The NZ Initiative's Eric Crampton says it is a massive mistake to point to unemployment figures and blame immigrants for what unemployment is still out there

By Eric Crampton*

You already know about Schrödinger’s Cat: the imaginary cat trapped in a box with a device that may, or may not, have already killed the cat. The cat is then simultaneously dead and alive, from the position of someone outside of the box.

You might not know about Schrödinger’s immigrant. That immigrant is simultaneously stealing your job while mooching off the welfare system.

While the cat inside the box is definitely either dead or alive, it turns out that Schrödinger’s immigrant doesn’t exist in New Zealand in either form. We know that immigrants are far less likely to be on benefits than are people born in New Zealand. But the latest employment figures also give lie to the other variant: it looks like immigrants are creating jobs rather than taking them.

The latest Household Labour Force Survey showed employment growth that can only be described as shockingly strong. More working-aged people have moved into employment over the past three years than have entered the working-age population. It is consequently a massive mistake to point to unemployment figures and blame immigrants for what unemployment is still out there.

Let’s walk it through.

The chart below has the latest Household Labour Force Survey data. The green line tells you how many people aged 15 to 64 live in New Zealand. The rapid rise over the past few years has been driven by strong immigration.

If the economy could only generate some fixed number of jobs, then the rise in the working age population would be matched by an increase either in the number of people reporting that they are not in the labour force, or reporting that they are unemployed.

But that is hardly what the data shows.

Immigration has been especially strong since 2013. From 2013 to 2017, New Zealand gained just under 200,000 working-age people – almost a 7% increase in the working age population. And almost sixty thousand fewer people report that they are not in the labour force. That represents a very large increase in the number of people reporting ready for work.

And the job market has expanded to take all of them – and then some. Employment has grown by 272,000 people and the number unemployed has dropped by more than 13,000.

Just over 76% of all people aged 15-64 are in employment and just over 80% count themselves as being in the labour force. Both of those numbers are staggering. New Zealand’s consistent employment data goes back to 1987. The average employment rate, since 1987, has been 71%. And, before this year, it never exceeded 75%.

It is also incredibly strong when compared internationally. The most recent OECD data had only four countries with higher labour force participation than New Zealand, and only two with higher employment rates.

But even those figures understate things.

Every year since 2013 has had more than 60,000 net permanent and long-term immigrants arriving in New Zealand. Most work visas require migrants to have a job-in-hand, but some will bring spouses who will also be looking for work.

At the same time, the government has been more strongly expecting beneficiaries to work. A single mother on a benefit is required to be looking for work from the time her dependent child reaches the age of five. If she had her most recent child while receiving a benefit, she must be ready for work by the child’s first birthday.

Many beneficiaries strongly want to move into employment. But it is also likely that at least some are only looking for work because their case manager demands it. All of them would report that they are looking for work, whether or not they are making a serious effort to become employed. That would increase reported unemployment. This means that people who did not used to count as unemployed because they were not looking for work now count as unemployed, whether or not their job search efforts are particularly strong.

And despite all of that – the increase in people coming in from abroad, and the increase in the number of people being encouraged into the labour market and away from benefits – the number of people reporting that they are unemployed has dropped since 2013. While it is true that the unemployment rate looks middling in international comparison, New Zealand’s 4.9% unemployment rate is categorically different from America’s 4.5%. America has had strong declines in labour force participation. There, discouraged workers gave up and left the labour force; here, they are being drawn into the labour force. America’s employment rate is consequently 69.8% - well behind New Zealand 76.1%.

What about underemployment?

Statistics New Zealand’s Infoshare only reports data on that from 2005 onwards, so we can’t report on trends before then. The underemployment rate – the proportion of people who say that they would like to be working more hours, regardless of whether they are actively seeking more work, hovered around 3% before 2009 and has hovered around 4% since 2009. But if we only count those who are actively seeking more work, the underemployment rate is a titch over 2.5% - and has been slowly declining since 2010.

Again, it is hard to blame migrants for underemployment if the proportion of workers saying they are actively seeking more hours has declined as migration has surged, and the number of people so-reporting has been basically flat since 2014.

