that was good at sport and had lots of sheep.

Since we still hold the record low test cricket score, racked up in the bad old days when we had some of the very highest material living standards in the world, I’m not even sure about that “good at sport”.

But, frankly, what is he talking about?

100 years ago, before the First World War, people flocked here – and not just from the Commonwealth – to study New Zealand’s economic and social reforms.  And they often marvelled at what had been created, so quickly, so far from the centres of the world ( including (but not limited to) the best material living standards in the world).

Actually, 30 years ago, before the great immigration resumed, people abroad were fascinated by New Zealand’s economic reforms.  It was a darker story by then, trying to pull back from decades of decline, but the interest was real nonetheless.

Does anyone remember Dame Edna’s tragic Kiwi bridesmaid Madge Allsop? She summed up our image pretty well.

Personally, I don’t remember this character, but I’m sure Dann isn’t trying to suggest that Australians have stopped making fun of New Zealanders (accent and all), or vice versa.

So what is he talking about?  Does he know?   Allegedly….

Against all odds, New Zealand became cool.

Where is the evidence?  What does “cool” mean in this context?  And what does it do, even if it is true, for the living standards of ordinary New Zealanders?  Dann doesn’t tell us.  And yet somehow

Our place in the world has changed and that warrants debate about the immigration policy settings we have in place.

Actually, if one takes any sort of longer view of modern New Zealand history, our place in the world is in decline.  That is more or less inevitable.  We were once one of the handful of (very successful) offshoots of the most powerful empire in the world.   100 years ago there weren’t many independent countries, and few as successful as we were.  Since then,  many more countries have emerged, and quite a few have got a lot richer.   The UK’s global position has declined, and even the US is no longer what it was (in say the decades from 1940).  We are neither powerful nor important –  no longer with automatic access to counsels of the great and powerful we once had –  and, worse, we aren’t even that successful economically any more.  That has real implications for our own people, especially the poorer of them.

So, I really have no idea what Dann is on about.  Perhaps he is thinking of some references in once-hip publications like Lonely Planet guides?  But to what end?  As I ‘ve shown previously, our exports of services –  the lure of tourism, export education etc –  are lower now as a share of GDP than it was 15 years ago, in an age when international trade in services globally has become ever more important.

Leaving aside the detached-from-reality rhetoric, Dann tries to come back to specifics

The Government has belatedly started to recognised that with policy tweaks that have not yet had time to show results.

We could go further and look at more fundamental changes – such as how we set the criteria for residency.

But it would be a terrible thing for the debate to play out here the way it has in other parts of the world.

Quite what does that mean?  You might approve or disapprove of the Brexit result (I approve), but the process was an open one, there were no riots on the streets, and views differ on quite how large a role immigration policy played anyway.

I reckon Donald Trump is fundamentally ill-equipped to be US President.  Then again, the choice was a poor one.  I couldn’t have voted for him or his principal opponent.  And is a physical wall a good solution?  Quite probably not.   But it was an open and democratic election, and there were plenty of other issues at play in the election.  And –  unlike us –  the US really does have a large stock of illegal migrants in the country.  

Alternatively, and optimistically, New Zealand is in a position to lead the world on the immigration debate. We could do this right.

But simply flinging around, as slurs, references to Brexit or Trump isn’t really a great start to the sort of debate Dann claims to want to have in New Zealand.  After all, if immigration is an issue in those countries, there are good reasons why it could be a much bigger issue here (we simply take more people, per capita).

We could pay close attention to the data, we could look at economic impact studies and we could have a frank and open discussion about the kind of country we want to build.

That would certainly be a novel (but welcome) approach.  Perhaps Dann could point us to the New Zealand specific studies illustrating how New Zealanders, and New Zealand productivity levels, have been raised by decades of large scale immigration, much of it simply not that skilled?  Other champions of immigration policy haven’t been able to.    There is plenty of theory, but not much grounded analysis that takes specific and detailed account of the circumstances of New Zealand.

Dann doesn’t like the idea of Labour promising to do something to markedly cut the non-citizen immigration flow.

It is difficult for Labour because the politics are polarising. Labour wants power, it sees a rich vein of discontent but in the current topsy-turvy political environment, it has to make careful choices.

