Two stories wax and wane in New Zealand debates about migration. With record arrivals, falling departures and high net migration, current public concerns are around pressures on housing, infrastructure and publicly funded services like schools and health care. In 1979 people fretted about whether the last one to leave would be turning out the lights.
Why have immigration?
Immigration is normally seen to be part of labour market policy and as a solution to problems of a shortage of labour or specific skills (an inability to find skilled employees is a consistent theme in the New Zealand Institute of Economic Research’s Quarterly Survey of Business Opinion). Where there is insufficient domestic labour willing to relocate to address localised skills shortages, as occurred in Christchurch after the 2010–11 earthquakes, immigration can also reduce the need for economy-wide tightening of monetary policy to reduce wage pressures.
Immigrants boost international connections and can increase trade, tourism and foreign direct investment. Working-age migrants bring significant short-term fiscal advantages, although longer-term impacts are negligible.
Immigration policy is also connected to population policy, and in New Zealand this is evident in discussion around migration replacing departing New Zealanders. As Figure 2 shows, non-citizen inflows have more than compensated for citizen departures since 1992. Figure 2 also shows that the number of departures and arrivals by New Zealand citizens is a key driver of net migration in New Zealand. While the government can control the number of non-citizens who arrive in New Zealand, it has no control over the numbers of people leaving or the number of citizens (and residents with return rights) returning from overseas. These numbers are both material and volatile, and this makes planning difficult.
Arguments for increasing the population highlight the potential benefits of scale and agglomeration: the idea that a larger population, especially in Auckland, our largest city, is a necessary, if not sufficient, condition for improving the living standards of all New Zealanders. This narrative is based on several themes:
- There are ‘agglomeration’ effects from cities that can be (only) captured in a larger Auckland.
- Related to this, high-paying jobs are created in the CBDs of big cities, and the bigger the city, the more high paying jobs.
- Auckland must be larger to ‘compete’ with other regional cities, with Sydney and Singapore cited as examples. This competition includes attracting migrants, who are themselves a source of economic prosperity – so we have an ‘Auckland has to grow so it can grow even more’ element here.
More generally, more population is seen as helping firms counteract the disadvantages of New Zealand being small and distant from world markets; encouraging firm growth and innovation though increasing competitive pressure; and reducing the per capita cost of infrastructure with high fixed costs. However, increased scale is neither necessary nor sufficient to improve per capita well-being: there are small prosperous nations
Migration has been good for New Zealand, but it has not been great. We think using a well-being framework has the potential to make it better. Focusing on smaller numbers of more highly skilled immigrants, and considering important broader issues that a simple focus on per capita GDP allows us to ignore, should lead to more effective and more sustainable immigration policy for New Zealand.