Matthew Hooton: The Method in the Labor Migration Makeover

OPINION:

From the same people who brought you KiwiBuild and the elimination of child poverty comes a new promise, this time from hundreds of new angel investors from overseas to help you grow your
small business into a bigger one.

Economic Development Minister Stuart Nash and Immigration Minister Michael Wood said changes to investor visa rules this week will attract high-value, experienced investors to provide growth opportunities to a city near you.

It will no longer be enough for new migrants to buy permanent residence by spending $10 million on a house in Parnell, a few Meridian stocks and a few government bonds.

Instead, Nash and Wood halved the investment threshold to $5 million, but only for migrants who speak passable English, are willing to be here for at least a month each year, and want to invest directly. and get actively involved in Kiwi start-ups. or SME.

Passive investments in real estate, bonds or stocks will not count.

In a move, the Beehive says it sees immigration as more of a matter of economic development than border security, decisions on eligible companies will be made by NZ Trade and Enterprise, which reports to Nash and the Minister for Trade Damien O’Connor, rather than by immigration officials.

For its part, NZTE says it already employs dozens of investment managers who are expected to help overseas investors identify high-value investment opportunities here and connect Kiwi businesses with their capital, knowledge and expertise. networks.

Companies already on NZTE’s books will be pre-approved for migrant investors, with others eligible to apply.

For risk-averse migrants as angel investors or venture capitalists, Nash and Wood raised the threshold to $15 million, but with a twist.

These migrants will be able to meet the new $15 million rule by buying $7.5 million worth of Meridian stock and donating $7.5 million to Auckland Art Gallery, with Nash following John Key in wanting to start a culture of North American philanthropy. American in New Zealand, hopefully with more success. .

The changes were almost universally condemned.

On the right, the message is that excluding homes, stocks and bonds from the $5m rule will deter high-value migrants from New Zealand, costing billions of dollars in foreign direct investment.

National rising star Erica Stanford cites work from the Productivity Commission and Labour’s favorite economic consultancy Berl, which suggests that migrants who initially make passive investments to gain residency subsequently invest two to three times over more in active investments.

Stanford accuses the government of ignoring Berl’s work, although it was commissioned by no less than Immigration New Zealand.

Meanwhile, Act’s James McDowall wants all professions on Labour’s ‘green list’ to have a fast track to residency. In practice, all suitably qualified doctors, nurses, plumbers, electricians and operations managers would join the more limited range of professionals eligible for fast-track to live here permanently.

On the left, Ricardo Menéndez March of the Greens accuses Labor of allowing the wealthy to continue paying for their place in the residency while leaving low-wage foreign workers on precarious, temporary visas.

It recommends that investors obtain a three-year provisional visa, with residency confirmed at the end of that period only if a government audit confirms that their money has been invested in projects that meet criteria of viability, sustainability, opportunity and respect for human rights.

Te Pāti Māori’s dominant position is that there has been enough immigration since whalers, sealers and missionaries began arriving in the late 1700s.

From where these parties stand, it all makes sense.

But the new rules are also in line with Labour’s strategy of reducing demand for existing New Zealand assets, particularly residential property, and pressuring businesses to invest in technology and training by reducing the supply of cheap labour.

As Bill English, Steven Joyce, Nicola Willis or David Seymour will never tire of telling you, orthodox economists argue that productivity gains drive and should lead wage increases.

They say that improving productivity generates surpluses that workers, management and shareholders can share through negotiation.

Raising wages before productivity only increases unemployment and reduces output.

By contrast, Nash, Wood and Finance Minister Grant Robertson hold a heterodox view that the reverse is true.

If the minimum wage is increased, cheap foreign labor restricted and unions empowered to negotiate higher wages, they say companies will have no choice but to invest, invent and develop. Adopt new technologies to reduce average costs and increase output, making every worker and the economy more productive.

They accept that this means some businesses will go bankrupt, untrained and untrained workers will lose their jobs and short-term unemployment could rise. But they deny that these effects are as significant as orthodoxy claims, even in the short term, and argue that the costs will be far outweighed by the medium- and long-term benefits.

The Beehive claims that the polytechnic’s centralized management will ensure that there are retraining opportunities available locally for anyone who is unemployed.

Forcing this transition when the labor market is already under pressure, and while tightening immigration rules, makes it much more difficult for companies in the short term. But, like Labor brutally forcing farmers to live without subsidies in the mid-1980s, better do it quickly.

It is also politically safer for a Labor government to try to force the transition when unemployment is so low.

The government is also betting that forcing migrants to invest in projects that increase capacity, rather than simply increasing demand for existing assets, will help the economy through the current phase of monetary tightening more quickly.

Hopefully by this time next year, she hopes prices will have stabilized, wages will rise, interest rates will fall and unemployment will remain well below historical averages.

That would set Labor up perfectly for a third election victory.

Conversely, if orthodox economics is right and the heterodox view is wildly optimistic, then the minimum wage will rise and Nash and Wood’s new immigration rules will prolong the recession and Labor will be toast.

Here’s the good news: On this issue at least, our two main parties are proposing policy based on competing economic models rather than converging where the focus groups lead them.

Whatever happens, we should know by election day the answer to this important but so far unresolved old dispute between labor market economists.

The answer will determine whether Labor leads us into a lovely new world where artificially rising wages deliver higher productivity – or whether we should do it the old-fashioned way under National, working smarter and producing more with less, so that employees can benefit from the higher sustainable incomes promised by both parties.

Place your bets.

– Matthew Hooton is a public relations consultant based in Auckland.