MB Report: Three Economic Myths about Ageing: Participation, Immigration and Infrastructure

By Leith van Onselen

Dr Cameron Murray and I were commissioned by Sustainable Australia’s Victorian party branch to examine the causes and implications of population ageing in Australia, and whether maintaining a high immigration program is a worthwhile policy response. Below are the Overview, Executive Summary and Key Findings from our report:

Overview

Population ageing due to longevity is one of the greatest successes of the modern era. However, it is widely thought to dramatically reduce workforce participation and overall output resulting in significant economic costs.

This widely held view is wrong. Ageing countries have higher economic growth and the improved health and longevity of older people increases their economic contributions.

High immigration is also thought to combat population ageing and be a remedy for these non-existent costs of ageing.

This is wrong. Low immigration can affect the age structure by helping to stabilise the population, but high immigration has almost no long-run effect besides increasing the total population level. This creates bigger problems in the future.

It is also widely thought that simply investing in infrastructure will accommodate high immigration and population growth at little cost.

This too is wrong.

Diseconomies of scale are a feature of rapid infrastructure expansion due to (1) the need to retrofit built-up cities, (2) the dilution of irreplaceable natural resources, and (3) the scale of investment relative to the stock of infrastructure.

This ageing-immigration-infrastructure story is wrong on all three of its major points. Population ageing should be seen as the successful result of improvements in medical and health practices that have improved longevity and fostered a long-lived and economically productive society.

Executive Summary

Key Research Findings

  • Population ageing is a successful result of efforts to improve longevity.
  • Countries with older populations maintain high workforce participation, are more productive, and grow faster economically.
  • Ageing does not lower workforce participation in general. Since 2012 there have been more full-time workers aged over 65 than under 20.
  • Low net immigration of between 50-80,000 permanent migrants per year can alter the age structure over the long-term by stabilising the population.
  • Low net immigration increases GDP per capita and wage growth.
  • High net immigration above this 50-80,000 amount has almost no additional effect on changing the age structure and simply increases the total population.
  • Most of the increase in permanent migration since the early 2000s has been through the skilled migration program.
  • This program primarily benefits the migrants themselves and increases wage competition for other workers.
  • A focus on skilled immigration fosters a “brain drain” from developing countries, reducing human welfare.
  • There is a real economic cost to high population growth due to the diseconomies of scale inherent in rapid infrastructure expansion.
  • There is a real cost from environmental degradation due to development to accommodate much higher populations.
  • The high costs of population growth are often ignored, as immigration policy is a federal matter, while infrastructure provision is predominantly a state and council matter.
  • Population growth in general dilutes ownership of our environmental endowments, mineral wealth, fisheries, wildlife, and national parks.
  • The political capital and resource devoted to managing high growth have an opportunity cost in terms of solving other social problems such as homelessness, indigenous disadvantage, mental health, and other social services.

Policy Recommendations:

  • Reframe ageing as the economic success story that it is.
  • Reframe immigration as an environmental and ethical choice, not an economic necessity.
  • Lower overall net immigration to the 50-80,000 range by mainly targeting skilled visas. This can largely be achieved by increasing the minimum salary for skilled migrants to 150% of the average full-time salary, or $129,900. This desirable net immigration range can be achieved while having a slightly higher permanent intake of around 80-90,000 per year, as permanent departures will reduce the net effect while still maintaining the optimal target range.
  • Adopt systems for infrastructure planning and provision that clarify the expected cost of new public and essential services, and ensure upgrades keep pace with city growth for the benefit of existing and new residents.

The Full report is downloadable here.

Comments

  1. I like the front bits of the report and will read the full thing in due course.

    Hopefully this report can also help refocus the SAP on the macro population issuers rather than the micro-NIMBY-bandicoot saving-shenanigans that they’ve recently drifted towards.

      • Yeah, nah. They’ve won elections ….and started proselytising about numbats and bike lanes and crap.

      • CanuckDownUnder

        Preface: I’m an SAP party member.

