Busting immigration’s biggest economic myth

By Leith van Onselen

The Australian’s Angela Shanahan penned a spurious article over the weekend repeating the oft-used myth that Australia needs to persist with mass immigration in order counter population ageing:

We need immigrants because we can’t replace ourselves. No industrial economy, no matter how advanced, can afford not to replace itself. The old place too high an economic burden on the young. The classic correct demographic shape of a nation is an upside-down triangle, with more children and young people at the top and fewer old people at the bottom. This must persist for several generations. Only with this profile can we afford to support the elderly and the less able-bodied who can’t work.

The narrower the top becomes the harder it becomes to support the growing number of people at the bottom. This applies particularly now because of our rising age at death (which makes Darwinian quick-fixes such as euthanasia seem attractive to some.) It also entails a far bigger tax impost for the parents of families in the middle, who also supply the children…

We need more family immigration to Australia. Skills-based immigration can be combined with family immigration as it was in the past.

Thankfully, The Australian’s Judith Sloan was quick to set the record straight:

How many times does the Productivity Commission have to ­remind us that immigration is not a feasible countermeasure to an ageing population? It made this point in 2005, 2010, 2011 and 2016. “Substantial ­increases in the level of net overseas migration would have only modest effects on population and the impact would be temporary since immigrants age themselves.”

And here’s another set of facts to consider. According to academics Bob Birrell and Ernest Healy, nearly 70 per cent of Australian graduates aged between 25 and 34 have managerial or professional jobs while only 31 per cent of non-English-speaking background immigrants with a degree hold such jobs. A further 31 per cent of these immigrants are unemployed. Note also that 80 per cent of graduate immigrants are from non-English-speaking backgrounds.

And dare I mention the government’s support for the underfunded contributing parent visa category that allows immigrants to pay for their elderly parents to migrate, and the five-year temporary parent visa category? It could be worth asking the Treasurer what impact these entrants have on the ageing of the population.

Judith Sloan was the Commissioner in charge of the PC’s 2006 review into the Economic Impacts of Migration and Population Growth, so on this topic she carries significant weight and her views should be taken seriously.

Sloan also appears to be an MB reader, since I made the exact same points about immigration’s futile impact on ageing last week. Specifically, here’s what the Productivity Commission (PC) has said over the past decade about the claim that immigration can prevent population ageing:

  • PC (2005): Despite popular thinking to the contrary, immigration policy is also not a feasible countermeasure [to an ageing population]. It affects population numbers more than the age structure”.
  • PC (2010): “Realistic changes in migration levels also make little difference to the age structure of the population in the future, with any effect being temporary“…
  • PC (2011): “…substantial increases in the level of net overseas migration would have only modest effects on population ageing and the impacts would be temporary, since immigrants themselves age… It follows that, rather than seeking to mitigate the ageing of the population, policy should seek to influence the potential economic and other impacts”…
  • PC (2016): “[Immigration] delays rather than eliminates population ageing. In the long term, underlying trends in life expectancy mean that permanent immigrants (as they age) will themselves add to the proportion of the population aged 65 and over”.

In short, trying to overcome an ageing population through higher immigration is a Ponzi scheme.  It requires ever more immigration, with the associated negative impacts on economic and social infrastructure, congestion, housing affordability, and the environment.

Sloan could also have mentioned that the PC’s Migrant Intake into Australia report showed that the immigrants overall have experienced lower median income, lower labour force participation, and higher unemployment than the Australian born population:

ScreenHunter_15659 Oct. 24 14.47

You will note from the above that Shanahan’s claim that we “need more family immigration to Australia” is incredibly daft, since this form of migration has much lower median incomes, lower labour force participation, and higher unemployment than either the Australian born population or skilled immigrants. It is a poor policy choice from an economic perspective.

Separately in her article, Sloan calls for the government to cut Australia’s permanent migration intake to 100,000. Such a level would be significantly below the intake of 190,000 currently and the 193,000 annual net overseas migration (NOM) experienced since 2003. That said, it would still be generous from a historical perspective, given the long-run average NOM is around 70,000 people per year (see next chart).

ScreenHunter_17784 Mar. 05 13.21

According to PC projections, NOM of 100,000 would see Australia’s population hit around 35 million mid century, versus around 40 million under current immigration settings:

ScreenHunter_15977 Nov. 09 07.44

Thus, slashing NOM to 100,000 would be a significant improvement on the status quo, but would continue to put excessive strain on infrastructure, housing, Australia’s natural resources, and the environment. Thus, a lower target is justified, such as Sustainable Australia’s policy of returning NOM to the historical average of 70,000 people per annum.

