Confronting populism with evidence

Dr Rachel Hodder
The National Business Review
3 February, 2017

The New Zealand Initiative this week made a case for why, when assessing immigration, it is important to count the benefits and not just the costs. Not surprisingly it was greeted with an intemperate response from NZ First leader Winston Peters, who railed at our finding that migrants are not stealing jobs from Kiwis.

This of course was to be expected from a populist politician, who seems to think observing the ethnicity of the checkout operators at his local supermarket overrides empirical research. But it is notable just how widespread the notion is that if a migrant takes a job this automatically means that there are fewer job opportunities for native-born New Zealanders.

Last year, broadcaster Duncan Garner kicked the tyres on the immigration system and concluded that the high level of migration must be contributing to youth unemployment. The Salvation Army’s policy unit came to the same conclusion using Statistics New Zealand data. In fact, peruse the comments section on any Stuff article about immigration and someone will be making the same argument.

But just because an argument is popular does not mean it is factually correct. In our report, The New New Zealanders: Why migrants make good Kiwis, we examine many of the popular arguments against immigration to see if they stack up against the evidence. The "jobs-stealing" argument is one of the quickest to falter under scrutiny, despite its popularity.

This perhaps shouldn’t be a surprise. The false belief that there are a fixed number of jobs in an economy has been debunked by economists as far back as 1891, yet the belief prevails.

Migrants are consumers, too

Instead of a fixed number of jobs, we typically see the number of available jobs moving closely in line with the number of available workers. It makes sense when you go beneath the surface. Migrants are not just workers; they are also consumers. By purchasing goods and services in New Zealand they help create jobs for Kiwi workers.

Likewise, entrepreneurial migrants who start businesses can also create more job opportunities in the economy. Migrants like Kai Du, the founder of SkyKiwi, who came to New Zealand on a student visa and managed to create a $15 million operation selling New Zealand goods to the Chinese market. He now has 25 staff working at his Albany warehouse.

A wealth of empirical research looking into the effect of immigration on employment rates has confirmed this finding too. Migrants simply do not steal jobs from native workers.

What about wages then? If migrants do not ‘steal jobs’ perhaps they simply lower wages for Kiwi workers?

On this point, it would make sense from a narrow economic analysis to assume that increasing the supply of labour would lower wages. Digging beneath the surface again reveals a bit more of a complex reality.

Overseas trade opportunities

For one, the increase in consumption demand also helps counteract the wage effect of increasing labour supply. Second, where some migrants may compete with locals, other migrants will boost the productivity of locals. In economics terminology, migrant labour can act as a complement to local labour rather than a substitute. This can occur through various channels such as hiring people from overseas who can help businesses set up export routes with their connections, language, and local knowledge of their origin countries. Opening trade with a foreign market is much easier when you have someone on staff who can navigate cultural barriers.

Highly skilled migrants can benefit local workers through the shared knowledge and experience from their diverse backgrounds. This is not to disparage skilled New Zealanders. New Zealand is simply too small to be able to accommodate the same breadth of skills that can be found in a larger population.

Even low-skilled migrants can make a difference. A recent report by the IMF found that although high-skilled migrants boost GDP the most, low-skilled migrants also made a significant contribution. In particular, working mothers benefit significantly from having access to childcare and other services that help with housework.

Finally, many of the migrants are working in areas where Kiwi workers have proven reluctant to move to. A migrant working at a dairy farm in Southland is not likely having any tangible effect on the employment prospects of an unemployed youth in Northland.

Of course, it could be argued that without immigration employers would have to pay more to attract Kiwi workers. An equally plausible scenario is that the job simply wouldn’t exist. The amount of money required to motivate unemployed New Zealanders to leave their home city and support could well be more than the job is worth.

Immigration is a complex topic, and trying to explain the inner workings of labour markets makes for poor soundbites. We don’t expect Mr Peters to change his mind soon, it makes for easy votes. Nevertheless, we have confidence that the majority of New Zealanders will form their opinions on the evidence, rather than just looking at the faces of their checkout operators.


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