Economists Julie Fry & Hayden Glass argue the impact of migration on our economy is overstated & we need to broaden our migration policy to welcome more entrepreneurial foreigners to NZ

Economists Julie Fry & Hayden Glass argue the impact of migration on our economy is overstated & we need to broaden our migration policy to welcome more entrepreneurial foreigners to NZ

By Jenée Tibshraeny 

How much of an impact does migration have on an economy?

Not a huge one according to two economists who have just written a book: ‘Going Places: Migration, Economics and the Future of New Zealand’.

New York-based Treasury consultant Julie Fry, and Figure NZ chief operating officer Hayden Glass, write: “The whole idea that migration can have a major economic impact – positive or negative – is best treated with a large dose of scepticism. The general consensus of researchers and policy-makers these days is that the overall economic impacts of immigration are positive, but only modest.

“Many of the negative impacts on existing residents are smaller than popular debate would suggest, or, like the present housing situation in Auckland, related to other issues as well as migration.

“In reality, the economic impact of large-scale immigration is much smaller than the political impact.”

The duo talk to Jenée Tibshraeny in an audio Double Shot interview.

Economic impact of migration overstated

Glass explains a bigger economy doesn’t necessarily translate to a more productive economy.

He says it’s good to look at GDP per capita when assessing how migration has affected the living standards of individuals in New Zealand.  

Glass and Fry write: “In the past, migration to New Zealand tended to push up aggregate demand first because it took quite a long time for migrants to settle in and contribute to aggregate supply…

“As we have got better at matching people to jobs and have attracted larger proportions of young migrants who are more likely to work, this relationship may be changing.

“In recent monetary policy statements the Reserve Bank suggests we may be starting to see immigration impacting on supply more quickly, although there is no robust empirical evidence as yet.”

Furthermore, they say there is no evidence of a link between immigration-induced population growth and innovation in New Zealand.

As for capital, Fry and Glass write: “The substantial rise in immigration from Asia has not translated into large increases in investment from Asia. Foreign direct investment still primarily comes from Australia – $51 billion of it, out of $100 billion in 2015.”

When asked what kind of state the New Zealand economy would be in if it wasn’t for migration, Glass refers to an answer Finance Minister Bill English has recently given when asked the same question.

Glass says: “If you took out the impact of migration, economic growth is still positive – it’s not hugely positive, but it is positive. Yes, it’s helping economic growth at the moment, but it’s not the only growth that there is.”

Migrants aren’t the ones driving up property prices

Fry and Glass say expats returning to New Zealand have a greater impact on the property market than migrants from overseas.  

Fry explains migrants tend to rent when they first arrive in New Zealand as they’re hesitant about entering an unfamiliar property market. Returning New Zealanders on the other hand are more likely to purchase property as they have stronger connections to the country.

Glass says: “Migration obviously has an influence on house prices – it’s basic economics that when too much demand hits inflexible supply, then prices go up quickly.

“The real solution is nothing to do with migration. In practice you wouldn’t be able to adjust your migration flows for house prices even if you wanted to – it’s not the kind of thing you can easily directly control. The real solution is the supply side of the housing market.”

Fry adds: “If you took migrants out the equation in Auckland, you would still have the same kind of [housing shortage] problem. The scale would be slightly reduced, but you’d still have the same issues.”

She notes that if you tried to reduce the number of migrants coming to New Zealand to address housing problems, you’d create other issues. She challenges people to think about what our hospitals would look like without all the migrant doctors, nurses and other healthcare workers for example.

Looking beyond what job vacancy a migrant can fill

Fry and Glass say we need to tweak our migration policies, as we aren’t attracting as many creative and entrepreneurial migrants who will increase our productivity as we could.

“In New Zealand, the quality and diversity of migrants matters more than their raw numbers when it comes to overall economic impact,” they write.

Fry says: “Our current system is really good at matching people with jobs. If you compare us internationally, around 90% of out migrants after six months are working. That’s fabulous in terms of helping people settle, it’s fabulous in terms of helping people integrate.

“But if people come in and just fill existing slots, you don’t get that transformational impact, you don’t get people who set up new businesses, who bring new ideas; they’re just filling existing roles.

