Monthly Archives: February 2018
Australia should cut its immigration intake, according to Tony Abbott in a recent speech at the Sydney Institute. Abbott explicitly cites economic theory in his arguments: “It’s a basic law of economics that increasing the supply of labour depresses wages; and that increasing demand for housing boosts price.”
But this economic analysis is too basic. Yes, supply matters. But so does demand.
While migration has increased labour supply, it has done so primarily in sectors where firms were starved of labour, and at a time of broad economic growth.
Immigration has put pressure on infrastructure, but our problems are more a function of governments failing to upgrade and expand infrastructure, even as migrants pay taxes.
And while migrants do live in houses, the federal government’s fondness for stoking demand and the inactivity of state governments in increasing supply are the real issues affecting affordability.
The economy isn’t a fixed pie
Let’s take Abbott’s claims about immigration one by one, starting with wages.
It’s true that if you increase labour supply that, holding other factors that affect wages constant, wages will decline. However, those other factors are rarely constant.
Notably, if the demand for labour is increasing by more than supply (including new migrants), then wages will rise.
This is a big part of the story when it comes to the relationship between wages and migration in Australia. Large migrant numbers have been an almost constant feature of Australia’s economy since the end of the second world war, if not earlier.
But these migrants typically arrived in the midst of economic growth and rising demand for labour. This is particularly true in recent decades, when we have had one of the longest periods of unbroken growth in the history of the developed world.
In our study of the Australian labour market, we found no relationship between immigration rates and poor outcomes for incumbent Australian workers in terms of wages or jobs.
Australia uses a point system for migration that targets skilled migrants in areas of high labour demand. Business is suffering in these areas. Migrants into these sectors don’t take jobs from anybody else because they are meeting previously unmet demand.
These migrants receive a higher wage than they would in their place of origin, and they allow their new employers to reduce costs. This ultimately leads to lower prices for consumers. Just about everybody benefits.
There’s an idea called the “lump of labour fallacy”, which holds that there is a certain amount of work to be done in an economy, and if you bring in more labour it will increase competition for those jobs.
But migrants also bring capital, investing in houses, appliances, businesses, education and many other things. This increases economic activity and the number of jobs available.
Furthermore, innovation has been shown to be strongly linked to immigration. In the United States, for instance, immigrants apply for patents at twice the rate of non-immigrants. And a large number of studies show that immigrants are over-represented in patents, patent impact and innovative activity in a wide range of countries.
We don’t entirely know why this is. It could be that innovative countries attract migrants, or it could be than migrants help innovation. It’s likely that the effect goes both ways and is a strong argument against curtailing immigration.
Abbott’s comments are more reasonable in the case of housing affordability because here all other things really are held constant. Specifically, studies show that housing demand is overheated in part by federal government policies (negative gearing and capital gains tax exemptions, for instance) and state governments not doing enough to increase supply.
Governments have responded to high housing prices by further stoking demand, suggesting that people dip into their superannuation, for instance.
In the wake of Abbott’s speech there has been speculation that our current immigration numbers could exacerbate the pressures of automation, artificial intelligence and other labour-saving innovations.
But our understanding of these forces is nascent at best. In previous instances of major technological disruption, like the industrial revolution, the long-run effects on employment were negligible. When ATMs debuted, for example, many bank tellers lost their jobs. But the cost of branches also declined, new branches opened and total employment did not decline.
In his speech, Abbott said that the government needs policies that are principled, practical and popular. What would be popular is if governments across the country could fix our myriad policy problems. Abbott identified some of the big ones – wages, infrastructure and housing affordability.
What would be practical is to identify the causes of these problems and address these directly. Immigration is certainly not a major cause. It would be principled to undertake evidence-based analysis regarding what the causes are and how to address them.
A lot of that has already been done, notably by the Grattan Institute. What remains is for governments to do the politically difficult work of facing the facts.
Robert Breunig, Professor of Economics, Crawford School of Public Policy, Australian National University and Mark Fabian, Postgraduate student, Australian National University
We must conceal the identities of the donkeys!
This story, from the Daily Post of Wales (h/t Matthew), wouldn’t give you much pause just from the headline. Yes, a guy was caught smuggling equids from Ireland to Leeds, but that’s sort of. . . ho-hum. It’s the photos, or rather one photo, that make this story. Click on the headline to see the tale of the donkey + horse smuggler:
A summary from the Post:
A donkey smuggler has been sentenced for trying to bring the animals into Wales without the proper paperwork.
