Thursday, 20 April 2017

An "ugly casserole" indeed

So we've tightened up our immigration settings, again. Opponents are saying it's fiddling at the margins. I hope the critics are right: while it's dismaying that they've felt the need to bend with the prevailing political winds at all - "an ugly casserole of prejudice, resentment, economic envy and xenophobia from which New Zealand is not exempt", as Vernon Small put it in his īnsightful Dom-Post article - I hope it's the absolute minimum the government could get away with.

Not that it's without its own political dangers.Throwing scraps of meat out of the sleigh as the wolves close in may delay the chase, but wolves soon learn to chase sleighs for reward, and will be after you fitter and faster than before.

And I certainly didn't like the "Kiwis first" messaging around the thing. That's more the sort of jingoism you expect from the Aussies, and indeed got this week in their own tightening of their immigration regime, which more obviously pandered to the likes of One Nation and is more likely to do real economic damage. Early reactions suggest they've shot themselves in the foot, making it harder for employers to fill hard-to-recruit vacancies.

Let's not pretend, either, that there's anything remotely linked to the economy behind this. It's pure politics.

For one thing, the cyclical state of the labour market is very strong. Wanna see a picture of a thriving labour market? Here's one from the ANZ's Bank's latest tot of job ads.

Wanna see another? This is MBIE's latest tot of vacancies - jobs available right now. High, and climbing steadily,

If you're concerned that unskilled emigrants are driving down wages and stealing the everyday battlers' jobs at the hard end of the labour market, the greatest rise in vacancies in recent years has actually been for unskilled and semi-skilled jobs.

So it's extraordinarily hard to make any case that immigrants have soaked up the available jobs. Despite a recent large increase in net migration, there are more vacancies available than ever, even at the low wage end.

As for the fable that immigrants are putting pressure on already stressed infrastructure, it's either a marginal effect or complete bollocks. Higher levels of net immigration are a relatively recent phenomenon - the last three years or so - whereas the infrastructure, especially in Auckland, was already stuffed every way to Sunday well before that. 

Here's the clincher: as an economist colleague helpfully pointed out when I was tweeting about this, there was very little difference between Statistics New Zealand's population projections for Auckland's population ten years ago and what has actually happened. We knew there was a surge coming, and didn't plan for it, and still aren't - that's the reality, under national and local administrations of all political hues. It's got very little if anything to do with migration, and everything to do with systematic underfunding of infrastructure and obstructive land-use and other regulation. Our politicians have preferred to run dairy farms, mine coal, deliver letters and keep prime housing land to grow onions, rather than deliver the social and physical infrastructure for a high-income economy.

And that's something else the anti-immigration crew are missing. Far from being a burden on the economy, many migrants are actually alleviating the roadblocks to growth we've inflicted on ourselves. Across the road from us, one of those terrible Asian property investors - probably got one of those suspicious Chinese-sounding surnames - has started to turn two houses into five. Round the corner another of these awful leeches has already redeveloped one house into three. Employment for two gangs of tradies, five extra houses. Not bad for two parasites.

Maybe I shouldn't be surprised about these latest turns of events here and in Australia. Liberal values and sensible economics are under attack pretty much everywhere, from the clowns in Washington to the Brexit-deluded in the UK through to the more sinister operators in (for example) France, Hungary and Poland. It's especially sad to see people "of the left", who might be expected to take a more progressive, internationalist view of the world, going along. 

But maybe there's hope around the corner. As this excellent article, 'In defence of liberalism', points out, the liberal values and better economic policies that created post World War Two prosperity are certainly under attack. But it concludes
the things we value can’t all be realised simultaneously and made compatible with each other. A liberal society is the best method yet devised of recognising this multiplicity of aims. It stresses value pluralism in the face of political and religious dogmatism, and of spurious appeals to national unity for the common good. I’ll doggedly stick to it.
So will I, even though in the short run the probability of a socially liberal, economically responsible government emerging from our next election looks to be half of five eighths of sod all.


  1. Michael Reddell20 April 2017 at 19:50

    I won't debate the economics - we won't persuade each other, and anyway my objections to large scale immigration aren't those you touch on - but I did read the Kamm article.

    Reflecting, no doubt, my political and social conservatism I couldn't see much to celebrate in his parade of accomplishments. And the one I'd count as an unalloyed success - collective security to help wait out and defeat eastern bloc communism - dated to an era when, for example, there was very little immigration in most of the older OECD countries (and the US), and what there was was mostly just a backwash from the end of the colonia era, rather than a vision of opening up borders.

  2. Thanks for the comment.

    On the economics, maybe we can't agree at the moment, and maybe never will, but I for one wish there was some decent literature survey of the economic evidence on the various impacts of migration. I'm not aware of any satisfactory tour d'horizon. If we both had the time, it could even be useful to try doing one ourselves, as I suspect a mix of our viewpoints might get to a decent balanced place.

    And as you say we're probably not on the same page of the social hymnal, either. Just by way of background, part of my leaning towards open borders reflects my family history: both my paternal grandparents were part of the great Irish diaspora in the early 1900s and met and married in the US. My father was born there in 1917. The great melting pot that was the US of that era (less so later, as you observe) was in my view one of the reasons for the US' later success.

    But even without that, I'm reflexively in favour of open frontiers - for people, goods, services, money, ideas. There are arguments (as you'll have seen) that the new political divide isn't left/right any more, but open/closed, and I know where I stand on that spectrum.

