Population Matters

Open letter on migration to OECD

Open letter on migration to OECD

Australian academic Jane O’Sullivan responds to an OECD report on migration.

To:

Jean-Christophe Dumont

Senior Economist (Principal Administrator)

Direction for Employment, Labour and Social Affairs (Division for Non-Member Economies and International Migration)

OECD

Paris

Dear Jean-Christophe,

I am appalled that the OECD would publish such a partisan document as the policy brief “Is migration good for the economy?”

Policy brief

Is migration really increasing?

Is migration good for the economy?

The opening paragraph:

“The economic impact of migration has been intensively studied but is still often driven by ill-informed perceptions, which, in turn, can lead to public antagonism towards migration. These negative views risk jeopardising efforts to adapt migration policies to the new economic and demographic challenges facing many countries”

pre-empts a conclusion that immigration is good, that public concerns are unfounded, that ‘demographic challenges’ (presumably ageing) have a significant negative economic impact and that immigration is an effective and necessary element of adaptation to ageing. I contest that none of these assertions are upheld in evidence – not even the evidence presented in the paper itself.

The paper implies that migrants increase the level of education in the workforce, but the histogram “Changes in tertiary educated labour force”, if combined with the figures quoted for migrants’ contribution to labour growth, says that this is not true. While it is later noted that the proportion of tertiary-qualified immigrants has recently risen, this has negative impacts both on the sending country, which has invested in their education and may be in far greater need of qualified personnel, and on domestic graduates, many of whom struggle to find work in their field of training. To extrapolate productivity according to educational attainment is not legitimate, without demonstrating that there is a deficit of particular skills, and of capacity to train them.

While it is claimed that “Migrants contribute more in taxes and social contributions than they receive in individual benefits”, this is a ridiculously low bar against which to judge an individual’s social contribution. What is the average percentage of government revenue spent on social transfers (‘individual benefits’)? Average citizens’ contribution (including consumption taxes and their share of employer’s corporate tax) must exceed individual benefits by this ratio. The chart on p 3 clearly shows that immigrants are not paying their way in terms of other government spending. Why does the chart not show the same data for native-born people, for comparison? The paper does admit that migrants contribute less than native-born to public infrastructure (i.e. their ratio of taxes to benefits is lower) but does not recognise that a large proportion of those infrastructure costs are directly attributable to the migrants, not to the native-born people. That is, the public cost of population growth (whether through migration or natural increase) is around 1.7% of GDP per one per cent population growth, and this spending should be rightly attributed to the added people, not as a ‘per capita allocation of collectively-accrued items’. Those who are already there have plenty of roads, sewers, hospitals and schools already, but for the crowding caused by adding more people.

Then it is admitted that, in countries which have had migrants for long enough for their age profiles to be similar to native born people, “the fiscal position of immigrants is generally less favourable”. So it is only because immigrant populations tend to have a younger age profile that there is any claim to a positive balance sheet at all. The claimed benefit to be gained by raising immigrant employment levels to those of the native-born affirms that immigrants are more likely to be unemployed. Why is it implied that the onus on nations is to employ them (inevitably at the expense of employment of native-born people) instead of not accepting them?

In the second chart on p 3, it is baffling to me why a major drop in natural increase has been projected. Recent UN assessments say that fertility rates in developed countries have risen rather more than previously anticipated. Is this a fabrication to give the impression that migration will soon be the only thing keeping our heads above water?

The impact on aggregate GDP is presented as a legitimate goal, while the importance of per capita GDP is brushed aside. Immigration merely delinks GDP growth from wealth growth.

Any number of studies are available to show that current migration flows have very little effect on ageing. Given their lower workforce participation (actual employment, excluding the unemployed), there is no evidence that they improve dependence ratios. Indeed, among the OECD nations, which vary considerably in extent of ageing, there is no trend in proportion of total population employed against demographic ageing. It is normal to see an increase in participation rates, as the oversupply of labour dwindles in stabilised populations. Your economists don’t seem to have considered that the amount of employment may be more governed by consumption demand than by labour supply.

The paper makes no mention whatever of the natural endowment of nations, and their contribution to the economy and public welfare. No account is made for diluting the natural resource base with more people.

Given that increasing neither aggregate GDP nor size of population are good things in themselves, we should consider what criteria would need to be met for immigrants to benefit a receiving society.

I offer the following criteria:

1. If immigration contributes to population increase, migrants’ economic contribution should, on average, exceed that of native-born people by an amount sufficient to cover the costs of expanding infrastructure and professional service capacity to accommodate them. This would amount to about 1.2 times the average contribution, over a thirty-five year working life.

2. Immigrants should not displace native-born people from economic opportunities, that is, they should not make it harder for anyone to find a job at their level of expertise.

3. Immigrants should not lower the conditions of employment (wages, benefits, job security) through increasing competition for jobs.

4. Immigrants should not lower the terms of trade, either through their direct demand for imports, their consumption causing diversion of domestic production from export, their remittances, or their influence on the total amount of foreign debt servicing (such as results from the inflation of property values and government debt to pay for the additional infrastructure) in excess of their contribution to additional exports. Given that exports are often based on the natural resources of the country which are limited, they would have to increase the value added to these resources in a way that native-born people are unable to achieve.

5. Immigrants, and the infrastructure supporting them, should not have any negative impact on the environment and resource base. No natural vegetation or productive agricultural land should be converted to new urban areas to accommodate them, no extra water should be diverted from natural systems, no reduction in urban air quality, no extra impacts experienced by their behaviour.

6. Immigrants should not diminish a society’s ability to move toward environmental sustainability – a move that might depend on population reduction to match declining energy availability or agricultural output in the face of climate change.

If global benefit is to be demonstrated, the following further criteria are necessary:

7. Their emigration should not reduce the availability of professional services in their home country.

8. Their move should not increase their greenhouse gas emissions.

I would welcome a policy brief from the OECD testing these criteria. I suggest that none may be met, unless immigration is merely offsetting a natural decline in population, and then only if that population is not already in ecological overshoot.

There is no doubt that migration benefits most migrants. This is an outcome of some value, but we should be able to discuss candidly how much impact on the receiving country is justified for this benefit to a tiny fraction of the disadvantaged people on the planet, and how much it may diminish the receiving country’s capacity to assist poorer countries, such as by diminishing food surpluses or by contributing to government debt constraining foreign aid.

Jane O’Sullivan

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