Retaining a traditional, optimistic liberal view leans towards free and open borders. That now puts them on the side of the neo-liberal globalists – not a fashionable place for the centre-left these days.

But campaigning to radically slash immigrant numbers by unspecified amounts puts them in the camp of angry nationalists like Winston Peters, Donald Trump and Nigel Farage.

It would certainly be good to see some specifics from Labour –  it is after all only four and half months until the election.  But it is not as if Labour has always been some sort of “open borders” party.  It was the Labour icon, Norman Kirk, who in the 1970s put in place the biggest post-war adjustment to immigration policy, depriving people from the United Kingdom (then far and away the main source country) of their automatic right to move here.

For the last few decades, Labour and National have had much the same immigration policy –  believers, apparently, in the rhetoric of lifting productivity through immigration, and in the skill shortages, that never seem to ease no matter how many decades we wait.

Suggesting that Labour would cut immigration by tens of thousands certainly needs something concrete behind it –  and soon –  but I’m afraid that comparisons between Andrew Little (or Jacinda Ardern, Grant Robertson, David Parker and Phil Twyford) and Donald Trump simply aren’t worthy of a serious journalist, and especially not one making the high-minded call for a world-leading immigration debate.

Dann starts to come to the end of his column

We can’t let the politics become emotive. This is fundamentally about economics. It should be boring.

Not sure I entirely agree.  Politics is about conflicting world views and values.  There are, and inevitably will be, emotional dimensions about that.  Personally, I’m angry at the decades of failure by a succession of political leaders to really grapple with New Zealand’s economic underperformance.   And pretty upset about the apparent (practical) indifference to the housing disaster, all politically wrought.    But Dann asks

Can we quantify how much value immigrants add to the economy?

How does the added value compare with the economic cost of new infrastructure that we need to cope with increased population?

It isn’t really a fiscal question, but the honest answer to his first question is that “no, no one really has”.  It has been a programme based on faith and theory, and often the short-term self-interest of employers (especially those in the non-tradables sector).    The government does not know if large-scale immigration has added to New Zealand’s productivity over time.      For such a large experiment, that is an extraordinary failure.

Distributional issues matter.

The harder question is trying to understand how the value and costs are distributed.

Some established citizens will be bigger beneficiaries than others. There are different geographic impacts.

Given we’ve had an immigration policy that favours wealthy immigrants it is self-fulfilling that our policies have increased wealth in this country.

But they may also have exacerbated inequality

Again, he has lost me.  Most of our immigrants aren’t very skilled or wealthy at all –  most can’t even earn $49000 a year, the starting salary for a primary teacher with a basic degree.  So there is no automatic presumption that the country is wealthier as a result (again, per capita, the only measure that really counts).  And it shouldn’t really be news to the business editor of our largest-circulation paper that inequality hasn’t materially changed in New Zealand in the last couple of decades (at least if the distorted housing market is excluded).   The New Zealand Initiative, rightly, point it out repeatedly.

I’m all for a good quality debate about New Zealand’s immigration policy.  One is certainly well overdue.  But when Dann’s call for such a debate is so riddled with errors, misconceptions, and slurs, it is hardly a good start.      In the end, it is hard to avoid a conclusion that what Dann really wants is just a continuation of the status quo, with a few more houses and roads built, and the column is mostly an attempt to avoid the real debates.   It certainly isn’t the start of a world-leading debate, especially not one that engages seriously with the decades of serious economic performance, or with the revealed choices of New Zealanders –  for 40 years now –  to leave.

As I’ve said, MBIE do release approvals data monthly, but it is hard to use (at least for a lay person with a spreadsheet). The temporary approvals spreadsheet is some half a million lines long.

But I decided to brave it anyway.  The spreadsheet contains approvals up to the end of March 2017.  And I was curious as to whether there was anything in the Essential Skills approvals (those for some of the more –  supposedly –  skilled roles) to back the suggestions being made by the Herald and Professor Paul Spoonley.  To minimise my effort –  and the last column of this little table took the best part of an hour –  I focused just on approvals of people from the 10 countries that were top of the list in the latest summary MBIE data (that for the year to June 2016).

There is some overlap in the last two columns.  The first two columns are June years (the basis of MBIE’s summary data) and the final column is a March year (seeing as it is still April now).

