Rodney Dickens says if policy was less skill-qualification-oriented and more honest-hardworking-orientated the regions would have a better chance of competing for immigrants

Rodney Dickens says if policy was less skill-qualification-oriented and more honest-hardworking-orientated the regions would have a better chance of competing for immigrants

By Rodney Dickens*

Auckland is a major winner from the government's skilled-based immigration policies, Wellington and Canterbury benefit to a moderate extent, while Canterbury benefits form the rebuilding-related skill-based policy.

All other regions are double losers as a result of the skilled-based immigration policies, as explained and quantified in this Raving.

Skill-based immigration policies would appear to be great at ensuring the largest group of immigrants, excluding Kiwis returning form OE, offer skills that fit with the evolving economy.

However, the evolving economy and the skilled-based immigration policies both favour large urban centres over other centres.

This is having a significant impact on regional economic growth, retail spending, residential building and house prices.

The Regional Barometer reports we launched this quarter that include analysis of migration behaviour provide the best available insights into regional and city/district prospects.

Restricting where immigrants can live would be self-defeating.

In time many skilled immigrants would end up filtering to the major urban centres even if they were originally restricted to living in provincial towns and cities.

However, if the criteria were changed to allow hard-working immigrants in as much as highly skilled immigrants it would even the playing field.

It would allow regions with cheaper housing costs to compete for immigrants on a much more equal footing with regions dominating new economy job creation.

Regional winners and losers from immigration

Auckland hogs a huge share of immigrants from overseas that includes Kiwis returning from OE (chart below).

Canterbury comes a distant second, aided currently by rebuild-related immigrants and Wellington third. The not applicable/not stated group actually comes second and I assume largely reflects people not filling on the immigration form completely. I assume the not applicable/stated group ends up spread around the country roughly in proportion to the stated/allocated group, but this may not be the case.

Comparing the regional shares of immigration, based on the stated or allocated group, to the region shares of population puts the immigration numbers in perspective (chart below).

Auckland's share of allocated immigration is almost 15% (15 percentage points) higher than its share of population.

Canterbury is the only other region with a larger share of immigration than population, but that is likely to be a temporary phenomenon related to rebuilding, while Nelson almost gets its share of immigrants.

I have calculated the number of immigrants each region would get if its share of immigration matched its share of population. From those numbers I have calculated the excess or deficit for each region (chart below). 

For example, in the 12 months ended March 2014 Auckland gained 11,766 more immigrants from overseas than it would have if its share of immigration matched its share of the population. Waikato had 2,424 fewer immigrants than it would have if its share of immigration was in line with its share of the population.

Canterbury is the only other winner, while Nelson is only a small loser.

It is useful to see the excess/deficit numbers in the chart above as a % of population (chart below).

Setting aside Chatham Islands that is only included for family reasons, the majority of regions experienced a deficit share of immigration in the 2013/14 March year of between half a percent and one percent of the population (e.g. Tasman's population would have grown 0.9% more last year if its share of immigration had matched its share of population, while Auckland would have had 0.8% less population growth if it hadn't hogged an excessive share of immigration relative to population size).

The economic multiplier effects amplify the regional differences

The regions that don't get their share of immigration are double losers.

Immigrants have to restock lots of non-durable goods (e.g. furniture, whiteware, etc.). The only study I have seen on this said an immigrant added spent 1.7x the average spend per person in the first year because of this restocking process.

He/she also needs housing, which adds to existing and new housing demand. While a reasonable portion of the spending will filter outside the region, especially for smaller regions that don't offer such a full range of goods and services, a sizeable portion will be on goods and services bought from suppliers in the region.

The increase in income experienced by local suppliers will result in them spending and employing more.

Some of this spending will filter outside the region, but a sizeable portion will be on inputs purchased in the region, while the boost to employment will most likely attract some workers from outside the region. This is the economic multiplier process of textbook economics at work.

The regions that have a deficit share of immigration from overseas don't gain so much benefit from this economic multiplier process, which makes them vulnerable to losing workers to the regions that gain an excess share of immigrants and consequently have more powerful economic multiplier processes at work (i.e. almost exclusively Auckland).

This means the regions that aren't gaining their share of immigration from overseas are being hurt by more than implied by the numbers in the chart above.

A practical policy suggestion

To some the answer to this problem, assuming regional underperformance in terms of gaining immigrants and population growth are seen as problems, will be restricting where immigrants can live.

I see this as a waste of time because if people want to be in Auckland you can't keep them caged in the provinces indefinitely (i.e. any such policy will only have a transitory impact before it gets undermined).

