Weeo, weeoo, weeoo. The Pascometer is back and immigration is his victim today:
Even liberal commentators such as Ross Gittins are worried about our scarce physical capital being stretched rather than deepened.
Ms Ellis immediately acknowledged the thing that concerns such voices Mr Gittins: “Of course, just adding more people and growing the economy to keep pace wouldn’t boost our living standards.”
And she then offered two reasons for not assuming that is all that happens:
“Firstly, recent migrants have a different profile to the incumbent Australian population. They are generally younger, and the youngest age group are significantly more likely to have non-school qualifications. This is possibly because so many recent migrants initially arrive on student visas and then stay. In line with that, service exports in the form of education have grown rapidly over the past few decades.
“Older migrants are on average less likely to have such a qualification than existing residents in the same age groups, but they are a small fraction of all migrants. The average education level of newly arrived Australians is actually higher than that of existing residents, precisely because they are younger. So Australia’s migration program is structured in a way that, in principle at least, it can grow the economy while raising average living standards.
“Secondly, increasing economic scale is not neutral. There is more to it than just getting bigger. This is the lesson of what is sometimes called New Economic Geography: scale economies arise from product differentiation. Bigger, denser cities are more productive. Perhaps more importantly, larger population centres allow more variety in the goods and services produced.”
…The bigger, denser cities that Dick Smith hates are great sources of innovation and productivity growth. And the bright lights, big city continues to attract the young, the creative and the innovative.
…Our migrant story is too rich, we have gained too much from it, to lose perspective and betray it. Thank you, Luci Ellis.
Tell Michael Pascoe that. Here he is in March 2007:
Immigration Minister Kevin Andrews is reportedly taking to Cabinet next month [a submission] increasing the permanent migration program from the present 140,000 a year to “at least 180,000”…
The surge of guest workers and skilled migration has already kept a lid on wages. As we’ve previously reported, more than half the growth of 200,000 full time jobs last year went to guest workers and targeted skills migrants.
With no apparent cap on 457 visas, plus the Kevin Andrews’s migration submission, it will continue to do so.
And July 2007:
From Brisbane to Perth and all major centres in between, Australian cities are groaning under inadequate infrastructure, choked roads, unaffordable housing, failing public transport.
…the influx remains beyond the planning and delivery capabilities of hapless state governments, never mind a federal government that underfunds the states.
The immigration surge plays a major role in keeping wages inflation under control and, therefore, interest rates down — but it’s putting plenty of strain on other parts of the system.
And August 2007:
Crucial skills shortages in a number of areas means the idea of a flexible and fast temporary visa system has considerable merit, but the badly-administered and demonstrably slip-shod 457 scheme presently run by Kevin Andrews doesn’t.
And there are broader issues yet to be debated about the impact of 300,000 migrants this year on the labor market and economy, the role such an unprecedented intake will play in keeping down inflation by keeping down wages.
And July 2008:
457s are now being processed faster than ever… As the Minister correctly notes, “the increase in the subclass 457 visa grants highlighted the importance of the program in delivering skilled labour to employers across a wide range of professions and industries.”
It also helps reduce inflation by keeping down wages in at least some select industries.
And, with the economy coming off the boil, the matching of 457 visa applicants with areas of particular skills shortages is somewhat less than laser sharp, if only because 47 per cent of those 110, 570 visas were for “secondary grants”, i.e. dependents, who themselves have a very high workforce participation rate in whatever field they fancy…
It’s not so good for workers in the lower half of the pay spectrum who lose bargaining power when positions are filled by 457 visa holders…
Recently The Pascometer described his anti-mass immigration, eminently more senior and superior colleague, Ross Gittins, as an “un-Australian”, “intolerant mental pygmy”, so here we offer Mr Gittins space in riposte:
As well as letting Gittins explain to Pascoe why “using migration to boost growth isn’t smart” at all:
Economists aren’t supposed to believe in growth for its own sake. Their sales pitch is that economic growth is good because it raises our material standard of living.
But this is true only if the economy grows faster than the population, producing an increase in income per person (and even this ignores the extent to which some people’s incomes grow a lot faster than others).
This simple truth is obscured by economists’ practice of measuring growth in the economy without allowing for population growth.
Take the national accounts we got for the June quarter last week. We were told the economy grew by 0.8 per cent during the quarter and by 1.8 per cent over the year to June.
Allow for population growth, however, and that drops to 0.4 per cent and a mere 0.2 per cent. So, improvement in living standards over the past financial year was negligible.
Over the past 10 years, more than two-thirds of the growth in real gross domestic product of 28 per cent was accounted for by population growth, with real growth per person of just 9 per cent.
It’s a small fact to bear in mind when we compare our economic growth rate with other developed countries’.
We usually do well in that comparison, but rarely admit to ourselves that our population growth is a lot higher than almost all the others.
Our population grew by 1.6 per cent in 2016, and by the same average rate over the five years to June 2016. This was slower than the annual rate of 1.8 per cent over the previous five years, but well up on the 20-year average rate of 1.4 per cent…
Almost all our business people, politicians and economists support rapid population growth through high migration. With that much conventional wisdom behind it, who needs evidence?
It’s certainly rational for business people to support high migration. Their concern is to maximise their own living standards, not those of the rest of us, and what easier way to increase your sales and profits and salary package than to sell in a market that keeps expanding?
I oppose “bizonomics” – the doctrine that the economy should be run primarily for the benefit of business, rather than the people who live and work in it – and the older I get the more sceptical I get about the easy assumption that population growth is good for all of us.
For a start, I don’t trust economists enough to accept their airy dismissal of environmentalists’ worries that we may have exceeded our fragile ecosystem’s “carrying capacity”.
But even before you get to such minor matters as stuffing up the planet, there are narrowly economic reasons for doubting the happy assumption that a more populous economy is better for everyone.
The big one is that the more we add to the population, the more we have to divert our accumulation of scarce physical capital – housing, business equipment and public infrastructure of roads, public transport, schools, hospitals and 100 other things – from “capital deepening”, so as to improve our productivity, to “capital widening”, so as to stop our average productivity actually worsening.
In short, Pascoe, you’re full of shit.
Weeoo, weeoo, weeoo.