Essential skills visas granted, by country
	2006/07	2015/16	12mths to Mar 17
Philippines	1695	5,408	6174
India	1943	4,812	4904
UK	4692	3,686	4086
Fiji	2145	1,973	1756
China	2749	1,823	1801
South Africa	2003	1,382	1807
Ireland	481	969	824
Brazil	1376	923	1066
South Korea	1145	828	767
United States	1493	820	837
Total all countries	31015	31766	32775

But there isn’t much sign of the patterns having changed in the most recent year.  Of the European countries, UK approvals are up a bit, but still below where they were a decade ago, and Irish approvals are down a bit, but still above where they were a decade ago.  And by a clear margin, approvals of people from the Phippines and India top the list.

Two other things caught my eye.   Total approvals haven’t changed much  –  in the last year, or in the last decade (although they did dip during the recession).  And approvals for people from China have been tailing off.  The peak year for Chinese approvals was, in fact, 2004/05.

 

I wasn’t going to write about immigration  today at all, but a radio station rang up last night and invited me to go on their show this morning to discuss an article in today’s Herald that runs under the headline Top source countries for migrant workers are not Asian.

Since I had to get up early anyway, and since the article gives me the chance to make two points, I thought I’d respond.

Perhaps my key point is that flawed articles like this really should reinforce the message to MBIE, that I made in a post the other day,  that while MBIE’s annual immigration approvals data are good and useful, they are only available with a long lag,  and the monthly data they provide is limited, little-known, difficult to use, and therefore largely overlooked.    If people can’t readily use that – accurate, official, adminstrative –  data they will use what they can easily get.  In this case, that is the permanent and long-term migration data derived from arrival and departure cards, and reliant on the self-reported intentions of people when they cross the border.  It is published monthly and hogs the headlines, but for actual analysis of immigration policy (which affects non-citizens) it just isn’t very good at all.

The Herald builds an article around this opening

A rise in work visas has been the driving force behind record immigration numbers but the main source countries are not from Asia.

A Herald analysis into immigration data found work visa arrivals increased from 16,787 in 2004 to 41,576 last year.

The top five source countries for work visas last year are the United Kingdom, Germany, Australia, South Africa and the United States of America.

They get those numbers not from data on the number of work visas issued, or outstanding, but on the basis of PLT arrivals data.   When people arrive at the airport they complete an arrivals card, indicate whether (at that time) they intend/expect to stay 12 months or more, and the reason for their visit.    The “reason for visit” isn’t tightly mapped to the various different visa classes, and all the non-New Zealand arrivals are grouped under four main headings (Residence, Student, Visitor or Work) and a small “Other” category.

So these data are correctly reported by the Herald, but:

• SNZ only publish the data by previous country of residence, not country of citizenship (although they must have the latter data).   The Herald should have been a little wary when they noticed Australia high up on their list, since Australian citizens don’t need work visas to live and work here.  Published data don’t let us work out which country (citizenship) those people were actually from, but if someone worked in Australia for a couple of years and then came on to New Zealand there is no meaningful sense in which they are “Australian”.
• The PLT data only attempt to capture the visa people held at the point they crossed the border.   Huge numbers of people change their visa while here –  more than 70 per cent of residence visas are granted to people who were already living here.  Perhaps more importantly in this context, many people who come on student visas –  probably almost all of those in the PLT (more than 12 months) category –  now have work rights while they are here.  And when they complete their qualification, many can acquire a “study to work” work visa.  So if we are trying to understand which country the migrants (temporary or permanent) who are working here come from, the PLT numbers are barely any use at all.

In fact, MBIE knows exactly who has an outstanding work visa (which doesn’t include students working while on a student visa), and which country those people are citizens of.  They now publish the data each year.  Here are the top 10 countries as at 30 June last year.

Outstanding temporary work visas by country, as at 30 June 2016
India	25,479
United Kingdom	15,040
China	12,192
Philippines	11,980
France	6,126
Germany	5,011
Fiji	4,912
United States	4,431
South Korea	3,443
Japan	3,102

The UK is still important, but it is swamped by people from India, and China and the Philippines aren’t far behind the UK.   We only have this particular data since 2009, but back then the UK was the largest source country for people with outstanding work visas.  Since then the UK numbers have only increased a little, while the Indian numbers have more than trebled.     And all that is so even though these stock numbers include the numbers here on working holiday (work) visas, where European countries (Germany, UK, and France) dominate the annual approvals numbers.

