Earlier this month, the New Zealand Treasury released a bunch of briefing papers warning that an increasing share of New Zealand’s record intake of non-New Zealand migrants are increasingly low skilled and could be lowering the nation’s productivity and GDP per capita (see here for my analysis).
Treasury’s concerns are best summarised in the below chart, which shows that a “significant proportion” of the 21,000 migrants granted residency under the Skilled Migrant Category (SMC) in 2014-15 now work in low wage occupations. The recent trends also show a “relative decline” in the skill levels of these migrants, with almost 40% of SMC migrants former international students.
In short, international diploma-level students granted residency has more than doubled since 2008, whereas the number with bachelor degrees has fallen by around two-thirds.
Moreover, the primary motivation for international students going to New Zealand has become immigration, not education. From Interest.co.nz:
Meet Sandeep Dahiya.
He’s a 21-year-old international student from India, working towards completing a National Diploma in Hospitality Level 5.
He’s forked out $29,850 for the two-year course at a tertiary education provider in central Auckland…
Dahiya says he’ll be in the running for permanent residency if he manages to get a job in hospitality once he qualifies. Otherwise he may be able to get a two-year working visa if he stays on at Countdown…
Dahiya’s story isn’t unique…
Another international student from India, who has asked not to be named, says him and his friends are happy to work in a menial jobs they’re over-qualified for, in order to get New Zealand residency…
He believes he’s being overcharged for the course, which is sub-par to the university degree he did in India, but says it’s all worth going down this path to secure residency and enjoy a higher quality of life in New Zealand.
Late last week, Kerry McDonald – a company director, chairman and advisor – wrote an excellent report warning that New Zealand is running a ponzi economy based on quantitative drivers of growth, such a low quality immigration and housing – rather than quality drivers of growth. From Interest.co.nz:
The high rate of immigration is a national disaster. It is lowering the present and future living standards of New Zealanders by serious adverse economic, social and environmental consequences.
The critical criterion for policy is impact on the living standards of New Zealand residents. The impact on the immigrants is irrelevant. But, the political view is a simple and misleading “quantity” based one – more immigrants means population growth and more jobs, houses and infrastructure spending, so GDP increases. This suggests a strong, well-managed economy – which is a nonsense in New Zealand’s case with an export dependent economy.
In terms of national benefit the “per capita” impact is the important one. Unless immigrants increase New Zealand’s exports and foreign exchange earnings and savings per capita, or bring particularly valuable skills to the economy, they simply impose substantial additional costs on and reduce the living standards of New Zealand residents.
Having a job, even in an export industry or tourism, is not enough, and many immigrants lack the particular, high level of skill and productivity to add the necessary value. Using them to fill low skill, low productivity gaps in the labour market, eg. building houses for our excess population (other than on a temporary basis), is damaging to New Zealand’s interests, in the short and long term. So, we scramble to build more houses and ignore the fundamental policy problems…
The regions are critical in the economy, and for our living standards. They produce a high proportion of exports and are the main tourist destinations. But, they are struggling because the NZD is too strong, they are less valued politically and their competitiveness and quality of life is being undermined, mainly by poor policy which doesn’t recognise their paramount role in the economy.
Auckland is increasingly a millstone around New Zealand’s neck: “its economy is inwardly focussed, driven by consumption, real estate and domestic services”; “measured internationally it’s performance is poor…
Its population growth is increasing the negatives: more spending on infrastructure and government services; more agricultural land for housing; a less attractive living environment for existing residents; more demand for urban water use at the expense of more productive uses; greater population pressure on the environment generally; and an increasing dependence on the rest of New Zealand to subsidise it’s weak export performance – which reduces the living standards of everyone else.
The scale argument (bigger is better) is a typically wrongheaded quantity not quality political argument; and the innovation centre argument is not economically viable – if it depends on Auckland’s size then the national benefits are inadequate to justify the cost.
Much like Australia, New Zealand is wrongly pursuing quantitative ponzi growth. This might be good for the aggregate economy and big business (i.e. more inputs equals more outputs and more customers for business), but it also represents a step backwards in living standards for the average Kiwi.
But unlike Australia, New Zealanders are at least debating the issue, whereas in Australia it is the ‘elephant in the room’ that few will discuss for fears of being wrongly labelled a “racist”.
