Paul Bloxham: rebooting immigration will stall wages

HSBC chief economist Paul Bloxham is the latest to acknowledge that rebooting Australia’s mass immigration program will stifle wage growth:

HSBC chief economist Paul Bloxham says workers from overseas are more readily available and the recent pace of decline in the national unemployment rate will slow.

“It could mean that the labour market does not tighten much further, as labour demand starts to be met by increasing supply from overseas,” Bloxham said.

“Of course, this process could take some time or the outflow of Australian workers to offshore could offset, or more than offset, this effect.”

Hilariously, after last year claiming “the RBA got it wrong on immigration and wages” and that “more migrants do not mean lower wages”, The AFR’s Economics editor, John Kehoe, also admitted that keeping the border closed to immigration lifts wages:

Premier Mark McGowan’s decision to defer the border reopening beyond February 5 will strain the state’s already tight labour market and exacerbate skills shortages…

Unless the laws of economics are suspended, WA should experience a noticeable pickup in local wages and inflation…

In the short-term, WA’s closed economy could be good news for workers as they receive outsized pay rises.

But there could be a sting in the tail: if nominal wages jump and are not offset by productivity gains, inflation pressures in WA will build.

Businesses forced to pay higher wages may offset these costs by raising the prices of their goods and services.

ABS data unambiguously supports the notion that immigration lifts the unemployment rate and slows wage growth.

Since Australia’s international border was closed in March 2020, the working-aged population has virtually stopped growing:

This lack of growth in labour supply has, in turn, helped to drive the employment-to-population ratio to its highest ever level as well as driven the nation’s unemployment rate to its current 14-year low of 4.2%:

Obviously, rebooting mass immigration, as advocated by the Morrison Government, the Treasury, the NSW Government, and the business, property and edu-migration lobbies, would increase the supply of labour, reduce worker bargaining power, push-up the unemployment rate, and stifle wage growth.

The only upside is that preventing wages from rising would also lower inflation.

Perverse isn’t it? Crush wage growth via immigration to ensure lower interest rates and higher house prices: win-win for chosen elites.

Shelter inflation good, wage inflation bad.

Unconventional Economist

Comments

  1. reusachtigeMEMBER

    Paul Bloxham… Where’s that ledgend been? He was as right on housing as those other ledgends like Chris Joye and Doc Wilson. Good to see him back in the media. Good times for sure.

      • And there’s no-one better at forecasting booms than Bloxo. He’s forecasted the last 26 booms. A careful study of the record might find that not all of them fully materialised, but no matter – onwards and upwards!

  2. Inflation, as measured, is largely directly or indirectly imported anyway, lower wages would do FA to reduce it.

  3. But there could be a sting in the tail: if nominal wages jump and are not offset by productivity gains, inflation pressures in WA will build.

    Businesses forced to pay higher wages may offset these costs by raising the prices of their goods and service

    OR….

    a reduction in profit share as a %?

    It is bizarre this is never thought of as a factor.

  4. Over at The Conversation today, there’s “Jeff Borland, Professor of Economics”, University of Melbourne. Gee, he notices that unemployment is at a 13-year low, what could it really-and-truly possibly mean, and how long will it last?

    Nothing to do with COVID cancelling the mass immigration program, of course. Takes us back to the famous Sinclair aphorism, “it is difficult to get a man to understand something, when his salary depends on his not understanding it.”

      • You betcha I did. Go8 and other uni academics write seemingly “objective” Conversation pieces about migration and international students, without bothering to declare the obvious conflict of interest – their uni is totally dependent on them.

  5. Governments have noted that stimulus and money printing will only cause inflation if any of that excess money finds its way into the pockets of the working class. If it goes to the holders of capital and the already wealthy then the money will be saved and no inflation occurs. That’s why Jobkeeper was so effective at not producing inflation and why Joe Biden’s stimulus policies had different outcomes.

  6. It’s basic mathematics to see that the proportion of youth in the Australian population i.e. <15 years of age (like the working age cohort of 15-64) has been in long term decline (following falling & below replacement fertility), tracking the rest of the world i.e. 18.6% 2020; youth have or are becoming outnumbered by oldies……

    https://data.oecd.org/pop/population.htm#indicator-chart

    Anyone looking to the future on investments and asset valuations, especially those doing property, need to see the OECD (not UNPD) data which presents the issue and trends very clearly for every nation and trading area; everything is in demographic decline, except oldies.

    However, it's generally (ex. Covid) masked by modest permanent migration and, far higher NOM net overseas migration churn over as 'net financial (budget) contributors'.