Wasn’t skilled migration meant to lift Australia’s productivity?

By Leith van Onselen

Australia’s productivity growth has averaged less than 1% a year since the global financial crisis – well below the 30-year average of 1.6% – and the near-term outlook remains bearish. Productivity Commission chairman Michael Brennan has urged the federal government to pursue measures aimed at boosting productivity in the wake of a new forecast from the International Monetary Fund that real national income per capita will average just 0.3% annually over the next six years. From The AFR:

Productivity began to slow before the 2008 financial crisis and has averaged below 1 per cent since then. Treasury assumes productivity growth will equal its 30-year average of about 1.6 per cent…

Adding to a call by Reserve Bank of Australia governor Philip Lowe for politicians to apply a “laser-like focus” to productivity reforms to help lift subdued wages, Mr Brennan backed up that cry by calling for reforms to competition policy, regulation and the funding and design of the skills, health and education sectors.

The curious thing about Australia’s productivity slump is that is has coincided with the massive ramp-up in skilled migration:

For years Australians have been fed the false claim that skilled migrants are younger, more educated, and more productive than locals, and that without a strong immigration intake, the population would grow old and the economy would stagnate.

Economic models are often cited as proof that a strong immigration is ‘good’ for the economy because they show that real GDP per capita is moderately increased via immigration, based on several dubious assumptions.

First, it is generally assumed in these models that population ageing will result in fewer people working, which will subtract from per capita GDP. However, it is just as likely that age-specific workforce participation will respond to labour demand, resulting in fewer people being unemployed, as we have witnessed in Japan.

Even if this assumption was true, the benefit to GDP per capita would only be transitory. Once the migrant workers grow old, they too will add to the pool of aged people, thus requiring an ever-bigger immigration intake to keep the population age profile from rising.

Indeed, the Productivity Commission (PC) has for more than a decade debunked the myth that immigration can overcome population ageing. For example, in its 2010 submission to the Minister for Population, the PC explicitly noted that “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”.

Academic demographer and mass immigration spruiker, Peter McDonald, also previously stated that it is “demographic nonsense to believe that immigration can help to keep our population young”.

Second, it is generally assumed that migrant workers are more productive than the Australian born population and, therefore, labour productivity is increased through strong immigration. However, the evidence here is highly contestable, with migrants generally being employed below the level of their qualifications, as well as having lower labour force attachment than the Australian born population (more information here). Migrants have also tended to go into areas that are not experiencing skills shortages.

Third, economists generally ignore obvious ‘costs’ of mass immigration on productivity. Growing the population without commensurately increasing the stock of household, business and public capital to support the bigger population necessarily ‘dilutes’ the capital base, leaving less capital per person and lowering productivity. We have witnessed this first hand with the costs of congestion soaring across Australia’s big cities.

Moreover, the cost of retro-fitting Australia’s major cities with infrastructure to cope with larger populations is necessarily very expensive – think tunnelling and land acquisitions – with costs borne largely by the incumbent population.

Given Australia’s low savings rate, the large levels of housing and infrastructure investment required to keep pace with population growth also puts upward pressure on real interest rates. That, in turn, has kept the Australian dollar elevated for years making it harder to export from Australia and resulting in manufacturing closures.

Finally, high immigration has unambiguously helped to lift housing costs. This has made it more difficult for younger households to invest in businesses, limiting entrepreneurship. High housing costs also creates barriers to labour mobility and social mobility, both of which matter for achieving Australia’s productive potential.

Currently, there is no economic plan other than to flood Australia’s major cities with tens-of-thousands of extra people each year to stoke overall economic growth (but not growth per person), to support big business (e.g. the property industry), and to prevent Australia from going into recession (despite growth and income per person stagnating).

Meanwhile, productivity and individual living standards are being eroded through rising congestion costs, declining housing affordability, paying more for infrastructure (e.g. toll roads and water desalination), environmental degradation, and overall reduced amenity.

Mass immigration has hindered, not helped, Australian productivity.