What about approvals data?  Here are the top 10 countries of people granted Essential Skills work visas in 2015/16.

Essential skills visas granted, by country, 2015/16
Philippines	5,408
India	4,812
United Kingdom	3,686
Fiji	1,973
China	1,823
South Africa	1,382
Ireland	969
Brazil	923
South Korea	828
United States	820

A decade ago, the UK was clearly the largest source country.

And here are the top 10 countries of people granted Family work visas (note, work visas –  these aren’t the residence approvals).

Family work visas granted, by country, 2015/16
India	7,720
China	4,012
Philippines	3,216
United Kingdom	2,566
Fiji	1,895
South Africa	1,407
United States	1,186
South Korea	865
Brazil	643
Sri Lanka	584

Again 10 years ago the UK was the largest single source country.

MBIE don’t provide this breakdown for those granted “study to work” visas, (even though the number of those visas granted has increased from around 6000 in 2005/06 to around 22000 last year.   And since student visa numbers are totally dominated by people from Asian countries

Student visas granted, by country, 2015/16
China	25,931
India	19,920
South Korea	4,888
Philippines	3,996
Japan	3,604
United States	2,914
Thailand	2,176
Brazil	1,961
Fiji	1,886
Germany	1,850

…we might reasonably assume that almost all of the study to work visas have gone to citizens of Asian countries.

And finally, of course, there is the residence approvals programme.     The overwhelming bulk of these approvals are granted to people already living in New Zealand, who arrived on one or other of the temporary visas programmes and eventually qualified for residence.  Here are the top 10 countries, for 2015/16 and for 2005/06 , 10 years earlier.

Residence approvals by source country
	2005/06	2015/16
China	6,773	9,360
India	3,334	8,498
United Kingdom	14,674	4,934
Philippines	1,252	4,614
South Africa	4,033	2,970
Fiji	2,366	2,230
Samoa	2,188	2,156
United States	1,838	1,288
South Korea	2,260	1,125
Pakistan	140	882

Total approvals didn’t change much over that decade, but the composition (by source country) did.  One forgets I suppose, but I was a little surprised to realise that even 10 years ago the UK was still far and away the largest single source country.

Which country our temporary or permanent migrants come from isn’t a big concern of mine, and has never been a focus of my analysis of the possible connection between immigration and economic performance.  I don’t much care where migrants come from, but about what skills and talents they bring.   That said, I was interested in the new study by Harvard researchers that I linked to a few weeks ago, suggesting that if there were economic benefits from immigration (and that particular study reckoned there were) they were most evident when the migrants were from countries that are richer than the recipient country, or from countries with a degree of cultural similarity to the recipient country.   Perhaps that result won’t stand up to close scrutiny over time, but it does make quite a lot of intuitive sense.   On that residence approvals list, only the UK and the US are richer than us.

And as a final note, I repeat my plea to MBIE to markedly improve the availability of such summary data on immigration approvals (and outstanding visas).  They hold all the data, and there is no reason why these data could not be available, and easy to use, on a monthly or quarterly basis within a few days of the end of the relevant period.     Debate about immigration policy is often difficult enough, but it is made more so when the good timely data just aren’t made easily available, and people fall back on what they can find, inadequate for purpose as it often is.

Readers might suppose that I have always been sceptical of large scale immigration to New Zealand.  It would be more accurate to say that for most of my life I never gave it much thought.

I first remember being aware of immigration as a political issue when I was at intermediate school in Auckland in the early-mid 1970s  That was a period of very high immigration, and about the time of the big policy change initiated by the Kirk Labour government which removed from British citizens the automatic right they had previously had to settle here.  Pacific island immigration was also an issue.  But despite being a bit of a political nerd even then, my only perspective on it was that of a South Islander reluctantly resident in Auckland: I recall advocating a cap on Auckland’s population and forcing incomers to move elsewhere in the country.