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Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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Comments

  1. AUS has unofficial immigration also:

    Sarah’s 457 visa has expired but she refuses to go back to Ireland. She is not the only one.

    If the official immigration rate is cut to 45k/year, how many unofficial immigrants will we get?

    Nigel Farage made that point before 23 June. Officially there are 300,000/year coming to Britain, but another 200,000/year unofficially on top.

    Unofficially is perhaps a euphemism for illegally.

    • ‘Unofficially is perhaps a euphemism for illegally.’ – you have no idea how wrong you are on this point. There is no such thing as illegal. This is some bullshit definition.

      There is what power tolerates, and what power does not tolerate. Explicitly, if a behavior is being tolerated by power, repeat after me here, that behavior is the official policy of power, irrespective of the rhetoric. Consider if you did something ‘illegal’, would it be tolerated. No, you and I both know this. You and I also both know that you and I do not have power, so ‘this’ behavior will not be tolerated from either of us.

      A better question is why is a specific behavior is tolerated by a specific power structure. Good news and bad news here, the good news is that generally the specified behavior is tolerated because of coordination problems within the power structure, i.e. human greed and stupidity. The bad news is that when power moves to approve something (tolerate overstaying/money laundering/banks and insurance firms robbing everyone blind), it is almost always explicitly to increase the power of those who already have it.

      My take on why they turn a blind eye to wholesale disregard of every law in this case? They are leftist traitors who understand that importing more ‘vibrants’ of every type increases their power and access to funding. If Sarah is not ‘special needs’ or ‘learning disability’ enough, ‘Sarah’ coming in next week from Mogadishu will surely be. Welcome to the leftist singularity.

      • The main determinant of power is access to and control of “institutions for collective action”.

        Generally collective action is more effective than individual action. The problem of collective action (recognised intuitively since ancient times by only explained rigorously in recent times through game theory) is one of Prisoners’ Dilemma. Each player, while supporting some collective action in principle, has an incentive to defect and free-ride on others, and each player recognises that every other player has a similar incentive.

        To achieve coordinated collective action requires institutions through which those coordinating it may offer credible promises of reward and credible threats of punishment to those who defect or try to free-ride. The ultimate such institution is “the state”, which is why Elites take great care to ensure that they maintain effective control of the state (whatever rhetoric they may use about “representative liberal democracy”). The system of private property (under which the state protects and enforces the property of those who actually own property) allows property-owners to achieve collective action through the payment of monetary rewards guaranteed by contract (contracts ultimately enforced by the state).

        The 20th century was historically anomalous in that the mass of citizens did at times comes close to exercising some effective control over the state. However, in recent times there has been a significant reversion to the historic norm of Elite domination:

        a) the concentration of private wealth has been documented by people such as Piketty;

        b) the creation of new types of property (such as “intellectual property”) has increased the scope for private ownership and control;

        c) the privatisation of strategic monopolies, essential services and critical databases, together with the alienation of public revenues streams (such as tolls) into the hands of private tax-farmers, has further diminished the ability of citizens to use the state to exert any form of collective action; and

        d) the alienation of sovereign powers to opaque private panels under so-called “free trade” agreements has also acted to diminish the scope for public collective action.

        These matters were discussed a little further in one of the weekend links here http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2017/03/how-capitalist-power-works.html (see in particular the comment at the end on strategic coalition-building under elective government).

      • Agree with the majority of what you have written. Will have a look at the link you posted this evening as at work now. One quibble/comment from a quick skim of your comment re, ‘incentive to defect and free-ride on others’. In my world view, this is defection and free riding is the primary driver behind leftist virtue signaling. Why? Because virtue signaling is a safe way to defect without the costs (death/exile whatever historically), it is the epitome of free riding, ‘give me your money/listen to me because I am more holy than you’.

        The challenge becomes that over time, institutions become dominated by people who defect and free ride, eventually becoming parasites. Thus Henry Ford was a massive anti semite, but the Ford Foundation is a huge SJW nerve center. Our institutions have no memetic defense against the virtue signaling. Similarly. institutions founded on solid principles (i.e. universities, the media and the legal system), have similarly slid into gatekeepers for ever more egregious forms of social degeneracy, and will possibly have to be gutted before they can be useful again.

