Jenée Tibshraeny teases out an economic theory for why migration policy should be driven by well-being not GDP growth

By Jenée Tibshraeny

Migration has played a key role in boosting New Zealand’s economic output.

Nominal annual gross domestic product (GDP) has risen by 24% in the last five years, while annual net migration is up from -3,799 people in the year ended July 2012, to 72,402 in the year ended July 2017.  

This is a good news story right? Both foreigners and kiwis living abroad want to come here, indicating New Zealand has something other countries don’t.

So why then is New Zealand so divided over this “success story?"

Why are we not all popping champagne corks to celebrate one of our greatest income earners?

For some of us it might be because more people, means more traffic, which means 20 minutes less sleep in the morning.

For others it might be because more people, means greater competition in the auction room, which means changing our expectations around home ownership.

And for others it might be because more people, means more pressure on the waste water system, which means we can’t take a dip at our favourite Auckland beach at the peak of summer without getting sick.

We’re all adults here. We know we can’t have our cake and eat it too. We need to accept that with the benefits of migration, come some challenges.

But shouldn’t more of us be a little more stoked that migration has helped produce this lovely chart?

The answer is no.

Why? Because we are all human and losing 20 minutes of sleep in the morning due to traffic, or not being able to cool down at our local beach on a hot summer’s day, means more than a number reflecting success.

We all ultimately live our lives to maximise the well-beings of ourselves and those we love. We don’t set out each day with the explicit aim of adding a point to New Zealand’s GDP growth (even though in theory this should benefit us).

So why then does the government use “GDP”, and not “well-being”, as a basis to form migration policy?

In other words, why does it use “GDP growth” to sell migration to us, when what we really care about is our well-being?

Would more of us be popping champagne corks over this great income earner if the government formed its migration policy with our well-being front of mind?

Independent economist, Julie Fry, and New Zealand Institute of Economic Research (NZIER) principal economist, Peter Wilson, think so.

They believe we could maximise the benefits of migration and have a more constructive conversation about it as a country, if policymakers focussed more on ensuring people are capable of leading the types of lives they value.

Accordingly, they are developing a ‘well-being framework’ for migration, based on the OECD’s Better Life Index.

These are the main factors they identified in a paper published last month, which they believe should be considered when migration policy is formed:

Fry and Wilson acknowledge this won’t make policymaking easier, but believe it will deliver better outcomes.

The fear is that if too many of us get too rarked up about losing that 20 minutes of sleep or dream of home ownership for example, we will go full circle and say: ‘Batten the hatches, New Zealand’s full’. Look at what the Brits have done with Brexit, and the Americans with Trump.

So no, Fry and Wilson aren’t airy-fairy academics with extreme leftist views.

They’re all about trying to maximise the economic and social benefits of migration. They just see a more effective way of doing so than the status quo.

In any case, look at what a fixation on GDP growth has done to GDP per capita:

So how do Fry and Wilson believe our migration policy would change if their well-being framework was applied? The number of less-skilled migrants would be cut, the calibre of skilled migrants would be increased, and “transformation” migrants would be targeted.

The economists explain: “We need to consider both temporary and permanent flows. In the year to June 2016, 192,688 work visas were approved, compared with 52,052 residence visas. Almost 5% of the New Zealand labour force hold a temporary work visa.”

“New Zealand does not have a shortage of unskilled labour: uncontrolled flows of working holidaymakers and students with work rights are the result of foreign policy and export education objectives being prioritised over the well-being of locals. Reducing inflows of unskilled and low-skilled temporary migrants should be a priority. The skill level of both temporary and permanent ‘skilled migrants’ has been declining over time. As Figure 4 shows, successful applicants for New Zealand residence under the Study to Work category increasingly hold lower-level diplomas. These are lower levels of skills than were anticipated when the policy was designed.”

“It does not make sense to provide permanent residence to people working in low-earning retail management jobs or those in the tourist and hospitality industries. If there are areas of labour shortage, they are more appropriately dealt with through temporary visas, and through training New Zealanders.

“Migrants who have the potential to enhance the well-being of New Zealanders across more than one of the dimensions of well-being should be a priority, although our ability to identify such people is low: at present we have difficulty selecting migrants who have the potential to contribute to GDP per capita.

“Targeting people likely to make a bigger difference can involve greater risk, but there are ways to manage this. The Edmund Hillary Fellowship is currently recruiting the first cohort of 100 fellows who will be eligible to enter New Zealand on a three-year global impact visa. Rather than emphasising traditional screening measures such as age, previous experience and detailed business plans, fellows – who can include whole start-up teams – are being assessed based on recommendations from pro-social networks, their potential to develop ventures in New Zealand that could create global impact, and the extent to which their proposed ventures are consistent with New Zealand’s values and needs.

