Independent research organisation the New Zealand Institute of Economic Research is calling for a big increase in the net rate of migration into the country, saying it would boost the economy.
In a new "Insight" research paper NZIER senior economist Kirdan Lees said that increasing net migration would lift incomes "not just for immigrants but for the native population".
Lees did detailed modelling based on 40,000 net migrants a year and said that an additional 40,000 people a year for 10 years increases GDP per capita "by a chunky $410 a year".
“So let’s grow for it and plan to entice more migrants,” he said.
In recent times New Zealand has often had a net migration outflow as more Kiwis head overseas - particularly to Australia.
At the moment, however, net immigration is growing strongly as fewer Kiwis head across the ditch and more immigrants settle in the country.
The biggest net migration gain the country has ever had in a 12 month period is 42,500.
Lees and the NZIER are talking about the country pursuing a policy of a net gain of 40,000 every year.
'More ambitious policy'
"A more ambitious population policy is needed to increase New Zealand’s population," Lees said.
"New Zealand’s point-based immigration framework gets the mix of migrants required about right. But we need to do more to keep lifting the number of migrants that come."
He said almost one-in-four New Zealanders were born overseas, but the current policy of a gross 45,000 to 50,000 migrants a year was too low and very arbitrary – bringing in more migrants would lift incomes.
"Immigrants provide firms with new skillsets, allowing firms to access new markets, new ideas and new products. A deeper population base also helps firms to get big and offset initial start-up or fixed costs that can be high. But our work shows that the impact on incomes outweighs the inflationary impacts of migration."
International studies also point to positive effects of immigration, he said.
How might immigration boost incomes? In the long-run, immigration can help boost incomes because of five key channels:
- Providing firms with new skills: Immigrants offer skills that are different but complementary to native workers, boosting the possibilities of what domestic firms can produce. Immigrants also deepen the labour pool, which helps firms expand and enables a better match between workers and firms.
- Increasing innovation and entrepreneurship: International evidence suggests immigrants lift entrepreneurship through their networks and access to new markets and products.
- Lifting scale: New Zealand is both small and distant from the global stage. Growing the population through immigration can help New Zealand firms scale up.
- Increasing competition: Larger domestic markets increase competitive pressures that force successful firms to innovate to survive and then grow.
- Increasing returns to investment: Immigration lowers average per capita costs of high fixed cost physical infrastructure (such as motorways) and institutional infrastructure (such as a central bank).
In his paper Lees cited a variety of examples from overseas, which demonstrated that migration increased productivity and incomes.
And he said that closer to home, Australia provided a useful case study since it also had a population with a high proportion of migrants and used a points-based immigration framework similar to New Zealand’s.
"In 2006 Australia’s Productivity Commission concluded skilled migrants lift labour participation and increase the capability of the labour force, providing a “positive, but small” increase in productivity. So on balance, international evidence points to benefits from immigration to both immigrants and the native population in terms of a lift in income per capita."
Testing the effects
In terms of testing the effects of migration gains in NZ, Lees said a model was formed using GDP, population and immigration data since World War II and then the question posed: "What would happen to per capita income, in real terms adjusted for inflation, if, over a period of ten years, we gradually raised the rate of net immigration to almost 40,000 additional migrants each year?"
Lees said 40,00 was chosen as the example because it is "significantly higher" than the average net annual immigration flow of 15,000 New Zealand has experienced over the past dozen years, and near the peak of the most migrants we had in any one year.
Lees said the model demonstrated that a "shock or change" to net migration shows that GDP per capita increases "and the accumulated response over 25 years is not trivial – $10,240 in today’s terms or a little under a quarter of what New Zealanders produce on average each year".
"That means every New Zealander produces just under $410 dollars of additional output each year."
Lees said that the current long-term government policy target of 135,000-150,000 of inbound migrants alone appeared to be driven "much more by perception of what is politically tenable than economics".
'Income boost'
"We can boost incomes by growing our population and should look to an immigration target that achieves more ambitious population growth. The target should be tuned to population outflows so the New Zealand population grows each year," he said
Earlier work done by NZIER showed that strong migration growth rates were "entirely plausible".
"Politically there is no easy time to increase immigration," he said.