“Because of the way our system is structured, somebody who’s really talented, essentially has to get a job to get in. So rather than coming here and thinking, ‘what’s the best fit for me’, they’re constrained for ‘what can get me a visa to get in the door’.”

The duo propose extending our migration policy so authorities can also accept migrants based on the networks they have in New Zealand – or the endorsements they receive from New Zealanders.

Glass says it’s a matter of “trying to extend the way we select people to try to get people who are not just coming here to work for somebody else”.

The practicalities of network-based selection

Glass says the challenge is predicting how successful a potential migrant’s going to be.

He says the existing system measures applicants’ riskiness before letting them in.

“We don’t focus at all on what you might do, value you might bring when you come here, how well connected you are to your country, whether you’re going to maintain those links. We focus instead on what could go wrong,” he says.

Glass and Fry aren’t advocating an overhaul of the existing system, but want to see the criteria broadened at the top end.

They go into more detail about the practicalities of a ‘network-based selection’ policy in their book.

For example, they refer to Christchurch City Councillor, Raf Manji’s, ‘Open Visa’ idea.

He maintains a visa could be made available to a small number of energetic under 30s keen to help rebuild the city. If they qualify for residency once they turn 30, they can stay, otherwise they have to move on.

A migration policy that evolves with the world

Fry says our migration policies need to adapt to the way globalisation’s seen the world become more integrated.

“We’ve thought of migration for a long time as something that’s permanent and a ‘one-time’ thing, and it’s really not,” she says.

“We’re finding with technology, with the price of flights coming down, people are much more mobile.

“If you think when NZ was first colonised, people got on a boat and they said goodbye to their family and that was it forever. Now people can move and it’s not so permanent, and they can stay connected even if they’re in different locations.

“As the world has moved, it’s made it possible for deeper, richer, more productive connections, even if people aren’t physically in one space for a long time.

“We see people like me moving from one part of the world from another, or having a stint of two or three years in one spot and then moving along to another spot.

“It’s all around replenishing those connections and strengthening them and keeping the contact, so you can use them for the benefit of New Zealand.”

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

44 Comments

16
up

Okay , so where is the massive demand for Auckland houses coming from then?

We have not had that many children in the past 25 or 30 years to explain this surge in demand , and while some folk moved here for Chch its not enough to explain the demand surge either

Its not young Kiwis buying all these houses ......... or is it ?

Something else maybe ?

no, it's mum and dad investors purchasing them and renting them out to immigrants.
Or you're one of those who think that all migrants are loaded and enjoy gambling with property in one of the less affordable markets?

Any stats on property owners and the number of properties they have? My landlords have always been kiwis. Just saying..

18
up

Isn't immigration great (not) --- it holds down real wages, provides loads of low skilled workers for the elite in the city for cleaning and restaurants etc and at the same time pushes up the profits on the 'elites' houses in Auckland. The current system is geared to reward an elite which the rest of the world is beginning to get rather upset with.

And we love the transport gridlock too. Gives us more time in our beloved cars, enjoying the music.

I'll agree on holding down wages, plus it saves on training NZers and the wait for that. I dont agree on low skilled, you have to get 28 points? to get in which means younger than 35~40, have a minimum of a Degree in an area needed and a job offer to get to 28 points? that isnt low skilled.

Upset at elites, yes indeed, I suggest livid. The UK Labour leader has gone from being considered un-electable to preferred PM gob smacking really.

13
up

.....I could probably read this article thoroughly if I wasn't stuck in traffic all day.

15
up

So immigrants do not cause the Auckland problem.
Let us just say they contribute to the problem.
It is just a matter of degree.
Now a few other relevant points.
One is the fact that cashed up immigrants not only buy a home for themselves BUT they also 'invest' in additional properties. It is not racist to suggest that if you are one of them and have little or no local language ability, then residential property investment using a manager is the way to go.
This raises another problem. When investors have the financial muscle to shove prospective home owners aside the result is a bigger one than at first seen.
Yes, demand exceeds supply but also the demand is partly low supply but is exacerbated by the helpful tax system for investors.
Then there is the tax holiday for new immigrants for their first four years here. They have no obligation to pay any tax locally on overseas sourced income.
'nuff said.

