Why we should follow Canada and cut migration

My brother runs a small business in a remote location in Ontario. Cannot get skilled workers so brings them in on a visa at significant expense and trains them up on the company equipment and then the Canadian government pulls the visas on his best workers. Yes, great policy.

Hi Kevin,

Two sides to every story: my brother in law also happens to own a small business in Ontario, a few hours outside of Toronto. His town was innundated with migrants post Covid. Subsequently, many new restaurants popped up in town, rivalling my brother in laws. Good for the consumer; not so much for existing businesses.

Lots of second and third order effects; positive and negative, as I mentioned in the article.

James

Hello, skilled migrant here, applied 2003, approved in 2004, both of us skilled and approved for migration by DIMIA. Back in 2002-2003 there was occupational list and a few other requirements (English language, profession, at least 10 k (AUD) to support yourself for the first 6 months, no benefits nor any help from the government.
As far as I remember most of the people back then were skilled, total number between 80-100 k.
Great times back then.

Author: "Migrants have helped build modern Australia."

True, but no longer so, as the origin and quality (e.g. cultural fit) of migrants has changed radically since the post-WWII immigration wave.

While the government says Australia in on track to meet its climate commitment Australia's cumulative emissions continue to increase in proportion to the population increase squared.

The other “M” word not part of the political discussion is “Multiculturalism”.
There is ample evidence from other countries that multiculturalism as a policy has resulted in social dislocation, pressure on welfare services, and a drag on productivity.
Australia thrived in the 50s and 60s when the aim was to integrate migrants into a multi-ethnic society with one overarching set of values and promote a clear Australian identity.
A return to this once successful policy will be difficult given the extent to which we have fractured and denigrated our past. But it can be argued that our future success as a Nation depends not only on reducing the level of migration, but also on a return to a policy of assimilation.

Absolutely correct Peter .

There is overwhelming evidence that income and wealth inequality are globally and locally the biggest drags on social cohesion and productivity.

The period you refer to (1950s to 1960s) was a period of mass multicultural migration with significantly lower levels of income and wealth inequality.

Steven,

I'm confused by the comment. How does income inequality contribute to productivity drag?

Shouldn't we be addressing the causes of income and wealth inequality? In my mind, a big part of that is from asset inflation and in Australia, property inflation. If right, it's a feedback loop, isn't it?

James

Hi James

You might be confused, ay comment was in reply to other comments that multiculturalism and assimilation are what we need to address.

To answer your question, How does income inequality contribute to productivity drag?

In several ways, but here are two which are observable…
1. Human capital underinvestment.
When income is highly concentrated, many families lack resources to invest in education, skills training, or starting businesses. This means a significant portion of the population can’t develop or deploy their productive potential.

2. Health and stress effects
High inequality creates chronic stress and health problems in lower-income populations, reducing their productivity and increasing healthcare costs. Stressed, unhealthy workers are less productive and more likely to miss work.

Steven,

Good points - thank you.

The Greens are also in favor of high immigration - the open borders they espouse would result in millions of refugees. Anybody who votes for one of the three major parties is voting for high immigration. And I would dispute the sentence "Migration has been a major net-positive for Australia." Just ask the first nations people! Every person who has come here since 1770 has been bad for them, and bad for the environment. (I include my own forebears in that.) Your sentence should read "Migration has been a major net-positive for the migrants." That is, for us, because we got to share in the riches from Australia's huge natural resources. Which we now have to share with more and more people every year.

While the government has continued to promote its commitment to meeting Australia's emissions target Australia's cumulative emissions continue to increase in proportion to its population increase squared.

corrected e-mail

There is a rally today (31st. August) in Adelaide against a big Australia. The Premier has called it divisive, and trying to link far right groups to discredit those who march. I'm fed up with the way this country is being run, and can only assume politicians live in an Utopian dream. Of course, infrastructure never keeps up with increase in population, neither does housing. A sorry state.

SHUT THE GATE !!! Simple.

First medical response is stabilise the patient. It is so, so, stupid that numskulls in Canberra do not get basic economics that when Demand outstrips Supply you have a problem. Reduce "Demand" by pulling the "Migration" lever!

Kept simple. migrants and specifically their family as a group need to proven as positively productive to the Australian economy. If not, go elsewhere.

It's truly very complex issue with so many factors to consider and quantify to see the full picture.
Assessing the relationship between productivity and immigration raises the question how much productivity is foregone by preventing skilled workers from practicing in their fields. Ironically most such people would have emigrated on skills visa for skills that they can not apply. It is a loss to the individual and a loss to the country at large.

