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Tracking the Trends

Friday 28th July 2000

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Net migration
Source: Statistics new Zealand

Permanent and long-term departures
Source: Statistics New Zealand

Net migration, difficulty finding skilled labour
Source: Statistics New Zealand, NZIER

Net migration outflow continues

Last week, Statistics New Zealand released the external migration figures for June 2000. The statistics show although the net outflow of permanent and long term migrants has flattened out, there is still no real improvement in sight. A brief analysis of the trends suggests changes to immigration policy could hold the key to reversing the flow.

The annual net loss of 9760 is a slight improvement on last year's net outflow of 11,370 (see graph below). However, there was a net outflow of 6200 migrants for the June quarter, up 14% on the previous June quarter. Permanent and long-term departures exceeded arrivals by 1500 for the month of June, nearly double the losses for June 1998 and 1999.

Back in the mid-1990s, New Zealand saw a strong net inflow of migrants. But since then, the number of migrant arrivals has dropped steadily. Net migration turned negative in mid 1998 and has remained negative ever since. Although other factors were involved, part of the turnaround was attributed to changes made to the English language requirements in entry criteria.

In contrast, migrant departures have risen steadily over the last five years. This means despite a recent pick-up in arrivals numbers, it is going to take a significant turnaround to reverse the net outflow.

Not just the high flyers

Is an intensifying brain drain to blame for this rising trend? Not entirely. Breaking the figures down into occupational groups reveals similar trends across the board. The chart below shows the migrant departures classified broadly into skilled and unskilled. Skilled migrants include professionals, service and sales workers, and trades workers. Unskilled refers to those migrants citing "elementary" occupations. Unskilled migrants dominate the departures statistics. The growth in departures for this group is also more pronounced than for the skilled series.

However, this does not mean we should not be concerned by these figures. Unskilled migrants represent a higher proportion of arrivals (66%) than departures (59%). Hence the replacement rate for skilled workers is much lower. This means net losses of skilled workers are larger than the departures figures suggest (see graph above). The overall effect on the economy is a declining skill level of the remaining domestic labour force.

Wage pressures imminent?

The dissipation of skilled labour is reflected in the results of the July 2000 Quarterly Survey of Business Opinion. A net 32% of firms surveyed reported difficulty finding skilled staff, up from a net 13% at the same time last year.

The graph below plots the net migration of skilled workers against the difficulty of finding skilled labour. The massive divergence in these two series suggests shortages in skilled labour are being exacerbated by migration outflows.

Migration could therefore be adding to wage inflation pressures as employers try to attract skilled staff.

Arrivals the key to reversing trend

Despite much of the recent surge in departures being attributable to unskilled emigrants, the brain drain seems to have returned in the last few years.

Interestingly, it is the arrivals side that appears to be driving migration patterns, with the trend in departures seemingly impervious to other factors.

What this suggests is any reversal in the trend outflow will hinge on a turnaround in the arrivals side of the equation. This in turn suggests immigration policy may have an important role to play in improving labour market conditions.

Unfortunately, there are no simple solutions. Improving access and reducing barriers to entry may attract more migrants but not necessarily the skilled migrants New Zealand clearly needs.

- Compiled by Joanna Smith

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