"In bad times migrants are seen as taking jobs and increasing unemployment even though there is little evidence that immigrants negatively affect either the wages or employment opportunities of New Zealand born workers."
But Lees said with unemployment now on the way down, and employers again looking for skilled labour, this was not going to be a worry.
Housing worries
"In boom times some worry about the pressure immigration seems to put on housing, infrastructure and publicly funded services (like schools and healthcare). We should expect some impact of immigration on the price of housing from the need to home more people and partly because incomes are higher," he said.
"But our work shows immigration raises incomes of the native population – above and beyond any requirement to boost infrastructure or the need to divert resources towards building houses. So fears of immigration overburdening the economy appear overstated."
Lees said on this issue the real question was improving flexibility in infrastructure.
"If it is poor it needs fixing, not sheltering."
Over the next few years net immigration looked set to increase strongly even if the government did not change its immigration quota now.
New Zealand’s high terms of trade would boost incomes, encouraging migrants to come or New Zealanders to stay, just when Australia’s boom was starting to wane.
"Our assessment of the international evidence and our own New Zealand specific work together suggests a positive impact from this immigration on per capita income. So the sooner we attract new migrants to materially lift immigration the sooner we lift average incomes for all New Zealanders," Lees said.
Net long term migration
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39 Comments
What is this, the morning for codswollop?
There are no economic benefits of migration whatsoever.
Look at parts of NZ such as Timaru or Dunedin or Invercargill where immigration is very low or neglible.
In those areas, housing is very affordable, jobs are relatively plentiful, the standard of living is good and despite wages being less than the big cities people are not struggling a lot like in Auckland.
Also these areas are filled with opportunities and potential for the locals in both business and in lifestyle.
Migration has caused hardship for the original Aucklanders that didn't own vast chunks of real estate.
Growth can occur without migration, any argument to the contrary is complete codswollop (which must of been on this morning's menu at interest.co.nz).
Better to keep skilled kiwis here and encourage the ones in oz to return.
Specially since we arent valued as full citizens there. Stop the free flow of our skilled people in the prime of their working lives by scrapping the trans tasman agreement. Oz gains a lot out of us growing healthy and educated young adults to work for them knowing that half will eventually go home, maybe to retire. If the climate keeps going the way it has recently Australia may eventually need us more than viceversa and we don't want 20M of them able to just walk in.scrap the agreement now.
Even if there were finances advantages (and there are none, just more poverty for the locals without foreign degrees and foreign made cash).... then RBNZ would just up the OCR etc to keep inflation in check. Who would be worse off? Existing kiwis. How did with end up with those lunatics at the helm of NZIER
I think you will find, that if no filthy rich immigrants, no rise in real estate prices in a free land.
(Free...yeah right).
So the current over leveraged rich in the free land cannot pass on the real estate parcel to the next rich sucker off the incoming flight from their previous abode, where they had bouts of stealing from the poor to give to the upper classes, where the citizens are not free to think for themselves, but dictated to or brain washed into submission.
In some countries it is called Capitalism. In other countries Communism, or a Dictatorship.
Some evene call it a Republic, or a Democracy. No such beast.
Same rules, different cronies to keep the game afloat.
It is called a money go-round.
Capitalism sucks. Communism sucks. So does Republicanism.
Sucks Capital from the mortgage slaves to feather the nests of the landed gentry.
Some people will do anything for money, even jump ship to a free land, where they do not feel threatened, because we are all one Nation, one vote, one rule for all.
Yeah, right...
Except one Day....when the true suckers come to life, in this free land.
Where votes can be bought, so can each and every politician, that supports our version of Crony Communism, sorry...Crony Capitalism, sorry, Crony Democracy, can feather their nest, to their hearts content.
Get the Visa, Pass the parcel.
Pass the test, pass the buck, ? Thanks.
You are very Welcome!.
Did you bring your servants?..
Why naturally. That is what us cronies...do.
It's a free country after all. Wasn't it.?
