The NZ Initiative's Eric Crampton says it is a massive mistake to point to unemployment figures and blame immigrants for what unemployment is still out there

By Eric Crampton*

You already know about Schrödinger’s Cat: the imaginary cat trapped in a box with a device that may, or may not, have already killed the cat. The cat is then simultaneously dead and alive, from the position of someone outside of the box.

You might not know about Schrödinger’s immigrant. That immigrant is simultaneously stealing your job while mooching off the welfare system.

While the cat inside the box is definitely either dead or alive, it turns out that Schrödinger’s immigrant doesn’t exist in New Zealand in either form. We know that immigrants are far less likely to be on benefits than are people born in New Zealand. But the latest employment figures also give lie to the other variant: it looks like immigrants are creating jobs rather than taking them.

The latest Household Labour Force Survey showed employment growth that can only be described as shockingly strong. More working-aged people have moved into employment over the past three years than have entered the working-age population. It is consequently a massive mistake to point to unemployment figures and blame immigrants for what unemployment is still out there.

Let’s walk it through.

The chart below has the latest Household Labour Force Survey data. The green line tells you how many people aged 15 to 64 live in New Zealand. The rapid rise over the past few years has been driven by strong immigration.

If the economy could only generate some fixed number of jobs, then the rise in the working age population would be matched by an increase either in the number of people reporting that they are not in the labour force, or reporting that they are unemployed.

But that is hardly what the data shows.

Immigration has been especially strong since 2013. From 2013 to 2017, New Zealand gained just under 200,000 working-age people – almost a 7% increase in the working age population. And almost sixty thousand fewer people report that they are not in the labour force. That represents a very large increase in the number of people reporting ready for work.

And the job market has expanded to take all of them – and then some. Employment has grown by 272,000 people and the number unemployed has dropped by more than 13,000.

Just over 76% of all people aged 15-64 are in employment and just over 80% count themselves as being in the labour force. Both of those numbers are staggering. New Zealand’s consistent employment data goes back to 1987. The average employment rate, since 1987, has been 71%. And, before this year, it never exceeded 75%.

It is also incredibly strong when compared internationally. The most recent OECD data had only four countries with higher labour force participation than New Zealand, and only two with higher employment rates.

But even those figures understate things.

Every year since 2013 has had more than 60,000 net permanent and long-term immigrants arriving in New Zealand. Most work visas require migrants to have a job-in-hand, but some will bring spouses who will also be looking for work.

At the same time, the government has been more strongly expecting beneficiaries to work. A single mother on a benefit is required to be looking for work from the time her dependent child reaches the age of five. If she had her most recent child while receiving a benefit, she must be ready for work by the child’s first birthday.

Many beneficiaries strongly want to move into employment. But it is also likely that at least some are only looking for work because their case manager demands it. All of them would report that they are looking for work, whether or not they are making a serious effort to become employed. That would increase reported unemployment. This means that people who did not used to count as unemployed because they were not looking for work now count as unemployed, whether or not their job search efforts are particularly strong.

And despite all of that – the increase in people coming in from abroad, and the increase in the number of people being encouraged into the labour market and away from benefits – the number of people reporting that they are unemployed has dropped since 2013. While it is true that the unemployment rate looks middling in international comparison, New Zealand’s 4.9% unemployment rate is categorically different from America’s 4.5%. America has had strong declines in labour force participation. There, discouraged workers gave up and left the labour force; here, they are being drawn into the labour force. America’s employment rate is consequently 69.8% – well behind New Zealand 76.1%.

What about underemployment?

Statistics New Zealand’s Infoshare only reports data on that from 2005 onwards, so we can’t report on trends before then. The underemployment rate – the proportion of people who say that they would like to be working more hours, regardless of whether they are actively seeking more work, hovered around 3% before 2009 and has hovered around 4% since 2009. But if we only count those who are actively seeking more work, the underemployment rate is a titch over 2.5% – and has been slowly declining since 2010.

Again, it is hard to blame migrants for underemployment if the proportion of workers saying they are actively seeking more hours has declined as migration has surged, and the number of people so-reporting has been basically flat since 2014.

And, indeed, the IMF last week reported that migration has had a positive economic impact, with output increasing by 1.5% to 2% for every percent increase in population from net migration.

Not everything is roses. Employment expands with migration because businesses do not need government permission to create new jobs. But government doesn’t exactly make it easy for new housing to be built, and so strong migration has exacerbated Auckland’s housing mess.

Were government ever to sort out its broken land use planning and infrastructure financing, perhaps some of the construction workers who moved to New Zealand to help rebuild Christchurch could be encouraged to come back to help sort out Auckland. The next Schrödinger’s immigrant might then not just be bidding against you at the house auction – she could be building dozens of new houses at the same time.

The Initiative’s report on immigration, The New New Zealanders, was released earlier this year.


*Eric Crampton is the head of research at The New Zealand Initiative, which writes a fortnightly column for interest.co.nz.