There wasn’t much non-citizen immigration to New Zealand over the following 15 years, although the developing exodus of New Zealanders was an issue.   And even as policy changed in the late 80s and early 1990s, the high rate of unemployment still meant that non-citizen immigrant numbers were low.    As late as 1992 there was a net inflow of only around 13000 non-citizens.    I don’t recall immigration data ever getting much discussion around the Reserve Bank Monetary Policy Committee table, although the modellers had interesting equations to explain, in particular, the trans-Tasman flow.    I was the manager of the Bank’s forecasting team for a while, and I also don’t recall us ever paying much attention to immigration data then either (anyone else who was there can correct me if my memory is faulty).

I went overseas for a couple of years and when I came back we were in the midst of the first big inward wave of non-citizen migrants since liberalisation.     Those flows put a lot of pressure on house prices, especially in Auckland, and also on the economy’s real resources.    We were a bit slow to understand what was going on, but eventually appreciated (as our predecessors had in earlier decades) that the demand pressures from increased immigration typically exceeded the boost to supply, at least in the short-term.  Being the Reserve Bank we didn’t have much interest in (or any responsibility for) the longer-term issues, and certainly didn’t have an institutional view on whether in the longer-term large non-citizen immigration was of economic benefit to New Zealanders.

It was the 21st century before the issue came back to the fore again, with the sharp increase in non-citizen immigration numbers around 2002/03 –  some of it the increase in foreign students in response to the exchange rate.    The Bank was a bit gun-shy by this time, at having made some material monetary policy mistakes in the late 1990s, and I remember arguing (I wince at the memory) that there was a case to “look through” the net excess demand effects of increased immigration, because they were likely to be ‘one-off” in nature.  I certainly didn’t have a view, or much of an interest in, the longer-term issues.    Being a central banker, I was probably only interested in the monthly PLT numbers, and wasn’t even aware there was a residence approvals programme and a numerical target/”planning range”.

To cut the story short, I had little interest in the issues until I was involved with the 2025 Taskforce, set up to advise the government on why the large income and productivity gaps to Australia had opened up, and to recommend a policy programme that might close the gaps over the following 15 years.   I was seconded to Treasury at the time, and there was also quite a bit of interest there in why New Zealand’s interest rates were so high (relative to those abroad).   The 2025 Taskforce did not –  as readers might expect –  come out in favour of high rates of immigration.  One of the Taskforce members was the Australian economist Judith Sloan, who had lead the Australian Productivity Commission’s 2006 report on immigration.   She persuaded the Taskforce to adopt a line, consistent with that earlier report, suggesting that immigration was unlikely to offer much, if anything, in boosting medium-term GDP per capita (or productivity).

I came away from involvement with the Taskforce pretty supportive of the list of measures, and way of thinking about things, that they proposed.     But the more I reflected on the issues, the more it started to seem like a list of measures that, while useful, was unlikely to make a large enough difference to close the gap.   And as our exchange rate rebounded after the 2008/09 recession, I began to focus again on trying to understand why our real interest rates were still so high (relative to the rest of the world), noting that as a result of those high interest rates, the real exchange rate had averaged far higher than relative productivity underperformance might lead one to expect.   I was involved with a Treasury working paper published during this time arguing that the explanation for the high interest rates seemed most plausibly to lie in things affecting aggregate savings and investment preferences (demand for and supply of savings) in New Zealand.

It was only out of all that experience –  mostly down to the good fortune of the secondment to Treasury –  that my current way of thinking started to develop.  That was as recent as 2010.   I was fortunate enough that the Savings Working Group – another government appointed working group –  got interested in an early version of the ideas, and reflected some of them in their report.   And I was able to push them a little further in discussant comments, and then in a paper, in two conferences on macroeconomic and exchange rate issues sponsored by the Reserve Bank and Treasury.    But it wasn’t an issue that was of much interest, or importance, to the Reserve Bank (reasonably enough), and in fact the Bank became increasingly uneasy about my involvement in the area.  Immigration policy inevitably had political dimensions, and it wasn’t an issue the Bank was ever likely to take a preferred policy position on.

Through this period, my focus was very high-level and macroeconomic in nature.  I kept being told –  by Treasury and MBIE – that our immigration programme was one of the best in the world (and there were papers to prove it).   I didn’t have any reason to disagree (I didn’t have the detailed knowledge and my background was macroeconomics), but as I always stressed, if my argument/analysis was valid, it was so broadly speaking regardless of the quality of the individual immigrants.   Persistent excess demand pressures, in an economy with a pretty moderate savings rate, would put pressure on real interest rates and the real exchange rate and skew the economy away from business investment more generally, and that in the tradables sector more specifically.  It was simply cleaner to take as given the received notion among public sector economists that the quality of the immigration programme was pretty high.