Get off the grass
The fallacy of fallacious opinion pieces
NZIER's Statement of Purpose is to provide impartial economic analysis to add certainty to business decisions and policy
Independent research organisation NZIER calls for a big increase in the net rate of migration into the country, saying it would boost the economy Kirdan Lees said that increasing net migration would lift incomes "not just for immigrants but for the native population. The sooner we attract new migrants to materially lift immigration the sooner we lift average incomes for all New Zealanders," Lees said.
There is a real problem with releasing this type of blurb by organisations such as NZIER which give it some authority, and then blindly re-published by outfits like interest.co.nz without any serious examination
Why I dont believe this nonsense
Did you know, thirty years ago, New Zealand was a higher wages economy than Australia
New Zealand wages and salaries were higher than Australian wages and salaries
Today, thirty years later, after many years of open door policies, and immigration, and huge increases in the population, 40% of whom were not born in New Zealand, the situation has reversed.
After 30 years of high immigration, 40%, why hasn't it happend?
What has happened is, Australia is now the high wage economy versus nz the low wage economy.
I am unconvinced. Agree with Chris_J
Why don't they do the research? Where is the evidence?
Look who is doing the trumpeting, non-new zealanders, including interest.co.nz
Just because NZIER, Lees, Eaqub, Hargreaves, and Chaston say it's so doesn't make it so.
The article is not based on any analysis. It is an opinion piece with no basis in fact
I intentionally referred to wages and salaries not GDP
GDP includes capital goods including importation of capital and capital goods
For the past decade foreign nationals have poured obscene amounts of capital into australia during the establishment and expansion phase of extractive mining capacity, which in turn has inflated GDP making Australia look very good, very propserous indeed. BHP, Xtrata, Rio
That has now (suddenly) dried up. They've moved from the establishment phase to extractive phase. All automated. I'm anticipating Australia will cut back savagely on immigration over the next decade. You watch.
Australia has a far deeper and stronger economy than just banks and resources ... in fact , it's a ruddy miracle that the Kiwi peso has gotten so close to parity with the sunburnt bushfired Aussie-digger-dollar ...
... and lest we let facts get in the way of a good old " bash the immigrants rant " , 25 % of Australians are foreign born , according to their 2011 census .... versus 23 % for NZ , foreign born , during our 2006 census ....
Absolutely no difference at all between our two fine nations in % of foreign born citizens ...
... so you'd best find some other scrape-goat to vent your frustrations on , for the ills that you think have beset this beautiful land , girt-by-sea ....
Personally , I reckon Godzone is an brilliant place to be ..
Is it possible we have comprehension issue here GBH?
I am not racist. I am not against immigration. So long as it is done sympathetically, in keeping with the location and the environment, and the capacity to accomodate and assimilate without disruption.
I am on the record here many times saying that immigration should be suspended until Auckland can cope with the influx of newcomers (I wont use the word unfettered out of deference to your grammatical sensitivities)
Your use of percentages 23% and 25% above is deceptive.
To use Basel Brush 3rd's oft stated quote most newcomers into new zealand arrive in auckland and dont move any further, locating themselves no further out than 1 days walk from auckland international airport. In other words there is a disproportionate concentration in the one metropolitan area while your 23% is calculated accross the whole population or perhaps just over the 4 main cities of Auckland, Wellington, Christchurch and Dunedin. Whereas in Australia there are 7 Metro areas and the influx tends to be spread out over those metro areas with an emphasis on Sydney, Melbourne and Brisbane, with less into Adelaide and Perth. In which this case the 25% you have used is fairly representative of an even distribution right accross those metro areas. For context, read Chris_J's post at the top of this thread.
You have never disclosed how many years you have lived in Auckland. Actually living there that is, not just passing through, on your way to or from Rangiora.
Auckland today, where most of the immigration over the past 10 years has gone, is under stress, due to the concentration of migrants in the one place.
Now, one solution would be to require all new arrivals since 2001, to pick themselves up and under forced relocation rules, move to Rangiora, together with all new arrivals for the next 10 year also being required to establish themselves in Rangiora.
I would have no concern about that at all. I would shut up. That would be your problem.
Out of sight out of mind.
"I am on the record here many times saying that immigration should be suspended until Auckland can cope with the influx of newcomers "
Auckland will be able to cope better with the influx the next time the economy tanks and the locals flee to OZ. Then people will be saying "i'm not racist, i will welcome them quite openly once we have enough jobs to go around".