[email protected]

Unconventional Economist

Comments

  1. Every time you hear someone refer to “Economic models” — run!

    (Can I just add that high levels of consumption-based debt are an impediment to productivity improvements — productivity improvements require investment — and increasing diversion of income toward debt service detracts from the investment side of the equation via low savings rates. Add to which, property flipping as a preference to investing in real businesses – productive endeavour – just exacerbates the problem)

  2. Lenny Hayes for PMMEMBER

    Read recently that the Singaporean Government has targetted reduced immigration in an effort to “increase productivity” and “create jobs for locals”.

    One of us has gotten it very wrong !!.

    • If I recall correctly real incomes have risen in Japan. Had some experience of some ‘new arrivals’ in government. Some issues. You can’t validate their work history, or their qualifications and good luck with getting references.

    • I believe they are also cracking down on the use of workers from a certain part of the world. A guess, it starts with ‘sub’ and ends in ‘ontinent’.

  3. So the loss in Australia productivity in the last decade has been 6% (1.68% decline to 1.0% 10 years).
    An aggregated loss against trend of -6%?
    Matching almost the average Australian wages loss of in the last decade.

    What happened in the last decade?

    1.9 million migrants were given Citizen Grants & PR. 78% were unskilled/dependent. 87% were from third world countries. The majority of the dependent were aged or totally unemployable. They had low or no assets and even after a decade in Australia, still earn far less and are massively over-represented in our Centrelink welfare, unemployment & Medicare cost burden.

    Many are not assimilated, living in highly concentrated ethnic enclaves, some with no English (or even literacy in their own language) after a decade.

    The evidence is of a second generation with low aspiration & achievement, non assimilation, welfare dependent, the epicentre of vice, gangs, an ideological antipathy if not hatred of Australian values, crime & gang violence and over represented in criminal drug, fraud convictions & in our prisons. Just stating the facts.

    The last decade of Citizen & PR grants will continue to burden Australia for generations to come.
    Unless we start revoking a million or so Citizen and PR grants – we are completely stuck with this burden.
    —-
    It gets worse, but we can do something about this.

    On top of the1.9 million PR intake in non assimilation and unproductive social & economic burden, Australia then allowed in 2.561 million non resident migrant guestworkers on a splendid array of visa pretexts and alibis.
    It was 2.431 million non resident migrant guestworkers as of March 2018 (VSure & DHA Stats & links posted here on MB many times before)

    A 5.7% yearly growth (DHA quarterly reports) to now be as of March 2019 – 2.561 million non resident migrant guestworkers.

    An ‘additional intake’ equivalent to 14 years of PR.
    At a growth rate of 130,000 in the last year – rivalling the PR intake of 190,000 a year.

    It will be 2.6 million migrant guestworkers in 3 months time in July 2019.

    These 2.561 million non resident TR migrant guestworkers are 86% third world origin (includes 260,000 of the 669,000 NZ SCV as third world origin with the NZ SCV stamp). Other major TR visa groups are 672,000 foreign students & partners, 196,000 bridging & protection visas, 156,000 employer sponsored (only 68,000 primary & only 11,000 actually high income unique skilled), 142,000 backpacker with 91% never leaving Sydney or Melbourne or paying a farmer / labor ring a bribe to say they did, and so on – a splendid array of visa pretexts.

    The DHA Website has the statistics and tables of their country of origin & visa categories.

    The non resident migrant guestworkers are
    Permanent stay (NZ SCV),
    very long stay (foreign student TR in Australia for 9 years on visa extension is not uncommon,
    Long stay 5 years on bridging/protection visas cat A to E rorting the appeals tribunal etc.
    3 years backpacker with the farmer / labor ring bribe.
    And so on.

    Third world. Adult. Unskilled. Unproductive.
    No assets. Most in agent procurer loan debt for the bribes & fees paid to enter on a visa pretext.
    Over 1.4 million work illegally or are on a visa pretty again that detail posted here before.
    Average income $24 a hour – half the Australian average. It’s possibly much less $10-15 a hour offset by many extra hours worked cash in hand or on multiple fake identities & systemic labor ring & ABN fraud as many investigations have shown.

    Occupying some 440,000 ex Australian dwellings now converted to migrant only cash in hand bunk share.
    That’s 6 per dwelling, at twice normal Australian occupancy and that’s a conservative estimate from DHIA & SCC housing occupancy studies.

