The numbers show we're born to leave

By BRIAN FALLOW

Last week's migration figures from Statistics New Zealand make sobering reading.

Put crudely, they show the country is bleeding Kiwis as fast as it is breeding them.

Over the past five years the outflow of New Zealanders leaving for at least a year has averaged 28,000 more than the number returning after a year or more abroad.

That is almost exactly the average for natural increase in the population (births minus deaths) over the same period. But the natural increase is on a declining trend and the net outflow of New Zealanders is on a rising one.

There has been a lot of recent attention on the strength of net immigration and its impact on the housing market and economic demand.

Two or three years ago the talk was all about the brain drain, and would the last person out of New Zealand turn out the lights.

Statistics New Zealand's count of permanent and long-term (PLT) migration is based on airport arrival and departure declarations. It counts those New Zealand citizens who say they are leaving for more than a year or returning after more than a year abroad, and non-New Zealand citizens intending to stay for a year or more or leaving after that same period.

Last year there was a net inflow of 38,200, the highest ever. But over the past five years, three of which recorded a net outflow of PLT migrants, the average net inflow was 4260 people.

This number is in line with the long-term trend (a little under 5000 a year over the past 40 years) and is not nearly enough to offset the effects of an ageing population.

The statisticians think that with a net inflow of 5000 migrants, growth in the labour force will dwindle to zero within the next 20 years, which is a problem when most of the economic growth of the past 10 years can be explained by growth in the labour force rather than productivity gains.

It does little for the security of taxpayer-funded pensions.

Talk of "migrants" can be misleading if it conjures up images of 19th-century settlers: six weeks in a sailing ship and never seeing home again. These days even Britain is only two 12-hour flights away and there is a global labour market, for the highly skilled at least.

Demographer Professor Richard Bedford of Waikato University says the PLT immigration figures include not only flows of new settlers, approved for residence, but those who come to work for one, two or three years on extended work permits, and international students. While most students would be counted as short-term visitors for statistical purposes, the likes of postgraduate students are likely to be counted as PLT immigrants.

The statistical picture is further confused by the phenomenon of "category hopping".

"Given the fact that around 60 per cent of our immigrants are approved on-shore now, rather than from our residence overseas, a lot of people make the transition to permanent residence while in New Zealand," Bedford said.

They are not captured by the PLT statistics. Likewise those New Zealanders whose departure cards reflect an intention to stay overseas less than a year, but who end up staying longer, are not caught either.

Over longer periods the total net migration figures - the difference between all arrivals and departures - give a more accurate picture because genuine short-term trips are cancelled out.

During the 1990s the average net total was an inflow of about 10,000 a year.

"Over the next decade the contribution to overall population growth made by natural increase will fall unless there is a change in fertility patterns and this looks unlikely," Bedford said.

So net migration will become a more important factor in population change and the movements of New Zealanders will be a critical part of that.

The big net losses of New Zealanders seen in 2000 and 2001 are unlikely to become the regular pattern, Bedford believes.

"In the past 12 months, the net loss of New Zealanders halved over that of the previous year.

"I suspect we will see increasing levels of return migration of New Zealanders, especially if or when the war in Iraq breaks out."

Longer-term he expects to see lower levels of emigration as the population ages, because the biggest net losses of New Zealanders are among those aged between 20 and 29 years, the OE years.

Even if the net migration gain is closer to 10,000 a year than 5000, it will not be enough to offset the effects of an ageing population on the labour force.

Statistics NZ projections show we can expect slowing growth in the labour force under either scenario, to the extent that between 2021 and 2026 it turns negative. In other words the workforce will be shrinking.

The New Zealand Institute of Economic Research has looked at what that would mean for economic growth, assuming that labour productivity will grow by 1.5 per cent a year, near to its historical average.

With a net migrant inflow of 5000 a year, real gross domestic product growth would slow from an average of 2.9 per cent over the 2002 to 2007 period, to 1.6 per cent in the 2017 to 2022 period.

From 2022 on, economic growth would depend entirely on lifting labour productivity, or output per hour worked.

Increasing labour productivity implies increasing the use of capital, the NZIER says.

"Yet this would need to occur at the same time as the New Zealand population is ageing, and hence saving less."

Our traditional recourse to the savings of foreigners might get harder too, as other developed countries are in the same situation.

Turning from quantity to quality, a Treasury report on the skill profile of migrants two years ago found that it was more appropriate to talk of a brain exchange with the rest of the world than a brain drain.

Using the occupation data from airport departure and arrival cards - which is not comprehensive but represents a statistically large sample - the report concluded that immigrants are more skilled than emigrants or the general population.

"Although those departing for the rest of the world appear to be more skilled than the remaining population, we need to take into account the larger proportion of high-skilled people immigrating to New Zealand," it said.

"In fact there is some evidence recent arrivals have contained a higher proportion of people in the high-skill category than have departures."

Comparing the 1990s arrivals with those of the 1980s it seemed those coming in were more likely to be highly skilled, whereas the skills of those departing seemed unchanged.

The net impact of migration flows was small compared with other influences on population, but this was growing.

"As for the economic impacts ... the sooner immigrants can get jobs and start applying their valuable skills the better, both for the incumbent population and the immigrants themselves."