By Rachel Hodder*
If migrants are generally good for New Zealand and already contribute substantially to the public purse, why on earth would The New Zealand Initiative have suggested a levy on new migrants?
The Initiative’s report on immigration, The New New Zealanders: Why migrants make good Kiwis, finds that New Zealand’s current immigration system is broadly successful but some tweaks could be worth considering. Our suggestion of considering an immigration levy to help fund new infrastructure has been received with mixed reviews. Multicultural New Zealand was disappointed that we recommended a levy despite finding that immigration is a boon to New Zealand. Similarly, Immigration Minister Michael Woodhouse noted it would be unfair to levy migrants - who already pay more in net taxes.
We view the levy proposal as an excellent example of policy in second-best worlds. The best solution to one specific problem viewed in isolation may create three different, bigger problems elsewhere. Analysts look instead to a ‘second best’ solution which does the best job of solving the specific problem while causing the least damage elsewhere.
Second-best solutions are seldom popular and a levy is definitely in the realm of the second best. Without considering the second best, it would seem puzzling that our report suggested a levy on migrants while arguing that migrants make a strong contribution to New Zealand and that most of the concerns about immigration are overblown. High population growth has been causing strain on New Zealand infrastructure. This is not the fault of migrants, nor is it the fault of those born here. But it is a problem that needs to be solved. And it is understandable that New Zealanders may not welcome more people into the country if they perceive immigration (rightly or wrongly) as a burden on themselves.
We see a levy as a compromise. It could ease the financial burden on existing residents while accommodating a relatively liberal immigration system. In this way it may also hit another bird with the same stone – it may ease integration by persuading more New Zealanders to see immigration positively.
Integration is a two-way street. Integration is more likely to succeed when the existing population is welcoming to migrants. Our report does highlight that the vast majority of New Zealanders are positive about immigration and the broadly positive reception we have had to our report confirms this. Unfortunately, not all New Zealanders agree. And legitimate concerns over infrastructure spending act as a respectable way of framing anti-immigration stances.
Our recommendation then also stands as a challenge to political parties that have been using infrastructure burden as justification for cutting immigration. If that is the genuine reason you believe immigration policy needs to be adjusted, then why not explore this option first?
Voters should be sceptical of the motivations of politicians who argue fiercely to restrict immigration because of infrastructure costs, but who will not consider the simplest way of addressing infrastructure costs. Maybe, just maybe, some of those stated concerns about infrastructure costs are simply a mask hiding ulterior motives.
Responding to our report, Prime Minister Bill English said that a new levy would need a lot of consideration and would have to meet a high bar. We completely agree. And we invite those who have been blaming migrants for clogging up the roads and hospitals to start considering it.
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*Rachel Hodder is a research fellow at The NZ Initiative. The NZ Initiative writes a fortnightly column for interest.co.nz.
43 Comments
Immigrants pay for all the infrastructure they use when they pay rent to their landlord. Rental value reflects the value of the public infrastructure (see Law of Rent). It's not their fault that NZ's government insists that these values should only benefit private landlords. In other countries (such as Singapore or Taiwan), the government captures much of the community-created land values and funds the infrastructure without having to impose excessive fiscal burdens on workers and businesses.
Not true at all. Infrastructure is paid for through years of taxes. Instantly increasing population does not give any additional capital to make infrastructure improvements. Rates and taxes are barely at a level that can maintain existing services. Debt is generally needed to make capital improvements, which require endless growth to ultimately pay for.
It is never ending black hole that our economy is falling into.
When is the NZ Initiative going to provide some evidence that multi-decade large-scale non-citizen immigration is an economic benefit to the average New Zealander...let along all the negative externalities it causes that are not measured by GDP.
"As a rule, misinformed people do not change their minds once they have been presented with facts that challenge their beliefs. But, beyond simply not changing their minds when they should, research shows that they are likely to become more attached to their mistaken beliefs". thesocietypages.org
The "negative externalities it causes that are not measured by GDP" matter most to me. In my travels around the world I've noticed that a poor man can live well in an area of low population density and high resources, whereas a poor man lives miserably in an area of high population density and low resources. Hence as NZ's population increases, much that we value is eroded away (open space, 1/4 acre section, fishing, hunting etc etc).
