Immigration imposes a large net cost, and should be reduced

[I’ve posted on this before, but the issue keeps coming up.]

The dramatic drop in immigration because of the Covid-19 closure of our borders is causing concern among advocates of a high immigration rate, who claim it is essential to the economy. But there is a widely-overlooked and very large cost.

Discussing immigration in Australia is fraught, with any questioning of policy likely to generate outrage and to be labelled racist, populist, nationalist and an assault on Australia’s economy. All of that has followed Labor spokesperson Kristina Keneally’s rather mild suggestion that total numbers of immigrants ought to be lowered after the coronavirus shutdown, especially of temporary immigrants.

The rather hysterical response is partly just over-reaction, partly confected by those who support massive immigration, and partly reflecting common economic furphies.

Immigrants don’t take jobs, they make jobs, says Jock Collins. Spuriously, he cites fee-paying foreign students, but of course they pay to be here and we benefit. He also cites holidaying fruit pickers, with the usual claim Australians won’t stoop to such work. Well, the market solution to that is to increase the pay. Anyway Collins’ example doesn’t show any jobs created.

Then Daniel Ziffer, continuing a pro-immigration blitz at the ABC, picks Keneally for being an immigrant herself. Well most of us are of immigrant stock, are we not allowed to debate the question? He praises multiculturalism (which she did not question), notes that most migrants establish themselves and prosper (no argument), and parades other common irrelevant or questionable arguments.

A more common version of the ‘immigrants make jobs’ claim is the construction their arrival requires. This is actually a cost to our society, but our reliance on GDP as a measure of welfare causes it to be counted as a benefit. GDP is just a crude tally of how we spend money, and not proper accounting, which would use a balance sheet to make the issue clear.

Economists call this an opportunity cost, because we could spend all that money instead on, for example, raising the minimum wage, educating and skilling our own youth, and helping the transition to clean energy, each of which would boost the economy.

Not only is the provision of ‘durable assets’ a cost, it is enormous. Durable assets are public infrastructure, like roads and schools, and private assets, like houses and shops.  Every year we not only have to replace some old assets, we have to build extra for the new arrivals. Jane O’Sullivan estimated it costs around $500,000 per new person. For a net intake of 400,000 immigrants per year that comes to $200 billion. If this amount seems excessive, just think that we are effectively building a complete new city the size of Canberra every year, infrastructure, housing and facilities public and private.

Several other weak or spurious arguments for high immigration rates are regularly paraded. The population must grow for the economy to remain healthy. Really? Those of us already here would not be capable of supporting ourselves? This argument is used to cover up the fact that per capita GDP is stagnant under the current incompetent management.

‘Growth’ (of GDP) is also appealed to because, in our current style of economic management, unemployment rises if GDP growth slows. The remedy is to manage for full employment (in the 1950s and 1960s unemployment was routinely only 1-2%), and to have a buffer stock of employment of last resort, as advocated by economist Bill Mitchell.

It is claimed that our low birthrate will increase the proportion of unproductive old people. True, but it will lower the proportion of unproductive children, and anyway are we saying we can’t or won’t take care of our ageing parents? Especially if we are supposed to have become richer by the time this becomes a ‘problem’?

Another argument is that there are skills shortages and we must urgently import people with skills. It may be that there is occasionally a legitimate issue here, but the list of skills allegedly missing has grown dramatically over the past decade or two and really it reflects two more basic things missing in Australia: many of our businesses want to scrimp on wages, and our governments want to scrimp on education and training. We have high youth unemployment and we’re too cheap to educate our kids into good jobs.

Claims Keneally is being populist, dog whistling or even overtly racist are clearly nonsense. Perhaps it would have been better to say we should employ ‘those who are here’ rather than ‘Australians’ ahead of immigrants, but if you read her actual words she does not single out any group. She talks about low skill levels and the vulnerability to exploitation of holders of temporary visas. She raised similar concerns in a speech in January.

There are those in our society who benefit from importing cheap labour, but society as a whole does not.

1 thought on “Immigration imposes a large net cost, and should be reduced

  1. Dick England

    [A divisive comment was made here that I have deleted. Any more such comments will lead to blocking.

    The issue I address is about total numbers being too high, not about who comes or who is here.




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