Many years ago I used to work in the student policy area of the Dept of Immigration. Our role was to tighten regulations to stop rorting of student visas. The problem was non-genuine students enrolling in dodgy education providers mainly in the vocational education training (VET) sector. Pop up colleges, gained a CRICOS number, enrolled overseas students, who then never, or rarely, attended classes but instead got a student visa simply to get into Australia to work in low skilled employment. Most of these non-genuine students were coming from India, PRC, Sri Lanka and Nepal. We cracked down on student visa rorts and scams, introduced higher entry requirements for English language proficiency, savings history, academic standards etc, but pressure grew on the government, from various lobby groups standing to benefit from high student numbers, so these once stringent anti rorting regulations have been watered down, causing a blow-out again in overseas student numbers.

What a complex issue, but certainly worth the discussion.

I am very sceptical of the notion that foreign higher education students are an export (part of the argument for the huge student visa figures you outline in the article). To get to the services export $ value, I understand the ABS takes the # of foreign students enrolled in Australia and multiples it by an assumed spend figure per student. It apparently disregards any income those students earn to pay their bills. I think most of us would conclude it is a very flawed and unrepresentative estimate.

Granted some students bring money in to pay for education, but many work in Australia to pay their way. Whatever the % that work locally to pay bills should not be counted as an export. My understanding is some students actually remit money back to their home countries which is therefore an import!

My conclusion is that the importance to the economy from 'education exports' is overstated

An excellent article. When I was briefed by Immigration in the 1970’s before leaving to serve overseas they said the same: only 13 percent of migrants are economically active. The others of course require support through education and health and often welfare. The US takes a 1 million migrants a year with a population 20 times our size. Of course we need to reduce the migration intake. Well done James

Well said, but as someone pointed out it is lowly paid migrants who are doing the work no one else wants to do and this is nowhere more evident than the number of households who now need a lawn moving person and gardener, a cleaner, a person to do the ironing, make and deliver food, paint their nails, wax their legs, etc, etc. Most of these tasks were done by/within the household 20-30 years ago or were only used by the wealthy, now lots of households use them regularly, and most are low paid jobs ( and hard to improve productivity in). And that is not even mentioning the explosion in child, aged and disability care which are, in the main, low paid jobs. And many of these are cash jobs, with one of the biggest rorts in the system being that nannies can be "employed" for the cost of board and lodging and "pocket money" of $300 per week, so the nanny doesn't even pay tax!

Excellent summary however one thing has been overlooked. Australian's in business are the world leaders at ripping people off, their own countrymen or whoever it may be. Its enshrined in our culture. To suggest implementing a system that will see a significant drop in house values and rental returns, would cost a government dearly.

Two points.
I have been saying for well over 10 years now that water will eventually force restricted immigration. Since the millennial drought our population has increased millions, but no new dams and probably less water due to climate change. A setting for disaster.
Also, I read recently that there are 1500 new immigrants entering Aust every day. I doubt very much that there are 1500 jobs being created every day. A setting for disaster.

More broadly, it's time policy makers woke up to the fact that, environmentally, Australia is living beyond its carrying capacity. We seem to assume that because Australia is a relative large land mass it can accommodate a much larger population. This is simply not the case as water, soil & other natural resources are in insufficient quantities to support the human population we seem to desire. As well, our land use practices are such that we quickly deplete the value of our natural resources. More dams, for example, will result in drier landscapes which will be more vulnerable to wild fires.
Alas, our response to climate change isn't auguring well as a template for our response to environmental destruction.

There are also an un-known portion of immigrants who are qualified in their home countries with skills we could undoubtedly use, but are prevented from practising in their specialist fields by governments/unions/ lobby groups (i.e medical specialist colleges etc) who feel threatened in various ways. As acknowledged, immigration is a complex matter - but both manor parties are committed to the ongoing prosperity of homeowners at the expense of the rest ofthe population.

Anyone who has been to Japan recently will have experienced the increasing use of humanoid robots in hospitality and aged care.
At the Osaka Expo there were some exciting examples of how AI powered humanoids can replace workers in a wide variety of jobs.
Humanoids don’t need housing or unions.
In a high labour class cost economy such as Australia it is likely they will increasingly carry out low skilled jobs or even replace University staff.

"migration also lifts housing demand and house prices. As mentioned previously, it’s likely a minor driver, though it’s there, nonetheless. And the government loves anything that drives house prices higher!"
and
"I’m not suggesting that cutting migration is the sole answer to our economic and housing woes. Though it’s a piece of the puzzle that’s worth more thoughtful discussion."

Methinks that 1.5million additions to the population over the past 4 years is a whole lot more than just "a minor driver" and "a piece of the puzzle".
I would suggest that it's more of a major driver, a large piece of the puzzle, and well worth " more thoughtful discussion".