“There would also be value in making the immigration process easier for small numbers of very highly skilled people. Although New Zealand may never be the first choice for the world’s most driven people, greater efficiency and certainty would make us more attractive to top talent looking for alternatives as other countries tighten their border controls.”

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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36 Comments

Good stuff, when can we make a start with such policy changes? Mind you, it does look very much like NZ First immigration policy - but what would they know?

Agreed good stuff. But probably what successive governments have had in mind for decades. The problem is it is not written policy that the department of immigration and the government can be measured against. It is so easy to let the standard slip; for example the author has: see the 6th point "Education" which is then contradicted by the 9th point "Health".

If it is your elderly relative who is being well cared for by an immigrant care-giver you quickly say well lets make an exception. Andrew Little who stoutly defended NZ workers made his exception for construction workers and National's farming lobby has an exception for dairy-workers and the Herald is a firm supporter of immigrant kitchen staff otherwise our top restaurants may drop their standards.

It comes down to what is skilled - hard to define so why not make it 'how much will they pay' - charge employers for a skilled resident visa; they will find the money for a top surgeon or a top level experienced engineer but maybe they will prefer to set up training for unemployed Kiwis to fill the care-giver and construction worker jobs. It is fairly common practice in other countries to charge substantial amounts for work permits and more for permanent residency.

We are stuck between a rock and a hard place where this goes, because it has not been managed well at all, it and the necessary infrastructure etc that goes with it all, now we are just about damned if we do and damned if we don't. But we cannot continue as we have regardless. Perhaps with proper planning we can gradually decrease the numbers coming in. For that National is not required, have demonstrated almost complete incompetence at proper planning.

Agreed. If NZF get into a coalition with whoever they will be aminor party with little power but I hope they will do two things:
1) Increase labour inspectorate (hopefully it will only be needed temporarily) to eliminate the rorts, corruption and widespread exploitation. Until this is done every immigrant however honest is looked on suspiciously.
2) get the dept of stats to follow up the successes & failures of our current system. How many immigrants earn more than average wages - and that is average for Auckland if living in Auckland; how many refugees have not learned English and are still on benefits. I know many if not most immigrants are very proud Kiwis (as per myself) but how many of the skilled chefs are still chefs and how many just kitchen hands? We are told immigrants are good for the economy but the figures seem to say otherwise - lets collect and publicize more evidence.

It is worth mentioning that when measuring a potentially skilled immigrant against these criteria that they are likely to bring a family with them (my own skilled residency 14 years ago now has a wife and four adult children working) so actual skilled permanent residents are usually about 27% of total permanent residents. They should make some attempt to measure the skills and potential of the family.

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Jenée Tibshraeny asks "why does the government use “GDP”, and not “well-being”, as a basis to form migration policy?"

We have it on the very good authority of Michael Reddell of Croaking Cassandra that the Government does not have a "written immigration policy" which is code for saying "there is no immigration policy"

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Yup that why I find a little ignorant of some National politicians/voters who get their tits in a tangle over Labours tax working group and lack of defined tax policy - yet I have no idea where under National where were heading with immigration and population growth - points that could affect by lifestyle more than what tax changes might make....so if we're going to go all OCD over the details of Labours tax policies, let's get OCD over Nationals immigration/population plans. Because right wing supporters are fair minded souls - so I know you'll understand the logic of this approach?

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We are being suckered

Immigration is the big issue
It affects everything else - employment, education, health, housing - everything

Yet, you will have noticed the Stephen Joyce imaginary hole and the TWG attack job has got immigration out of the headlines

Have wondered what was going to be the 2017 version of Teapots and Ponytails distractions

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Much of our quality of life in this country is due to our low population. We are essentially giving this away for no lasting benefit. GDP per capita does not really account for this either. I'd planned to vote NZ First on the strength of their immigration policy but I'm conflicted because Winston is such a dick. There would be a real future for NZ First party with a more constructive leader.

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We definitely need a party which can cut through the media bias against any constructive discussion of population and immigration. The reality is that NZ First is the best we've got at the moment. The Greens have strayed far from the original values of the Values party and now seem to have no problem with unending population growth. They love to virtue signal regarding climate change but don't have the balls to state the climate change is a mere symptom of the primary problem which is overpopulation and overconsumption.

https://en.wikipedia.org/wiki/Values_Party

Dear Grandkids,

Back in 1975, the Values Party would have made it into Parliament had NZ been running an MMP electoral system (they received 5.19% of the vote in that year).