To me there are some interesting economics at work that lead to a very different policy recommendation to the government.

Many years ago a visiting US economics professor presented a different approach to analysing economic behaviour. His starting point was the size of urban centres.

The size of the centre largely dictates the types of industries and firms present, subject a bit to the composition of the adjoining rural economy, which in turn largely dictates the types of jobs available. Small centres have a more restricted range of industries/firms and a more restricted range of job opportunities.

This is extremely relevant to immigration because to a large extent we restrict immigrants based on skills and qualifications.

By having high skill and qualification barriers to immigrants it reduces their chances of getting jobs in many parts of the country.

This may be the single largest reason why especially Auckland but also Wellington and Canterbury to some degree perform much better than regions with smaller urban centres in terms of capturing share of foreign immigrants.

Most notably Auckland has a much wider range of jobs available for the sorts of skilled immigrants we let into the country.

This issue is becoming more important with the growth in the work visa share of immigrants. The adjacent chart shows permanent and long-term immigrants broken down by visa types.

The no visa category will largely reflect Kiwis returning from OE. A decade ago immigrants with work visas matched immigrants arriving with residency visas, but in the last year there were 2.5x more immigrants with work visas than with residency visas.

This link is to the news section of the Immigration New Zealand website that includes lots of interesting info, including info on skill shortage lists (see, for example, this link). There is a Canterbury skill shortage list. The skill shortage lists will to some extent be relevant to all regions, but they will be more relevant to regions with larger urban centres that have a wider range of job opportunities.

This is better understood if we look at the Skilled Migrant Category which the Ministry says is:

"… the main pathway for skilled workers from overseas to become New Zealand residents. Points are awarded for factors such as a skilled job offer, qualifications, previous work experience, and age. A skilled job offer is usually critical to securing enough points to gain residence under the SMC." Source

A great example of this last week was accounting software firm Xero that has Auckland and Wellington offices announcing it is looking for 160 software developers in Britain (the first link below for this story). In a past Raving I looked at regional winners and losers from the evolving economy (use the second link below to access this report). Xero is a good example of a new economy firm that is playing an important part in driving new job creation.

For a range of reasons these firms mainly set up in large urban centres (e.g. proximity to large customers, a skilled labour pool and an international airport; the lifestyles offered by large urban centres that are favoured by higher skilled and higher paid workers in new economy firms; etc.). 

From one perspective this means our skill-based immigration policy fits well with the evolving economy and makes sure new economy and other firms with skill shortages can attract the required workers from overseas to supplement local supply.

And maybe this is the best outcome even though it means most regions will be losers.

But if the criteria were relaxed to include hard-working people with lower formal qualifications, it would create a more balanced playing field from a regional perspective.

If this were done it would allow regions with smaller urban centres to better compete in part because they offer much more affordable housing costs compared to income levels than the large urban centres.

Take Hawke's Bay and Southland, for example. Neither has participated in the national upturn in existing house prices over the last couple of years, as shown in the two charts below, while both are underperformed in immigration shares. Both now offer much more affordable housing relative to incomes than the national average and dramatically so when compared to Auckland.

If the focus of immigration policy was less skill-qualification-oriented and more honest-hardworking-orientated the likes of Hawke's Bay and Southland would have a much better chance of competing for immigrants with the major urban centre, aided by the more affordable housing offered in these regions.

Wide-ranging insights into regional and city/district prospects are covered in the Regional Barometer reports we launched this quarter or contact me for info on these sharply-priced reports.

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*Rodney Dickens is the managing director and chief research officer of Strategic Risk Analysis Limited.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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When weighing the benefits of immigration we need to measure the fiscal and social impacts.  Fiscally we should consider how much income the average immigrant contributes through tax including GST.  Similarly we should consider the amount of benefits received by the average immigrant; there would be no need to calculate the immigrant’s proportional cost of health and education if you assumed that immigrants used no more or less of these services than natives.  If the level of immigration forced the construction of more hospitals, schools, etc then the govn should consider a levy on immigrants to cover this additional one-off cost.  If the tax income is more than the total benefits claimed it could be assumed that immigrants are making a net positive fiscal contribution.    
 
Social measures should be immigrant’s participation in sport, art and cultural activities and the number of awards won in these fields.  Immigrant’s participation in crime, or lack thereof, should be considered.  You should also measure the rate of displacement of natives if most other factors remained constant. 
 
