It’s great news the Minister of Immigration Michael Woodhouse has indicated some tightening of immigration laws. That he has acknowledged that people on the median wage or lower are perhaps not as skilled a category of immigrant as New Zealand needs, is a long overdue admission that National’s immigration policy is about as far from a skill-based strategy as one could get. So that’s progress.
But it’s the fundamentals of immigration policy that National still really has terribly wrong. The evidence on immigration tells us that it can have a small positive impact on the living standards of citizens of the host country if managed correctly. So yes the impact can be positive and yes it is only small though; It is worth pursuing, but with care.
There’s plenty of chance of ending up with immigration strategies that do not lift the living standards of citizens; plenty of scope for immigration to lift the overall population numbers, to expand the size of the economy but to either have no impact on the living standards of citizens or to even reduce them below what they would otherwise have been without that immigration.
This should require the sponsor of the policy – the government of the day – to prove that their immigration strategy is one that actually does generate the small, positive impact on New Zealanders’ living standards – and doesn’t just clog up infrastructure and suppress local wages. Herein is the challenge that National has yet to meet. We all know the population has lifted substantially as a result of opening the spigot to lower skilled immigration (notwithstanding the fact the government has called such people ‘skilled’). But the proof of the impact on New Zealander’s incomes is prominent by its absence.
Indeed there is a real smoking gun here; it is that immigration policy has been constructed to deliberately suppress the wage incomes of New Zealanders, to in effect prevent the wage rate rises that would normally and traditionally accompany national prosperity. Such a strategy would be in line with that of a neoliberal regime that permanently gives priority to profit growth over wage growth; a regime that denies the trickle through affects of greater prosperity to wage earners; a regime that sees wages only through the lens that would argue that wages to people are a cost to be minimised.
Such a regime of course would use immigration of low skilled workers as a way to ensure the local lower-skilled people do not get wage rises, that instead their wage rates iterate inevitably toward the lowest global wage for such work – those rates paid in India and China for example. Only minimum wage legislation would stand between such local workers and that outcome. And in New Zealand we fully acknowledge that the minimum wage is well below the living wage – which is why we have the super-targeted regime of “Working for Families”. That system places the cost of such a policy directly back to the taxpayers.
The obvious question then is why would a government choose to do that? Under normal circumstances as full employment is approached lower paid workers would share in the spoils of prosperity through enjoying higher wages. That is the normal operation of the market. Instead, the Government has aimed to prevent such an outcome by importing low skilled labour, which puts pressure on infrastructure and pushes up living costs (e.g. transport and housing). The ultimate outcome is that taxpayers have to make up the ever-expanding difference between the minimum wage that more and more people find themselves on, and the living wage. If ever there was a circle of futility, this seems to be it.
Despite its moves yesterday Mr Woodhouse’s speech reiterated that this is to remain as National’s approach on immigration:
“I want to make it clear that where there are genuine labour or skills shortages, employers will be able to continue to use migrant labour to fill those jobs.”
While he didn’t define his use of the word “genuine”, the meaning is clear. If an employer cannot get a local to fill a certain position – because say we’re actually at full employment in that skill for that region – then he will import labour. He will not expect the employer to offer a higher price in order to attract labour from the rest of New Zealand. How then are the fruits of prosperity expected to “trickle through” to the general workforce? Or aren’t they?
Given the changes yesterday Minister Woodhouse is indicating he will now achieve this through ‘temporary’ migration rather than offering residency visas. In other words we can expect greater numbers of care workers and farm hands living here for many years without ever gaining rights to residency. The effect will remain – wage rates will not be allowed to rise, trickle down will be prevented through using migrant labour.
The standard reply to this criticism is that wage rises should only occur “… when productivity rises ….”. What this banal response refers to is the reality that the costs of labour per unit of production for a business will rise unless wage rate rises are offset by productivity growth. That’s simply a fact but it tells us nothing about wage and profit-setting behavior and what is actually happening here. For instance, if markets aren’t competitive either wages or profits can rise merely by driving the other down.
A firm going out of business is not a bad thing – the whole process of capitalism is about the most profitable endeavours growing while the weakly profitable ones fade and die. That process of renewal is essential to sustainable economic growth. Pertinently, if wage rises come at the expense of profitability, then only if the goods markets are competitive will the firm suffer a potentially fatal drop in profitability. If the firm doesn’t face competition it would just suffer a reduction in its rate of profit – it could still continue with satisfactory profits. It comes down to how excessive its profits are to begin with, how much ‘economic rent’ has it been able to extract due to its market dominance.
And that is the point, the neoliberal era has been one where the competitiveness of markets is no longer a priority for policy setting so it’s relatively easy for a dominant firm to capture all the fruits of rising sales without having to share any with employed labour. In other words the profit rate can very easily become excessive, or ‘economic rent’ be extracted from consumers and employed labour. This is the legacy of neoliberalism and its obsession with “free” markets but no deference at all being given to the importance that markets be competitive as well. Free entry and exit of players is one testament to that competitiveness.
We all know the labour force has lost a lot of its market power. To see a government aiding and abetting that effect of globalization, deregulation and technological change, by using immigration to drive the wage rate as low as possible, is a development New Zealanders need to be fully aware of.
One of the mainstays of sharing the spoils, or “trickle down” has been removed by the immigration policy of recent years. That, as confirmed by Mr Woodhouse yesterday, is deliberate. Charming.
Is that what New Zealanders want? Wages driven lower by immigration and the bill for that being borne by taxpayers funding ever ballooning Working for Families welfare? Surely it would be better to allow all ships to rise and the market to rule domestically so wage rates can rise as full employment in local areas and industries is approached.
Protecting weak businesses from the impact of competition – even weak export industries – by manipulating the supply of labour to ensure the labour market cannot operate on a demand and supply basis – while having the fallout from that manifest in increasing misery for low wage workers, and taxpayers picking up the tab through Working for Families and other benefits – is pure unadulterated neoliberal madness.