Josie Pagani is a commentator on current affairs and a regular contributor to Stuff. She works in geopolitics, aid and development, and governance.
OPINION: Survivors of a shipwreck find themselves on a desert island with a large quantity of tinned food, but no way to open the cans. An economist among them declares he has a solution: ‘’First, let us assume that we have a can opener.’’
Economic forecasting can be illuminating even if it’s not always practical.
Immigration is a favourite focus for economic forecasters. Will more migrants increase or decrease wages for locals?
The Labour Government has quietly taken the stance that immigration reduces wages, and therefore it wants less of it.
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Minister Michael Wood this week announced that restrictions would be slightly eased for ‘highly skilled’ immigrants. But the broad policy is that New Zealand won’t return to pre-pandemic settings and a dependence on ‘low-skilled and low-paid migrants’, as the former minister, Kris Faafoi, put it (before heading seamlessly into a new lobbying job with barely a change in suit).
Keeping the border semi-closed to the low-skilled is how we ended up with 12 nurses crossing the border. We need 21,000.
Delivering less than a thousandth of the number needed is failure on a scale that makes KiwiBuild look like a raging success. Is Waka Kotahi now running immigration?
Cuts in immigration are not the result of incompetent delivery in the way the Government’s housing policy is, though. It was a policy choice made under the cover of two years of lockdown.
Covid gave the Government cover to rewrite immigration settings. The borders closed and – abracadabra – no migrants was followed by full employment and higher wages.
Because one thing follows another doesn’t mean the first event caused the later one. Full employment and higher wages are caused by all the capital that is available to put people to work.
If the absence of low-skilled immigration made wages higher, then Niue, with no low-skilled immigration, would be wealthier per capita than Manhattan.
The Nobel Prize for Economics was won last year by David Card for his 1980 study on immigration and wages.
Back then, about 125,000 Cubans arrived in Miami within a few months, all eligible to work immediately in the United States. The greater Miami workforce jumped by 7% in weeks and the number of low-skilled workers increased a whopping 20%.
What do you think happened to wages? Professor Card showed that the sudden supply of new workers had no negative effect on wages for the low-skilled natives of Florida.
But surely simple supply and demand should dictate that more low-skilled workers lowers wages? Card reassured policy-makers that simple logic was wrong.
The reasons have been debated ever since, but the results are widely accepted: Local low-skilled workers transitioned into jobs that required good English, while new migrants took jobs that didn’t need language skills.
The UK borders also closed during Covid. Initially, wages went up for low-skilled jobs. But researchers at Oxford University in England could find no evidence of widespread wage increases in low-wage industries that previously relied on EU workers.
Donald Trump, the former US president, agrees with Labour. Awkward. In 2015 he accused low-skilled migrants of “taking our jobs … taking our money. They’re killing us.”
The US is now faced not with a border crisis, but a shortage of new arrivals. Its restaurant and accommodation sectors are struggling to fill about 15% of job openings.
Janan Ganesh of the Financial Times says the Hart-Celler Act of 1965 that President Lyndon Johnson signed gets less attention than Johnson’s civil rights legislation. But it also profoundly changed America by shifting the composition of immigration from mainly European to more Latin-American and Asian.
It’s hard to imagine American culture, politics, or cuisine, let alone the workforce, without the influence of those migrants today.
Imagine how different New Zealand would be if we’d open our doors, as requested, to more Jewish refugees in the 1940s.
One of the reasons we can’t build enough houses is that we don’t have enough builders.
We could bring people into New Zealand to build them. But the government spent the last 10 years thinking of ways to reduce immigration, compiling lists of immigrants with Chinese-sounding names, and blaming them for causing the housing shortage. It’s not going to get away with now saying immigrants are the solution to the housing shortage.
The recent visit of India’s External Affairs Minister, Dr Subrahmanyam Jaishankar, demonstrated that our lukewarm attitude to immigration is damaging our international relationships.
Jaishankar was publicly critical of New Zealand’s unwillingness to renew visas for Indian students who left New Zealand during Covid. A trade deal is off the table, even though a growing India has the potential to be more important to us than China.
No country has a laissez-faire approach to its borders. Every government has to manage the impact of immigration on its citizens.
But right now businesses and hospitals need staff, not an imaginary can opener.
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