        On your points:

        a) the concentration of private wealth has been documented by people such as Piketty; – I’m also not the biggest fan of Piketty, but that is because I do not trust his motivations/background and his face. He looks like a beta who puts women on a pedestal for the hint of pussy. Bet he has never lifted in his life. A reasonable heuristic of a man’s relation to reality is how much he can lift for my money – this is possibly more applicable to my generation than his though. He seems to be good with chicks though, and women have a significantly more keen sense for a mans worth, so could be wrong. I have not read his work also.

        b) the creation of new types of property (such as “intellectual property”) has increased the scope for private ownership and control; – don’t really agree or disagree. Maybe, but what is the alternative? I don’t buy the whole from each according to his abilities to each according to his needs bs.

        c) the privatisation of strategic monopolies, essential services and critical databases, together with the alienation of public revenues streams (such as tolls) into the hands of private tax-farmers, has further diminished the ability of citizens to use the state to exert any form of collective action; and – absolutely. Worse, this outsourcing has happened in a state of greatly accelerated genetic and memetic fracture [i.e. outsiders with no loyalty to the local commons, in our case Australia is the commons I am referring to]

        d) the alienation of sovereign powers to opaque private panels under so-called “free trade” agreements has also acted to diminish the scope for public collective action. – same as c. With the added bonus of letting the outsiders provide political donations leading to a complete subversion of the intent or well, everything. fml.

        (c) and (d) are basically our equivalent of romans selling monopolies to fund their welfare/warfare state or the church getting rich on selling indulgences.

    • Jacob, Farage doesn’t make points, he makes figures up. So best not to use him or his numbers to inform policy.
      T, labels and conspiracy theories?

      • labels and conspiracy theories… lol. Could I gently suggest that labels are merely names, and conspiracy theories are simply non mainstream hypotheses.

        Maybe the names I have used are more accurate, and the hypotheses I have suggested can explain the world better? Do you discount the possibility? Tell me, how accurate is your world view at predicting current events. Do you find events challenging how you think things should be?

        Here is something that explains what a conspiracy theory actually is, a definition of sorts: https://devinhelton.com/meme-theory.html – have a look.

      • @JasonMNan “Jacob, Farage doesn’t make points, he makes figures up.”

        Farage is a bloody hero – he speaks the truth albeit bluntly and he is always spot on.

  2. mild colonialMEMBER

    How is euthanasia Darwinian? I wish people would get through their heads, for once and for all, that when Darwin used the word ‘fittest’ he was talking about fitting into an ecological niche, not fuqing how many fuqing push ups you can do at the gym. some fit people survive, some weak sociophobes hiding behind rocks survive. Mostly survival of the fittest is not predictive at all. Angela has thrown that ‘Darwinian’ in because as a fundamentalist Catholic she wants to diss evolution. I will give her her due though, she has put her money where her mouth is when it comes to producing a younger generation. Never got the feeling she was happy about it, but she did it.

    • drsmithyMEMBER

      How is euthanasia Darwinian? I wish people would get through their heads, for once and for all, that when Darwin used the word ‘fittest’ he was talking about fitting into an ecological niche, not fuqing how many fuqing push ups you can do at the gym.

      Even sillier is in the context it’s being used – knocking off oldies – the opportunities to pass on their genes have already well and truly past.

    • Darwins “fittest’ were those who survive to reproduce and have offspring who reproduce.
      That does include being in the right place at the right time.

  3. Leith’s stats on this are really pretty persuasive on the productivity front. A cap of 100,000 would appease the people who are worried about this, without wrecking the whole game, perhaps they should just do it.

    Increase the visa fees by 50-100% so that we also get to see more tangible benefit. We’re a popular destination, let’s charge for it!

  4. “Sloan also appears to be an MB reader, since I made the exact same points about immigration’s futile impact on ageing last week.”

    Congratulations, Leith! You are the source of anything intelligent that Judith Sloan says!

    I am sure she will agree.

    BTW… Don’t forget to credit me with the immigration ideas I have given to you over the past 18 months. I sure this was just an unfortunate oversight by you as I know you are not an intellectual social climber.

    • BTW… Don’t forget to credit me with the immigration ideas I have given to you over the past 18 months. I sure this was just an unfortunate oversight by you as I know you are not an intellectual social climber.

      LOL.

      MB has had a consistent position on immigration for at least the six (? – might even be seven) years I’ve been reading it

      • drsmithy

        MB Has not been an advocate of ZERO population growth since before my time.

        As admitted by Leith today, MB has been supporting a Smaller Immigration Ponzi Scheme, drsmithy. That is very different to supporting NO immigration Ponzi Scheme.

        Thank you and God Bless You

      • MB Has not been an advocate of ZERO population growth since before my time.

        Nor is it now.

        As admitted by Leith today, MB has been supporting a Smaller Immigration Ponzi Scheme, drsmithy. That is very different to supporting NO immigration Ponzi Scheme.

