..



.

Business News

Blaming immigrants for unemployment, lower wages and high house prices is too simplistic

  • Written by Robert Breunig, Professor of Economics, Crawford School of Public Policy, Australian National University

Australia should cut its immigration intake, according to Tony Abbott in a recent speech at the Sydney Institute[1]. Abbott explicitly cites economic theory in his arguments: “It’s a basic law of economics that increasing the supply of labour depresses wages; and that increasing demand for housing boosts price.”

But this economic analysis is too basic. Yes, supply matters. But so does demand.

While migration has increased labour supply, it has done so primarily in sectors where firms were starved of labour[2], and at a time of broad economic growth.

Immigration has put pressure on infrastructure, but our problems are more a function of governments failing to upgrade and expand infrastructure[3], even as migrants pay taxes.

And while migrants do live in houses, the federal government’s fondness for stoking demand and the inactivity of state governments in increasing supply are the real issues affecting affordability[4].

Let’s take Abbott’s claims about immigration one by one, starting with wages.

It’s true that if you increase labour supply that, holding other factors that affect wages constant, wages will decline. However, those other factors are rarely constant.

Notably, if the demand for labour is increasing by more than supply (including new migrants), then wages will rise.

This is a big part of the story when it comes to the relationship between wages and migration in Australia. Large migrant numbers have been an almost constant feature[5] of Australia’s economy since the end of the second world war, if not earlier.

But these migrants typically arrived in the midst of economic growth and rising demand for labour. This is particularly true in recent decades, when we have had one of the longest[6] periods of unbroken growth in the history of the developed world.

In our study[7] of the Australian labour market, we found no relationship between immigration rates and poor outcomes for incumbent Australian workers in terms of wages or jobs.

Australia uses a point system for migration that targets skilled migrants in areas of high labour demand. Business is suffering in these areas. Migrants into these sectors don’t take jobs from anybody else because they are meeting previously unmet demand[8].

These migrants receive a higher wage than they would in their place of origin, and they allow their new employers to reduce costs. This ultimately leads to lower prices for consumers. Just about everybody benefits.

Read more: A focus on skills will allow Australia to reap fruits of its labour[9]

There’s an idea called the “lump of labour fallacy[10]”, which holds that there is a certain amount of work to be done in an economy, and if you bring in more labour it will increase competition for those jobs.

But migrants also bring capital, investing in houses, appliances, businesses, education and many other things. This increases economic activity and the number of jobs available.

Furthermore, innovation has been shown to be strongly linked to immigration. In the United States, for instance, immigrants apply for patents at twice the rate of non-immigrants[11]. And a large number[12] of studies show that immigrants are over-represented in patents, patent impact and innovative activity in a wide range of countries.

We don’t entirely know why this is. It could be that innovative countries attract migrants, or it could be than migrants help innovation. It’s likely that the effect goes both ways and is a strong argument against curtailing immigration.

Read more: How migrant workers are critical to the future of Australia's agricultural industry[13]

Abbott’s comments are more reasonable in the case of housing affordability because here all other things really are held constant. Specifically, studies[14] show that housing demand is overheated in part by federal government policies (negative gearing and capital gains tax exemptions, for instance) and state governments not doing enough to increase supply.

Governments have responded to high housing prices by further stoking demand, suggesting[15] that people dip into their superannuation, for instance.

In the wake of Abbott’s speech there has been speculation[16] that our current immigration numbers could exacerbate the pressures of automation, artificial intelligence and other labour-saving innovations.

But our understanding of these forces is nascent at best. In previous instances of major technological disruption, like the industrial revolution, the long-run effects on employment were negligible. When ATMs debuted, for example, many bank tellers lost their jobs. But the cost of branches also declined, new branches opened and total employment did not decline[17].

Read more: New research shows immigration has only a minor effect on wages[18]

In his speech, Abbott said that the government needs policies that are principled, practical and popular. What would be popular is if governments across the country could fix our myriad policy problems. Abbott identified some of the big ones – wages, infrastructure and housing affordability.

What would be practical is to identify the causes of these problems and address these directly. Immigration is certainly not a major cause. It would be principled to undertake evidence-based analysis regarding what the causes are and how to address them.

A lot of that has already been done, notably by the Grattan Institute. What remains is for governments to do the politically difficult work of facing the facts.

