The Economic Impact of Immigration
Some months ago we blogged about news coverage of an academic report on the economic impact of immigration. Well, finally, I got round to reading the report that the news articles were based on;
Economic Impacts of Immigration: Scenarios using a computable general equilibrium model of the New Zealand economy.
<WAKE UP!>
Only that was six weeks ago when I started reading it, and it’s taken me this long to finish reading it. The catchy title may give away some of the reason why. For once I’d recommend sticking with the newspaper articles.
The report is really dull, uninteresting, and full of academic waffle. And lots of assumptions, which is quite fitting really since it’s been documented that the collective noun for a bunch of economists is an assumption.
Reading tables of INZ statistics was more interesting. And more useful. Which is saying something quite sad really.
Anyhow, this report talks about what might happen in 11 years time to the NZ economy based on different levels of immigration. Plus thousands of assumptions, equations and economic theories about how money works. {which as we’ve said before, completely ignores that money doesn’t exist in a vacuum and while money doesn’t have emotions, people do!}
Which is all about as useful and reliable as predicting what the weather will be like at 4pm on the afternoon of April 15th 2011, and what this means for ice cream sales across the country.
Indeed if you look at the ‘general findings’ within the executive summary, they could just as well apply to giving everyone an ice cream on Friday after lunch and the rest of the afternoon off.
So as you may have already deduced, I have a number of concerns about this research;
- Someone somewhere is going to use the information as a solid prediction and make decisions that impact the whole country. That’s a really scary thought.
- The report makes a point in time prediction 11 years ahead, with no information about what happens in the interim. i.e. we can’t at any point in the next 11 years track whether the prediction is on target to happen.
- There’s no evidence to demonstrate that the model they are using, when supplied with historical information from years ago can, within a margin of error, predict where we are now.
About as reliable as reading tea leafs then. 
In the interests of balanced reporting, here are the interesting things I found from reading the report.
- Increased immigration results in a larger economy[Really? I'd never have guessed]
- We actually need a wide variety of emigrants to grow the economy, not just highly skilled Dr’s, Teachers or IT folks [Fair enough, useful insight]
- Irrespective of how many new people come to NZ, the economic impact of immigration only really shows when there’s a productivity increase for everyone. [Ah, so it makes bugger all difference unless we all up our game, which would be a good thing to do in the first place]
- This is only a model, based on economic theory of market performance. If prices go up, demand goes down. [Which is simply supply & demand, but ignores elasticity i.e. if the price of milk & bread goes up demand doesn't change in proportion as they are basic commodities most people buy]
- The model is interlinked, so increases in wages in one sector flow through to increased costs for consumers, less demand from those consumers etc. [So that's all good]
- The model assumes supply=demand, companies maximise profits (i.e. zero inefficiency), and consumers spent their last cent maximising enjoyment from whatever they buy [well, at least the last assumption is mostly sound]
- The capacity to meet housing demand in 2016, even with high immigration, is sufficient – with the following assumptions;
-
- As long as the type of accommodation they build changes from what is built today
- That more people want to rent rather than buy
- That people choose to live in flats/apartments rather than houses
- [in other words, there is enough capacity to build high density housing, which isn't currently in demand and isn't built, thus isn't in high supply, and people will just have to accept they can't buy a house, or an apartment, they should really rent]. So that’s a useful prediction, the residential building market is fine!
- The more things we build, the lower the price, therefore the higher our exports. Since the production price is lower. [err, since when has a company producing twice as many widgets, halved the price of those widgets? And exchange rates have a much greater influence on export pricing than the actual production cost. But ho hum, I'm not a learned academic economist, what would I know?]
- The supply of people in the market is fully demand driven, and supply=demand at all times [i.e. there's always a cancer specialist available when you need one, you have the minimum time off work as a result of your treatment, and there's always a community nurse & physiotherapist available to get you back to work. At which point your employer gets rid of the temporary person who has been doing your job at exactly the same level of skill and productivity. And as soon as the Cancer specialist gets you better, the next person who needs them with get cancer at just the right time.]
- Zero immigration for the next 11 years drops the NZ population from 4.5million to 4.1 million. While net immigration of 20k a year would instead grow the population to 4.8million.
- Zero immigration results in an economy 11% smaller (national GDP & per person GDP), while 20k a year net immigration gives us an economy 7.6% bigger [i.e. there is a disproportionate negative effect on population levels and the economy as a whole to not having immigration, than a positive benefit]
- There is a correlation between high immigration and high productivity growth, although there is no established causality. [translated as we've spent a lot of time trying to find a direct link, and there isn't one, we just find that as one goes up, so does the other]
- Immigrants from a particular country increase imports from that country by 1.9%, and increase exports by 0.6%.
Then you have thirty pages of appendices and tables, which are actually more interesting than the report itself. So we have;
- 53 different types of businesses
- 8 different spending categories for all household consumption [try budgeting to those!]
- 25 types of exports
- 40 types of occupation
Anyone still with me out there? No? I’m not surprised.
Still it’s good to know that the economic future of the country is in the good hands of a whole load of assumptions.
Related posts:
- The Economic Impact of Immigration
- Well I never: An interesting Immigration report
- An interesting Immigration report – part 2
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