Business

Case against migration gets unlikely support

It is set to be one of the hottest topics of the election campaign, despite the Government’s attempts to tweak it away or hope it goes away in some sort of cyclical swing.

Concern that record high net migration is intensifying Auckland’s housing and transport deficit has been one of the Opposition’s key attack lines against National in the last three years, led firstly by Winston Peters and then carried on by Labour. But it is the relatively low-skilled quality of the migration that is set to take the debate to another level, and Peters has some unlikely allies that include his old foes at Treasury and some data that just won’t go away.

He has regularly accused the Government of enabling a surge of temporary work visa and international student migration that is displacing young unemployed New Zealanders and keeping downward pressure on wages. For much of his campaign against high migration, Peters was sidelined as an perma-campaigner opposed to migration on cultural and foreign capital grounds who had little support from academia and the bureaucracy. The widespread belief of the mandarins and the assumption of the policy wonks below them was that all migration was good for both the economy and society all of the time.

But now he’s getting some unexpected support from officials within Treasury, who have been having second thoughts since 2014 about their previously unblinking support for migration. They are worried it is dragging on productivity and disabling the drive to pull people off benefits.

The veteran campaigner also has the wind at his back from the figures on both migration and unemployment, along with stubbornly low wage growth numbers that seem to fly in the face of widespread talk of rock-star-like economic growth and skill shortages. An escalating number of prosecutions for migrant worker abuse is also supporting calls for a rethink on the intensity of the low-skilled worker arrivals.

The seemingly unstoppable rise of net migration to fresh record highs with just seven months until the election has defied the repeated predictions from both John Key and Bill English that migration would naturally subside as the cycle turned. They often referred to the major role of New Zealanders not leaving for Australia and Kiwis coming home from the lucky country because of a stronger jobs market here, which is true and plays to their ‘good problem to have’ argument.

But the ongoing surge in the number of people arriving on temporary work visas and the high numbers of international students at Private Training Establishments are as much of a factor in New Zealand having one of the highest population growth rates in the developed world.

The biggest worry for Treasury in its advice to Ministers is the heavy role of temporary migrants in the workforce and how it may be displacing unemployed and young New Zealanders who also have low skills. That hits directly at one of the Government’s core strategies – generating jobs growth that can soak up beneficiaries being nudged off dependency by some of its social investment policies.

Treasury highlighted its concerns in advice to ministers through 2015 and 2016 that was released through the Official Information Act in May last year. It was the turbo boost Peters needed and the surge in annual net migration to over 70,000 early in 2017 has injected more fuel into the debate.

Within months of the release of the advice, the Government was considering tightening its migration settings. Immigration Minister Michael Woodhouse announced in October what he called “tweaks” to the settings for the Government’s long-term planning range for permanent residency and an increase in the number of points needed for residency as a skilled migrant. He also toughened the English language rules and signalled a review of the work test system this year, again portraying it as changes “at the margins”.

But the issue won’t go away because temporary worker arrivals (114,400 in the last three years) have kept rising in tandem with a rise in unemployment to 139,000 and a rise in the number of 15-24 year olds who are Not in either Education, Employment or Training – the NEETs – to 91,000 in the December quarter. Annual wage growth fell to a six-year low of 1.3 percent in the December quarter, confounding forecasts of wage inflation in an economy growing at an annual rate of nearly 4 percent.

“The increasing flows of younger and lower skilled migrants may be contributing to a lack of employment opportunities for local workers with whom they compete," Treasury said in one of many papers expressing similar concerns over the last year. It also pointed out New Zealand had the highest proportion of temporary workers in the OECD. Productivity has also been stagnant in recent years.

"There is no clear empirical evidence of this impact yet, but we consider that there is a risk of displacement when migrant workers are potential substitutes for local workers. So we think there is reason to be concerned about the impact that some of our current immigration policies may be having on the labour market prospects of lower-skilled New Zealanders," it warned.

Woodhouse has also cautioned about the lack of empirical evidence of a connection, but Peters and Labour will campaign hard with plenty of data on low wages and high youth employment in the lead up to the election.

The Government is preparing a fresh set of tweaks around work testing for skilled migrant visas within a few months. The problem for the Government is that less than a quarter of the work visas issued, including the temporary ones, the student ones and the working holiday maker ones, are subject to work tests. Treasury made the point in its advice that less than 20 percent of migrants are restricted by these tests. Tweaks to the taps for such a small part of the flow won’t make this story go away.

High and growing levels of low skilled migration are a worry for the Treasury, but they’ll be a political worry for the Government in an election year. Winston Peters has an extra gleam in his eyes when he talks about migration and jobs and wages in an election year. That’s because one of the most eye-opening correlations over the last two decades is that between long term net migration and New Zealand First’s polling.