Over the past 10 years net migration has accounted for the lion's share of population growth. Photo / Getty Images
OPINION:
The Productivity Commission has embarked on the "We are all ears" phase of its inquiry into immigration.
The issues paper it released this week seeks views on a range of questions but they boil down to this: what should the overall objectives of the immigration system be, and how can government policy feasibly achieve them?
First, some numbers. Over the past 10 years net migration — which includes the coming and going, but mainly going, of New Zealanders — has accounted for the lion's share of population growth — 59 per cent of it. Natural increase, births minus deaths, provided the rest.
While natural increase has been on a gently declining trend, net migration has swung wildly around an average of about 40,000 a year, from a net outflow of 3400 in the year to March 2012 to a net gain of 91,900 in the March 2020 year, before Covid-19 saw the border closed.
The cumulative effect has been that the 2018 census found 27 per cent of the resident population was born in another country, roughly twice the size of the Kiwi diaspora.
It represents a population shock greater than the country's creaky residential construction sector could accommodate, literally.
These numbers relate to permanent and long-term migration. As well as that, there are people in the country on visas which give a temporary right to work.
The two largest of those, essential skills visas and the post-study work visas for former foreign students, have both trebled over the past 10 years, to nearly 100,000 between them. The commission notes that four out of 10 of the essential skills visa approvals have been for what the statisticians classify as low-skilled roles including builder's labourers, sales assistants, dairy farm workers, and aged and disabled carers.
When international students, working holidaymakers and the relatively modest number of RSE horticultural workers are included, a Cabinet paper presented in December 2018 estimated that at any given time about 170,000 people are living and working in New Zealand on a temporary work visa, adding 6 per cent to the labour force. That was pre-Covid, of course.
They were particularly in a few lower-wage sectors where their share of employment is closer to 20 per cent, notably accommodation and food services, and agriculture.
These are sectors where the clamour to reopen the border to address labour shortages is loudest.
The Government is looking at changes to some visa categories and conditions, such as the skilled migrant category (for residence visas) and several temporary work visas.
The Cabinet has agreed to allow for regional variations to labour market tests, making it easier for employers to hire migrants in regions and jobs where fewer New Zealanders are available, but tougher in the cities where there are more New Zealand job seekers.
"These changes will also strengthen the level of evidence required for employers wanting to hire migrants in lower-paid occupations," the commission says. But it still wants views on how the pre-pandemic system was working.
Economist Michael Reddell, who has a longstanding interest in immigration issues, would rather see the Government get out of the business of compiling lists of approved skills-short occupations or setting salary thresholds.
He advocates replacing that with a system in which any employer could hire a person on a temporary work visa, but the visa should be limited to three years and subject to an annual fee payable to the Government of perhaps $20,000 or 20 per cent of the employee's annual income, whichever is greater.
"That sets a clear and predictable test for where non-New Zealand recruits really are required and a genuine incentive on employers to search for and develop New Zealanders, especially for less well-paid positions," he says.
As a general proposition, one would want the immigration system to relieve, and not exacerbate, structural weaknesses in the economy, conspicuous among which is low productivity.
While the causes of that are manifold, high on any list is capital shallowness — New Zealand firms' tendency to have relatively low levels of capital invested per worker.
It is understandable if, when there is a choice between hiring and investing, businesses prefer the former on the grounds that, if they hit a rough patch, workers can be shed and there are plenty more where they came from when things pick up, whereas the cost of capital goods is sunk.
Capital shallowness also applies to human capital — skill.
Unfair as this generalisation may be to many employers, it does seem that rather too many New Zealand businesses see skill as something to import rather than something to impart. It is the mentality of the hunter, rather than the farmer.
To be fair, the commission does observe that "some firms may be relying on immigration because they lack confidence in the quality and responsiveness of training providers or in the availability and reliability of technology.
"Many New Zealand firms are small and may lack the capacity to effectively engage with the training system. For their part, training providers may not be able to make enough money from some courses or find it difficult to get firms and industry involved in their development."
Reddell argues that from a longer-term perspective — which is the commission's brief — it is residency approvals which matter more for economic performance than the rules on temporary work visas.
"By international standards the skill levels [of immigrants] mostly aren't too bad ... but they aren't spectacular," he says.
"And why would they be? Much as New Zealand is a pleasant enough, and peaceful, place to live, it is (a) remote, (b) not now very prosperous and (c) small. The smartest and most ambitious and most driven of potential migrants are much more likely to go to other migration-welcoming countries if they can get in.
"And a country whose own people leave en masse isn't a great advertisement for abundant economic opportunities."
Maxim Institute senior researcher Julian Wood, in a prescient report on immigration last year, makes a similar point about complacency. He cites a world Gallup poll in which only 1 per cent of respondents named New Zealand as the country they would most like to move to, the same share as China and Russia, while 5 per cent favoured Australia.
There is also the issue of how immigrants are treated. Among the commission's questions is what successful settlement means, and what the barriers to achieving it are.
"We are in danger of creating a two-tier labour market and society, whereby low-skilled immigrants are seen simply as labour supply, to be discarded should we meet economic headwinds or should they get sick," Wood says.
Treating immigrants as potential Kiwis instead, rather than as disposable stop-gap solutions to labour market failure, means recognising the importance of families and community connections. International experience shows the value of civics courses, which would benefit from local and Māori input, and the use of sports programmes as a positive way for migrants and communities to interact, Wood says.
Submissions on the commission's issues paper are open until Christmas eve, but the sooner the better, as it plans to release a draft report in October, ahead of a final report to be presented to the Government in April next year.
The labour market remained weak and disinflationary, economists say.