Introduction & Session Notes. Opening Address. Plenary 1, 2, 3, 4. Panel Discussion 1A, 1B, 1C. Review & Preview. Plenary 5. Panel Discussion 2A. Session Notes, Population Change & Social Services. Panel Discussion 2B, 2C, 2D. Plenary 6. Panel Discussion 3A, 3B, 3C. Closing Address.

PANEL DISCUSSION 1C - SUCCESSFUL SETTLEMENT OF MIGRANTS AND RELEVANT FACTORS FOR SETTING IMMIGRATION TARGETS

DR MANYING IP, THE UNIVERSITY OF AUCKLAND DR JOHN YEABSLEY, Senior Economist, New Zealand Institute of Economic Research 1 Introduction 2 Setting the Scene - Policy Issues 3 What Do Migrants Contribute? 4 What Do Migrants Cost? 5 What About Policy And Targets 6 References SESSION NOTES, The Successful Settlement of Migrants & Relevant Factors for Setting Immigration Targets

DR JOHN YEABSLEY, SENIOR ECONOMIST, NEW ZEALAND INSTITUTE OF ECONOMIC RESEARCH

1

INTRODUCTION

This is a contribution to an important conference. The gathering and the surrounding (and hopefully ongoing) discussion provides a prominent public forum for the debate of issues that have frequently been the subject of strong - even divisive - comment. The questions associated with New Zealand's population, particularly those related to immigration, deserve extensive public airing and reasoned debate. But, possibly because of the complexity of the statistics, or the difficulty of approaching the problem in terms of a sensible and logical framework, or just the emotive nature of the topic¹, it seems to have been difficult to initiate sustained and sensible public discourse.

Within the broad sweep of the discussion of population itself, the brief that this paper responds to is also very wide. It encompasses, moreover, some emotive and also analytically difficult questions.

Indeed, some of these are poorly structured in a technical sense: they are questions which have no natural framework of analysis that produces a resolution of the issues. This, indeed, would explain why they have the status of having defied logical resolution over long periods of time. This, of course could be seen as consolation to one who has worked previously in the area.² I do believe, though, that the real explanation is the one given above; the issues are not amenable to straightforward solution techniques - in technical jargon, they are unstructured.³ So, realistically, this paper will not be able to discuss all, or even many, of the key issues posed; at least not in any satisfactory depth.⁴

Rather, the strategy here will be to consider, in a simplified analytical way, some of the fundamental policy related issues⁵ which arise in the topics reviewed.

So, this paper follows the outline:

• setting the scene - policy issues

• what do migrants contribute?

• what do migrants cost?

• what about policy and targets?

These are dealt with in succeeding sections.

2

SETTING THE SCENE - POLICY ISSUES

2.1  Global Movement And Internationalisation

The discussion in this paper will follow rather conventional definitions and focus. That is, it will concentrate on the movements of people into this (the host) country on a permanent basis. In particular the focus will be on the gross flows. We will consider here the impact of the whole stock of arrivals without netting out the departures, whether of New Zealanders or others.

So, in policy terms, its compass is the question of the policy related to admission and post arrival treatment of those who are changing their country of residence - essentially for good. This is typically called "residence policy" in New Zealand and contrasts with "temporary entry,"⁶ which is taken as a separate issue.

But, it must be noted that this dichotomy is, at best, a hazy notion. The idea of permanent commitment to a single country, for instance, is shaky. Who is sure that the decision of today will not be reversed by experience, or whim, tomorrow? Or, more pointedly, who does not know, at least by repute, a migrant who has changed their mind?

The "fuzzy" boundary between these immigration policy distinctions is, unfortunately, one that is at odds with the firmly grounded structure of policy. Further, this tension is common to at least the "island" nations.⁷

Geography aside, the changing costs of international transport have radically altered the choices available to the average migrant. Even relatively modest first world earners can secure incomes that are sufficient to support frequent world circling travel. Provided that successful adjustment can be made between countries, peripatetic "residents" are becoming more normal. I suspect they will multiply in coming years, at least among the skilled professionals likely to be the in-demand citizens of tomorrow.

The changing cost of travel have been reinforced by other alterations in circumstances, such as the globalisation of aspects of world markets, including finance. These have, in total, created a new sense of internationalisation of business, whereby operations are seen in world terms, with the various production units and consumers run as part of an interconnected whole, though having to be accessed in different countries. This also applies to social issues. One of the consequences of international business is the spread of such brands as Coca Cola and MacDonalds, which encompass a degree of lifestyle as well as economic impacts.