John Peter Luke Wilcock admitted five charges brought against him by Anglesey council when he appeared at Caernarfon magistrates court.
Delyth Crisp, prosecuting, said the 37-year-old, of Dens Green, Bradford, was driving an animal transporter but was stopped at Holyhead Port in May.
Officials were concerned and, upon inspection, found 12 donkeys and a horse in the vehicle.
. . . Wilcock was also ordered…
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A recent article reveals how perverse is the trendy pattern of virtue signaling. Ron Ross observes examples of this growing substitute for ethical behavior, adding perspective and raising concerns. His essay at the American Spectator is The Power and Prevalence of Virtue Signaling Excerpts below with my headings, bolds and images.
Puzzling Events Explained by Virtue signaling
One key to understanding much of the bewildering behavior we see around us is to recognize the power and popularity of “virtue signaling.” Keeping virtue signaling in mind will help you understand a lot of behavior that otherwise makes no sense.
What, for example, is the point of removing Confederate statues or attempting to disown the country’s Founding Fathers because some were slave owners? It makes sense if your objective is to be sanctimonious. You make yourself feel better by looking down your nose at Thomas Jefferson.
Virtue signaling is the modern…
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From Matthew we get a tweet of an albino bat. It sure sticks out from the other bats, and I hope it will be okay.
This is a true mutant, unlike my favorite bat, the Honduran white bat (Ectoyphylla alba), which lives in the tropics and makes nests for itself by folding together Heloconia leaves. As far as I know it’s the only species of white bat on Earth. When I was in Costa Rica in the early seventies, doing a graduate course in tropical ecology, I went on a night walk and we found one of these bats in a leaf. We also mist-netted one, which I got to hold in my (gloved) hand. I…
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When I woke up this morning there was one notice of how the Perpetually Offended were acting, and then it multiplied through today, so now I have four instances and no time to write about them. I’ll just give brief notices about these four episodes, which combine to show that people are looking for any reason to call other people out. It’s sad that forgiveness can’t obtain in innocuous cases like these.
First up, actress Jennifer Lawrence, who wore a revealing dress at a photoshoot in the cold. Apparently she was publicizing her new movie, “The Red Sparrow” Here it is:
It’s a lovely dress on a lovely woman. So what’s the beef? The beef is that it was cold and she had her picture taken with men who wore coats against the cold. That has to be sexist, either on her part (objectifying herself), theirs (refusal to give…
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War is an ugly thing, but not the ugliest of things, the decayed and degraded state of moral and patriotic feeling which thinks nothing worth a war, is worse. When a people are used as mere human instruments for firing cannon or thrusting bayonets, in the service and for the selfish purposes of a master, such war degrades a people. A war to protect other human beings against tyrannical injustice; a war to give victory to their own ideas of right and good, and which is their own war, carried on for an honest purpose by their free choice—is often the means of their regeneration. A man who has nothing which he is willing to fight for, nothing which he cares more about than he does about his personal safety, is a miserable creature who has no chance of being free, unless made and kept so by the exertions of…
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The “President” tweeted this today:
All religions? Who is he kidding? Graham was an anti-Semite, and why would the Jews miss him? Given that he thought all non-Christians—and those Christians who didn’t accept Jesus Christ as their savior—would go to hell, why would any non-Christian miss him? Trump could have been laudatory without that ridiculous statement.
Reader Brian called my attention to a beautiful collection of sea slugs (nudibranchs, or shell-less marine gastropods) at EarthTouch News Network. It’s likely, but not certain, that the striking appearance of many species, as you see here, are aposematic: they advertise the fact that they’re toxic, distasteful, or dangerous (stinging cells) with their easily-recognized patterns and colors.
These marine jewels all come from one small area. As the site notes:
Take a dive in the waters surrounding Pulau Hantu, a small island off the west coast of Singapore, and you may reemerge feeling unimpressed. Visibility around the island rarely tops three to four metres, and plentiful algae tints the water a vivid green. For macro photographers like Katherine Lu, however, Hantu is a hidden gem. The island harbours a little-known reef that’s teeming with tiny marine life – and among its most remarkable inhabitants are the local sea slugs.
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