Bigger is not necessarily better !

Bravo for raising this.

Excellent analysis and well balanced James. Federal governments have chosen high migration over housing affordability. It's understandable that many are upset when their rents are skyrocketing and house prices are getting far beyond what their income can service.

On the "who will take the jobs question", there's plenty of under-employment and it has been rising recently. It would be a good opportunity to nudge some of the long term unemployed off welfare. Also, when migrants leave their demand for goods and services also leaves, reducing the strain on the economy.

Thanks for being very balanced. Its valuable to see some science behind immigration and housing.
A concern I have is AI and its impact on jobs. I expect this will affect the number of people we need in general. There will be some job areas affected more than others.

Blind Freddy knows population growth is excessive. But our politicians are too weak to act. And they probably care more about capital growth in their own investment property portfolios.

If temporary numbers are cut, who will do the work that others do not want to do? Cleaning toilets, driving taxis, stacking shelves...at minimal wage and conditions? Without access to that cheap labour, wouldn't input costs rise and hence cost of living for everyone rise? Does it mean that permanent workers can focus on work that raises productivity? If part of our permanent workforce had to do the 'drudge' work, doesn't that mean labour shortages, which then cuts output? Wouldn't companies then raise their prices (even more) to account for the need to pay higher labour costs? Is the Canada productivity growth chart on a per capita basis, or an overall rate - meaning the growth is not real, it is caused by a drop in total population? It is difficult to compare Canada's house pricing/rental levels with Australia's since there are very different methods, such as rent-controlled buildings, totally different tax incentives and rental laws. Wouldn't student visa visitors be mainly in the very low end of the market and in fact would be increasing the 'usefulness' of housing stock by being far more willing to share accommodation, whereas permanent residents tend to shy away from that? So many levers are intertwined - it seems quite simplistic to state that less student visas will immediately reduce rents?

Hi AccentOnYouEnglish,

Good points. Lots of nuance. I kept it relatively simple here; perhaps the nuance might be worth a further article.

James

If adding people solved skills shortages, surely Canada would have a skills surplus?
Population growth creates more demand for goods and services that its labour alone can meet.
If Canada had a stable population, how many houses would need to be built? Where would the people who currently build houses be working? Oh yeah, aged care or some other more productive area of the economy.
Higher wages would attract pensioners and retirees back into the workforce, lifting participation rates, just as we see in Japan.
Population growth is the problem that masquerades as a solution. Nothing can grow forever. A cancer cell tries, but it eventually kills its host.

Thanks for introducing some common sense into this discussion on a complex topic. Aggressively expanding the “full fee paying international student market” was a deliberate strategy to underfund the university sector and to create a large reserve army of low paid workers to do many of the jobs for which takers are few.

James - you provide some clear statisitics, although I do wonder aboutn the final conclusion over economic impact.
Students at Universities are paying fees which is direct income from overseas. they also pay rent, buy food and stimulate our local entertainment economies.
Those on short term work visas bring in less from outside income sources, but they often take the transitory jobs in agriculture (such as fruit picking) or low skilled jobs in the service sector that few Australian citizens apply for (just ask the growers about their difficulties in finding pickers!)
We do need to be careful of our immigration numbers, but the discussion is quite nuanced - you start us off well, but we need to explore further the indirect and direct economic impacts. For example, productivity measures typically look at permanent employees in established industries and to consider these against population figures that include temporary immigrants and university students seems an unfair comparison. Secondly, it is unlikely that those on student or short-term work visas would be competing with home purchasers, but would certainly impact the rental markets in many areas.

Andrew,

Valid points - it's not a straightforward issue and there are a lot of second, third, and fourth order effects.

"Overseas students in Australia sent approximately AUD $10.5 billion back to their home countries in 2023, according to a conservative think tank, the Institute of Public Affairs (IPA). This amount was part of the $15.4 billion earned by foreign students through part-time work that year. "
certainly reduces the income that stays in Australia

Careful what you wish for, hope financial analysis is more grounded that this on demography?

Good comment Andrew, I also disagree with the article theme which misses key data points including the ABS* expansion of the NOM net OS border movements to 12/16+ month residency test way back in 2006/7, sweeping up far more students and prone to short term spikes.

Then media started describing these students as 'immigrants' suggesting high immigration, automatic migration and permanence; false as permanent migrants are capped at 190k p.a. (many already counted into estimated pop'n via the NOM)*.

Meanwhile, the same mislabelled 'immigrants' are glibly blamed for the alleged perils of population growth by RW MSM and finance sector outlets (or just migrants?), but it's our improved health and longevity that is driving long term permanent population growth; like compounding term deposits, longer term produces more $.