They were founded in 1972 with the following high level manifesto:

- against nuclear power and armaments (legislation enacted - that's done!),

- advocating zero-population and -economic growth (negative progress - NZ's going backwards: we're bigger but not better. Our economic productivity has declined and environmental degradation is much worse),

- abortion reform (no legislative change - no progress),

- drug reform (no meaningful progress - substance abuse/harm is increasing, alcohol and drug related crime is up) and

homosexual law-reform (legislation enacted - that's done!).

1972 to 2017 is - 45 years ago!!!!! - sad to say, this is my boomer generation's report card.

We knew the problems, had the aspiration, had the (free!) education/knowledge - but (in the main), we failed to deliver.

Time to hand the baton to your parents generation.

Let's do this!

Love, Grandma

https://en.wikipedia.org/wiki/Values_Party

This might be of assistance to you https://www.greens.org.nz/page/population-policy

Yes!

Too vague - not a single number in the policy. If everything is defined where is this ideal population target and actionable steps to get us there?

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Drain the Swamp

NZ First is the best chance you've got and the best you've had since 2011 - yet all the yokels and hayseeds rejected them, preferring to be entertained by lies and subterfuges and sleight-of-hand of Key and now English

NZ First have had their day and it is feared they will be consigned to the waste-bin of history as what might have been

NZ has needed NZ First and rejected them and will spend the next 15 years rueing the day they did

Picture this. John Key and Bill English have hoodwinked the hard-scrabblers again and again. You have read about it often enough. You know what they are. English is going around the countryside repeating the same lies. example: Bill fixed the clean-rivers. He increased the e-coli benchmark from 260 ppm to 540 ppm. Problem fixed. There is no problem. Sound familiar?. There is no crisis. Repeat. Repeat.

If English is given a mandate to perpetuate that, you have no chance

Live peacefully if you can

Why we need to drain the swamp

Check out Rod emmerson's summary of National's mis-steps of the past 9 years and try and explain how Nationals can sell that as success

https://twitter.com/rodemmerson/status/908782931501391872

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This is the most sensible article I have read all year. I am so glad that some forward thinking economists are looking at measuring what really matter in life, not just economic indicators.
In NZ we should have a well thought out idea of how we can make our lifestyles better so people can live happier fulfilling lives. After all isn't that what it is all about? The economy should be seen as a means to an ends to try and get us there.

I agree. But we don't need to reinvent the wheel locally, as there is already a econometric for measurement developed internationally, called the Genuine Progress Indicator (GPI) which we could adopt tomorrow:

https://en.wikipedia.org/wiki/Genuine_progress_indicator

And it could and should be adopted with respect to all of our economic policy and reporting initiatives - so across all areas of government (including immigration policy).

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It would be good if our immigration policy didn't allow foreign spies to enter NZ illegally and then become MPs.

Never mind - he is checking his citizenship papers for us to see if he made any false declarations.

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11922788

What a stout hearted trooper.

Kiwis so dumb lah!

You ask the impossible - there is no "immigration policy" - just ad-hockery on the fly

Brilliant article thanks Jenée

So...New Zealand wants Other Countries to do all the hard work of rearing, educating and enriching the nationals of other countries, then it wants to take those selected individuals away from where the cost was incurred and reap the benefits here? How about WE PAY the country of the emmigrants nationality a 'finders fee'; say $50,000 to 'India" for the importation of a qualified Punjabi surgeon etc. Would it make us more discriminating with our immigration dollar, and reimburse 'India" for the costs incurred in educating our new citizen?
There is no 'right answer' of course, but stripping the World of 'the best' and not expecting to pay for it ( by taking lesser qualified mortals as well?) is no long-term answer. "Smalltown', above, quotes the National Party chap as having embellished the truth to 'leave China'. Maybe, he's on to something?!

Yes there is a right answer, which is NZ is not stripping the third world of their best and brightest, it's stripping them of below-minimum-wage workers at south Auckland car dealers. If there is a brain drain going on it's happening because the brains want to leave, not because they're being recruited. In the end this is, pardon the harsh seeming comparison, trying to separate the wheat from the chaff when it comes to applicants.

Not only is there nothing wrong with that, it is the very least that one should expect of a responsible immigration policy, You don't make bread from chaff.

Actually a fair minded idea and surely an experienced Doctor would be worth far more than $50,000.
On the other hand the total value of the infrastructure of NZ is about one Trillion or just over $200,000 per kiwi - and that gives you the roads, sewers, schools, hospitals and maybe more important but not included in that total the trained civil servants: teachers, nurses and Doctors. Logically whoever employees your Punjabi Doctor ought to pay the NZ government about $250,000 towards those infrastructure costs.
I'm not familiar with India but the 3rd world country I do know is in desperate need of nurses and doctors and ought to be compensated for every one who is attracted abroad.