18
up

The top visas applications are for the following occupations:
Tour Guide, Chef, Dairy Cattle Farmer, Cafe or Restaurant Manager, Retail Manager (General), Retail Supervisor, Aged or Disabled Carer, Student

http://www.immigration.govt.nz/NR/rdonlyres/BCA40778-5C9F-4E5A-9D38-C0B8...

So much for bringing in skills. Seems like there are plenty of Masala style visas floating around.

But JK says we need to import chinese chefs to make chinese meals,
i agree with little on this one, some of these jobs could be filled by training locals and who cares if they are chinese, indian, european, what has race to do with who can do a job

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11606664

Tell Len Brown that, he needs more Chinese..

The issue I have is that these visas are obtained with fraudulent applications. These chefs or whatever are paying the business owners under the table for this. I've heard several anecdotes that job offers or local family can be furnished from thin air.

Would like to see some evidence or cases to back this up. It is very easy for 'urban conversations' and casual guesswork become 'facts' after a few retellings. But if there is actual 'fraud' involved it needs to be exposed.

At a minimum, evidence of fraud should first be presented to the authorities. Suggestions on website comment streams is not taking action. It struggles for credibility if it is just a passing guess.

I am sure there could be some fraud. But whether it is widespread can only be judged from actual cases that are investigated properly.

If I am paying to go for an expensive or even inexpensive meal I want an authentic experience where it is cooked by a chinese cook and served by chinese waiters and waitresses.

For goodness sake Robert, are you seriously suggesting that a non Chinese can't put together an acceptable Chinese meal. Perhaps only the English can cook a proper fish and chips.
We have all seen the thinly veiled ads for "Chinese Chef - must be fluent in Mandarin" or some such other nonsense. What a joke, we are being had and these are our "skilled immigrants"?
BTW, this article is riddled with assertions backed up with " no robust empirical evidence" and "no evidence of a link between immigration-induced population growth and innovation in New Zealand" and so on. Waste of time!

It's a book promo - how much did they pay for the promo?

13
up

Petrol station attendants must be a highly skilled job as most of these seem to be new arrivals.

Don't get confuse with "migrants" and "overseas buyers". They aren't the same.

Both affect quality of life to the same ends.

Actually I would argue that the Overseas Investors are far worse for inflating Auckland's house prices. Since they're just using NZ as a bank account to squirrel way their funds. And therefore just throwing money at the NZ Elite to secure property and elbow NZ residence out of the way. We know that this has been happening for quite some time. And many of these properties are left empty which increases demand for property in Auckland.

What I'd like to is know, now that we have the Buyer registration requirement. Is how much of the market is taken up by Overseas Investors? It has been almost six months now since the new registration was introduced, so when are we likely to get some feedback on what's going on with this market??

One look at first home buyer numbers tell you that migrants are not influencing New Zealand / Auckland property prices. One look at RBNZ mortgage data tell you what is influencing real estate prices.

agreed it is investors over owner buyers

10
up

This article completely misses the point. Perhaps migrants don't affect house prices much - debatable.
But:
>>> Unrestricted Foreign Investment definitely does affect house prices <<<

Migrants definitely increase rents for existing Auckland renters as ultimately they are charged more due to the supply shortfall.

A reminder

Nick Smith "stated" (promised) that the data arising from the new regulations starting 1 November 2015 would be published in the public domain every 3 months

Anybody seen any data published yet? or, do we continue to guess?

If the results were negative they would have been out mid-January - see, we told you so

Are they currently being massaged in the massage-department?

$10 mill and your in pretty much. Plenty of new migrants have that.

And much of that $10m then gets recycled time and time again. They need to be much much stricter on the checks.
Rules are rules and too many new immigrants are flaunting them. The quality needs to be upped quickly.

Been reading a book called DEEP SOUTH by Paul Theroux..In it he describes how Indians immigrants have virtually purchased all the Gas stations,Motels and convenience stores in the deep south,especially in Mississippi.
He said they do this because along with providing work it also provides housing.He also says that they employ very few of the local African Americans but employ mainly from their own caste.
Just an observation.

and in Pahiatua too.

