Not what Immigration Promised

Skilled migrants to Australia are apparently not doing what they were meant to: get jobs. 🦘👷

[MacroBusiness (MB)]: The notion that Australia’s migration program was ever ‘skilled’ is debunked by the empirical data from the Department of Home Affairs’ Continuous Survey of Australia’s Migrants. This survey shows that recent permanent migrants experienced higher rates of unemployment and are paid less than the general population:

And the government has been sitting on this. Tsk. Tsk.

Before borders reopen, let's use the opportunity to re-introduce a little conspiratorial thinking:

[MB]: Thus, this ‘skilled’ migration program is actually undercutting local workers and adding to Australia’s unemployment queue. As such, it helped drive Australian wage growth to record lows:

How, exactly? Migrant unemployment higher than the general population's implies that employers are preferring to employ local Australians (at presumably higher wages). If migrants are offering to work at scab rates, they are evidently striking out. If anything, locals are undercutting migrants, but that would not sound sweet to nativist ears.

On closer inspection, the argument is a variation of Schrödinger's Immigrant, in which an immigrant takes your job and your place in the dole queue at the same time. Are skilled permanent migrants inking deals for lowball wages, or are they languishing? Make your mind up! 🐈

The meaning of Migrant

The key lies in 'recent permanent migrants':

[Department of Home Affairs (DHA)]: "At the six-month stage of settlement, Skilled Migrants (that is, primary applicant migrants of the Skill stream) demonstrated mixed employment outcomes compared to the Australian general population ..." (emphasis mine)

Six months. The skilled migrants six months into the country experienced 6.2% unemployment against the general population's 5.0%. Only a 1.2 point (24%) difference in unemployment after six months? I challenge you to move your household to another country and get a job at local salary matching your skills in six months.

Why use six-month status? Why not twelve or eighteen? Why draw a line at all? The unstated truth is that over time, permanent migrant employment approaches that of the general population.

That is, migrants become Australian (Mind = Blown🤯) and are deservedly considered such.

Does Immigration lower wages?

The Reserve Bank of Australia (RBA) puts this to bed:

[RBA]: While sparse, the evidence generally indicates that Australians’ wages are not adversely affected by immigration on average. In considering the outcomes of particular subgroups, the available evidence is weaker still, and sometimes mixed, but also does not strongly support the idea that immigration is hurting natives’ wages.

That's evidence from dedicated study. Not insinuation of a relationship from data.

What about the modelling?

[RBA]: ... the [Productivity Commission's 2006] increased migration scenario would lead to average wage growth around 0.09%per year lower than the base case.

At worst, immigration may stabilise wage growth, but not reverse it.

And from Treasury's 'Shaping a Nation' (2018) report:

[Treasury]: Breunig, Deutscher and To (2016) found that the labour market outcomes (wages, weekly hours, participation rate and employment rate) of the incumbent labour market had been neither helped nor harmed by migration over the period 2000 to 2011. In fact, the study found almost no evidence that outcomes for those born in Australia have been harmed by immigration. The most statistically significant associations were with stronger labour market outcomes for the Australian-born.

So if concerns are unfounded that skilled migrants are 1) driving wages down, or 2) not getting jobs (and hence not driving wages down) in a timely manner, then on what basis is immigration opposed?

[RBA]: ... this difference [in attitudes] across education groups is unlikely to be primarily driven by labour market concerns, and may relate rather to cultural concerns (see Card et al. 2012).

'Cultural', huh? 👳Can't call it 'racist' anymore. Might trigger some snowflakes.

Criticism Migrating with Age

The above exemplifies how the anti-immigration argument is itself adapting, migrating if you will, from targeting (illusory) secondary effects like overcrowding and resource depletion, to suggesting that immigration will not - and was never intended to - meet primary goals like filling skills shortages. Next up, how immigration will fail to combat demographic aging. 🧓

[MB]: For years population boosters have told us that Australia needs to run a ‘strong’ migration program to mitigate an ageing population.

Anybody with a shred of common sense can work out that this argument is spurious given migrants also age. Therefore, immigration can at best only delay population ageing, while also adding a host of other economic and environmental costs from having a substantially larger population ...

This framing implies that policy makers do not have that elusive 'shred of common sense'. Or perhaps the elites are 'in' on the act.

[MB]: Even the ABS’ own demographic projections show that immigration is useless in ‘younging’ Australia’s population.

So if it's well known that immigration will not as promised fill skills gaps and lower the average age then what is its purpose? Well, now dear reader, you're primed to let your paranoia fill the blanks with nefarious secret objectives. Fortunately, paranoid xenophobia is repetitive, and we know what comes next.

[MB]: This tiny ‘benefit’ will only be transitory and comes at the expense of adding 150% to 200% more people to Australia’s population versus zero NOM [Net Overseas Migration], according to the ABS’ projections.

Wait for it ...

