Wednesday, February 22, 2017

Why do journalists ignore facts on immigration?

When foreign supermarket chains ALDI and Costco entered Australia, did Coles and Woolworths welcome them with open arms?

What a silly question. Of course not. The entry of foreign competitors undermined their pricing power. So much so, that recent RBA research credited the entry of ALDI with a 13% reduction in grocery prices.

Good for customers, bad for business. It’s simple economics.

When foreign competitors enter the labour market, should local workers welcome them with open arms?

Of course not. More competition reduces the pricing power of workers, depressing their wages.

Good for business, bad for workers. It’s simple economics.

Depressing wages is a terrific thing for the owners of capital - landowners, miners, banks, and other businesses - who love to promote the story that immigration is an overall economic win. Yet they conveniently ignore that this overall outcome only occurs because their profit gains outweigh the losses to wage earners.

For the past decade, Australia’s big business lobbyists have provided the “skills shortage” and “ageing” myths as cover stories for their calculated raid on wages through record high immigration levels.

Even pro-immigration Canada is not even in the ballpark of Australia’s population growth.

So it puzzles me how so many journalists, politicians, and other media commentators, can buy into lobbyist’s story. Can they not separate the humanitarian logic of supporting refugees, who make up a tiny fraction if immigrants, from the economic logic of mass immigration?

Take Bernard Keane. He writes for Crikey. His latest article carries the tagline:
Businessman Dick Smith attacking immigration as a threat to our economy is both wrong-headed and encourages anti-immigrant sentiment in the community.
I sort of see his point. Keane reckons that talking about immigration could stoke racial tensions, and that is a bad thing. But that logic leaves no opening to have any discussion about important policy questions surrounding our immigration system.

Not only this, he employs the same false rebuttals to Dick Smith’s economic arguments that Waleed Aly tried on The Project a couple of months back.

Here’s Aly.

And here’s Keane.
Immigration can’t halt the ageing of the population, but it can slow the decline in participation, which — far from impoverishing us — will support economic growth.
But they are both wrong. On both points. And what is more surprising is that they both have stuck with these views despite the clear evidence. It’s almost as if they won’t let the facts sway them.

Keane quotes a 2006 Productivity Commission report to support his view, which found that
…the overall economic effect of migration appears to be positive but small.
But that report mostly supports Dick Smith’s view, which is the standard economic one. It concludes with:
The distribution of these benefits varies across the population, with gains mostly accrued to the skilled migrants and capital owners. The incomes of existing resident workers grows more slowly than would otherwise be the case.
While it may well be the case that there are small overall gains, the distribution of those gains also matters. Working class wage-earners suffer a loss, while wealthy capital owners, and the skilled immigrants themselves, benefit.

And what about housing? Keane mocked Smith about his view that high immigration rates are contributing to elevated housing costs. He says:
Blaming migrants is the “they take our jerbs” argument of housing affordability.
I wish the Productivity Commission could clear this one up too. Oh, here. Look.
Urban land owners, in particular, might benefit from increased land values or rents.
Aly and Keane both make the point that immigration is helping to solve population ageing, which leads to a decline in the share of the population actually in the workforce (because of more retired people). Yet that too is a myth. Here’s the Productivity Commission to tell us about it.
Despite popular thinking to the contrary, immigration policy is also not a feasible countermeasure. It affects population numbers more than the age structure.
Not surprisingly, immigrants age as well.

The economic analysis Bernard Keane used to try and discredit Dick Smith actually supports all of Dick Smith’s fundamental points.

I don’t know why this is so hard to fathom. Keane and Aly aren’t arguing for open borders, which would be the natural conclusion of their arguments. So they implicitly realise immigration policy is a choice, and that it has economic and social consequences.

Making a proactive choice about immigration policy isn’t being anti-immigrant, nor is it anti-refugee. Australia’s absurd immigration policy choice has been to lock up the neediest refugees, while at the same time adopting an immigration policy that has been off the scale in global terms, and affecting local wages.

Keane and Aly can go on ignoring economic reality. They can paint as racist everyone who understands that population and immigration outcomes are the result of policy choices. But they can’t change the facts.


  1. As a migrant, descended from migrants (I'm an ex-pat Australian Anglo-Saxon-Norman-Celtic heritage living ironically enough back in Germany) I should be all for open borders, but I think some restrictions on the volume of immigration must be needed so long as the world is so unequal. But one issue that doesn't seem to be addressed at all, is the interaction of open borders on ecological sustainability. It seems to me that open borders could well undermine experiments in sustainability, eventually fatally. It sort of reminds me of the paradox that societies that choose planned parenthood will be outbred by societies that ban contraception.

    This doesn't seem to be an issue that is talked about much. (P.S. It came to me in thinking about the related issue of open borders and UBI.)

    1. This sort of, in a way, relates back also to your previous post about costly competition.

    2. I just realized that the "paradox" is not clear. It only becomes clear if you think that decisions on planned parenthood vs no contraception are in some sense inheritable (either biologically or culturally) so that the decision to voluntarily reduce fecundity will result in the population as a whole choosing higher fecundity (as the more fecund part of the population becomes relatively more numerous).

    3. I agree. Open borders make sustainability more difficult. I actually see high rates of immigration (or population growth in general) making many things more difficult. Instead of investing resources in renewable energy, we are busy expanding the network to get to the millions of new homes, etc.

      I actually don't think there will be societies outbreeding. The reality, that has been seen many times, is that as societies get much richer they have fewer children. So a country that is already poor and has high fertility will struggle more to become rich than one with lower fertility.

    4. Cameron, great article - but I can't make head or tail of your last comment:
      "The reality, that has been seen many times, is that as societies get much richer they have fewer children." (This is a myth - there's actually no relationship between the fall in family size and the GDP per capita of nations, it's got a lot more to do with whether or not they promoted family planning, and those that did subsequently got richer.) But then you say "So a country that is already poor and has high fertility will struggle more to become rich than one with lower fertility." Which of course is acknowledging the fact which the development community loves to deny, that high fertility impedes development (and therefore stops them getting rich enough for wealth to reduce fertility). But what has it got to do with not outbreeding low fertility societies, and over-running them if there are open borders? Or do you mean they'll be more motivated to get rich, so they don't breed as much? Good luck with that. If they were not smothered in misinformation, they'd be motivated to not breed as much, in order to become richer.

    5. Cameron "I actually don't think there will be societies outbreeding. The reality, that has been seen many times, is that as societies get much richer they have fewer children."

      I don't think this is true. The very rich also have more children. The key variables seems to me not income but social insurance (especially retirement insurance) and universal education. Compare Kerala and Saudi Arabia if you want to concretise that. It is not so much higher income, as a capital intensive middle class lifestyle that acts to decrease birth rates.

    6. P.S. When I say capital intensive here, I'm including human capital.