Time for the migration conversation
Building back better following Covid-19 is our best opportunity in decades to create a more sustainable and inclusive New Zealand economy and society. As we emerge from the pandemic, we are more open to change. Now is the perfect moment to consider the economic future we want to work towards.
To make the most of this moment, we need to have some important national conversations on how we run our economy. These conversations can be challenging and how we work through the issues speaks volumes about our maturity as a nation.
One such national conversation is on migration, which has had a major impact on New Zealand. About a quarter of our population was born overseas, compared to a worldwide average of about 3 per cent.
Before Covid-19, more people were coming into the New Zealand labour market through permanent and longterm migration than through our school system.
Although migration has been such a distinctive feature of the economy, we know surprisingly little about its economic impacts. Internationally, however, it has been studied intensely. Contrary to the rhetoric of populist politicians the world over, these studies often find that low-skilled migrants do not necessarily reduce the job prospects and wages of locals. In part, this is because new migrants spend money – they go to restaurants, they get haircuts, and go shopping. By increasing demand, migrants create jobs for locals. While low-skilled migrants most likely don’t reduce local employment, they can change the way businesses operate. For instance, some international studies show that a reliable supply of low-skilled migrant workers makes it less likely that local businesses will invest in capital and adopt new technologies.
On the other hand, highly skilled migrants who are well matched to local skill shortages can help lift the performance of the businesses that employ them.
Where does all this leave us in Aotearoa New Zealand? Data collected by the OECD show that New Zealand’s overseas-born population is more highly skilled than the overseas-born population of any other OECD country. On the face of it, this implies that our migration system has done a good job of attracting high-skilled migrants.
But there is also evidence that many migrants here work in unskilled jobs and occupations. Before the pandemic, temporary migrants accounted for almost 25 per cent of workers in the accommodation and food industries.
Skills gaps have also been a constant feature of the New Zealand economy, raising questions about how well highly skilled migrants are matched to available jobs, and how our education system matches learners with skills in demand.
We also know that New Zealand firms have generally been slow to invest in capital and new technology,
Skills gaps have been a constant feature of the New Zealand economy and have held many businesses back.
with negative effects on our productivity. While this reflects many influences, it is consistent with international patterns.
While we need to learn much more about the impacts of migration on our economy, what we do know suggests that the Government’s intention not to return to the very high preCovid migration rates could help build a more productive, high-income economy. However, we should not lurch too far in the other direction. There will always be some jobs in our economy best done by overseas workers.
The Covid-19 reset also gives us an opportunity to improve our investor migrant visa programme. New Zealand is currently a very attractive destination and we should use this as an opportunity to increase the commitment investor migrants must make in return for permanent residency, such as supporting local charities.
The pandemic has fundamentally changed many aspects of the global economy. We are incredibly well-placed to benefit, provided we get our house in order. Getting migration right is a key part of that puzzle.
Paul Conway is BNZ’s chief economist. He was previously director of economics and research at the Productivity Commission, and has also worked internationally at the OECD and with the World Bank.