And, indeed, the IMF last week reported that migration has had a positive economic impact, with output increasing by 1.5% to 2% for every percent increase in population from net migration.

Not everything is roses. Employment expands with migration because businesses do not need government permission to create new jobs. But government doesn’t exactly make it easy for new housing to be built, and so strong migration has exacerbated Auckland’s housing mess.

Were government ever to sort out its broken land use planning and infrastructure financing, perhaps some of the construction workers who moved to New Zealand to help rebuild Christchurch could be encouraged to come back to help sort out Auckland. The next Schrödinger’s immigrant might then not just be bidding against you at the house auction – she could be building dozens of new houses at the same time.

The Initiative’s report on immigration, The New New Zealanders, was released earlier this year.


*Eric Crampton is the head of research at The New Zealand Initiative, which writes a fortnightly column for interest.co.nz.

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27 Comments

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Sorry Eric, is job stealing the only thing folk are concerned about with immigration ? There are lots of other reasons. What about the industry groups who advocate for immigration. ie. Transport, Tourism. They see it as a device to keep wages down, relatively successfully it seems. Look at the mess in Queenstown before you argue that one.
The problem I see is a silly government who go for the big numbers eg Tourist numbers, but fail to ask the question. Who benefits ?

Schrödinger did not wish to promote the idea of dead-and-alive cats as a serious possibility; on the contrary, he intended the example to illustrate the absurdity of the existing view of economics

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Interest - can we get some balancing input from the groups working with the lower rungs of AKL society affrcted by the massive immigration figures such as the Red Cross, WINZ, Child Poverty Action Group, AKL City Mission, Salvation Army etc to counter the blatant verbung from the "Research Fellows" (you're kidding right) at NZ Init?

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22

Nothing like a Right Wing think tank for objectivity...

FYI - just spent 4 days at the Chateau at Mt Ruapehu hiking - didn't get served by one NZ born person.

Not one....

Coffee bar / cafe - Indian - The Tussock pub - Indian...they were lovely guys but are you seriously telling me people from NZ cant do these jobs???

Or maybe they would if the pay was half decent...instead we bring in those who will work long hours for min wage to work in the foreign owned hotels, with foreign tour groups.

The whole tourism benefits is overstated me thinks........

Yes indeed - drove down to Wellington a fortnight ago. Every petrol station down and back was staffed by an Indian. Even in the sticks - what the hell is going on here?

@smalltown - yes exactly, I forgot to mention in the Macca's at Otorohanga I was served by an Indian woman and my coffee made by another.

The gas station in Taumaranui also staffed by an Indian,

This is no slight against them as they were all very nice people but more a realization of how far this importing of cheap labour has spread... these are NOT skilled positions....

low wage (and lowish demands) labour to keep things afloat ... just like the US needs its Mexicans

The $4 billion export education sector comes at this very price. These students are given 20 hours of work per week (who's watching the hours), a year of open work visas upon graduation, further two years of employer-specific working rights and now up to three years of essential skills visa.
So even at the job requiring the lowest possible level of skills, the person is allowed to work in New Zealand for 7-8 years. Finally, we have 25-30k of Indian students coming in every year. You do the math!

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11

One bit of data destroys all this enthusiasm. And that is GDP per person. Productivity.

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19

FOR THE LAST TIME, stop misrepresenting facts to suit your purpose.
The figures in this article are once again skewed by NZ Initiative to shove their political agenda down our throats.
National, NZ Herald and NZI keep basing their studies on those who "enter the country on work visas" because it is a conveniently smaller number. From July 2015 to June 2016, 39,100 migrants entered the country on work visas (a figure which the ministers use repeatedly). However, Immigration New Zealand handed out a total of 201,978 work visas (5 times the former figure). Not all of these may be new entrants into the job markets but tens of thousands of them are. For example, 22,899 graduate work visa applications were approved, none of which would have been counted in the 39k entering the country on work visas.
The latter figure includes migrants from previous years who were already in NZ when they applied for work visas i.e. previous students, workers, refugees etc. This is exactly what Winston Peters said to the reporters at the Herald.
Using the former figure instead of the latter is misleading since former international students, dependents and refugees now on work visas are not included in any of the calculations.