[MB]: ... lower wages for workers, crush-loaded infrastructure, increased traffic congestion, forcing people to live in apartments rather than houses, and environmental degradation.

Aah. There it is. Lifestyle as a stand in for 'culture'.

Concerns about stagnant wages reflecting labour's decreasing bargaining power, inadequate infrastructure, and the environment are warranted, but laying all of these at immigration's feet is lazy, not to mention ignorant of more influential factors like de-unionisation and regulation.

[Treasury]: This is not to say that population growth has no impact but, rather, to say that it is often not the key factor driving growth in demand or expenditure.
These pressures should not only be addressed by new infrastructure. They should also include better use of existing infrastructure.

In fact, Treasury (2018) - quoted often in this piece, and selectively by isolationists trying to lend immigration-blaming the legitimacy of economic commentary - lays down an argument for more people:

[Treasury]: A larger population in Australian cities may provide additional impetus for private investment in infrastructure or result in a project’s benefit-cost ratio increasing.

Nevertheless, let's get back to the suggestion that the juice (younger population) ain't worth the squeeze (overcrowding).

The Juice

The argument that migration will insignificantly rejuvenate the population because migration will have little effect on dependency ratio is misleading because:

1. The Young are Dependents

The dependency ratio measures working age population against very old AND very young. 🚸That is, the bread of the demographic sandwich to its filling. Let's compare ABS 2063 population projections for current trend migration (about 240,000 NOM) against zero NOM.

Population	2013 (publication)	2063 2013 Trend Migration	2063 Zero NOM
Age 85+	2%	5%	7%
Age 65+	14%	23%	29%
Age 15-	19%	17%	15%
Dependency Ratio	50%	65%	79%

While there may be a 22% difference in dependency ratio between the 2063 current trend migration scenario and the 2063 zero NOM scenario, there is a greater 26% difference in the proportion of the population aged over 65, and a 40% difference in the proportion of the population aged over 85.

The proportion of old and very old is more important than the dependency ratio given that they will require care for longer and place upward pressure on average age as lifespans lengthen.

2. The Relative (vs Absolute) Difference is Large

Even accepting the definition of working age as 19-70, the chart by eyeball still shows a 17% relative dependency ratio gap at the 2063 mark.

The chart understates the difference because it allows for the display of unrealistic ratios over 90% and under 25%. No country should strive for those levels. Those levels of demographic bulge or barbell would instead signal disaster on the scale of civil war or plague.

Cut the top and bottom half off the chart. That'll give a clearer picture.

Australia is already having trouble keeping elder care residents alive at 50% dependency in 2020. One or two points in dependency ratio means a lot.

Worth the Squeeze

Before we decide whether a larger population is a price worth paying we need to consider immigration's actual effects on population. Thankfully, the ABS has already done that for us, and projects that immigration will actually contribute to a quarter of the population by 2066. Not the apocalyptic 150% to 200% estimate above.

The discrepancy comes from calculating the more drastic claim by subtracting the zero NOM scenario population from other scenario populations. Understandable, but that rests on the false assumption that immigration is cumulative. That is, that immigrants stay immigrants.

They don't.

All together now:

Immigrants Become Australians

The people you jostle against on the trains, the roads, or in public spaces aren't immigrants. They're Australians. That opportunity you lost went to an Australian. Australians are 'degrading' your environment. The people who meet and couple with AUSTRALIANS and produce the AUSTRALIAN kids who will offset the ballooning number of AUSTRALIAN elderly, all while hitting the ground working and paying AUSTRALIAN taxes, are AUSTRALIAN.

Playing up the role of immigration in population growth is understandable. Declaring that you want less immigrants is one thing. It is quite another to say you want less Australians.

The debate about immigration is as much qualitative as it is quantitative. It depends on how we distinguish between 'immigrant' and 'Australian' as much as it depends on the numbers.

The fundamental difference being one of distinction is supported by the tendency of immigration-sceptics to be far less critical of immigration immediately after World War Two, which ran hotter in percentage of population per year. (See Treasury (2018) fig. 20).

Did the post-war migration boom irreparably trash Australian jobs or render Australia unliveable? Not even the most hardcore will argue that. Instead of being upfront with a claim that some immigrants are more acceptable as Australians, the above fear-mongering about immigration levels gets substituted, perhaps to avoid accusations of bigotry.

How Much is Enough?

Immigration critics are generally silent as to a suitable level of immigration. Zero NOM gets put up as a quantifiable alternative, so let's examine that.

I'll let you in on a secret.

[Breathes]

Zero NOM still means Immigration

Why?

Because people want to leave Australia. 🛫More than you might think. About 360,000 departed in pre-pandemic 2019.

Netting to zero means bringing in an equal number. Otherwise, slamming the door on arrivals also means slamming the door on departures. That's one way to keep local talent in local jobs.

