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The Nation: Julie Fry and Peter Wilson

On Newshub Nation Saturday 14 April:
Lisa Owen interviews consulting economist Julie Fry and NZIER principal economist Peter Wilson.

Lisa Owen: Labour campaigned on cutting immigration numbers by around 20,000 to 30,000, reducing the strain on housing and infrastructure, but immigrants also contribute to GDP growth and prop up our labour market, so is there a magic formula for hitting the right balance? Our next guests say we need to look at the whole equation differently, and they’ve written a book explaining why. I’m joined now by consulting economist Julie Fry and Peter Wilson, principal economist from the New Zealand Institute of Economic Research. Good morning to you both. Julie, we currently kind of measure the value of immigrants coming here by GDP ¬— you know, whether they make us richer as a country in a dollar sense. What’s wrong with that?

Julie Fry: It doesn’t take into account everything that New Zealanders care about. So when we look at GDP impacts, that’s great, that’s valuable for the economy, but people care about things like our environment, the impacts on our work-life balance, the impacts on the Treaty relationship; and we’re arguing that we should set immigration policy with all the things that people care about in mind, rather than just the financial and economic impacts.

Just the dollars and cents.

Fry: Yeah, that’s right.

So, Peter, in simple terms, then, if we’re going to take those factors in — which you have called wellbeing measures, basically, aren’t they — what ones are important in the context of immigration? What would you use to measure wellbeing?

Peter Wilson: In the book, we set out 12 dimensions. We’ve taken 11 that the OECD use in their wellbeing framework and we’ve added the Treaty of Waitangi, so that’s housing, income, jobs, the environment, security. The important thing about our framework is they’re all important; you can’t just pick one and say that migrants are having a bad impact on housing, so let’s have less migrants, because migrants have good impacts on jobs, they have good impacts on the community. So it’s taking all the costs and all the benefits into account rather than just looking at the single thing of GDP.

You’ve got to know that some people listening to this will think, “Well, that sounds complicated.” Is it?

Wilson: It’s complicated but better. We say that complexity is a feature, not a bug, in this work. It makes it harder to do policy. We call the book Better Lives for a reason. We think you can get better lives — not perfect; you have to think about more things. But a lot of the things we’re talking about, people and ministers and policy advisers, they do it now anyway, but they do it implicitly, they do it roughly, so we’re talking about a bit more transparency and being very clear about what’s important to you rather than hiding things under the carpet.

So, Julie, how would you actually measure those things, then, in the context of policymaking? If you’re going to decide — let’s just take some random numbers — that 1000 immigrants is the right number based on this criteria, who do we consult; how do we measure?

Fry: Well, we haven’t done the actual measurement yet. This book is setting out proof of concept and ‘does this, as an idea, work?’ so we’ve got to that point. The next step is to look at data and indicators on each of those dimensions, and the OECD does this in their better lives framework — so they compare countries’ performance on a wellbeing basis by looking at different data series. So there’s some foundational work, but we’d have to look at the specifics.

What do you think will happen if we don’t do this, if we don’t take wellbeing measures into account? What could happen politically and socially?

Fry: My concern, having lived in the United States and the United Kingdom, is when you don’t bring these concerns up and allow people to address them in public debate and to say, “I’m concerned about whether migrants are impacting on the housing market” — is one issue that often comes up — if you don’t have that conversation, people still express their concerns in other ways. If you look at Brexit, if you look at the rise of the far-right in Europe, if you look at the Trump presidency, these are all, in part, driven by people responding to feelings that they have about migration. Some of those feelings aren’t based in fact. If we look at the migration and housing debate in New Zealand, migrants are a small part of the issue. We’re talking about capability in the housing sector being a larger one, but people still have these concerns, and if you don’t address them, people vote based on those concerns.

Yeah. So if we look at a couple of specific areas of immigration, Peter, the number of Permanent Residents visas, according to your book, has remained relatively stable over the past few years, so what particular group is pushing up the numbers?

Wilson: It’s temporary workers. It’s some of the people you were just talking with the minister about — people coming on temporary skills. There’s been a very big increase in working holiday scheme visas, up from 6000 to 64,000 over the last 10 years, and they’re people with employment rights. The other big growth has been students, who, although they’re coming here for their education, they also have pretty wide employment rights. So currently there’s about 190,000 to 200,000 visas issued each year, and only about 20,000, 25,000 of those are for permanent residents.

So — and let’s be clear of that — what people would regard as permanent residents, like come here to stay here for the rest of their lives, in essence, is what you mean, isn’t it?

Wilson: Yes, that’s right.

Or indefinitely?

Wilson: Yeah, it’s not forever, but it’s moved countries. “My home is now New Zealand.”

So let’s look at the students, because the students coming in have work rights, as you say. A lot of them would be working in areas of unskilled labour and part-time work. Do we really need to be importing labour for that kind of stuff?

Wilson: Probably not, and that’s an interesting point. And one of the things we’re concerned about from a wellbeing point of view is, sure, it’s great for employers to have young, educated employees who can work in these part-time jobs, but what impact is that having on the wellbeing of people who might take those jobs, who could be less well educated New Zealanders? But we’re also worried, with both students and working holidays, that it’s habituating the gig economy — that if you’re a café owner in Queenstown and a PhD student from Sweden comes and talks to you about a job, they speak really good English, they’re really bright, and they’ll say, “Can I have a couple of shifts?” and you’ll say, “Sure.” So you’re just getting into that idea that employers in these areas will get over-qualified people who are prepared to work for a short period; what impact is that having on people in New Zealand who might not have perfect skills? So we’ve got to take that into account.