The characteristics of a ‘good’ immigrant would be someone young, highly educated with in demand skills and with no criminal record.  This would ensure they are employed without displacing a native from their job (and hence increasing unemployment), a young immigrant would be less likely to immediately claim health or retirement benefits and some evidence that they have made a positive contribution to their host countries culture as measured by the aforementioned social measures.  Any right of the immigrant to bring their extended family should be removed as there is no way to ensure these extended family members meet the criteria. 

Oh yes indeedy
 
The IRD (is capable) and should publish summary data relating to migrants and how much income tax they contribute in their first 5 years
 
Not hard to do
 
We, the hoi-poloi, need to know whether these talking-head-boffins who preach more, more, more, let-em all in, are talking rubbish or not
 
It's the absence of any data that creates the vacuum into which this sort stuff can be disgorged without any worry that it can be either tested or refuted
 
I put up a link last week that demonstrated that while GDP is going up, Per Capita GDP isn't going up, which means the migrant is the only beneficiary of their presence in NZ, and of no benefit to NZ as a whole

Bingo Drawdown
 
Social measures should be immigrant’s participation in sport, art and cultural activities and the number of awards won in these fields. Immigrant’s participation in crime, or lack thereof, should be considered.

Draw up a ledger card on sport participation versus crime participation and see the balance

who gives a damn about sport?  I mean in terms of GDP, etc.
regards

I don't weigh economic factors, I see moral responsibilities.

I think these days its limited to parents, no extended family.
regards

Parents are extended family.
 

What makes us rich is GDP per capita, more ppl, sure, higher GDP, sure, but not per person.
Kiwi's wages are also low, and with 6% un-empolyed we just dont need more ppl....
regards

I forgot to mention sustainability; I do not advocate increasing NZ's population, rather a open debate and a public aggreement/commitment by all parties to keep our population at a agreed level.  What that level should be is a whole new conversation.  At times immigration would be needed to keep a population static. 

Again though that is almost an assumption of BAU.   So "static" while fossil energy availablity falls over the next 20~40 years to just about 0 fossil fuels is a long drop on numbers NZ can support.
Consider also that NZers who have left NZ "permanantly"  still have the right to return and take up residence.  I would suggest that when it gets really rough out in the world we'll see NZers coming back.  When this happens what do we do? we cant really send "new" NZers back vary easily to make way, and I'd sugegst we shouldnt, after all they commited to live here and pay taxes while the NZers who left have not.
Hard Qs...
regards

One in one out ? ? ?  With priority to returning citizens.  Might get to the point there is no immigration; just breeding and returning citizens. 
 
Have you done a calculation on how many people NZ could sustain without fossil fuels?  Might be a good number to start with. 

That calculation also depends on what lifestyle you would like.
In a way you dont have to do a calc and approach it from a different angle. You can say lets go back to pre-cars and pre-mass use of artilficial fertilizer how many ppl were there then?  This suggests a time frame of about the 1920~30s, which had a world population of about 2billion I believe.  Now is 1.5million NZers too many?  "New Zealand’s population grew steadily during the decade, climbing from about 1.24 million in 1920 to 1.48 million in 1930. "  I'd suggest NZ can sustain above that.  how far? well we are an exporter of food right now, so look at organic production v artificial output.  However I have as yet not been able to find any trustworthy documents that compare apples with apples.  For instance there are claims that organic can produce anything from 30% to 90% of "modern methods", trouble is to get up that high requires a lot more human labour, which doesnt seem to be properly quantified. Then there is the fact that artificial fertilizers seem to be a) degrading and b) poisioning the soil.  So I hope we can feed 4million OK....5million? probably, 8million? cant see it...
We have of course developed a huge amount of knowledge in that time, the problem will be not losing it.
Life will I think be a lot simpler and slower, not sure if it sounds that bad.
regards
 

Given 6% un-employment right now "Might get to the point there is no immigration; just breeding and returning citizens. "
seems sensible if only short term.
regards

When oh when is the human going to get its head aroiund what is staring us in the face - that is, we are destroying the planet by our overpopulation of it.
Why do we keep on thinking we need more people? As long as we use this ponzi scheme as our means to prop up our "prosperity", it has no fullstop to it, as it does not matter how many people you have you will always need more. China only managed to do it by taking the whole world's jobs to progress themselves. That run is coming to an end and they will once again use population increase to enhance prosperity, that is beginning to happen already.
The human race is mad

Yep.
regards

"But if the criteria were relaxed to include hard-working people with lower formal qualifications, it would create a more balanced playing field from a regional perspective."
That is one huge assumption and not justified....we have lots of ppl who will work hard IMHO.
On top of that when  searched for work I went all over, right down to Dunedin and I was told I wasnt wanted, I ant a kiwi.
So really the centres are more cosmopolitan and will emply ppl.
regards
 
 

The Regional areas are largely neglected by National. 
The squeeze on funding for public institutions in regions is pushing more people to Auckland.
maybe they believe it's more efficient to have everyone in one place?