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11

The youth unemployment rate sharply increased from 11.2% to 13.6% 2016/17 showing that Kiwi kids are not securing the starter jobs they traditionally would. This at a time when jobs growth is at record levels. Clearly this growth will be creating an increase in entry level jobs. So someone OTHER than Kiwis kids are securing them. Previously discouraged will be accounting for some but the growth in jobs is across all job bands so only a portion will be going to mature people getting back into the workforce. Youth unemployment should have dropped in unison with general unemployment. But it hasn't.

Anecdotal evidence is that immigrants or work visa people are taking these jobs. Interest.co readers who travel regularly within NZ as I do, will be familiar with mvgsmf's experience. Our kids should have those jobs. Crampton's assertion that 'it is a massive mistake to blame immigrants for what unemployment is still out there', doesn't stand up to scrutiny in resect of our young people who are being consigned to the under/unemployment scrap heap in favour of foreigners.

Our ministers think that competing for our few thousands of jobs with billions of prospects in Asia and Europe is a good idea. The odds are undeniably stacked against us.
The United States is in an even troubling situation in this area. Most high skilled jobs are given out to foreigners who come from overly-populated countries with a competitive education system while domestic workers get jobs serving these wealthy Asians coffee and bagels.
A case can be made that migrants in the US create jobs for locals but only when completely ignoring the quality issue here.

I remember ready a travel consultant bemoaning the fact that there are few kiwis in the industry showing off NZ to the tourist and we have lost the kiwi flavor to it.
I travel quite a bit around NZ and would echo many of the comments here.
but also talking to the owners they tell me they can not get kiwis,
so we have a serious disconnect between youth unemployment and starter jobs being taken up and the real issue is how do we get those young people into those jobs, especially away from the bright lights of the big cities

I am in favor of controlled migration, not this game of Bull-rush we are attempting to pass off as an immigration policy

And of course , we can be our own worst enemy too , when we consider the example of a friend of my wife who gave notice to a Kiwi tenant paying $400 a week and receiving a housing supplement (and could not afford to pay more ) and has re-let the property to a recent immigrant Filipino who works for Chorus (and his wife is a cashier) , happy to pay $590 /week .

Thats almost a 50% rent increase for a property in Ranui , West Auckland

According the her , the Kiwi ex-tenant ( who from all accounts was a bit of a nightmare ) is now living in Massey in a converted garage , and the kids have gone to stay with Nanna in Huntly

The Filipino is no trouble at all , keeps the place clean and tidy ( he even mows the lawn) and pays the rent on time.

Thats business , I guess , but is it fair that Kiwi families are split up because they are now the working poor?

The question I have is what is National trying to hide? I mean why else do they have this max rate immigration at all costs stance? Why can't they say, hey yup thats probably enough for now, lets settle this down a bit, let the infrastructure catch up a bit, then see where we're at.

But they're not, they're pushing on at break-neck speed, and for what reason? They're yet to justify their stance, unless someone else knows why they're doing this?

Because debt doesn't take timeouts .... ie you dont wanna mess with a Ponzi.
I had someone tell me the other day that Auckland is destined to be the economic powerhouse for NZ going forward ... wasnt sure whether to laugh or cry at the delusion

The IMF's report that immigration increases output is a 'justification' - if you accept choking congestion, our kids being shut out of housing and imposition by Govt of radical change to the ethnic and cultural mix of NZ.

The easy answer is it's the short term sugar hit to the economy that is driving the accommodative immigration policy but the way the political establishment, left and right (excluding NZF), all parrot the same pro immigration mantra in the face of a mounting voter unease, suggests that the Wellington academic elite and government mandarins, have captured the pollies and are driving this issue at an ideological level.

Woodhouse couldn't resist rounding off his recent announcement of threshold criteria changes, with a stern faced assertion that despite lowering the boom a bit, immigration is good for NZ - so shove that you ignorant yokels.