Here is a chart comparing NZ to rest of world.
https://en.wikipedia.org/wiki/OECD_Better_Life_Index

Thanks, great link. We're ranked highest in the world in 2016 under the categories Community and Health - yet we have the highest rate of teen suicide in the world? So some adjustments to their statistics collection on us needed there.

But it's a great example of another existing set of indices used as an alternate to GDP. It's the way to go.

"Migration has played a key role in boosting New Zealand’s economic output"
I do not know how anyone can say this.
Prove it.
In order to do that scientifically you would have to identify all immigrant individuals and work out their average net worth to NZ. And to compare that the the (moving) average net worth of existing NZers.
Who knows, it may be that the average of the existing people has taken a big jump up and all the immigrants and their old ailing parents may actually be to the detriment of NZ.

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Productivity per capita flat for the last 5 years - even Australia is doing better than us. When I was born NZ was roughly top country in the OECD now it is about 30th - something has gone wrong and since we have had the highest immigration we can't blame it on too few immigrants only on the standard of the immigrants we are absorbing.

If we only allow immigrants in who have higher than average productivity and who increase environmental quality and increase the life satisfaction of locals, people who are engaged citizens and people who are supported, wont they displace and further drive down less capable and unsupported home grown citizens? Our societies tend to have a bit of an upper, middle and lower stratification. Such immigrants will fill the niche of the middle class and are likely to exploit the lower echelons as workers and tenants. Is this really being fair to the less capable in society?
I would think that immigrants who were restricted to female Scandinavian models in the 8-10 category would significantly increase the life satisfaction of many locals. Would this be fair to our local lasses?
The whole thing seems a bit dodgy no? Maybe we should just have a lottery to be truly fair?

So you would prefer an illiterate pensioner to a young professor of sociology? Whoever comes in competes with their peer group - in North Shore Auckland it seems to be disproportionately fast food outlets, supermarkets and coffee shops. Not good for those of my kids have done badly at school and are entering the workforce on the other hand my more talented kids with their degrees deserve some competition.

I offered it as a sort of thought experiment. But if I were a young professor of sociology and positions were limited, as they are, then yes I will take the illiterate pensioner. To say that someone else is more deserving because of an accident of birth, being born in the right place and time, is walking on thin ice toward a slippery slope.

I'm selfish - I would take whoever is best for NZ as a whole - and that would not be a pensioner (like myself). Note that NZ rugby is happy to recruit the best it can from the pacific - keeps the All Blacks no1; there are reasonable complaints about it reducing Fiji, Samoa & Tongan rugby but no arguments from top Kiwi players that they are getting less chance of gaining a valuable All Blacks contract.

However for refugees I take almost the opposite view - rather than virtue signal with the number taken (Nats to 1000, Labour 2000, Greens 4000, etc) I would specifiy a sum of money that would be spent as advised by the UNHCR (my preference is for an increas on our current expenditure of roughty $100m but maybe I'm virtue signalling) - that might mean say 2000 average refugees but maybe a smaller number needing expensive medical treatment unavailable in the refugee camps.

I think it is hypocrisy to take in refugees when we are helping the USA create the refugees.
The best service we could give these people is to stop the USA killing their families, bombing their homes and destroying their countries infrastructure.
The USA likes our involvement not for our few weapons but to help legitimize their behavior.
We like to kid ourselves that we are good guys helping out. We listen to the same crap media as the American people which is 90% cheap propaganda.
We are on the wrong side of history kidding ourselves that we are generous loving people helping out.in the refugees hour of need.

Finance is not something separate from society. It is neither a Marxian superstructure nor a monetarist veil, but rather the very substance of modern social relations, a web of time-dated promises to pay that stretches from now into the future, and from here around the globe. Financial relationships are not about mediating something else on the‘real’ side of the economy; they are the constitutive relationships of the whole system. Financial globalization and global financialization have produced a global Financial Society, hierarchical and inherently unstable. The problem confronting social analysts is not so much to find the social in the money grid – the money grid is already social – but rather to understand the dynamical operations of that grid on its own terms. This essay sketches the fundamental processes that produce and reproduce Financial Society – settlement and market-making – as an attempt to provide a realistic point of departure for any feasible project of reform. Read more

You cannot live by bread alone. Or who would sell their grandmother? In fact it was shocking when last week they published articles about underage prostitutes pimped by their druggie parents.

And on the other hand you have a point as anyone who has seen an acrimonious family dispute about inheritance.

I don't know Stephen, this is a bit shallow.

It assumes money is the measure and the hierarchy of it a causal actor. It then uses money as its foundation to the moral argument (injustice). It also doesn't differentiate between equality of opportunity (possible) and equality of outcome (impossible).

I do not agree that money is a useful measure of life's worth.

I don't see money as a useful foundation for morality.

I think equality of outcome is as impossible as it is pointless as a goal.