The reason I’m so willing to let them is that industries that are given the title ‘absolute skill shortage’ are industries where wages have risen quickly and our own labour market hasn’t responded. In this case there is some high value underlying work that is not being performed.

Furthermore, New Zealand does not have a comparative advantage at producing some forms of skilled labour. As a result, it will be more efficient for us to bring the skilled labour in then invest resources training them ourselves.

The ultimate measure is whether the worker produces more than they consume. If they produce more then they consume then there is some surplus to throw around the economy. If all skilled migration was based on that measure, it would be super.

I see with the open border argument you are saying that the fall wages in developed countries would lead to crazy political and social ramifications. You’re right. That is why individual governments do not want to open up there borders.

However, I get annoyed when people from the far left say they hate globalisation, they want higher wages, and they feel sorry for the poor overseas. They don’t seem to understand the tradeoffs associated with economic policy. We have to make a choice, if we want to bring in more of the poor from overseas, we have to accept that some wages will be put under pressure.

Still there might be some value in making a job offer in export industry more valuable than a non-export industry in the skilled migrant selection process (although isn’t this in effect an export subsidy?).

Open borders really deserves a post of its own, if only to rile up the wingnuts. I think the basic gains from trade argument holds up – both natives and migrants would be slightly better off. Realistically though, western societies would find the extreme poverty most of the migrants would end up in intolerable (maybe even utility reducing in net terms), even if the migrants themselves would be better off than in their home country.

It makes me laugh that people criticise globalisation, when we haven’t really tried it. True globablisation would have free borders for workers.

Our current pool of skilled migrants all come in based on the fact that they can satisfy absolute skill shortages, as long as we stick to that criteria, an increase in immigration could be useful for the economy. As long as the migrants are entering industries where their input is strongly needed and they are relatively productive then I don’t see any problem. Productive migrants will produce more than they consume, and it will benefit all of us, especially as there doesn’t seem to be anyone in NZ both able and willing to do some of these jobs.

I fully accept your point that a labour shortage across all occupations is relatively meaningless. However, as we are a small open economy we have a significant export industry, where the demand for labour depends on world, not domestic demand. World growth is running more strongly than domestic growth, and as a result there are long-term problems in staffing some of our export firms.

But the idea of labour shortages across all occupations is meaningless IMHO. It just implies that aggregate demand exceeds aggregate supply, and there is no fix for this problem (except presumably to reduce aggregate demand via monetary policy).

You can try to import more workers to attack the problem from the supply side, but unless they have higher savings rates than natives you won’t correct the underlying imbalance (and the conventional wisdom is that they worsen the problem due to high expenses as they establish households). Will be interesting to hear your take on this though Matt.

Of course, importing high-skill workers, where possible, seems like an excellent strategy for long-term growth, but I’m not convinced that in the short-term it is a fix for the problem of an over-heated economy.