Why NZ needs more immigrants in recessionary times
There are some sectors calling out for a reduction in the number of immigrants to New Zealand as the economy slows down and jobs become more scarce. This will intensify in coming months as the unemployment rate creeps up. Unions and out-of-work locals will no doubt pressure government to tighten immigration policy. We may see an increase in protectionist measures; more funding for Buy New Zealand made and government bailouts of uncompetitive firms.
In my view, this would be the worst possible response to an already dire situation.
I came across an interesting article in the New York Times by the author of “The World is Flat”, Thomas Friedman a few days ago. He says
If there is one thing we know for absolute certain, it’s this: Protectionism did not cause the Great Depression, but it sure helped to make it “Great.” From 1929 to 1934, world trade plunged by more than 60 percent — and we were all worse off.
Immigrants to New Zealand work the hardest, get paid the least and put their hard-earned money to good use: investing in local businesses and saving for their children’s education. Immigrants are less likely to splurge on non-value-adding plasma TVs and imported Italian designer furniture.
Immigrants, by their very nature, tend to be ambitious and enterprising. Why else would they travel thousands of kilometres to a distant land, far away from their families, to start over?
More than half of Silicon Valley start-ups were founded by immigrants over the last decade. These immigrant-founded tech companies employed 450,000 workers and had sales of $52 billion in 2005, according to research by Vivek Wadhwa, in an essay published this week on BusinessWeek.com.
The fear that many ordinary Kiwis have is that immigrants will steal their jobs because they are willing to work for next to nothing. Even if this was true (which it is not), so what? We all need to wake up to the new reality. We cannot afford to rest on our laurels and become increasingly less competitive on a global scale. We need smart, resourceful, connected and hard working immigrants in New Zealand. Current immigration policy does not give much scope for low-quality immigrants to enter New Zealand in any case.
The other myth is that immigrants make no economic contribution to New Zealand. Recent studies show the net impact for having an immigrant here is $3.29 billion, or $3547 per capita, while the net per capita contribution of a New Zealand-born is just $915. Immigrants are 4 times more valuable than locals.
Immigrants are willing to work harder and not mind getting paid less. Is that such a bad thing? Are we crying exploitation because we are genuinely concerned for the welfare of immigrants or simply because we don’t want anyone to rock the cushy boat?
Smart, ambitious and hardworking immigrants are good for this country. Having more such immigrants in New Zealand would increase not just the number but quality of jobs, resulting in a more prosperous nation in more ways than one.
“Smart, ambitious and hardworking immigrants are good for this country.”
As someone currently in a partnership with several recent migrants, I heartily agree with your sentiments. We have begun to establish a high value technology enterprise through leveraging some skills that are not readily obtainable here in NZ.
A note of caution however. One only needs to spend some time walking the streets of South Auckland or Newtown in Wellington to notice that there are plenty of underemployed migrants around who won’t be contributing much to the economy any time soon. Perhaps it seems like a problem because they are more visible?
I would be interested to see references for the academic literature that claims “immigrants are 4 times more valuable than locals”. The NZ Herald is not a trustworthy source in this regard.
Whatever the case. With Winston and his fossil cronies fading rapidly into oblivion, we can only hope that common sense will prevail in terms of immigration policy.
Paul
Thanks for your comments. I haven’t gone digging for the data, but I think it was Rob Hodgson from the Department of Labour who was quoted as saying “The net impact for having an immigrant here is $3.29 billion, or $3547 per capita, while the net per capita contribution of a New Zealand-born is just $915″
This equates to a ratio of 3.9 times.
What we really need to see is more cross-cultural business partnerships happening. This is one way of harnessing the power of cultural diversity.
Yes, too right! And I recall we discussed this some time ago. As it happens I’m now managing an annual business event that matchmakes high tech companies with investors. Obviously we’d love to have skilled migrants involved as investors or assisting with business development in their home markets.
Here’s last years presentations. Running it again in October:
http://www.youtube.com/UPW2W
yes, it’s been a while.I’m very interested in what you’re up to. Will take the discussion offline.