So wellbeing is a scale, because it flows in both directions — say, the wellbeing of the student who might be exploited and the wellbeing of the person that you’re talking about in New Zealand who perhaps might want that job themselves. Julie, I’m wondering — because the international education business is worth a lot of money to us, right, $3.5 billion a year — should we be prepared to downsize that and lose that money based on the welfare criteria?

Fry: What is says is you would need to look at the impacts on employers and the business in addition to those impacts on the students and on the competing New Zealanders in the labour market. So we would weight those effects in the framework. We would say we care about the impact on employers, we care about the impact on students, and we care about the impact on locals. So we’d take all of those into account when making a decision on numbers.

And you considered both sides of the argument in your book. What’s your gut feeling on that, having looked at the numbers and the impacts?

Wilson: As Julie said, we haven’t done all the formal analysis yet, but I think you’d probably see a different sort of migrant and pattern of migration, and that’s the important thing about what we’re talking about. We’re not saying have no migrants or reduce migrants. It’s not just about the numbers; it’s about what sort of migrants would you want to prefer? Our current criteria, just looking at GDP, you want young, fit, probably single people who don’t have kids to come in, do a job, and leave, because that’s great for GDP, but whether having those people just in and out all the time is good for the communities they live in or for the wider community. So you might say let’s have a bit more focus on people who might settle longer, so they’ll come in to do a job but stay.

Okay. I had a look on the list of labour occupations that we’re looking for, the list of labour shortages, and there’s things like bakers, dairy farmers, bee keepers, arborists, chefs, mechanics, panel beaters. Are we really not training people for those jobs in New Zealand? What does our immigration pattern tell us about our education system?

Fry: One of things that we talk about in the framework is that maybe we are using immigration in some places to compensate for the shortcomings of the education system. And when we look at when there are labour shortages, immigration is one solution, as the minister was saying. Training local people is another solution. And yet another solution is to change the wage rates and working conditions of the people we employ. So there’s a whole range of options that we can use to address these concerns. Immigration is just one of the tools in the box.

Do you think people will think this is radical thinking from you two? You know, what kind of reaction are you expecting?

Wilson: Whether it’s radical or not, it’s been around. Wellbeing as a criteria has been around since there was economists.

But it’s a whole field of study now.
Wilson: It is. It’s the new black. But the OECD started doing its Better Life work over 10 years ago. One of the things we’re hoping that the book will prompt is that governments and other people will actually start thinking in these terms. We’ve known about using wellbeing frameworks for a long time. Treasury’s had one for a long time. But migration policy in particular has always been just about GDP and GDP per head, so we’re hoping that the reaction will be, “Yes, this is a good idea,” “Yes, it makes policymaking a big harder, but we get better results,” so we’re hopeful that people will pick this up or be honest and say, “We can’t make it work; we’re just going to look at GDP. We’re not going to pretend that we’re doing this any other way.”

Julie, when you consider the low end of the labour market, there’s disproportionate representation of Maori in that end of the labour market, and when you think about our current immigration policies, do you think that we are breaching our Treaty obligations in any way?

Fry: I think one of the things that we think of the Treaty and describe the Treaty in the book is one of New Zealand’s first migration policy documents, so I don’t look at it as a breach in terms of specific outcomes, but in terms of intent, I think the Treaty was clear we should be having a conversation with Treaty partners about this, and we should be discussing them and involving them at the strategic and potentially at the operational level as well.

Wilson: Just one of the things we had to do in constructing our framework was we had to add the Treaty in, because the OECD didn’t have an indigenous people component, so that’s a bit where it is quite new thinking to think about how do you think about the impacts of migration on indigenous people? How do you involve them?

So you would recommend more direct consultation in New Zealand over our immigration policy — direct consultation with Maori about the numbers of people coming in and the types of jobs they’re taking?

Wilson: That’s one way of doing it. You could do it at the national level, because at the moment, migration policy is very much set by Cabinet with very little consultation, so it’s an absolute exercise of sovereignty. The ministers control the border. We would suggest that certainly there should be more consultation with the iwi at that level but also at the local level, talking about how can iwi help migrants settle? How can they welcome them to their country? That’s an important part of Maori culture — is welcoming visitors — and resettling migrants well is a really important way of doing it. So it should be both at the local level and at the national level, but the key point is talk about migration from a wide range of perspectives and include the Treaty dimension as one of those. It’s not the only thing you talk about, but it’s an important thing that should be talked about, and at the moment, it’s not.

Before we go, I just want to ask you both about - the economic development agency Infometrics has just predicted an economic slowdown that will drastically reduce immigration — is what they’re saying — that it will cause net migration to fall from 68,900 to 17,000 by 2021.

Fry: The interesting thing about the migration debate in New Zealand is that we swing between two phases, right? There’s the “Oh gosh, who’s going to be the last one here? Will they turn out the lights, please?” and “Oh wow, there’s more people than we can deal with.” Migration and economic performance are very strongly correlated, so if the economy turns down, fewer migrants are attracted. This is just what happens.

It’s part of the bigger discussion.

Fry: It’s part of the bigger discussion.

All right, thank you both for joining me this morning. We’re out of time.

Transcript provided by Able. www.able.co.nz

The Nation on TV3, 9.30am Saturday, 10am Sunday. Proudly brought to you by New Zealand on Air’s Platinum Fund.

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