Exactly Kauri. New Zealand needs a stable population policy. My preference being a population target of 2 million total population, but I would settle at five million.
Most of everything would be much better if we did not have to deal with this short term nuts population growth and the overload on our environment and economy that is building long term.
I don't think the debate needs to be about 'immigration' - it needs to be what is our 'desirable population target'. immigration is a side issue. Of course there would still be inflow/outflow at the border and that would be healthy for us.
Yes, it looks like they've simply gotten stranded on the reef of labeling anyone who suggests lowering the rate of immigration as xenophobic. They highlight the need for integration, but don't figure in the fact that integration depends on a volume that not too high for integration to be able to take place.
When I was growing up at school many, many of my friends were of different ethnicity - and some were migrants - but what made us all Kiwi was that segregation and enclaves were not occurring, rather that we were all living together and mixing and creating "Kiwi" culture.
Running immigration at such a high level that this does not practically take place - rather you have some of the flight we're seeing take place in some school zones - means you just end up with segregation and enclaves, not an improved and evolved "Kiwi" culture.
Agreed Rick. I enjoy meeting and befriending new people (wherever they come from) however, nowadays I feel overwhelmed at times and sometimes give up. Integration requires forming meaningful relationships with new-comers but it is becoming difficult with the sheer numbers. Sure they can integrate with those who have arrived only a few years prior but then they miss out on developing an understanding of the rich (and sometimes tumultuous) bi-cultural heritage many of us share and thus without understanding where, as a nation, we have come from it becomes very difficult for us all to agree on where we should go...
It could be argued that immigration, housing and infrastructure are the hot points for this year election, there has been no congruent policy from this government to effectively manage all of them effectively, leading to demand and now supply imbalances that have caused problems in all of these areas.
As a kiwi born citizen, I'm all for immigration some of my best friends were born overseas, but as a young family we feel the pain of the imbalances leading us to have to move out of my birth city due to the costs of housing,
National has pushed their 'supply-side' argument which in my opinion has failed miserably because:
a) Prices are already too high especially in major cities, locking first home buyers out
b) Demand from immigration is still increasing at 900 people per week in Auckland, yet only enough homes are being built to house 200-350 of them... exacerbating the problem - and worst still it is still not being acknowledged or addressed by the government
c) All forms of infrastructure including houses take at least 6-9months to bring online assuming you have no problems and regional infrastructure including schools, roading and public transport are complex problems that take 3-10 years to materialise
d) Speculation has been rampant on rapidly rising house prices especially in the last 3 years, leading to even more debt in the system and foreign capital (hard to deny when most funding comes from overseas) chasing 'easy' capital gains
e) House price to income levels at 10x in Auckland which is in the 5 least affordable cities in the developed world compared to 300 cities in Australia, Canada, America, UK you name it...
f) You have to question who benefits from this situation? the local workers to fuel the economy and are the backbone to consumerism and what effects it has
We have a short term immigration problem that is not being acknowledged or addressed (demand), while the supply side has very long lead times to eventuate, so there is no short term solution in sight with this government
I hope it changes for NZers sake with a more balanced approach that levels the growth and makes it affordable for NZers to live in their own cities
One group benefits from the current status quo: those who were born at the right time to get into property before the influx of a) foreign direct investment and b) increased demand via immigration. Two quite separate things.
Property investors will vote for any government who promises to keep inflating their portfolios, regardless of the cost to young and future generations of New Zealanders. It's simple, empty self-interest. The current National party government - who campaigned on the need to urgently address the housing crisis - is happily selling New Zealand out from under young and future Kiwis to keep and hold the votes of their investor voters.
We need to address both immigration volume / mix, and the direct buying up of New Zealand by foreigners who are not immigrants (storing money here) or are looking for a bolthole for the future.