        I’m sorry but SAP should not be acting like a party that is trying to win general elections. They are a micro fringe party, what they need to be doing NOW is getting enough votes to winning the odd Senate seat. Instead they continue down this path of weird platforming where they ignore their number one selling point. If they hammered that point home it would immediately get them into that 3-5% vote share translating into Senate seats, as people are fed up with the overcrowded roads, trains, schools, hospitals, low wage growth, and under- and unemployment.

        Now they are whinging that they would have done better in NSW except that there was a smear campaign against them by the hard left, and that the mainstream media were actively de-platforming them. Are they serious?

        No, the reason that they failed in NSW is that they continue to persist with this bland let’s not say anything about the massive levels of immigration crush loading our cities because that would be offensive platform. Instead of a giant logo with “LOWER IMMIGRATION NOW”, remember to look for the logo that says “STOP OVERDEVELOPMENT” and vote 1 for NIMBYism.

        Repeat after me SAP, wanting lower immigration is not racist!

      • C_D_U,

        Agree, just push the problems of massive immigration; like housing; transport infrastructure; schools; hospital etc. Leave ethnicity alone and you can see off the racists bs.

      • Spot on Canuck. It’s exactly this that is stopping me (and I suspect many others) from becoming paid up members of SAP. Their slogan reads as if they are a one-issue party on over-development.

        Why can’t their slogan be simply – SUSTAINABLE AUSTRALIA PARTY – IMMIGRATION, ENVIRONMENT, ECONOMY.

      • roylefamilyMEMBER

        I don’t know if you have noticed but we just won a seat in the Victorian Upper House.

      • CanuckDownUnder

        @roylefamily – Sure, SAP won a seat through a preference whispering deal.

        Yet unless I’m looking at the wrong results Sustainable Australia Party had a lower vote share than such household names like Lib Nats, Animal Justice, Labour DLP, Reason Party, Voluntary Euthanasia, Aussie Battler Party, and the Victorian Socialists. But let me guess, these parties weren’t subject to a smear campaign by the far left or weren’t being de-platformed by the ABC?

        The people are speaking (or in the case of SAP not speaking) – excessive population growth caused by an immigration rate that is running way too high is ruining our quality of life. This is the raison d’être of SAP’s existence yet the party continues to ignore this fact so they won’t appear offensive!

        This is a once in a generation opportunity to tap into this anger (before the coming recession smashes NOM anyway), and the failure of SAP to capitalise means rational centrist voters are holding their noses and instead voting for parties such as PHON, Palmer, Katter etc.

    • John Howards Bowling Coach

      I think the issue is that most people tend to believe that their personal view of what is important to the voters is what the voters are concerned about. It’s the personal frame of reference theory in Psychology. Just because your personal view is that the NIMBY’s are off the topic you want to discuss doesn’t mean they care about what you care about. In fact if you polled the whole voter group self interest would register high, for obvious reasons. Besides that the left and right telling us to give up our own wants either so the government can keep on pumping the population for their interests or the lefies can erode our lifestyle for benefit of non tax paying citizens, is on the nose. There is nothing wrong with wanting to protect your own patch, it’s a natural response. Further to that, the complaint about the focus on ecology is stupid. Globally the movement towards environmental awareness and the prevention of destruction of habitat is getting more voter attention, in fact it is listed near the top for ore voters than ever. So Sustainable Australia being focussed on that is going to win more votes than your suggestion to focus on MacroEconomic issues, which the stupid voters tend to find a bore and switch off with their increasingly short attention span.

  2. “Reframe immigration as an environmental and ethical choice, not an economic necessity”

    Sorry mate, that not how it works!
    1- Economic motives are always the ones that matter, environmental and ethical arguments are added later by PR departments to make the policy publicly sound permissible.
    2- When you say “economic necessity”, you’re thinking about an economic system that adjusts itself to benefit the majority of its population. In reality though, it’s all about class divisions and who gets the upper hand.

  3. Even StevenMEMBER

    Gonna read the full report tonight. Should be required reading for any self-respecting politician, demographer and joe blow voter.

    I expect you will seek to get this picked up by media outlets. One can only hope they have some sort of vague interest in what is one of the most powerful forces shaping our nation.

    • nexus789MEMBER

      There are no self-respecting politicians. Those that are independently minded are crushed by their party machine which is owned by various vested interests. The two main parties are tweedle dee and tweedle dum in this respect.