The last couple of years, outside the public sector, have certainly been an eye-opener for me, on just how mediocre our immigration programme has actually been.  It may well be that our average non-native born worker has among the highest skills of any of those in the OECD.  It may even be that our immigration programme is better than those of most  –  in many ways it should be, as we have full effective control of our own borders.  But it simply isn’t very good.  Even on those OECD numbers, the average non-native born worker (immigrants past and present) has skill levels below those of natives (the latter being among the most skilled in the OECD).   There have been many very able migrants, but averages are averages, encompassing the excellent and the poor.  The average isn’t impressive.

We’ve seen quite a bit of that over the last few years:

• only around 60 per cent of our residence approvals are to skilled or business migrants (and their spouses/partners/children), and all too many of those granted approvals in recent years have been in occupations that don’t strike most people as particularly highly-skilled –  not what people think of when they hear that MBIE sees our immigration programme as a “critical economic enabler”,
• there were fairly large numbers of approvals granted to middle-aged and elderly parents and siblings of other migrants (people whose skills/qualifications would not qualify them directly), unlikely to make much contribution to New Zealand economic performance.
• then there has been the big upsurge in student arrivals, concentrated in the lower-level private training establishments, the timing not coincidentally related to increased work rights for students in New Zealand.   Again, relative to our universities, the PTEs aren’t typically training the people most people have in mind when they think of highly-skilled foreigners.

And the disillusionment –  stripping away of the old illusions and official stories –  has continued even in the last week or two.

At a broader policy level, MBIE released data last week showing that

The Ministry undertook a random sample of more than 600 Skilled Migrant Category applications being considered as at 1 March this year. We found that 42.5 per cent of applicants earned over the New Zealand median income of $48,859 a year while 14 per cent of applicants earned over $75,000. These results have a margin of error of plus or minus 5 per cent.

57.5 per cent of those applying for residence under the Skilled Migrant category –  the most skilled bit of the residence approvals programme –  were earning less than $48859 per annum.  No doubt some of them would have been turned down, but the rejection rate of applications that get to this stage isn’t high.    On policy to date, a huge proportion of the so-called skilled migrants can’t even command that much income in the New Zealand labour market (and recall that 80 per cent of all residence approvals are granted to people already onshore, and I suspect that share is higher for the SMC category).

Perhaps I’m naively optimistic, but a week or so after these data came out, I’m still shocked at how low a skill level they reveal.   Our ministers and officials have repeatedly grossly misrepresented the programme and the number and sort of “skilled” people New Zealand is granting residence to.   If it were similar data on any other policy or economic topic, I suspect it would be front-page news in our media.

One of my readers (thanks Bob) took the huge unwieldy spreadsheet MBIE releases monthly and produced a summary of residence approvals over the 12 months to March 2017.  This table is in much the same format as MBIE uses in their annual Migration Trends and Outlook publication.

Residence Approvals: Year ended 31 March 2017
Application Substream	Application Criteria	Number approved
Skilled Migrant	Skilled Migrant	25,357
Work to Residence	Talent – Accredited Employer	1,464
Investor Category	Investor 2 Category	1,404
Entrepreneur Category	Entrepreneur category	740
Work to Residence	Long Term Skill Shortage List Occupation	527
Investor Category	Investor 1 Category	154
Partnership Deferral Skilled	Skills/Business deferral	142
Work to Residence	Religious Worker	122
Work to Residence	Talent – Sports	27
Employee of businesses	Employees of businesses	3
Business / Skilled	Sub-total	29,940
Refugee		1,902
Samoa Quota		1,008
Pacific Access		607
Other	Ministerial direction	295
Other	Victims of Domestic Violence	28
Section 61	Section 61	133
International / Humanitarian	Sub-total	3,973
Family Tier 1 & 2	Family Parent Tier 1	2,555
Parent	Family parent	457
Sibling	Family sibling	397
Adult Child	Family child adult	47
Sibling	Family sibling	2
Parent Sibling Adult Child Stream	Sub-total	3,458
Partnership	Partnership	9,439
Dependant Child	Family child dependent	1,861
Partnership	Partnership – Partner of an Expatriate	1,247
Parent Retirement	Parent Retirement	37
Partnership Deferral Family	Partnership deferral	23
Dependant Child	Family Child dependent – Dependants of an Expatriate	11
Partnership	Partnership	3
Uncapped Family Sponsored Stream	Sub-total	12,621
Residence approvals	Total	49,992

We now know how low the apparent level of skills has been in the skilled migrant category.  And that is the most skills-focused on any of these residence categories.  We can reasonably assume that the average skill levels across the other categories will be, perhaps materially, lower.

