Australian economists on low-skilled migration

Yesterday, Fairfax papers had a front page story about possible immigration fraud. I wrote about it here but the more I think about it, the more uneasy I feel. Compounding this, sneaking into the back of the paper was an op-ed by Bob Birrell, linking unemployment and immigration and calling for a general reduction in the number of migrants who come to Australia. I’ll have a response to this next week sometime.

Today, I want to discuss the contrast between what this coverage typifies – a public fear of more migrants – and how some economists see the impacts of immigration. While we have come to trust economists in most things (the GFC might have set this back a bit), on immigration, this is not the case at all.

In the U.S. a weekly survey run by the Initiative of Global Markets out of the University of Chicago asked a panel of over 45 prominent economists about low-skilled immigration. The general consensus view on low-skilled immigration in the U.S.? More low-skilled immigration would benefit the average worker in the U.S. but harm low-skilled U.S. workers.

Here are the results:

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(Source: IGM Economic Experts Panel)

I thought it’d be neat to replicate this with an Australian perspective. Looking for a decent response, I made a list of economists and emailed about 60 people. Unfortunately, I radically underestimated the amount of emails required for a decent sample and only received a handful of replies.

Instead of doing a statistical analysis as above, I thought I’d highlight the responses I did receive (and update over time if more come in) [note: some editing occurred].

The questions are the same as above except modified for Australia:

Question A) The average Australian citizen would be better off if a large number of low-skilled foreign workers were legally allowed to enter Australia each year.

Question B) Unless they were compensated by others, many low-skilled Australian workers would be substantially worse off if a large number of low-skilled foreign workers were legally allowed to enter Australia each year.

Jane Golley (ANU):

Question A: Agree, 9/10

Question B: Disagree, 6/10

I’m confident about my answer to A, but B is harder to answer – surely it depends on how tight the labour market is at the time, whether new immigrants spend money and create new jobs, how you define ‘low skilled’, how flexible low skilled workers are at moving between jobs, and what you mean by ‘many’ and ‘substantially’, among other things!

Warwick McKibbin (ANU):

Question A: Agree, 7/10

Question B, Uncertain, 5/10

Question A agree but the scale of the effect will depend on whether it is already educated younger workers rather than old unwell workers who enter and whether they are employable.

Joshua Gans (University of Toronto): 

Question A: Agree, 10/10

Question B: Disagree, 8/10

The most confident responder.

Paul Frijters (University of Queensland):

Question A: Disagree, 8/10

Question B: Agree, 8/10

Frijters deliberately made a distinction between the short-run of few decades and the long run of two generations. The response above is for the short-run and his response for the long-run was “no effect” for both statements.

John Quiggin (University of Queensland):

Did not provide numerical response.

on (A)
1. In my view, people now living in Australia would be better off in general if population growth were slower (for congestion, environmental, public capital expenditure reasons); but

2. What is true in aggregate, isn’t true when we consider particular cases. In all family reunion cases, and many others (including many cases of employer-sponsored migration), people already in Australia would like particular people to be allowed to come here  – to me, this concern usually outweighs the diffuse negative effects of more rapid population growth.

on (B)

Presumably if the migration intake is dominated by low-skilled workers, or by workers with some particular set of skills, Australians with the same skills (or lack of skills) will suffer from labor market competition. But I would prefer to focus on the concerns I mention in (A) in determining the intake, and on education, training and macroeconomic policy to deal with labor market impacts.”

(Note: My thanks to the above for their time and thought in responding to my email)

I can hardly lay claim to a consensus view of Australian economists with these five responses. However I think collectively they represent something a little bit different from the U.S. perspective. Whereas in the U.S. we see aggregate agreement on both statements, here we see each of the Australian economists agreeing to one statement and disagreeing to the other (or uncertain in the case of McKibbin).

I don’t want to read too much into this small sample but I found it interesting. There are distinct differences in U.S. and Australian immigration policy as well as other impact factors, such as labour market regulations, welfare design and societal concerns.

Perhaps these are non-trivial in explaining how economists of all stripes see the impacts of immigration (particularly John Quiggin’s response where qualified agreement on the first statement rested on social concerns of family). Within the Australian sample, isolating two responses, Joshua Gans and Paul Frijters, it’s fascinating to see such confident differences of opinion. I would love to be a fly on the wall listening to a discussion between those two on this topic.

Back to my main point being what I see as a disjuncture between economists and the public. Here, Paul Frijters, who is the most pessimistic of the five responses on low-skilled immigration, still doesn’t see any effect over the long-term. Other responses are more positive, at least in part.

However the Fairfax cover piece on visa fraud, the follow up op-ed and the constant public reaction against a larger population symbolise a much more skeptical public. People worry about immigrants – and not just low-skilled. It’s a fact across countries and across time-periods. They worry for economic reasons but also environmental, social and cultural reasons. To ignore this is shortsighted.

Chris Dillow points out here the need for limiting the space between how economists and the public understand issues, specifically highlighting immigration. I agree wholeheartedly but I do wonder how this will occur, if it can occur. Limiting this space should be seen as a public good. Politicians of both stripes in this country tend to agree with the economists which is why we know have a substantial net inflow of immigrants. Yet this situation is a finely balanced act with too much reliance on public disinterest. There has been little overt, sustained work to convince people of the policy fundamentals given the potential electoral backlash. This leaves a vacuum to be filled, particularly when things turn in the labour market.

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