So, it is a conscious decision in this paper to largely omit some of the key interactive features of the modern scene.

2.1.1  Trade Investment And Immigration

The exception to this, is the interaction between trade investment and immigration. Recent work undertaken at the NZIER addresses this topic . It suggests that there are important relationships at work within these factors. (The approach adopted in this research considers a more complex model than this paper.)

Though often the subject of policy and political discussion (recall the debates of the late 1980s and, indeed currently, about the business migration schemes both in New Zealand and elsewhere in the OECD) this has been little analysed in the formal analytical literature. Recent NZIER investigation suggests this is a major omission. While still 'work in progress,' this research aims to include aspects of the international scene, including effects of immigration that tend to be neglected in the conventional analytical studies.⁹

2.2  Scale Effects?

Immigration is of course only one aspect of population change. While it seems to be regarded as important, perhaps the policy/political focus stems from its nature.

Other aspects of population, such as birth and death rates, or the rights of citizens to free movement, are even more tricky subjects for policy. They frequently raise issues which voters see as close to their core values, involving, for example, religious beliefs. Thus, while immigration is emotive, involving the destiny of human families, it could be seen (politically) as less emotive than other aspects of behaviour that influence populations.

Every discussion of immigration is full of statistics; this paper will try and avoid that aspect.

2.2.1  Social And Economic Migrants

But there are two important numerical aspects of our immigration performance I want to address. The first is the makeup of the sorts of migrants allowed under New Zealand residence policy. There are various ways of considering the way people qualify for entry, but I only want to present one of these. This is the split between "social" and "economic" migrants.¹⁰ Comment has been made recently about the declining share of economic migrants in the total.

Two issues are worth noting. One is that New Zealand is the only country in the OECD which has anything like our proportion of economic migrants to social. Others have far fewer. To be facetious, policy round the world seems to demonstrate, that, whatever the analytical approach, in the long run:

in migration, families rule.

Perhaps this is because relatives vote.¹¹

It is probably true too, that New Zealand has as tight a definition of "family" (for reunification it is the nuclear variety) and of humanitarian grounds as any OECD country. Secondly, there is a logic that suggests that there is likely to be a switch from economic to family migrants following the instigation of a new - particularly a new economic - migration policy. This stems from the simple evolution of families. Once they are established, economic migrants want to bring their children and parents to share in the new life, as their situation improves and the relatives' situation changes.

2.2.2  Flows As Proportion Of Population

The second is related to the size of the inflows. New Zealand seems to believe that we are a small player in the world of migration. We are in actual volume terms. Our approval level of, previously 50,000 now 35,000 or thereabouts, is dwarfed by the numbers of permanent residents entering the US each year - around 900,000. But, if we consider the ratio to population we emerge as an interesting outlier. New Zealand's figures of 50,000 on a base of about 3,600,000, is a ratio of 1.4% to population. Even at the new reduced rate of 35,000 approvals the proportion would be around 0.95%.¹²

It is interesting to compare this with other OECD members. According to the official OECD figures¹³, aside from Luxembourg (an unusual special case) only Germany and Switzerland have exceeded these ratios in the 1990s. Even our more population hungry neighbour, Australia had figures above 1% in 1988 and 1989 only, during the period 1981 - 1995.

Two remarks are worth making on these figures. One is that the other two OECD countries that actively encourage permanent migration, Canada and USA hovered around 0.7% - with a generally rising trend - and 0.3% - with a surge about the time of the last policy review - respectively.

And secondly, these ratios are not probably very comparable. The countries other than the "islands" are reporting all the inflows that add to their registers of foreigners. These are not necessarily permanent settlers - most will not be.

There is indeed a tradition in Europe, particularly, which recognises the basic irrelevance of political boundaries, for people and their movements. ¹⁴Overall, this probably means the ratios for those countries are inflated by non-permanent people movements. They are also not easy to analyse in terms of the treatment of asylum seekers, which have represented large numbers for countries like Germany and Austria.

2.3  Policy and Practice- Some Basic Issues

To grapple with the issue of the policy for permanent entry we need to initially consider a group of conceptually difficult questions. This paper does not set out to do more than display them; their resolution is, at least in part, the task of the political process to which the conference is a contribution.

