The new prime minister Chris Hipkins stated that he wanted to make it easier for workers to come to New Zealand especially helping those sectors experiencing significant labour shortages but didn’t want to loosen immigration settings too much.
In economic theory the impact of migration we can assume that the supply of labour will shift to the right. This increase in labour supply makes labour less scarce and therefore leads to a reduction in wages. The lower wage means the level of domestic (local workers) employed is reduced. The blue area represents what local workers receive in pay whilst the green area is the immigrant wages. This will cause a transfer of surplus from domestic employees to employers – wage loss to labour but a gain to the employer. There is also a net increase in surplus from that before immigration called ‘Immigration surplus’ – see graph. However does this really happen? The impacts of immigration on the labour market critically depend on:
- skills of immigrants, the skills of existing workers, and the characteristics of the economy
- which areas of work are they involved in – skilled / non-skilled
- immigration leads to more aggregate demand and competition for existing jobs in certain occupations but also create new jobs
- the immediate impact on wages depends on the skills that substitute or complement existing domestic workers.
- the extent to which an influx of workers to an economy increases unemployment is dependent on how domestic worker are willing to accept the new lower wages.
- if skills of immigrants are complementary to those of domestic workers, all workers experience increased productivity which can be expected to lead to a rise in the wages of existing workers.
- Immigration can also expand demand for labour as consumer demand for goods and services increases, and employers may increase production in sectors where migrant labour is used (e.g. agriculture or care sectors).
- immigration may change the mix of goods and services produced in the economy and thus the occupational and industrial structure of the labour market. An example here would be the use of technology in the production process.
- at which part of the business cycle the demand for labour occurs – downturn means slower demand.
With the immigration issue in NZ Shamubeel Eaqub, from Sense Partners, told Radio NZ Checkpoint programme:
“We kind of use it as a political tool to deal with whatever we want to at the time,”
“Currently it happens to be that it’s labour shortages, 10 years ago it was because we wanted population growth and economic growth, and I think it’s really unfair to … use immigrants as these little political chess pieces. We need to be a little bit more structured around what we want it for, that would create more certainty – both for the immigrants and for the businesses in New Zealand.”