References

  1. ^ recent speech at the Sydney Institute (tonyabbott.com.au)
  2. ^ in sectors where firms were starved of labour (onlinelibrary.wiley.com)
  3. ^ failing to upgrade and expand infrastructure (grattan.edu.au)
  4. ^ real issues affecting affordability (grattan.edu.au)
  5. ^ an almost constant feature (www.homeaffairs.gov.au)
  6. ^ one of the longest (theconversation.com)
  7. ^ our study (onlinelibrary.wiley.com)
  8. ^ meeting previously unmet demand (theconversation.com)
  9. ^ A focus on skills will allow Australia to reap fruits of its labour (theconversation.com)
  10. ^ lump of labour fallacy (www.investopedia.com)
  11. ^ at twice the rate of non-immigrants (www.nber.org)
  12. ^ large number (www.cambridge.org)
  13. ^ How migrant workers are critical to the future of Australia's agricultural industry (theconversation.com)
  14. ^ studies (grattan.edu.au)
  15. ^ suggesting (www.afr.com)
  16. ^ speculation (www.theaustralian.com.au)
  17. ^ total employment did not decline (yalebooks.yale.edu)
  18. ^ New research shows immigration has only a minor effect on wages (theconversation.com)

Authors: Robert Breunig, Professor of Economics, Crawford School of Public Policy, Australian National University

Read more http://theconversation.com/blaming-immigrants-for-unemployment-lower-wages-and-high-house-prices-is-too-simplistic-92255

Business Daily Media Business Development

4 Best Budget-Friendly Attractions in Las Vegas

Perhaps no other city in the world deserves the moniker “Sin City” more than Las Vegas. This city has been illustrated in countless works of art as the place where dreams are made, lives a...

News Company - avatar News Company

Bahrain Property Show 2018: How does it reflect the real estate market development in Bahrain

It is no secret that the Arabian Peninsula and the Gulf Cooperation Council (GCC) countries are currently going through a lot of pivotal changes. Such changes do not include economic or po...

News Company - avatar News Company

Di Jones real estate recognises high achievers

Di Jones celebrated its outstanding performers on Saturday (24 February 2018) evening at the Di Jones Real Estate Annual Awards.                               The black-tie Gala Dinner s...

Helen Hull - avatar Helen Hull

Five Reasons Melbourne Rules

If you are traveling in Australia and have left Melbourne off your destination list, then you are going to want to reconsider. Many people consider Melbourne to the best city in the world...

News Feature Team - avatar News Feature Team

Making Friends During Your Campsite Stay

Part of the excitement of vacation is meeting people who you would never otherwise encounter. Staying at a campsite isn’t just about taking in nature. It’s also about sharing the beauty of n...

News Feature Team - avatar News Feature Team

Have More Fun On Your Business Trips

Whether you are a traveling salesman or someone who finds themselves on the road more than in their office you probably are grateful for any tips you can get especially if they involve havin...

News Feature Team - avatar News Feature Team

Business Daily Media Business Reports

Di Jones real estate recognises high achievers

Di Jones celebrated its outstanding performers on Saturday (24 February 2018) evening at the Di Jones Real Estate Annual Awards.                               The bla...

Helen Hull - avatar Helen Hull

Eclipse Travel Expands Operations to New Zealand

Eclipse Travel, specialists in key adventure destinations such as Antarctica, the Arctic, Africa and Latin America, have announced today their expansion of operations to ...

Yvonne Kong - avatar Yvonne Kong

How medical professionals can benefit from an overall wealth management solution

As a health care professional, you have made it your life's work to focus on the care and health of the general public. While this kind of work can be extremely rewarding...

News Feature Team - avatar News Feature Team

Why Pinterest Should Be Part of Your Marketing Strategy

Pinterest is a growing social media platform that can deliver significant traffic to your website and new followers to your brand. With it’s steady growth and outrageous ...

Greg Nunan - avatar Greg Nunan

The top reasons why gyms fail

Steve Grant is a Business Coach and Founder of GymHub.com.au   Every month thousands of new trainers walk out of their 6-month course with the qualifications needed ...

Steve Grant - avatar Steve Grant

WHITE LABEL NOBA’s Winter 2016 season: Earth + Country

Taking cues from the warm winter colours of tobacco and caramel, and combining them with the strength of navy and the embracing lightness of whites and creams; and then...

Kath Rose - avatar Kath Rose

Former Etihad boss brings substantial event insight to PMY Group Board

Paul Sergeant PMY Group, the architects of the digital insurgency occurring at major venues across Australia and New Zealand, are delighted to welcome 35 year even...

Annie Konieczny - avatar Annie Konieczny

More training for coffee making than property sales: REINSW

Sydney 9 May 2016. An overhaul of education and training standards for the real estate profession must take place to help prevent illegal activities, according to the Rea...

Helen Hull - avatar Helen Hull