        Why zero net immigration ? Why not negative ? Why not target a population reduction ?

      • Well…yes…Smithy.

        Why not anything.

        Well…Smithy… because you have to hang your hat somewhere. And you cannot morally secretly advocate for ZERO population increase while you openly advocate for less than the current level of immigration.

        drsmithy you seem to have elected yourself as an apologist for Leith. Please refrain from such conduct.

      • Well…Smithy… because you have to hang your hat somewhere.

        I see.

        So you are engaging in exactly the same behaviour you are attacking others for.

      • drsmithyMEMBER

        It’s pretty simple.

        You are being quite abusive of Leith for “hanging his hat” on returning immigration to long-run averages.

        Yet you are doing exactly the same thing with zero net immigration.

  5. There was a segment on Sky News Politics HQ last night. Bob Carr was arguing that the migration rate should be reduced and the Federal government should supply the states with a money per immigrant to cover infrastructure/housing/etc. Sloan backed him up and also suggested increased population provided no benefit to existing residents.

    The other bloke that was on (can’t remember name) agreed but too afraid to discuss. Nicholas Reece did his best to obfuscate the debate with identity politics and said the rate should not change just because. 64% of viewers voted for a reduced rate.

    • “…Federal government should supply the states with a money per immigrant to cover infrastructure/housing/etc.”

      I really like this idea!

    • That is a band aid solution to the real problems that include high real estate prices and environmental destruction, and social disruption due to poor life style planning in old and new developments.

      Far better to use the money to enable higher standards of living through creating housing and socially beneficial living environments together with ZERO population growth.

      • I agree with everything you say except that it is not politically palatable to stop it in one go. We can thank the Greens and Pauline Hanson for turning everything into a racism debate.

      • It depends. If the federal government actually had to wear much of the cost of its immigration policy (in terms of more money for infrastructure, health and education) then it might act in a more sustainable fashion. Don’t see them signing up to it though!

  6. Absolutely right, Leith, when you write above:

    “In short, trying to overcome an aging population through higher immigration is a Ponzi scheme. It requires ever more immigration, with the associated negative impacts on economic and social infrastructure, congestion, housing affordability, and the environment.”

    That is just one reason why your idea that we should have continuing immigration at historical average levels is so wrong. You are supporting a Ponzi scheme.

    Immigration levels that target ZERO population total growth will provide Australia with many environmental, social and economic benefits.

    It is time you changed you view (and you can credit me).

    • “It is time you changed you view (and you can credit me).”

      I won’t credit you squat, buddy. I’ve been lobbying hard against the population ponzi for six years – long before you came on the scene. You are a ‘Johnny come lately’ on this issue.

      • Sorry, Leith.

        You are a supporter of increased population.

        You are not a supporter of ZERO population growth.

        So, tell me I am wrong.

        • I am a supporter of significantly reduced immigration. I’d be fine with zero NOM, but can’t see any party ever supporting it. It is too extreme and anyone advocating it would be quickly written off as a loon. You’d be laughed out of the room.

          It’s far better to take a position that you can actually win, such as moderate immigration, than a more extreme position that you can’t.

      • I hear you, Leith.

        You are supporting a smaller Population Ponzi scheme because you want people to like you. Kinda like supporting partial Amazon forest destruction, or partial global warming, or partial pregnancy, or partial white collar crime, or partial negative gearing. Hmmm…

        Do you think you would have helped Gandhi by advising him to advocate for only partial withdrawal from India? Would you have helped the Allies by advocating only partial repulsion of the Germans and Japanese during World War 2?

        I suggest you speak the truth, Leith, and recognize that the truth is more important than selling out your values.

        Therefore you must advocate for the ZERO population growth, as you have now told the MB public, that you believe in.

      • NT are you advocating for a land tax?? That’s unlike you!

        With 0% NOM only a land tax will see the states break even. Are you changing your argument now? You’ll have to credit Leith for that enlightenment.

  7. The cognitive dissonance in the MSM is remarkable:

    #1: robots and software are taking all the future jobs.
    #2: there won’t be enough young people in the future to work in aged care.

    Errr. They can’t both be true.

    The actual truth is that the only reason we “need” an exponentially increasing population size is because our monetary system is dominated by usury / credit-derived money. Should credit contract then deflation sets in and the house of cards comes tumbling down. More people -> more consumption -> more credit. It’s the banksters pushing this.

    • nexus789MEMBER

      All short term as well. How much can I screw today as it will be someone else’s problem in the future and not mine.