This section aims to introduce the issues and show why they matter. The issues are considered as a series of questions:

2.3.1  Success? Whose Success?

The brief for the speakers to the Conference suggested that contributors should seek to answer the question:

"...and what factors distinguish successful migrants."

This raises the issue, what constitutes success?¹⁵

As is often the case with general questions, there are many ways this can be interpreted, let alone answered. The problem is to determine the "counterfactual," to establish some benchmark, as success must be evaluated relative to some alternative outcome; that is the way the grammar of the word operates.

So, who sets the test scores for the migrants?

Would a successful migrant be one who manages to reach the average levels of achievement of the host country, or of the host population with the same characteristics (but then what are the relevant characteristics?). Or should the frame of reference be the origin country? In a social science sense the test ought to relate the alternative path the migrant would have taken - but how could this be established?

At a trite level of practicality it might be thought that successful migrants are those who remain in the country of destination at least for a significant period.¹⁶

Or, perhaps more cogent for what follows, success could be defined in terms of impact on the host country: is it those who make a net contribution to their destination?¹⁷

We could note too, that typically immigrants measure their own success in various ways:

• relevant to their own aspirations (a version of the counterfactual above);

• the opportunities for their descendants; or

• relative to what they left - irrespective of subsequent change (another version of the counterfactual above).

There is no obvious practical solution to this issue. But the concept of success seems to be an important issue for policy. And as one that inevitably involves a degree of judgement, is necessarily closely connected with the politics of the decision.

2.3.2  What's The Population?

What is the relevant group whose welfare is to be considered in deciding policy? This is important, because there will be policy questions which directly relate to the distribution of welfare among groups. For instance, a policy of deliberately encouraging the immigration of skilled workers whose skills are in short supply may:¹⁸

• decrease the wages of those host country workers who have the skills in demand;

• increase employment prospects for those workers whose jobs depend on the employment of the skilled workers;

• improve the lives of the immigrants;

• make larger profits for the owners of the firms which employ the skilled workers.

Which of these groups should be counted into the policy decision and to what extent? This is a question that critically influences the policy, and one difficult to solve at an expert level as it involves winners and losers - it is fundamentally political.

2.3.3  What's The Unit? And How Is It Treated?

When making decisions about who to admit, there is a fundamental practical question: what is the decision unit?

Traditionally "the family" has been taken as a whole. This group has been assessed together. And in New Zealand this is the nuclear family; the boundary is tightly defined. In fact, the approval decision has typically related to principle applicant alone. Their characteristics are the ones scrutinised.¹⁹ Once that family member is approved, the rest (typically, spouse and minor children) travel with them, as a sort of bonus.

But this raises a set of issues. Why should there be a bias in favour of family groups? Why is it only one member whose (favourable²⁰) attributes determine entry? After all, the (positive and negative) impacts on the host country may differ according to family size and makeup.

2.3.4  What Counts?

In practice, even once the decision is made about the way the approval is going to be assessed there remains a series of real world problems. These relate to the business of judging individuals based on attributes. The process of gaining the right information raises problems which have been extensively discussed in economics recently.

Thus they can be neatly presented in terms of a set of economic concepts:

• hidden information; typically the attributes that are decided as the critical ones for the entry decision will be non-obvious. That is, they cannot be decided easily on face value on he spot. So, to qualify for family reunion, for instance, the key issue may be whether the individual involved is the mother of some New Zealand resident. This relationship cannot be determined by a meter at the border. It must be established indirectly, by a process of the collection of supporting evidence. Other characteristics (entrepreneurial ability) are even harder to measure, or garner satisfactory evidence about. This raises the question of the reliability and interpretation of such evidence;

• moral hazard; which covers changes in behaviour induced by policy criteria. In other words, there is going to be a change in behaviour of applicants driven by the criteria used as the basis for the decision. So, if the decisionmaker is going to use qualifications as an indicator of possible labour market success, prospective applicants may choose to seek such qualifications rather than practice in the labour market;

• adverse selection; this term describes a general policy, which in this case is the problem that arises when the people who most want to migrate may be those least desired by the host country. Moreover, these candidates may indeed be best placed to manipulate their way to the head of a queue. This could apply, for instance, in the case of despots who are on the verge of being deposed, but have command of substantial resources.

There are implications for the design of the process of selection, from all of these aspects of the asymmetry of information.

2.3.5  Fairness

Public processes need to be fair. The principles of natural justice are straightforward and can be designed into any decision mechanism. But there are trickier and wider concepts of fairness that arise in the case of migration policy.