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National's plan is roughly equivalent to that old Marx brothers movie where they're on a train, and keep the boiler going by hacking all the carriages to bits and burning them.

NZ First would walk in except (a) they express the immigration problem in terms of race (b) and more importantly Winston has been in power several times and conveniently did nothing about immigration.
The TOP party has some reasonable ideas.
Disappointingly Labour are too scared to discuss immigration rationally despite independent academic reports proving in nauseous detail terrible worker exploitation ( https://media.wix.com/ugd/2ffdf5_28e9975b6be2454f8f823c60d1bfdba0.pdf ).
The National party is paid for by small businesses and pensioners made wealthy by house price inflation so they will not sort it out. See how restaurants screamed when they thought they might lose cheap waiters, bottle washers and cleaners.

I was on Rosebank Road on Friday afternoon ................. what a nightmare !

If we are going to have such a massive rate if inward migration , we need to sort out the roads to cope with the numbers .

No congestion has ever been solved (for long) by laying more tarseal ...

So whats the alternative when we have three massive bus companies owned by Richlisters and receiving a subsidy , all while dictating to the City fathers how things will be done

The whole thing is arse -about -face a bit like the Tail -- Wagging -- the -- Dog

well you can blame the people of auckland (and a non vision political party) for voting out a visionary before he could get the job done
A wholly unsupportive National government were voted into power in 1975 and in 1976 the plan was cancelled completely.

https://www.greaterauckland.org.nz/2011/12/02/an-auckland-that-could-hav...

Overall it is such a huge shame we didn’t build this scheme, as it would have provided us with a five line rapid rail transit system with a central city underground loop, fed by integrated bus feeders and park-n-ride and a focus on development around key nodes. Auckland would be a much different (and in my opinion better) place if we’d had such a system shaping the city’s development for the last thirty years.

If 200,000 new working age immigrants in 4 years is such a good idea then does Dr Crampton think we would have been better off if there had been 400,000 or maybe 2 million or if it is so simple why not 20 million?

Very roughly each inhabitant of NZ (including babies and old codgers) spend about $1,000 on transport infrastructure per year and about the same on Hospitals, Schools, etc. And very roughly that infrastructure will last about 50 years (obviously some much longer and some shorter). So by simple maths each inhabitant has about $100,000 of infrastructure (I suspect these figures are conservative). Now add a single immigrant and some of this infrastructure is just better used (say the road north of Dargaville - it always seems rather empty) and some will be squeezed proportionally (eg. I millionth extra demand for hospital beds, school desk, GP, Teacher, Police) and for some infrastructure the extra load will be the straw that broke the camels back - for example the harbour bridge, most main roads in Auckland.

NZ is a country that earns its foreign income (needed for foreign purchases such as TVs, cars etc) mainly from exporting resources (such as milk, timber, tourism) so adding more people means that foreign income is spread more thinly. A reasonable assertion since it meets the reality that average wealth has been dropping for the last 30 years that the big immigration experiment has been tried (income per capita compared to other OECD countries).

A comparable country is Iceland with fixed resources but also fixed population. They are happier.

So why do immigrants temporarily lift the economy: they need houses, cars, furniture, food - in other words increased expenditure. This article is basically asserting that this demand driven expenditure is good for us; that sounds rather like those who say the Christchurch rebuild is boosting our economy so we all ought to be praying for more big destructive earthquakes.

If an immigrant is highly skilled then they might be able to add value by creating a new source of income (eg Nokia in Finland and Lego in Denmark) but it does seem that our immigrants are generally doing low level work even if the Department of Immigration has them all labelled as "Business / Skilled". And that is why one in eight young New Zealanders are unemployed - wages are too low to encourage them to tackle dirty work in difficult locations (eg Dairy workers) with no immigration our businesses would have to do what they did in the distant past: train on the job and pay well.

If anyone has better data for infrastructure please post it.

The New Zealand Initiative shilling for mass immigration. What a suprise!

As a putative prospect for PETA membership, I strongly object to the treatment of that cat by some foreigner called Schrodinger. An Inquiry is needed, and a qualified vet should Definitely open that box to ascertain its state of health.