Bernard Hickey: We need doctors, not bar staff

Columnist·Herald on Sunday·

11 Jun, 2016 05:00 PM4 mins to read

The top three 'essential skill' immigrants to New Zealand in 2014/15 were chefs, dairy farmers and cafe or restaurant managers. Photo / Getty Images

Opinion by Bernard Hickey

Bernard is an economics columnist for the NZ Herald

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In all the hullaballoo this week about New Zealand's record high migration, a strange fact has emerged.

The number of approvals for permanent residence has fallen from more than 50,000 a decade ago to little more than 43,000 in the last full recorded year.

It's mainly because skilled migrant approvals for permanent residence have fallen from more than 35,000 to fewer than 23,000 in that time.

Say what?

Surely Winston Peters has been banging on about the ruinously high migration approvals and how it's driving up house prices and clogging up Auckland motorways?

Peters has been on a very high horse about migration, but his main concern is the astonishing growth in the number of working holiday and foreign student visas, particularly over the past three years.

The Government likes to talk about the amazing turnaround in net migration of New Zealand citizens to and from Australia in the past couple of years, and that's true to an extent.

Less than 50 per cent of the 72,000 jump in annual net migration since 2012 was driven by these transtasman flows and no one is suggesting these can or should be stopped.

But that still leaves more than 36,000 extra new migrants over the past year, compared with four years ago. Who are they, if they're not permanent and high-skilled residents?

The Ministry of Business, Innovation and Employment (MBIE)'s figures show international students made up about 20,000 of the increase. The rest came from higher numbers of people on temporary work visas.

These include those here on a large variety of working holiday schemes and on temporary "essential skills" visas, which conjures up images of doctors, filmmakers and software engineers.

The truth is less glamorous.

The occupations of working holidaymakers and students able to work here aren't given, but anyone frequenting the cafes, bars, dairies, Uber cabs and service stations of Auckland, Wellington, Christchurch and Queenstown will have a reasonable idea.

And so does Treasury, which was this week an unusual ally for Peters, offering sustained criticism of the surge in temporary and student migration and a proposal for new entrepreneur migrants.

It released a series of papers over the past year that showed its growing discomfort with the increase in low-skilled migrants and the risk that they are displacing local workers and keeping wages down.

"Current policy settings may not be doing all they can to support the growth of higher productivity firms and industries, including facilitating the flow of higher-skilled migrants to sectors of the economy where skill shortages may be acting as a significant constraint," Treasury officials said.

"In addition, our current approach to selecting migrants may have encouraged reliance over time on lower-skilled labour in some parts of the economy.

"This may have been discouraging some firms from either increasing wages and working conditions or investing, either in training existing workforce or in capital," they said.

This is the crucial point.

Helping employers to bring in low-skilled migrants instead of investing in new technology and becoming more productive so they can pay local workers more is essentially stunting our productivity and real GDP per capita.

In rejecting New Zealand First's calls to slash migration, John Key said in Parliament this week the Government did not always accept Treasury's advice: "I think New Zealand is a far better and richer country for having migration in the way that we do."

"Yes, it puts some pressure on the system and we just simply need to fund that or build more houses," he said.

Key is right about the pressures on the system and the need for more houses, but he is wrong about our recent migration patterns making the country richer. It has made some richer by pushing up land prices in Auckland and beyond, but it has led to stagnant wage and real GDP growth and has lumped a big up-front infrastructure bill on to taxpayers in general and Auckland rate payers in particular.

I've called in the past for the Productivity Commission to analyse the effects of our migration on the economy, similar to analysis done by Australia's Productivity Commission last year.

That Australian analysis is yet to be published, but the early findings were that a migration shock, particularly a low-skill one like we have had, wouldn't boost productivity much.

That local analysis is needed more than ever. Key is reluctant to take Treasury's advice about the need for skilled migrants. Perhaps he would listen to the Productivity Commission.