What is it reasonable to offer/demand from migrants? And how would we judge this? The questions quickly become more than abstract. For instance, how far should migrants be expected to underwrite their own language ability? Should language be a precondition, or able to be negotiated around? What support resources should be available? Is there a place for the state to encourage or subsidise ethnic groups?

"Fairness" is a notoriously slippery concept, as it has so many different interpretations - almost as many as there are people discussing the idea. For an economist, the natural framework is that of horizontal and vertical equity: which roughly mean, respectively that (where there is a clear notion of need):

• those with greater need should be more favoured than those with less (vertical); and

• there should be consistent treatment across populations (horizontal).

But the application of these simple concepts is far from obvious. To see this we can consider a simple issue. It is the comparison between the treatment of the migrants and the host population. But even this, where "fairness" might be seen as suggesting that the immigrants get fully "local treatment" (and no more), could be questioned on a life time basis. In this perspective, well educated migrants bring (host country costless) human capital. Perhaps this fiscal saving in gaining skilled workers should be offset by other state support on arrival?

2.4  Approach - A Simple Model

To simplify the task here, I focus on policy issues, with the discussion couched in terms of a "score sheet." The framework is given in the Appendix. This allows the separate discussion of the various elements that are taken to make up the overall migrant contribution.

This framework is based on some straight-forward economic concepts, and they can be briefly reviewed. The idea is to consider the net result of migration. To ensure that a comprehensive approach is adopted, the analysis is in terms of a series of mutually exclusive and collectively exhaustive categories. This is done by a series of two way splits between recognisable concepts.

2.5  Interaction Between Immigration and Other Policies

Finally in this section, a note to point out that there is an interaction between the migration and also wider domestic policies in terms of the benefits and costs examined below. This is easy to see when examples are considered. For instance, if the policy proscribed all access to the resources of the state by permanent residents (as opposed to citizens, say) then the public costs might be expected to change.

Beyond this technical point this means, too, that the domestic policy will have an influence on the type of migrants attracted. This is important.

There is a sense in which it is virtually impossible to have an immigration policy, per se. This holds true if the aim is to try and define tightly what type of migrant is sought. In the end the host country can only select among the candidates that are offering.²¹ The interest in the host will depend on many factors, but these will undoubtedly include the whole domestic policy scene.

In terms of proximate causes, there is no doubt that there will be a depth of ignorance about local conditions and policy to be over come. Marketing is one potential contributor to this. As we have seen, most OECD countries are relatively closed to migration. This is well established - even the subject of hit movies.²² So for citizens of these countries the opening viewpoint is likely to be that the doors are closed.

Once the details of policy that define the capacity to migrate are wider known, a bigger pool of applicants may be forthcoming. In general one would expect that official pronouncements would have greater impact than normal immigration consultants' advertising. An experiment in official New Zealand immigration marketing in the UK in the early 1990s showed there was a degree of validity in this analysis. A relatively small advertising campaign produced a significant increase in applications.

3

WHAT DO MIGRANTS CONTRIBUTE?

In seeking to pull together the elements of a policy approach, the complications have been noted. In this and the following section a "comprehensive"²³ framework is briefly sketched. Note that the migrants themselves (together with their immediate associates) capture most of the benefits as they bear most of the costs. This is not surprising; it is true of most of us in most of our daily transactions. The external interactions are usually "balanced" and gains/losses from them typically captured by the participants.

This is intended to be a means of thinking in more detail about the key decisions but will not do more than organise the hard decisions. The overall structure is briefly discussed in the Appendix. Note that the divisions in all cases are somewhat artificial, with that between economic and social effects possibly the hardest to enforce. Nevertheless this is an analytical device to illustrate the multiplicity of effects that are relevant to migration policy design.

3.1  Gross Private Economic Benefits

This is the set of economic benefits that accrue to private individuals involved in the migration decision. In this case we can think of the following as encompassed by this category:

• economic improvements that are experienced by the migrant and accompanying family - this would include the increased real income and so on;

• economic improvements experienced by the wider family of the migrant, including those who remain behind - this could involve the benefits transmitted, say, by remittances;

• on-going improvements in economic opportunities for the whole family, including particularly the children and even further descendants;

• economic improvements to the wider family in the host country - including perhaps better business performance through having a relative on the spot, or rent paid in the host country; and

• economic benefits that accrue to the employer/sponsor of the migrant - including the enhanced profits made by the firm.