Also analysis using per capita dilution of GDP to complain about the same cohort which by nature of their visa, are unskilled and have qualitative retrictions to work, hence, productivity and/or per capita analysis is a non sequitur; nor do they buy houses (zero analysis of student housing behavior by FIRE media?)....... damned if they do, damned if they don't?

Then, international students' financial contribution is ignored ie. $billions in aggregate demand for services, GST and PAYE to support budgets for increasing long term old age dependency ratios**; like short term tourists or backpackers but the latter are ignored?

*The expansion was missed by all with ABS advising (very quietly) then not to compare pre 2006/7 data with post ie. cannot run trend lines (nor compare with other nations) and last week the ABS had to warn media again on definitions related to migration, immigration, arrivals departures etc. due to misrepresentation (serious allegation, similar issues on climate science).

**The elephant in the room is us with an ageing permanent population and longevity, increasing old age dependency ratios retirees 65+/working age 18-64 was 20% in 2000, 30% now and mid century 40%+

The Senior reported in '22 on health, age care and budget management for more retirees who are non taxpayers, but that is solved by high temporary border churn of net financial contributors, what's wrong with that? 'Immigrants'......?

'ABS data shows Australia is ageing, prompting a workforce, retirement and health wakeup call....The Senior's analysis of ABS population data from 1982-2022 shows a growing proportion of people aged 55+ representing the whole population, a shrinking amount of younger people, and a greater proportion of the overall population being eligible for retirement.'

We need more young people but we have this ageism that deems young residents from offshore as a load on the nation, but we are not?

Populate and Perish
Unsustainable immigration is the main driver to the destruction of our lucky country.
1,000,000 international students accommodated means less beds for Australians.
I see Australians living in cars and parks but international students living in trendy city apartments.
Who is really running Australia?

Interesting points but I took exception to this - "Universities have had a good time of it!"

Maybe university vice chancellors have, but not academic staff or students. Any reduction in international student numbers will require a restoration of decent government funding for the sector.

Spot on regarding the big political parties having little interest in reducing migration. I understand we have been in per capita recession for much of the past six years.

How would our economic performance look without high migration? A circular argument I suppose as those in favour of high migration would argue that it is boosting our economic performance, which of course ignores the downsides outlined in the article.

It is so easy to announce well intentioned or populist spending and social policies but so hard to reduce or stop any program that turn out to be more costly or less effective than conceived. Witness the bleating from the universities when a reduction in overseas students was proposed or the more recent attempt to reduce the rate of NDIS spending growth.

feels like i'm living in another country when i walk the streets!

James, you got many things right. I don’t feel you have sufficiently explained the link between productivity growth and immigration. I’m not yet convinced. It feels you are saying something analogous to (but with key differences) that Australian’s average life expectancy would increase if people with the lowest life expectancies left Australia. While mathematically true, it doesn’t materially benefit the rest of us. This could be the case with lowering immigration and labour productivity growth.

Grateful reader,

Thanks for the thoughtful response.

Re 1. Coincidentally this recent article by Matt Grounde, senior economist at the Australia Institute, interpretes the data differently.

Re 2. I would direct you to this study and Figure 1 in particular, which clearly demonstrates the decline in productivity growth in major economies, including the US: https://www.intereconomics.eu/contents/year/2017/number/1/article/the-global-productivity-slowdown-diagnosis-causes-and-remedies.html

The Australia Institute argument has many, many holes, including:

Relating house supply growth to population growth is false on many fronts. Takes no account of household formation, for instance.

They insist population growth has returned to prev Covid levels, which is nonsense.

Many other false points that make this research suspect, to say the least.

The e61 research is more credible, though a lot more studies will be done of this, methinks.

I agree. There is no data presented supporting the view that migration has hampered productivity growth. Nor any evidence that the decline in wage incomes is linked to migration.

Productivity growth has been declining for the past 20 years in all developed economies. The jury is still out on why and what is to be done. The reason for the decline in real wages is more easily identified. The increase in the profit share of national income.

By all means let's look at migration and it's impacts, but we need to be wary lest we draw unsubstantiated conclusions.

Tony D,

1. Most studies to date have focused on the link between overall migration or skilled migration on productivity, less on unskilled. A recent e61 study found a positive link between targeted migrant workers and firm productivity in Australia, and a negative link for untargeted migrant workers. https://e61.in/misallocated-migrants-immigration-and-firm-productivity-in-australia/

More work needs to be done here.

2. That's not true on productivity growth declining across all developed countries - some exceptions.

James