If you are government and Treasury produces a report on say the economic benefits of irrigation infrastructure that doesn't support your policy, NZIER can be relied upon - on suitable reward for services - to produce something with a better policy fit.
Today NZIER on the benefits from immigration.
Lets repeat history shall we , just ask the Maori elders what happened when the floodgates of European settlement were opened.
The newcomers had no respect for the local culture , ransacked the land and property rights and had no repsect for the land they took , took up congress with the Maori womenfolk , and generally caused havoc .
And now we want a whole new group of migrants to usurp the the statuis quo.
Fabulous nonsense from Independent research organisation the New Zealand Institute of Economic Research.
Not a single mention of the rise of Robots, Monoply, dupoly markets. No mention at all about New Zealands" killer apps" the things about NZ that help us to survive and thrieve in the world. How to build on these things that are special about New Zealand and New Zealanders.
Finally no talk at all about the rate at which New Zealand can assimilate new people. Because you can bring in as many people as you like- and we have , but at what point do you no longer assimilate them- they are just there, and do you want to assimilate them anyway- is that somehow racist? But if you don't actually assimilate them then what is the point in them being here? I understand why people from poor countries (most of our immigrants- Including those from the UK) would want to come here, but what is the point in them being here?
Cheap labour does not help- it can never be cheap enough to compete on wage rates
Cheap lablour means holding off investment in labour substituting technologies- look at dairy farms- cheap lablour in the main- no robots- where are the robots?
Assimilation is the big one- new people and their children will need education- our schools have to educate people from a very wide range of cultural background, there is a really cost to this, it is much much harder/more expensive/poorer outcomes to teach very diverse groups than very similar ones. Did the New Zealand Institute of Economic Research include this cost- probably not.
The Japanese Sakoku or "chained country" where foreign immigration or emigration was banned was a period where Japanese culture flourished and they managed to avoid being involved in many conflicts that affected the rest of the world (it's just a shame their world view changed by the end of the 19th C).
"45,000 to 50,000 migrants a year was too low and very arbitrary"
Yes and 85,000 to 90,000 choosen "because it is "significantly higher" " is not arbitrary how? I could just as easily say it is 'too high', or still "too low"
Why don't we aim for 500,000 per year? All these things that are better with 90K/year are even more better than 500K/year. Then eventually we will all be super rich, and can afford to emmigrate elsewhere to a country with less than 400,000,000 population and enjoy the kiwi lifestyle we used to have here.
Whilst I don't think economic justfication is a great reason to promote immigration I have no problem with welcoming 40,000 extra people to our country.
- Worker 'supply' is balanced by their 'consumer' family.
- Australia has run aggressive immigration for a long time and hasn't suffered economically.
- Immigrants lower the average population age and help balance our ageing poblems.
- I have worked with a lot of immigrants and they almost all been very hard workers.
Depends how long your longer term and how willing you are to predict the future I guess. But in a sensible time frame, from the Australian experience:
More than half are aged 15 to 34, compared with 28 per cent of our population. Only 2 per cent of permanent immigrants are 65 or older, compared with 13 per cent of our population. So immigration is making a small contribution to slowing the ageing of our population.
http://www.smh.com.au/news/opinion/backscratching-at-a-national-level/2…
I am fine with migration. I think foreign capital, unaccompanied by people, creates distortions because of unequal access to cheap sources of capital compared to locals, but people coming to live here I am fine with.
That said, I think this article is rubbish.
For one thing New Zealand has the fourth highest number of foreign born citizens in the OECD. Using firgures I can quickly google:
see http://www.oecd.org/migration/mig/33868740.pdf
and we are 20th in GDP per capita
http://en.wikipedia.org/wiki/List_of_OECD_countries_by_GDP_per_capita
Basically, if you think there is a simplistic relationship like this, then the kind of migrants that come to New Zealand (19.3% foreign born) give us almost exactly the same benifit as Spain (5.3% foreign born).
I'll put some hard numbers on this later if I can be bothered.