Of course, in some of the line items that shouldn’t be a concern.  We take refugees for humanitarian reasons, not domestic economic reasons.  But by and large our immigration programme has been sold as having an economic focus –  intended to lift productivity across the economy and benefit New Zealanders as a whole.    Standard economic theory will tell you that if the skill level of the migrants is low –  typically lower, especially at the margin, than the new native worker –  it could only benefit New Zealanders (on average) by driving down wages for relatively unskilled labour in New Zealand.    The evidence on whether it has done so is contested, but if it hasn’t, New Zealanders simply can’t have benefited.  And if we stand back and look at our productivity performance, business investment patterns, and tradables sector performance, there is no sign of such systematic benefits at all.

It looks increasingly like a costly sham.  New Zealanders have been sold the policy on one basis but –  whatever the merits of the policy they’ve been told we were running –  the actual policy looks to have been far worse than we were told.  And, I suspect, far worse than the people who first designed the more liberal immigration policy thirty years ago would have had in mind.

People will differ on how all this came to pass.  I’m not a conspiracy theorist, and suspect it mostly developed with the best of intentions all round (rather than, say, a deliberate attempt to drive up Auckland land prices and drive down lowly-skilled wages).   But good intentions don’t excuse shocking outcomes.  We simply don’t really have a skilled migration programme at all.  There are, and no doubt always will be, a few very highly-skilled people among the migrants –  and the issue here isn’t the migrants themselves (pursuing the best for themselves and their families) but the policymakers in successive governments –  but all too many have little to offer to benefit New Zealand.  For a country that hasn’t been doing that well economically for 50 years –  although there are cyclical ups and downs –  that simply isn’t an approach we can afford, if we want to offer our people some of the best material living standards in the world.  Perhaps it is partly a reluctance to accept that New Zealand just isn’t that attractive to very many of the sort of extremely able people we might genuinely benefit from.

And perhaps even more shocking than the skilled migrant applicant income data, was the news yesterday that our government is allowing someone who gained residence approval only five years ago, and has since committed several sexual offences, been in prison for them, made little apparent effort to rehabilitate, and remains (according to the experts) at high risk of reoffending, to remain in the country.  I’m not usually strongly sympathetic to “victims advocates” etc, or to those wanting to lock up even more people for longer, but I simply can’t believe that the government had let this chap stay.   Since such offenders don’t usually start offending in their 50s, you have wonder about the initial screening, but even set that to one side, how is this decision at all consistent with promoting the best interests of New Zealanders?   Individual decision it might be, but it looks too like a mentality in MBIE –  and their ministers? –  that simply doesn’t put the interests of New Zealanders first (whether in the economic aspects of the programme design and implementation, or others).      The specific decision might have been made by an official, but that person was operating only under the delegated authority of the Minister of Immigration.  The Minister now claims he’d have made a different decision, but if so perhaps he could release to us the guidelines he had laid down, that his officials were supposed to be working to when they made this egregious decision.    I’m quite sure Afghanistan would be an unpleasant place to be sent back too.    But Mr Akbari made his choices, breaking our law (and not simply traffic offences) not once but several times.  It isn’t clear why we owe him any further consideration, or why our people should be exposed to the risk of his further re-offending.   I don’t suppose Michael Woodhouse personally will be compensating future victims –  and of course with the best will in the world, he won’t be able to  put back together a life shattered by a further instance of such abuse by Mr Akbari.   Deportation then will be scant comfort to the victim.

As I like to stress, I try to be an equal opportunity sceptic.  Immigration policy has, for 30 years, been pretty much common ground between National and Labour.     The Donghua Liu case shouldn’t be quickly forgotten.