The immigration debate is heating up. There are plenty of people on both sides of the debate willing to tell people what they want to hear, but if we genuinely care about good policy then we need to start with the facts.
The fake issues
Immigration pushes up total GDP, but that is a mostly meaningless statistic that doesn’t even attempt to measure people’s quality of life. Anybody using this argument should be ignored.
It is more relevant to look at productivity, real wages, and employment. Supporters of immigration claim that migrants push up average wages and employment, but those benefits primarily go to the new migrants themselves and there’s scant evidence of a benefit for native Australians. Opponents of immigration claim that migrants push down wages and employment for native Australians, but the evidence doesn’t show that either. The mundane reality is that immigration has little net impact on the labour market.
It is also said that Australia’s low fertility rate is leading to an ageing population, and so we need to import young migrants to replace the kids that Australians aren’t having ourselves. The first part is true. The fertility rate in Australia is well below replacement rate (like most of the world) and this will lead to population ageing and eventually to population decline. However, as the government’s own Intergenerational Report makes clear, migration is not a credible solution to this issue for the simple reason that migrants will also get older. Attempting to keep our population young through immigration is like a Ponzi scheme that can only work by importing exponentially more migrants every year until the system collapses.
Winners from immigration
The biggest winner from immigration is the federal government. This benefit was highlighted by The Australian newspaper earlier this week, which used dodgy modelling to claim that stopping immigration would increase government debt by $420 billion in ten years. This is mostly because the federal government would miss out on income tax revenue from migrant workers … though notably the modelling didn’t factor in the future cost of aged care and pensions, assumed migrants would not access the NDIS or PBS, ignored the impact on state governments, and assumed no extra spending on infrastructure. Despite this sloppy modelling, it should be admitted that the federal government is a short-term beneficiary of high immigration, using the extra tax revenue to fund their extravagant spending.
The other big winners are property investors. Having more people in Australia increases the demand for housing, and since supply can’t keep pace that pushes up house prices. People living in their own homes nominally see this benefit too, though this ‘benefit’ is mostly a mirage, since the higher house price doesn’t change the quality of their home, and if they move they would be buying and selling into the same market.
Costs of immigration
Obviously, the flip side of higher house prices is that it hurts renters and young people trying to enter the housing market. Australia’s housing bubble represents a large transfer of wealth from the young and (relatively) poor to the old and (relatively) rich. The social consequences are significant but difficult to measure, with growing anger and disillusionment, housing insecurity, delayed families, runaway personal debt, and people being alienated from their community. The overheated housing market is also diverting savings from productive capital investments into speculation on the housing bubble, which contributes to our productivity problems.
The other big cost comes from congestion and overburdened infrastructure, which is struggling to keep up with a much larger population. We don’t have enough hospitals and schools, road and rail, ports and airports, parks and sports fields, police and courts, water and sewage, or energy and internet for all the extra people … which makes life worse and productivity lower. New infrastructure takes time and money, and if these extra costs are fully counted they largely offset the revenue benefit mentioned earlier. To make matters worse, the extra infrastructure projects compete for scarce construction resources, which further pushes up the costs and delays in house building.
Beyond economics
Reasonable people can debate the size of the above points, but for many people there is an additional argument that is more important. The impact of immigration on culture is often sidestepped in the public debate for fear of being called ‘racist’, but it is something we need to address head-on.
All cultures evolve over time as they add foreign or innovative ideas. That is normal and inevitable, but there is a big difference between cultural evolution and cultural replacement. The difference comes down to how many new people are added to a society each year, how different those newcomers are to our existing culture, and whether they assimilate into the host culture or remain separate.
Small numbers of migrants who are culturally similar or assimilate quickly will lead to natural evolution. Large numbers of migrants who are culturally different and don’t assimilate will fundamentally change the nature of our country … leading to social fragmentation, weaker communities, erosion of our ‘high trust’ society, alienation, ethnic tensions, and importing foreign conflicts into Australia.
For a growing percentage of Australians, this issue outweighs all of the economic arguments. Politicians would be wise to take the cultural issue seriously, skip the tired pearl-clutching about ‘racism’, and get immigration under control.
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