    Displacing at least 2.2 million Australian jobs.
    We now have 1.3 million Australian unemployed & 1.1 million seeming work.
    And we allow over 1.4 million of the 2.5 million migrant guestworkers to work illegally in blatant visa breach or on via a visa pretext. Who is paying who here.

    The 2.5 million non resident migrant guestworkers form a foreign run and controlled Australian onshore sub economy ‘gdp’ of some $112 billion (2.5 million migrant guestworkers x the treasury est of $43.7k income & economic activity) with over half or $60 billion being illegal work, illegal housing, money laundering, vice, drugs & crime.
    Cash / fake ID, no economic or social contribution.
    We have an exploding foreign remittances outflow, legal & illegal money transfer out of Australia – over $18 billion is sent back to their third world countries of origin (World Bank 2018, Western Union 2017 Australia FX outflows)

    Australia has the largest migrant guestworker population of any major first world OECD country.
    2.5 million migrant guestworkers is 1 in 10 per head of population.
    Highly concentrated.
    1,300,00 or 1 in 4 people in Sydney is a non resident migrant guestworkers.
    1,050,000 or 1 in 5 in Melbourne is a non resident migrant guestworker.
    215,000 are then elsewhere.

    We have more migrant guestworkers than Gaddafi at his peak (and his were productive, location bound, tracked, managed and they paid tax).

    So its a testament to the resilience of the Australian economy,… that our productivity has only fallen by an aggregate of 6%, rather than 10% or 20%.

    Obviously the past commodity boom helped, but thats over. The housing bubbles fed by the foreign acquisition of well over half a million Australian low end modest dwellings for permanent & long stay non resident migrant guestworker housing has left Australians in massive debt (190% debt to income) as their housing as overpriced as it was consumed by an avalanche of over $80 billion of foreign dirty money laundered by onshore PR proxies to evade FIRB controls, gobble up low end modest Australian established housing & convert it to migrant only sub let cash in hand bunkshare for the rivers of untaxed cash.

    In Sydney, a vast swathe stretches from Mascot in the south to Penrith far out west – 800 sq km of foreign owned via a PR proxy, migrant guestworker occupied housing as testament to the scale of the money laundering and migrant guestworker settlement.
    Similar in Melbourne.

    We now have 116,000 Australian permanent homeless.
    Another 360,000 Australian’s without affordable housing.
    Our CBD, streets, parks are full of our most vulnerable people, old, young, families – who’s jobs have been stolen and now their housing by the migrant guestworkers.
    The Australians evicted, displaced, on the street or fleeing to the country towns (no jobs there) where they can at least find housing on what the welfare pays.

    No ‘refugee housing’ for these Australian refugees.

    No other western economy (apart from NZ as a mini-me transit stop for migrants to enter Australia and now with exactly the same issues) has allowed such a deliberate action of betrayal and degradation of their people in jobs, welfare, housing or standard of living.

    We need a Royal Commission.
    A Royal Commission has to be specific and in the national interest so it would be:
    A Royal Commission into the Australian non Resident migrant intake (PR, Citizen Grants, TR, Visitor & Tourists) in Social & Economic Impact, and the necessary adjustments needed in Border Control & Visa Enforcement’

    Normally a Royal Commission has to be initiated by the Government of the day, but this one will have to forced by the people as both major political parties are equally culpable.
    Both parties play the politics of migrant intake, but neither will act, corrupted and beholden to the vested interests, property, education, developers and employers – where ‘more migrants’ is the only answer.

    The Australian people (including the new PR who are actually the most impacted by the TR in loss of jobs & housing) are literally being crushed by the third world unskilled migrant overload.

    So Australians including the PR, need to find that voice and tmechanism to force a Royal Commission.

    Unlike the US, we do not have a President that can act to the national interest, declare an immigration emergency and have the full authority to overide any partisan views.

    In Australia we only have a Royal Commission, initiated by the Government and approved by the GG rubber stamp as our ultimate impartial institutional authority to direct or even take control of federal immigration, border control and visa enforcement from either party.

    And force the legislation to slash the PR intake & to rapidly exit at least 1.4 million non resident migrant guestworkers in visa breach.
    And that is what is needed.