    What I thought about adding, but life (and blog post length) is too short, is that people are of course entitled to change immigration settings, but I'm dismayed that so many countries are all leaning the same more restrictive way. I can understand some countries' stance, if (for example) you're feeling swamped by Libyan and Syrian refugees, or (as in the UK) have lost sovereign control over the issue and have to live with whatever free intra-EU movement deals to you. But there are many countries who are tightening without any of those pressures.

    That bothers me. There's a fin de siècle, Weimar feel about where societies are going at the moment. It won't end well.

    1. Michael Reddell21 April 2017 at 08:09

      I think there are reasonable literature reviews on the economics of immigration more generally (and, for example, Jacques Poot did quite a book Handbook piece a few years ago). I don't have too much problem with the idea that, generally, there might be small gains to natives, as well as potentially large gains to migrants. The bigger literature gap, in my view, is on the specifics of the NZ (or probably) Australian situation, since it seems quite plausible to me that what holds on average won't apply everywhere, if relevant conditions are different). It is why I've suggested several times that the Productivity Commission be asked to look at the issue.

      On the US, i guess i read it a bit differently. The mass influx of migrants up to WW1 was mostly a response to US success, more than a key driver of it. And of course - not suggesting causal effects here - the years of greatest US dominance, and actually fastest TFP growth - were in the decades when the migration door was largely closed (and the melting pot - melding the disparate arrivals into a single nation - was at work).

      I don't really disagree with your final para. The debate is probably around what has given rise to those tensions and threats. But if you want a country going in the opposite direction on immigration at present, check out Canada - which announced quite an increase in their target a year or so ago, such that their target intake (per capita) is now pretty similar to NZ's.

    2. Would Tonga benefit from Immigration? Is it a general rule that a country benefits from Immigration?

    3. Tonga might, it might not. In my reply to your other comment re real wages in tourism/hospitality I've pointed to a recent survey article that finds economic effects of migration tend to be small either way, so Tonga might find it doesn't matter much and might care to decide on its immigration policy from some other, non-economic, perspective. Personally, as I said, I'm in favour of reasonably open borders as a liberal, humane thing to do.

      Incidentally in some of countries where immigration has been most controversial - the US, Brexit-voting UK, the eurozone - recent research suggests that immigration at elast in those places is economically beneficial.


  3. How do you explain the fact that real wages in tourism and hospitality fell 24.5 % between 1979 and 2006?

  4. Thanks for the comment. I haven't been able to replicate your numbers: I've been onto Infoshare at StatsNZ and can't find data that far back (nor indeed for 'tourism and hospitality', though there is an 'accommodation and food services' grouping that might be close). But Infoshare isn't always the easiest thing to navigate and I may have missed your numbers.

    But in any event let's assume it's the right number. If so, it is certainly very large, and I'd be interested in what led to it. Given I'd been writing about migration, I'll assume that you are suggesting that immigration had something to do with the fall in real wages?

    It's an unlikely explanation. Over the 28 years 1979 to 2006 (both inclusive) net immigration was only 43,323 people, or about 1,550 a year. That's very unlikely to have been big enough to affect anything at all - wages, employment, GDP, productivity - to any measurable extent, let alone to be responsible for the big fall in real wages you mentioned. International studies show that even large flows of migration tend to have quite small impacts on things like wages and employment: it's very unlikely indeed that small flows like the ones over 1979-2006 could have led to a very large drop in real wages.

    This is the latest survey of the international evidence that I can find and it shows very modest effects:

    If I had to find the real explanation for a wage move that big, I think I'd be looking at some combination of labour market deregulation (eg had wages previously been protected by say fixed relativities with other sectors, under collective bargaining arrangements?) or some (non-migration) shifts in demand and supply for tourism/hospitality staff, though you'd think that demand for staff would have been reasonably strong given the growth in the tourism sector in recent years, so it's odd you'd get real wages going down, unless there was an even larger increase in the availability of staff....

    1. Tourism used to be boutique. A tour bus company was once one of NZ's most profitable businesses. In 2004 the Boston Globes travel correspondent wrote "New Zealand at a Cross-road". About one-third of Queenstown's staff are on working holiday visa and Chinese migrants are driving buses.
      A friend recently drove a bus to Queenstown to find none of his Korean clients had booked accommodation for him. After yelling they found him a room where a woman (cash) rents out 3 rooms at $250/night. Korean drivers have been observed sleeping 4 to a hotel room.
      This seems consistent with Ian Harrisons model in The Superdiversity Myth.
      (Land based economy additional workers have lower marginal product)?

  5. David Williamson, a senior lecturer in Aucklands AUT School of Hospitallity and Tourism.

    The reality is that my Phd showed that real hourly wages in the tourism and hospitality sector have fallen 24.5% between 1979 and 2006. So you’re seeing a real drop off in the wages coming into that sector.

  6. What do you make of “Our story of bus drivers reveals the existence of the proverbial elephant in the room. It shows that the living standards of the huge majority of people in rich countries critically depend on the existence of the most draconian control over their labour markets – immigration control. Despite this, immigration control is invisible to many and deliberately ignored by others, when they talk about the virtues of the free market.” 
    ― Ha-Joon Chang, Twenty-Three Things They Don't Tell You about Capitalism

    A bus driver in Sweden earns 50 times that of a bus driver in India?

  7. Eric Kaufmann's book Whiteshift analyses resistance to immigration. Brexiters would take a 5% drop in income. Trump voters were motivated by nativism. It is about culture and values (human nature). People decide who is us and who is them and what path makes them us. A nation is a voluntary association - a social grouping. Essentially we are still a primate. In-group attraction is independent of out-group derogation. High income managerial elites have made the West "just -so" for themselves but created a societal dead zone for the majority ethnic group.


Hi - sorry about the Captcha step for real people like yourself commenting, it's to baffle the bots