Agree with the above post. However, the recent Lindsey Oil Refinery disputes in Britain have raised some interesting questions.
Was George Orwell right about “insularity” and “xenophobia”, particularly in Britain? Or have the companies involved effectively “hired half the working class to kill the other half”?
From the story so far, the extremist BNP cynically cashed in on the issue, only for the union representing the refinery workers to tell them to stuff off.
I am happy for New Zealand to welcome more migrant workers on an equal footing with New Zealand workers. I have concerns though about some employers seeking special permission to bring in workers from poorer countries and to pay them below minimum wage while they are here, then send them back to their home country. Some employers of seasonal workers do a good job of arranging pastoral care and ensuring that the workers are treated fairly. Others do not, taking excessive deductions for overcrowded accommodation and transport etc. There is a role for unions here and in the home country to ensure that seasonal workers are treated fairly.
Paul asked about reputable research into economic impacts of migrants. I suggest that he review relevant papers on the University of Waikato’s Research Commons. Waikato has done a lot of research in this area
e.g http://waikato.researchgateway.ac.nz/handle/10289/823
This is a 2005 paper – there may be more recent ones too.
Measuring the economic impact of immigration: A scoping paper
Authors: Poot, Jacques and Cochrane, William
Thanks for the reference Kay. That’s a great resource. I’m not convinced that particular piece of research supports the assertion that migrants contribute economically four times as much per capita.
However it does support the ideas that Ken discussed relating to the value that (some) migrants bring in terms of capital and connections. The BusinessWeek article he mentioned is backed up by scads of research on human networks and the positive correlation to technology entrepreneurship in Silicon Valley.
Unfortunately, we operate in a different ecology here in NZ. The U.S. West Coast attracts the best and brightest migrants because of the availability of venture capital. A handful of start-ups get VC funding in Silicon Valley each week, whereas in NZ it is the same number each YEAR. I wish it weren’t so – believe me.
Regarding venture capital, NZ has had the “DFC disease” for the best part of 20 years.
DFC worked quite nicely – until the mid 1980s, when it strayed out of its core competency and invested in glamorous but dodgy property developments by the likes of Chase Corp. It never recovered from Black Monday and left a major void that has never been filled since.
Some more insight into the wider issue from Idealog magazine:
http://idealog.co.nz/magazine/january-february-2009/features/show-us-the-money
There’s a significant pool of untapped startup capital right under our noses… there are scores of business migrant investors with extensive business interests offshore, with both the capital and connections to make things happen. Alas, NZ businesses are not connecting with this demographic (don’t know how even if they had the desire).
Ken, from May onwards some of my time will be devoted to developing the W2W event, to be held in October. I’m looking forward to sitting down with you and working on a solution to that very problem.
Report by BERL, the economics and public policy consultancy:
“The net fiscal impact of migrants climbs with duration of residence, although this is partly attributable to the age profile of these groups. The net fiscal impact per head was $2,680 for recent migrants, $3,470 for intermediate migrants and $4,280 for earlier migrants, while the comparable figure for the New Zealand-born population was $915 per head.”
“As at the census night in March 2006, New Zealand had a migrant population of approximately 927,000. The study estimates that this migrant population had a positive net fiscal impact of $3,288 million in the year to 30 June 2006. The net impact of migrants estimated in this study represents growth of approximately
15 percent per annum in real terms, compared to a similar study by BERL in 2003. The New Zealand-born population of 3.1 million people had a lower net fiscal impact of $2,838 million.”
http://www.dol.govt.nz/publications/research/fiscal-impacts/index.asp
http://dol.govt.nz/publications/research/immigration-research-summary-2007/irs07-02.asp
That is very interesting research. I note that the figures relate to “net fiscal impact” which is specific to govt revenue versus what govt expends on services to migrants. Would be intriguing to see the comparison in GDP terms too.
The study defines “migrants” as overseas born NZ residents, who now comprise 22% of our domestic population.
In our recent (most enjoyable) discussion we touched upon personal motivations. NZ born Kiwis happy to cruise, migrants highly motivated to succeed. I wonder if this data supports that hypothesis?