Bernard Hickey writes the best economic analysis in NZ. Here’s yesterday’s contribution:
Bernard Hickey: Too many visas, not enough pay
Reserve Bank Governor Graeme Wheeler is tasked with under-standing how supply and demand affects wages and prices in the economy and last week he pointed at migration, in particular the 160,000 people who have arrived in New Zealand since 2013 and increased the size of the workforce by 4 per cent. “That has added some downward pressure on wage outcomes in terms of the expansion in the labour supply,” Wheeler said. “Clearly it has added quite a lot of pressure into the housing market as well.”
Wheeler was particularly interested in the quality of the migration surge, and he’s not the only one. Treasury warned the Government in December it was concerned low-skilled migration was dragging on productivity and wages and may frustrate the Government’s push to move beneficiaries into work because lower-end jobs were being scooped up by migrants.
Immigration Minister Michael Woodhouse and Finance Minister Bill English said this week they had seen no evidence the surge in low-skilled migration was suppressing wages – but there are plenty of signs in the statistics.
Why not leave the market to work by letting the stronger demand exceed the local supply and lift wages?
Immigration New Zealand awarded 209,461 work visas in the year to June 30 – up 23.5 per cent from two years ago. The top 20 occupations for those visas show just four were in higher-skilled occupations. If those work visas weren’t awarded, the market would start to generate heat and increase wages at the low end.
Woodhouse, however, is reluctant to unleash the market. “If you completely remove the international labour market and have a pure supply and demand model, I think in the short term that could be quite damaging,” he said this week. For whom? Employers? Workers?
It wouldn’t damage the Government in the short or long terms. The best way for an economy to grow is for the market to allow wages to grow. Allowing a flood of low-skilled migrants is frustrating that market mechanism with the short-term aim of keeping wages low for employers. It does nothing to develop the economy and the society in the long term.
Plenty more in the full article in The Herald. It suits the Nats and their business mates to keep wages low. Does it suit the rest of us?