Just look at the percentage of foreign born citizen to GDP per capita, the general R squared value is about 0.5, which isn't too bad, but if I remove Luxembourg (as a tiny European tax haven filled with foreign born citizens) the R squared falls to 0.3. So all New Zealand needs to do to is be a tax haven country in the middle of Europe (Switzerland occupies a very similar space to Luxembourg as another tax haven high GDP & high number of foreign born citizens country, which is a little ironic given their vote to limit immigration). More importantly it shows how sensitive this kind of modelling is to exactly which countries you use.
Extended this spurious model even more, if GDP per Capita is conditioned on migrants, and number of citizens foreign born is representative of long terms migrations, then the migrants that have gone to Norway have contributed orders of magnitude more than the migrants to its immediate neighbour Sweden.
But really, I'm just highlighting the methodoligical problems rather than actually believing this.
More lets have more growth. Have we got richer per capita from inward migration in the last 20 years say? Someohow, no I susect not. We nned to realise that we are rich per capita from our natural resources, more ppl means less resources and less wealth per capita.
Sorry chaps but the economic model of expotential growth on a finiate planet is finshed.
Suits businesses of course, bringing in ppl is cheaper for NZ busineses rather than upskilling its workforce and helps keep wages low. Of course then our skilled ppl travel abroad to get a decent wage. This is like the so called trickle down effect, there is none, it just allows businesses to employ cheap labour. What we need is to upskill and keep the people we have, invest in NZers and not use cheap imported labour to maximise short term profits using up finite resources we are running out of.
regards
This discussion highlights the importance of sensible urban planning. When cities adopt urban containment policies, additional demand from new immigrants results in increased housing costs rather than an increase in new dwelling construction.
With prices spiralling out of reach in Auckland, it's hard to blame locals for feeling resentment towards immigrants, but they should direct their anger at those who have turned the city's housing market into a zero-sum wealth transfer.
The Auckland Council should send a team to Houston, Dallas-Fort Worth and Atlanta to find out how those cities have managed to accommodate large swathes of immigrants (including migrants from other US states) without house prices bubbling or infrastructure costs blowing out.
I eagerly await the "no-one wants to live in those cities" comments.
I will vote for the party that undertakes, by whatever process, to slow the rate of migration :-
- Until we have got on top of the housing backlog , and ,
- They identify and keep out those migrants with low tax -paying morality , and genarally sharp business practices , who are happy to take the state's benefits , free education , low cost healthacre, rule of law and handouts , but give nothing back
Migration and Macroeconomic
Performance in New Zealand:
Theory and Evidence
Julie Fry
New Zealand Treasury Working Paper 14/10
April 2014
2.3
Changing policy expectations
While useful, models do not capture all the effects policymakers expect from immigration.
When New Zealand moved to increase the numbers and skills of immigrants in the 1980s
and 1990s, policymakers appear to have considered that these changes had the potential
to have major beneficial impacts on the New Zealand economy, reinforcing the gains from
22
the other liberalising and deregulating economic reforms undertaken during that period.
At that time, it was considered that skills-focused inward migration could: improve growth
by bringing in better quality human capital and addressing skills shortages; improve
international connections and boost trade; help mitigate the effects of population ageing;
and have beneficial effects on fiscal balance. As well as “replacing” departing
New Zealanders and providing particular help with staffing public services (for example,
medical professionals), it was believed that migration flows could be managed so as to
avoid possible detrimental effects (such as congestion or poorer economic prospects) for
existing New Zealanders.
Since then, New Zealand has had substantial gross and net immigration, which has been
relatively skill-focused by international standards. However, New Zealand’s economic
performance has not been transformed. Growth in GDP per capita has been relatively
lacklustre, with no progress in closing income gaps with the rest of the advanced world,
and productivity performance has been poor. It may be that initial expectations about the
potential positive net benefits of immigration were too high.
Based on a large body of new research evidence and practical experience, the consensus
among policymakers now is that other factors are more important for per capita growth
23
and productivity than migration and population growth. CGE modelling exercises for
Australia and New Zealand have been influential in reshaping expectations.
http://www.treasury.govt.nz/publications/research-policy/wp/2014/14-10
So how does this guy manage to overturn the concensus (and get reported here there and everywhere)?
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