I'd suggest that National's core rural vote being there is safe, ie farmers. Then the farmers employ lowly paid staff, if there is job competiton they'd have to pay more and be un-happy, so National will ignore it.
Who would move from rural to urban? maybe mostly labour votes? So that makes rural seats safer and moves a vote that might count to where it doesnt matter.
Then I'd suggest that Labour seeing those were safe National areas has not spent the time and $s there, for no gains.
regards
 

Agree.  More focus on hard-working imigrants and less on highly skilled.  We have shortages in the trades for many years; a hard working apprentice is rare as hens teeth, and imigrants who value being in nz are often the hardest working people you will come across.
 
It is interesting to see that while most regions dont get their full 'share' of imigrants, they certainly are not missing out completely.  And with the booming numbers, you will see population swelling on a regional level too.
The effects on immigrants of the very high auckland house prices has also yet to be seen.  correct me if i am wrong but from the graphs ive seen:
There has never been a time in nz history when the price gap between auckland property and regional nz property has been so great.
This means there has never been a bigger incentive than now for people wanting more affordable housing to leave auckland for regional nz; or imigrants to choose regional nz over auck. 
 
 

Uh, and how do you judge "hard working"? and I dont agree that much on migrants being that great.  Some are some are not, just like kiwis.
Id suggest that truely highly skilled add far more value to the economy in terms of GDP per capita than these so called hard working ppl. I mean you can be a hard working farm labourer, does nothing really for GDP.
Sure apprentices are rare, few companies employ any these days.  What I did notice some years back however was an uptake in students doing trades, dunno if there is any data on that, DC?
Shortages? I have some friends who have gone to ChCh from Wgtn to get work, others gone to OZ.  They have left for work and/or better pay.  I have one mate who lives in ChCh works as a boat builder, most of his time is spent in Auckland as that is where the work is from overseas.
Affordable hosuing is mute, what counts is a job and the "comfort" that if that job goes you are likely to get another.  I'd like to "retire" to SI, but there simply isnt the quantity of work (none) or the pay (a 1/2 or 1/3rd pay cut) to make that possible.
regards
 

We are retailers in Napier.  It is becoming increasingly concerning how many shops are closing. Approximately 20% of the CBD is empty!  Something has to happen to reenergise the town.  We desperately need an inflow of residents, businesses and work opportunities.  Our housing is affordable, the climate is the best in the country and the Hawkes Bay has incredible wine!  All most appealling but without work opportunities for those in the job market this only appeals to the retirees.  If immigration had a policy whereby potential immigrants got resident status easier if they moved to a rural area (and stayed there for a period of time i.e. 5 years) it may bring more people into the area and stimulate business.

Oh, 20% down sounds bad.  Tends to be a bit too hot and dry, but I do love Napier, no work there however for me.
How can ppl move somewhere for 5 years if there is no work?
Here in Wellington Im see some empty mall spots and short term fills. Just another nail in the coffin of the argument that our economy is doing well so put up interest rates now....now...now.
 
regards

Napier City had about 3.4% growth between the 2006 and 2013 census. That's pretty reasonable by NZ standards for the period. But the sourruonding countryside has emptied out a bit. I'd look at the number of steady rural jobs in the surrounding area for that one.
Napier also has an issue that its population is, as mentioned above, older. And older populations do not make for foot traffic in the CBD. So it has been a twofold thing- people retiring to the region and younger people looking for the work stablity in the rural sourrounds to raise families leaving.

Mass immmigration into the UK provided a benefit equal to one Mars Bar per head of population after all the free health, housing, education and social benefits were taken into account. To read here that regions are not getting their share of immigrants to stimulate their area is not to understand the purpose of immigration. It's the governments job to stimulate growth across each region and educate the unemployed locals to fill these jobs. No NZ government since the war that I can remember has ever seen this as their prime duty and as a consequence we have had companies relocating northwards leaving workers stranded across the whole of the South Island. Kiwis have been emigrating to Aus in droves and all the government do is import loads of immigrants hoping that some of them might replace the lost revenue. To advocate immigration while the unemployment rate is high and skills are disappearing overseas is to ignore the real problem - an indolent and dithering government looking for short term gains through immigration with no real idea how to build a thriving economy and stimulate growth across the whole of the country and not just Auckland.  

Agree, well said.
regards