Indian and Sri Lankan immigrants to New Zealand are, in my observation, often racist. They mostly stick with their community, import brides and grooms from "home", employ overwhelmingly from their own lot and often show more or less open disdain for our societies.

And let not even talk about the many very entrepreneurial Indian-run "colleges" offering bogus degrees for bogus Indian students they take for a ride financially.

Of course, there are exceptions. Nevertheless, there should be laws that lead to the cancellation of resident visas and the loss of citizenship for people who do disrespect their new countries or refuse to integrate.

Rubbish. My view is "we" are often racist to them so they stick with their own as its less un-pleasant. The changeover is when the next generation goes through school, they come out NZers.

I have worked with a number of the above, I dont know if their degrees were real or not, but they knew how to do their job better and worked better than the NZers they replaced.

Oh really? I work with Indians on a daily basis and 10% of them max have qualifications comparable to "ours". And nothing gets done without asking three to five times. What kind of New Zealanders do you hang out with? The ones I know, at least those with some sort of education are really not that useless.

Even NZ-born, bred, educated Indians and Sri Lankans hardly cross-marry. A bit of bonky-bonky early on, and then back to the community playing Indian. Chinese are a lot less racist. They intermarry quite a bit and THEIR kids are true Kiwi, not the my-culture-this-my-culture-that Indians and Sri Lankans.

I guess we agree to disagree on this one.

Why is the government encouraging and holding separate festivals for different cultures then ?

And talk highly of the multi culturalism that is growing in Auckland and slowly in other centres ?

Integration is a very long term process, and there needs to be the right atmosphere conducive to that happening quickly.

My observation and feeling is skin colour plays a very important part in getting the right signals.
(This may sound racist and over the top, but the on the street practical situation is this).

We are still not the melting pot yet.

To put is short, because the government is stupid.

Multiculturalism is super-bs. Being multiethnic is a much more realistic concept and even that needs to always be under control. You cannot overwhelm people with foreigners to an extent that they no longer feel home in their own country. It is inhumane.

I think that government policy should encourage intermarriage and discourage ethnic ghettoization. That would be the most important thing to do to foster long-term social stability. Alas, some people do not see financial profit in a stable and happy society.

May be they should include more Chinese, Cambodians, Indians and Arabs in the Bachelor NZ show ?

Same with NZers, ie they dont like to employ "others" either, been through this myself.

.

Where are you from? Dont worry, I wont tell anyone :-) ...

I do understand though that one can develop a grudge. It sucks being rejected just for being different, even if one tries to fit in. I have lived all over the world and I know how it feels. Still, most Kiwis are not all that bad. Try to forget the petty misers.

Perhaps a good start would be to stop calling the purchase of residential property "investment".

People see huge profits to be made for little effort beyond borrowing off the bank and selling a short period later making 10~20% tax free to a greater fool, dont call it what ever you want.

Yeah, nah - Yeah - why does JK keep insisting that immigration is important for the economy? Nah - Notch's comment >>> Unrestricted Foreign Investment definitely does affect house prices <<< above. I would rather trust the comments of observers here who actually attended auctions in AK than a couple of academics who only trawled through various reports produced by vested interests.

I listened to bob carr (ex labour mp in aussie) and he came clean and says high bulk immigration is not needed in todays global economy. its a policy from the 60.s and 70.s when you need to build up your domestic economy.
instead immigration nowadays needs to be more focused on need and not numbers
I agree with that thought especially with a changing world and what future jobs will be

What say you, even old guard Labor politicians make some sense every now and then.

Digitization has just started. It will wipe out jobs on a massive scale and create far too few others to give everyone a decent life. Countries with declining populations should be grateful. NZ's immigration policy is indeed out of touch with the modern world.

Agreed the academics (especially NY based) are too far removed from the reality on the ground.

She challenges people to think about what our hospitals would look like without all the migrant doctors, nurses and other healthcare workers for example.
...........
Well there was Sister Knight and Dr Barnslow and then there were all the cute trainee nursies (prior to):

The immigration policy review in 1986 was part of a much larger agenda for change in New Zealand