'High population growth has been causing strain on New Zealand infrastructure. This is not the fault of migrants'
Hodder artfully uses the word 'fault', in an attempt to position the issue in a way that appeals to Kiwis sense of fair-mindedness. She insinuates that people objecting to the strain being place on infrastructure by immigration are somehow making a moral judgment. Which is emotive nonsense. It is simple cause and effect, nothing more.
Proposals from NZ Initiative and other lobbyists for infrastructure levies or other solutions, are all predicated on 'immigration being broadly successful'. As though economic growth were the only criteria. As though a the significant segment of the community that don't agree with the radical re-engineering of NZ society being imposed on us, should be ignored.
Easier still just cut immigration. Where is the return on the investment for the many $10's of billions that we are having to fork out to provide housing, services and infrastructure for them. After all the bulk of the income that the country generates comes from tourism and agriculture.
Should be blame immigrants or the irresponsible and incompetent Government? We should attribute blame to both and as Chris-M has said above it's easy to cut immigration. Cut immigration and invest in infrastructure to provide a rational solution. The National Government's race to the bottom is bad for New Zealand.
It doesn't take much to ask a difficult question about super. We need to start putting more money aside about the budget. Hmmm, no room to move with the budget. We either increase tax (we could put it back to what it was), or increase compulsory savings to Kiwisaver. Obviously we'd need to bridge the costs of those that were older when they joined Kiwisaver, hopefully without having to resort to excessive borrowing.
I'm sure there are other ideas people could come up with that are better than the current ponzi scheme. No matter what I think there will be hardship involved in fixing the problems.
And, how many immigrants are actually paying into the pool, after you account for low incomes, bringing in parents, and WFF? The whole system's predicated on having a pool of taxpayers supporting the oldsters, but there are reasons to be very skeptical as to whether it actually works that way.
err, no. Quite wrong. The cost of NZ Super is currently $13 bln per year. And rising by about $800 mln per year (+6% pa). No drop in the bucket. Compared with a ten year infrastructure plan of about $100 bln, NZ super will cost $175 bln.
The oldies built and paid for most of this countries infrastructure David. When National took over from the last Labour Gvnt the countries dept was less than $10 billion. Those oldies paid their taxes and built that infrastructure being told that they would have Super.
If we hadn't had artificial population growth that infrastructure would still be adder quit. The younger NZers coming through didn't need to build dams and harbor bridges so they could afford to support the oldies in their sunset years.
As usual, erroneous comparisons David Chaston.
If we had less (and better targeted immigration) the cost of super would be much less than $13b a year now.
We are letting migrants come here in their 40s and 50s often with only low earning potential, who barely make positive net tax payments over the time they have been here yet then receive full entitlements in relatively short order.
The infrastructure spend is only the tip of the iceberg in regards migrant costs. We have increased, health, education, welfare and pension costs plus all the infrastructure - schools, hospitals, road, public facilities and public services. Huge costs, little benefit.
Migration needs reviewed objectively, without the liberal elite preaching their social re-engineering nonsense.
Anyone with half a brain can see that immigration is crippling the western world, burdening states with future dependants, destabilising populations and straining infrastructure and resources.
The solution is a New Zealand First policy (not the party but a policy that puts NZ first) - if there's immigration it needs to be of benefit to NZ, if not and you want to move here, then you pay a levy - that way we can avoid the world's poor sucking the life out of our economy as has become the norm under the Key government.
Just out of interest how much would this levy be? $50K or more each? Surely it would be substantial if we are talking how much money does it take to completely set up the country for one more person to live here - their portion of roading, health, waste, water, electricity etc. These systems aren't cheap. Maybe that would actually halt immigration if the levy was a true representation of the costs of extra people?
$50,000 wouldn't even look at it Joneses. Auckland's population growth for the last 15 years now needs $100 billion spent on infrastructure to upgrade the roading etc back to the functional standard of 15 yrs ago. If NZ has 1 million tax payers that is $100,000 each. The 100 billion deficit in infrastructure is National governments own statement. When an immigrant steps off the plane they currently get this countries infrastructure for free. If the immigrant is educated with 40 yrs of tax paying ahead of them, then fair deal. As long as where not robbing developing countries of their educated young people.
