The Fourth Freedom

We need to rethink our strategy towards migrants.

The European Union’s single market strategy is based on the four freedoms of the movement of goods, capital, services, and labour. While each is complicated, it is the fourth which has proved the most contentious. Arguably, it was that experience which tipped many English into voting for Brexit and it has affected the politics of other parts of Europe. (This is in addition to the political tensions arising from refugees from outside the EU borders.)

For instance, Brits mutter about the invasion of Poles. Today about 1 percent of their population is Polish speaking, compared to less than 0.1 percent twenty years ago. The grumbling diminishes when the only available plumber is a Pole.

From the beginning, this fourth freedom was integral to the vision of Europe as a community. Migration within Europe goes back to the time of the Neanderthals. Immediately after the Second World War there were some massed forced migrations (especially of Germans from the east) in an attempt to align ethnic communities with national boundaries. It was doomed to fail, the flux continued. Fostering the free movement of persons as an alternative to war has been a major goal of European integration since the 1950s. Yet whatever the wider vision, it has not been popular at the local level.

Most economists argue that this free movement enhances the economy. Their analysis concludes that allowing labour to move to where it is most productive usually adds to economic output. Of course that does not mean everybody benefits economically and there is a tendency in the economists’ analysis to ignore that some may be made worse off. The argument usually goes on that such effects are small: those who migrate are in the age groups which are net contributors to government revenues while, if unemployment is low, displaced workers should be able to find other jobs.

Even so, distributional issues tend to be overlooked, so that when we were crowing recently about rising per capita incomes, we ignored that the rises accrued more to the new migrants while the incomes of those already in New Zealand were nearly stagnating.

Once there was an enthusiasm for the arguments that the larger population would reap economies of scale. But the likely increase is so small that the scale effects are too. (It is one thing to lift the population from 4.9m to 5.0m, but the big change would be to lift it to 49m.) In any case there are the offsetting economies of congestion, and the worry as to how to generate the required foreign exchange per capita.

I do not think the above economic arguments for migration are compelling, paying too much attention to GDP and not enough to wider wellbeing. The one which impresses me is that migrants are more vibrant and they add to cultural and technological innovation. It is especially important for a small country like New Zealand where there is a tendency to stagnate without external stimulus.

Locals are obviously not convinced by these economic arguments. Before we sneer at their economic illiteracy, it is worth pondering whether the economic arguments overlook things important to them. At this point economists are out of their depth and, indeed, much of the analysis involves the wishy-washy that economists abhor (when they are not doing it themselves).

One factor that the economic models overlook is the infrastructural demands which migrants generate. There is an admission that housing may be a problem in the short run but eventually the stock will catch up. But when? I’d have thought the experience of the last few decades suggests that the assumption that houses will soon get built if left to the private market is implausible.

But infrastructure is more than housing. The central government accounts record almost $160b of property, plant and equipment, more than $30,000 a New Zealand resident. Arrive here and you get your share, plus, of course, the (lesser) debt that goes with it.

A new migrant may not utilise their share of the schools and hospitals that are in the total. It includes $32b for state highways; few migrants will avoid making use of those. Given the recent record of underinvesting relative to rising demand, migrants must have been adding to the traffic.

However, few motorists fuming in a traffic jam wave their fists only at recent migrants. Nor does the spreading of the cities into rural areas (and the longer commute times that go with that, even without the jams) seem to be blamed on excessive population growth. So the economic arguments do not explain the unease.

My rough rule is that the economy makes up about 10 percent of our lives (even if the business pages imply 110 percent). Recall that the original vision of the fathers of the EU was that by making the borders more porous there would be less need or ability to defend them. (The Polish plumber marries a local hairdresser.)

New Zealand does not have such border challenges. The economic reason for immigration may be that – like Britain – we have been too slack training locals. I can also see a case for our taking a share of the world’s burgeoning population; that puts Pacific Islanders and refugees (especially climate-change refugees from the Pacific) high on my priority migrant list.

I have little time for the business which demands migrant labour even it its  commuting stuffs up the motorways. It tends to be a very short-term argument and may not do much for the economic prospects of the locals by discouraging their upskilling (the easy solution is taking on extra workers) and increasing productivity (to overcome shortages of the unskilled).

Having said that, exceptions abound. Workers to deal with seasonal horticultural peaks are an obvious one. I add that sometimes the most valuable things skilled migrants bring are their partners who staff rest homes with tender loving care (as well as their children who grow up here).

The key issue may be that New Zealand benefits from the vitality of immigrants. There is the downside. As a society we know we have to change but, a bit like Augustine, not yet.

In fact we have absorbed a lot of different cultures. I can recall in my youth mutterings about Poms, Dutch, Hungarians and Pasifika. (A little older and Jews would have been on that list.) Presumably my grandchildren’s generation will have similar memories of Asians (appreciating the enormous heterogeneity that the category covers) and Muslims. (Personally I admire a lot of Asian values and my Muslim friends are ‘people of the book’, far more sober than the rest of us.)

Even so, as far as I can gather from the sociological literature, one culture can comfortably absorb others only at a certain rate, although there is not a lot about what that rate should be. So I am comfortable if we ease back on our migrant inflow, but there should still be one.

Once the migrants are here, they are entitled to full human rights, but that is not the same as citizen rights. We are one of the few countries which allow non-citizens to vote. (We use a residential test.) Perhaps we should consider here and in some other areas whether we should make a distinction. (Including no passport tourism and requiring citizens to pay full taxes.)

Because I have had to stray outside formal economic analysis, this column is looser than many I write. But the issues are no less important. As for many economic issues, we should be thinking about it more systematically than we do. Sadly I see that we prefer to make ad hoc and incoherent decisions – if we make them at all.