Other than Zero

Was there EVER a sweet spot for immigration to Australia? 👌If 1958 passed muster, then why not 2018? And if cultural change is the real concern then why not turn the clock back to 25 January 1788? ⛵

Perhaps 'suitable' is a fluid term that has since colonisation been decided by the public. It is heartening that Australians since the 1970s overwhelmingly and genuinely support immigration. Again, from Treasury (2018):

[Treasury]: [Scanlon Foundation] surveys [since 2007] have consistently found that Australia is a stable, highly cohesive society. Australians tend to be supportive of immigration and the benefits it has brought to the Australian economy.

However, there are also some contrasting views, with relatively high levels of negativity towards Muslims and an increase in the proportion of people experiencing discrimination on the basis of skin colour, ethnicity or religion.

Hmm. perhaps "skin colour, ethnicity or religion" is the 'culture' that so concerns immigration alarmists more so than any worries about low wages, living standards, or the final argument: 'productivity'.

[MB]: ... downward pressure on wages caused by mass immigration necessarily disincentivises employers from investing in labour-saving technologies and automation to lift productivity...After all, why invest in these productivity enhancements when you can simply bring in cheap migrant workers to do the task?

They would have you believe that the alternative to immigration is a spacious, harmonious hotbed of innovation. "We don't need immigration because future robots!"

(Aside: cheaper labour is itself a productivity enhancement enabling higher profits and business investment per hour worked.) 🤖

Notwithstanding that immigration improves productivity by way of immigrants being more productive (through skills and selection, not their nature as foreign-born) [Treasury (2018)], what is more likely with closed borders?

Firms blasting new problem-solving tech into existence, sharing it with the world, and we all lived happily ever after. The end.

Or:

Firms lobbying to protect their goods with bans and tariffs. After all, the same isolationist rationale that 'protects' labour can also protect ~~entrenched anachronistic~~ traditional processes.
Employers keeping domestic workers so epistemologically and culturally secluded from the outside world that they have no globally transferable skills, driving down their bargaining power.
At the same time, employers pandering to xenophobia and avoiding hiring foreign decision makers, blocking tried and true productivity innovations from elsewhere.
Consumers, now accustomed to a stagnant status quo, being wary of disruptive innovation.
Static or shrinking population dis-incentivizing investment.

You mean, like Japan?

Fudge yeah, I mean like Japan. 🌸

	Australia	Japan
Population born overseas (est.)	29.90%	2.0%
Density in 2018 (people / km2)	3.248	347.131
Wage growth %	1.4 (Dec-20)	0.2 (Mar-21)
Ease of Doing Business rank	14	29
Labour Productivity GDP (PPP) per hour	55.87	43.77
Population aged 65+	14%	26.6%
Dependency Ratio	50%	68.1%

Japan is held up as a model of prosperous ethno-cultural stability by such great minds as Anders Behring Brevik.

Yet there is no productive innovation in sight preventing the growing number of Japanese elderly dying unnoticed for months in their own homes. Maybe they just need MOAR shared cultural solidarity. Turns out a few points difference in dependency ratio DOES matter.

Japan is sooo embracing of productivity-enhancing innovation that they still use flip phones and fax machines. 🖁

You don't need to chin-stroke about what Zero NOM Australia will be like in 2063. It's Japan in 2020.

And get your magical Kyoto trip out of your head. ⛩ Japan looks more like Kawasaki. 🏭

Life in Japan is actually very pleasant, but is so in spite of problems that immigration could have ameliorated, not because it kept itself sealed. As such, it refutes the proposition that low immigration guarantees productive innovation, wage growth, and open spaces, or that an aging society can be managed with ever fewer working-age people.

The kicker is that Japan has actually turned around and increased its immigration intake, but its ability to attract foreign talent has so atrophied that its fumbling attempts fall way short of target.

What Immigration Promises

Japan is quite culturally uniform however, supporting the idea that high immigration has changed Australians in nature. So if you want to have a conversation about how Australia's national character has changed, I'm all for that.

Just don't try to hide bias and bigotry behind pseudo-economics. And don't try to pass off official publications, which in fact express qualified support for immigration, as covered-up damning evidence of treachery or policy failure.

I promise a safe space, particularly if it will save me time spent stripping away bogus hand-wringing about wages, overcrowding, 'productivity', and even 'culture', to reveal 'racism by elimination™'.

If immigration has failed, it is at not meeting the conspiracist-confected goals of lowering wages and diluting the populace without meaningfully lowering average age.

The 'damning' evidence - if read thoroughly - actually exonerates immigration. To wit:

The vast majority of immigrants six months in are scoring jobs...
... with no evidence of depressing wages.
Immigration will reduce the proportion of elderly in the population ...
... by boosting the number of Australians ...
... more than offsetting the considerable number who leave the country ...
... with immigrants contributing to a - seemingly manageable - quarter of the population by 2063.

Immigration opponents would have you believe that there is a high-wage, ultra-productive, paradisiacal alternative kept from you by the powers-that-be.

The real alternative is Japan.

Immigration promises Australia.

🌏