At the moment a 55 yr old immigrant can step off the plane, get our infrastructure for free and then hook onto super and healthcare at 65, that is a rort!
As neo-liberals, they support the free flow of people and goods and services. Relatively liberal migration settings fall within this.
They then argue that this is fine if you have a low regulation planning environment, as the market will rapidly respond with housing supply.
It's a one size fits, simplistic and dogmatic view that fails to consider the nuances that vary from country to country and city to city.
But really, there are two reasons that they support open immigration and easy foreign purchases of land.
1. They drive wage costs for businesses down (and what Kiwis receive for their work).
2. They drive property portfolio prices up (while locking young and future Kiwis out of home ownership).
That's it, in a nutshell.
You are bang on Rick. Your generation needs to mobilize and vote. Your generation needs to not listen to mainstream media. Our mainstream media which is meant to be the eyes and ears of democracy are not doing their job.
Classic example; Mike Hosking TV 1 repeating the prime minister that we have to import labour as unemployed kiwi all have drug problems and are unemployable. Ministry of Social development figures have the drug test failure rate at 1 in 200, that is 0.05%.
Mike Hosking should lose his job. Journalists have a responsibility to check their information. Boycott TV 1.
The Prime Minister through 90,000 young unemployed NZers on the dust heap with his statement. TV 1 repeated it.
This is a crazy idea , how do you decide on who pays what ?
A means test ?
Lets be frank the majority Indians , Malays , Indonesians , Pacific Islanders and Fillipinos , along with South Africans (following their currency rout) are simply way too poor to pay such a levy .
We see them working as Fuel station attendants , packing shelves in supermarkets , working on building sites, flipping burgers or doing other work that is not well paid .
Not signs of affluence
I reckon many Chinese are too poor too .
Boatman, the migrants NZ needs should benefit NZ, not just benefit themselves.
If they are 50 and can't afford a $400,000 levy say, then don't come.
If they are 40 and can't afford a $150,000 levy say, then don't come.
If they are 25 and have recently graduated from a US med school then, welcome in!
If they are 25, no qualifications, no money, no English - no thank you either.
Here's another idea - if immigrants are so beneficial to NZ set a level of tax contribution - say the tax equivalent to earning $100,000 pa , grant a temp 5 year permit to immigrants which is validated if they have contributed that amount of personal income tax in the period with only a 1 year extension after which they either get a permanent permit or return home.
Blaming immigrants is like blaming children for being born.
The levy should come from the people who advocate for an increased population/mass immigration. How about we levy the fine people at the New Zealand Initiative and all the companies they represent. Plus the national party politicians could chip in as well.
Your thoughts?
Reading Dr Rachel Hodder's pressing the Initiative's party line .....
If we charge a capitation levy and allow more and more cars on Aucklands motorways all will be fixed ....
I am reminded of The Liverpool Football Club's disasters of allowing more and more in
Hillsborough Stadium in England
Heysell Stadium in Brussels
The whole immigration plan was sold to the public post-GFC as a way to plug advanced skill shortages in New Zealand. ICT, engineering, external auditors, medical professionals were the sought-after professionals under this revamped policy. Economist, policy makers and the public were comfortable with the immigration rate and the economic prosperity that came along.
However, since the 2013 change of student visa rules, immigrants are filling up every skillset out there. The unemployment rate is not a good measure of success here, which government officials frequently quote. A closer look at the productivity level of NZ, which ideally should have risen under 'high skill' migration, has dropped in the past 3 years. Cost of living has been increasing sharply with modest increases in wages due to increased competition for jobs. Criminal activities involving immigrants (especially at workplace) are frequent and we have been underperforming on other social measures. This shows a decreasing quality of life overall.
The GDP growth has relied solely on the basis of more hours worked as a result of more low skilled job creation which leads to further more low skilled jobs, according to Productivity NZ. This vicious circle will have adverse repercussions in the not so distant future. But such sensationalist organizations like Multicultural NZ think celebrating Chinese New Year and Diwali in Auckland makes New Zealand a better country.
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