How Much Migration?

Free movement of labour is often described as one of the four fundamental economic freedoms. Putting it into practice is somewhat more difficult.

To make the intentions of this column clear, I am generally in favour of migration. I am a descendant of immigrants and live in a country in which virtually everyone admits to a migration heritage and which has one of the highest proportions of foreign-born in the world. I am also very aware that future migration will dramatically change the country I love, especially by the Asian inflow. It will happen and the country will benefit from it.

For migrants bring with them a vigour and vitality which a small conservative country with a tendency to stasis needs. I am astonished at the impact of the thousand odd Jewish refugees in the 1930s and 1940s. I am delighted at the contribution of our Pasifika people. And, if I may characterise it as a ‘migration’ albeit an internal one, we are a richer community for the Maori move from country to town.

Immigrants can also ease the pressures of population aging which the country faces. Our rest homes seems largely staffed by them; we may not judge these carers skilled, but the ones I have met are so endowed with aroha.

However, accepting all these gains, this column is about the appropriate rate of migration.

First, the economics. In summary, the research shows that immigrants tend to give a boost to net demand in the short run and net supply (and hence sustainable economic growth) in the long run. That is because initially they put more pressure on resources (especially housing and infrastructure) than they add to them. But once their contribution to investing is sufficient, the effect subsides. It is strong enough for past Australian governments to increase assisted migration when the economy was depressed in order to help get an expansion underway.

Now you know one reason why this government is so keen on a migratory inflow. It is contributing to economic expansion (although that need not mean that real per capita incomes for everyone are rising).

The government will add that it also increases our supply of skills. True, but allow me a grumble. Relying on migrants for required skills is cheaper than training up New Zealanders. The consequence is that we have too many unskilled and under-skilled locals and inadequate training institutions. When the Christchurch rebuild was first talked about it was recognised that we would be short of builders. Rather than putting training schemes into place, it was decided to import workers with the required skills. Five years later we are still short of builders and no doubt we will again go offshore to provide them.

So, yes, there can be economic downsides to migration, but locals generally benefit. Curiously, the evidence does not say that local workers always suffer job losses or depressed wages. The explanation requires a theory a bit more sophisticated than the obvious Economics 101; in any case faced with a contradiction between 101 theory, which says it will happen, and actuality, that on the whole it does not, which should you adopt?

Why then the antagonism to migration? It occurs not just here but throughout the world, evident in the Brexit referendum, distress on the European continent and from many Trump followers.

The above discussion, like much of the public debate, has framed the immigration issue in economic terms. It says nothing about the cultural impact. The sociological literature I have read on the topic is not very helpful. There are numerous fascinating studies of immigrant impacts on localities, but I have not read any comprehensive overall (society wide) studies like those that exist on the economic impacts.

My second paragraph summarised the micro-studies but at the end of the day I have little idea about the rate at which a society can absorb migrants culturally. That is the nub of where the strains are. Undoubtedly there will be tensions when the migrants first arrive, but how long before things settle down? How do the locals adapt to the challenges the newcomers pose and adopt some of what they have to offer? What are the critical mechanisms? (Anecdotally, intermarriage seems to be important.)

I was struck that regional outcomes in the British Brexit referendum do not seem to have been affected by the level of migrants but that a higher vote for Brexit seems to have been affected by recent increases in the level of migrants in the locality. (here) That suggests the Brits do adjust to migrants but it takes time for them to adapt from a low level to a higher one. Like us?

The abandonment of free labour mobility is likely to be a key element of any deal Britain does with the EU. I shan’t be surprised if the EU moderates the principle of unlimited freedom of movement too. You can see related struggles in the US between dealing with illegal immigrants and not encouraging more of them.

What about New Zealand? There is an economic case for moderating the current inflow of immigrants especially as the high levels are putting pressure on us to borrow offshore. Cannot we be more self-sufficient in supplying skills; ‘more’ not ‘totally’ of course. That would mean building up our internal training programs – by no means a bad thing for New Zealanders with unrealised potential. The fetish for encouraging rich migrants probably needs to be restrained. The capital they bring with them is not nearly as valuable as the rhetoric says it is.

But we also need to think more about the cultural impact of the migrants. We should not be saying ‘no’ to those who are culturally different; all immigrants are!

The government’s decision for a modest increase in our refugee numbers was wise, given that the facilities can only be increased slowly. I should like to see a further increase in the quota three years on when the reception facilities can be extended again.

Could not localities be more supportive to arriving immigrants? Our local authorities could learn from the more welcoming Canadian practices. Perhaps the points system which determines who may be let in could incorporate a reward for those who go to the areas with the best welcomers.

 This column is not an anti-migrant tract. Rather it is an attempt to encourage a dialogue which steers between xenophobia and a free market view that only the impact of migrants on the economy matters.