3.2  Gross Public Economic Benefits

These consist of the economic benefits that accrue to the wider community due to the inward movement of the migrant. They may be in terms of rents or profits. They can include increases in tax collections and charges. But all these must reflect to some extent one or other impact of economies of scale or scope. Note these are often a feature of common facilities or public funding operations.

They could include the improvements stemming from the following:

• better business links to other parts of the world - trade can be facilitated through personal contacts;

• new ideas being brought to apply in business - entrepreneurs are those who can see new profit areas, or supply the connections to complete the deal;

• links of investment and management and/or new ideas - these often involve the application of international links through the personal interaction associated with the migrant; and

• the full impact of economies of scale and scope in both private and public spheres, which stem from the increased numbers and the particular migrants who have arrived.

3.3  Gross Private Social Benefits

These are the social (that is, non-economic) improvements that accrue to the group associated with the migration decision. These could include the following:

• better relations with family members present in the host country - this is the sort of welfare improvement that is inherent in the current family reunion and humanitarian policies;

• better non-economic conditions for the migrants - including say the absence of civil disorder and threats to life (this is the basis of refugee acceptance); and

• on-going improvements in lifestyle and social opportunities for the whole family, including particularly the children and further descendants.

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Footnote(s)

1

A bold (and difficult to justify empirically) statement would be that the published material about immigration shows an even greater tendency to "tight priors" than other areas of economic analysis.

2

See for instance, Chapple et al (1994) and Chapple and Yeabsley (1996).

3

See Chisolm (1987) for a discussion of the concept of "unstructured problems," which comes from the viewpoint of systems analysis.

4

Many of the issues dealt with here are not new; nor, necessarily, is the discussion. A number of the questions raised in what follows were debated, for instance, by Lane (1970).

5

Note that none of my remarks here should be taken as necessarily related to the analysis which underlies any particular current or previous New Zealand immigration policy. My time with the Department of Labour was marked by a steep learning curve in all aspects of labour economics and, in particular, the analysis of immigration. For this I would like to pay tribute to my generous colleagues of the time, especially the Secretary, Jas McKenzie. But the thoughts here are the product of recent analysis and reading.

6

A further issue relating to permanent domicile is that of citizenship. The distinction between permanent resident and citizen, so vital in other countries, including Australia, has received little attention in local policy or debate. Though see McKinnon (1996) for an interesting exception.

7

By this I mean the rare OECD countries that could previously, because of their geography - reinforced by their Anglo-Saxon traditions - realistically seek to physically monitor and restrict border entry. In particular, they comprise Australia, Canada, UK and USA. Our attitude and experience, in this, as in so many other policies is shaped by a narrow suite of histories.

8

This is Economic development - The interaction of trade investment and migration, Contract IER 602 funded by FRST.

9

See for instance Borjas (1995)., and the contrast of approach in Gould (1994).

10

Note that this classification as generally presented, based on application type, is bound to be misleading as there is no reason why a proportion of family reunion candidates would not qualify as economic migrants if tested, but they do not use that application method; the family route is generally quicker, and more assured.

11

A little more seriously, it would seem to reflect the type of analysis that the published literature demonstrates.

12

This is computed on a base of 3,700,000 to allow for growth since the policy change.

13

See OECD (1997)

14

So the regular cross-border flow of people to bring in the harvest or coach the skiers is recognised in migrant policy. More importantly, their control mechanisms are not at the border. They are internal and depend on identity documents and checks of "papers." In a sense their policy is a substitution of ease of control and removal for the "island" focus on entry restriction.

15

Indeed some other contributors to the Conference did not feel this was a sensible question.

16

For a criticism of this approach see the contribution by my fellow panellist Dr Manying Ip.

17

Again a concept Dr Ip was not happy with.

18

For a concrete example think of the market for general practitioners in New Zealand.

19

Note this is an oversimplification as far as health and character checks are concerned; for these aspects, the whole group must be examined.

20

Note again the reality covered by the previous footnote.

21

Conceptually it is like recruiting staff, or buying a used car (see Akerlof's (1970) lemons market discussion). One issue that arises therefore, is the motive behind the candidates' intentions to move. Are these the malcontents who will not settle well?

22

For instance, Green Card.

23

While it seeks to allow the inclusion of all factors, the structure means that issues arising from the interaction of factors are likely to be omitted. Some of these have been flagged above.

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