Tuesday, November 22, 2016

A harmful subsidy

Our government subsidises bad employers by giving them easy access to cheap migrant labour, allowing them to escape the market requirement to pay more to attract workers. But this isn't just bad for the workers effectively replaced in this way - its also terrible for the economy in the long term, because it discourages investment:

While New Zealand's light labour market regulation assists people to move from one job to another and helps keep unemployment low, this regulatory environment is also discouraging firms from investing in developing their existing and future workers, [a Treasury] report suggests.

"Further work is required to understand how regulatory flexibility impacts New Zealand's ability to sustain and build both human and social capital, particularly as the nature of work continues to evolve.

"A key part of this response is encouraging employers to take responsibility for workforce planning rather than relying on migrant labour alone," the report says. "This approach to immigration provides employment opportunities for domestic workers, with higher wages or improved working conditions where appropriate, and incentivises greater capital intensity, innovation and productivity."

Basicly, employers don't need to invest in training people, or in productivity-improving capital investment, because they can just hire someone from overseas. Which looks great in the short-term, but if allowed to continue means you end up with a low-skill, low-wage economy with out-of-date business infrastructure. You know, sortof like the one we've had since 1990 when National started this whole low wages kick.

If we want to end this negative cycle, we need to raise wages and make it harder to just import workers. That's difficult to do in a country which values diversity and freedom of movement like we do, but requiring skill shortages to be genuine and cracking down on industries, like farming, which use immigrants because kiwis won't tolerate their poor working conditions would seem to be a good start.