Dr Ganesh Nana: New Zealand's productivity woes – is immigration the answer?

Immigration is not a silver-bullet solution to the country's productivity woes, writes Dr Ganesh Nana. Photo / Supplied

Opinion

OPINION:

Migrants have made an important contribution to the post-Tiriti development of Aotearoa but, despite claims to the contrary, immigration is not a silver-bullet solution to the country's productivity woes.

And nor is it the cause.

Immigration is just one piece of many that together make up the jigsaw puzzle that determines our development, productivity and wellbeing.

As a soundbite, this goes down like the proverbial. But to tackle our critical productivity and wellbeing challenges, we need to recognise the many factors and connections that form the full picture.

Let's start with the positive. Migrants bring diversity to communities and much-needed skills to the country's workplaces. Our inquiry report into Aotearoa's long-term immigration settings, Immigration: Fit for the Future, found that job creation and net migration tend to follow the same path and that, on average, immigration has a small, positive effect on the wages and employment of local workers.

Migrants contribute to New Zealand's economic growth. This is an economic growth story of hard work. It is an economy reliant on adding more people to the workforce, and by those workers (both locals and migrants) working longer hours compared with other OECD countries.

The Commission also found that migrants have small positive effects on productivity through, for example, bringing in new skills, knowledge, capital and international connections.

These findings are not unique to New Zealand – overseas studies find similar results. So yes, the impact is positive, but it is the "small" that I – and many others – find frustrating. It is why the Commission asked: what immigration settings would support productivity growth? How can we shift the "small" positive impacts to much larger positive impacts?

Critically, it is productivity growth, not economic growth that is the aspiration. Productivity growth means more clever and different stuff coming from the same effort, rather than more and more effort for more of the same.

New Zealand needs a new approach to shift the dial on productivity growth and wellbeing. Here, the other pieces of the jigsaw puzzle become relevant. Our Frontier Firms inquiry found that a key challenge is increasing our overseas earnings by growing the value of our export offerings. That means an economy-wide shift from mainly exporting commodities to creating and selling distinctive, specialised and innovative goods and services.

Welcoming an innovation eco-system that explores new means and methods of production is part of that jigsaw. Other pieces include proactive roles for government, workers and unions, Māori and iwi, businesses and entrepreneurs, investors and financiers, scientists, researchers and educators. There are already promising steps to be built on. Fisher & Paykel Healthcare has built a niche in health technology. Zespri combined existing technology with plant variety rights and savvy marketing to commercialise unique varieties of kiwifruit. Rocket Lab established the world's first private orbital launch range. These examples involve investing in research effort, new technologies and skills in areas that add more value. Such investments need to make good risk/return sense for firms.

Dr Ganesh Nana, chair of the Productivity Commission. Photo / Mark Mitchell

For immigration policy to play its part, it needs to be well connected to the other pieces of the puzzle. It needs to be connected to a responsive education and training system, reflect Te Tiriti, respond to expected population growth, attract quality foreign investment, enable the capacity and capability of Frontier and emergent firms and to develop regulations that don't curb innovation and well-informed risk-taking.

Immigration: Fit for the Future recommends an immigration Government Policy Statement (GPS) as a vehicle to ensure a well-connected immigration policy. This transparency would enable businesses and entrepreneurs, workers and unions, communities, Māori and iwi to plan investments and risk-taking accordingly. A well-formed and communicated immigration GPS would also signal the appetite and intentions of the government of the day for a dial-shifting lift in productivity and wellbeing.

It is essential to look beyond the immigration system in lifting New Zealand's persistently poor productivity performance. While Aotearoa-New Zealand is much better off economically and culturally due to migrants, immigration is only a small part of a jigsaw puzzle that only makes sense if all the pieces fit.

- Dr Ganesh Nana is chair of the Productivity Commission Te Kōmihana Whai Hua o Aotearoa.