COMMENT FROM THE CAPITAL MIGRATION: DOES IT MEAN INFLATION—OR SALVATION?

Press, Volume CIV, Issue 30764, 31 May 1965, Page 12

COMMENT FROM THE CAPITAL MIGRATION: DOES IT MEAN INFLATION—OR SALVATION?

(From Our Parliamentary Reporter) WELLINGTON, May 30. The recent difference of opinion between the Minister of Labour (Mr Shand) and the Canterbury-Westland divisional committee of ths National Party over the desirability of increasing the flow of migrant-; into New Zealand is an indication this will be one of the more controversial subjects in Parliament this session. Until comparatively recently, the desirability of migration would hardlv have been questioned outside organised Labour circles, which have seemed convinced that increasing the country’s working force reduces the worker’s bargaining-power, and so tends to depress wages and conditions. • Today, however, the Minister of Labour is on record as saying that increased immigration would be inflationary and that “if immigration were stopped for a few months, the labour situation would improve.”

Mr Shand’s remarks no doubt reflect Government policy on migration. The Government’s economic advisers can prove fairly easily that, in the short term at least, the migrant does cause inflation. This is explained by a prominent economist, in the following words: “An extra member of the labour force may be thought of as adding net to output—and notice that I emphasise net—about £lOOO a year. That is related, of course, to his earnings. But out of the national production, the capital items required on average to go with each man will be an extra several thousand pounds—in some cases £2OOO only, in many cases far more. As a result, the new immigrant makes a bigger demand on the economy to set him up in the year he starts than he contributes. “Unless he brings in an equivalent capital, he adds to our problem of setting aside from our own production, or of borrowing from abroad, more than he contributes.” This argument, which is close to the one Mr Shand used at the National Party meeting last week, is part of the thinking of a pure economist. It is the same type of thinking which enunciates another economic truism—that a society is not properly balanced economically unless it has a pool of unemployed capital at the top and a pool of unemployed labour at the bottom. Economics And Politics This second phrase, enunciated some years ago by the eminent New Zealand-born economist, Sir Douglas Copland, almost lost an Australian election. The Australian Labour people of the day marched through the streets of Sydney with banners reading: “It’s awful cool in Professor Copland’s pod!” In fact, though the validity of the “balanced” theory is unquestioned, New Zealand Governments have not practised it for many years. During that time the Labour Governments have been frankly committed to preserving full employment, and the National Governments have followed suit. It would be reasonable to argue, as many New Zealand employers are doing, that

,the “pool” of unemployed at | the bottom should be kept at least deep enough to enIsure that important jobs offering in industry are filled with reasonably competent personnel. This is why immigration has become of great importance, both here and in Australia, where the attempt is being made to boost immigration to 125,000 a year. It is a reason, also why a committee of employers is preparing submissions asking the Government for greatly increased migration based on a liberalisation of the present policy. It might explain, too, why a wide cross-section of the population, including National Party branches and the Federation of Labour, favours the same course. Short-Term Or Long? Later in his speech, Mr Shand is reported to have said he agreed that New Zealand must have a high level of immigration. Here he was, no doubt, discussing the long-term consideration where previously he had been dealing with the short. The previously-quoted economic adviser discussed the apparent contradictions in these words: “If we really tackle the problem of restraining our consumption in order to provide the extra capital needed, then we can absorb increased immigrants without overstretching the economy; but we are not doing this now with the immigrant flow we already have. “To sum up, extra Immigration adds to the demands on production (or of borrowing from overseas) more than it adds to immediate production. In times like the present it can only add to inflationary pressure, of which the present economy shows unmistakable signs.” This undoubtedly is what the Government’s advisers have pointed out—not that immigration is a "bad thing” because it is inflationary, but that in inviting increased migration we must also make provision for the additional capital which this migration will need during its “settlingdown” process. A Lead? Many manufacturers and other employers of skilled and unskilled labour have

;! realised this today. They are . somewhat puzzled, however, ■ at calls from the Government ■to expand and earn more I money from overseas while : they cannot find the labour • necessary to permit expan- ' sion. The Government Is bein’ • asked at more than one level i for a lead. A “credit squeeie” I is one way of exercising control. In a way it upsets the i economists “balanced eco- : nomy” even more, by exert- ; ing pressure on the so-called pool of unemployed capital at the top. This is a task that only the Government can do. The business-owner is anxious to : build up his own business, but I the Government alone has control of most things, including the application of capital and the production (by immigration if necessary! of sufficient labour to make expansion possible. Very soon the Government will be asked to increase migration. If it does so. it will have to provide for the temporary inflation which the arrival of new workers will bring about. But this is a more healthy course than stopping all migration for a while. To some short-sighted workmen this would be fine, for it would inevitably increase wages—until the developmental sections of our industries found they had to be curtailed because of shortage of staff. In any case, the post-war record of New Zealand Governments in assisting immigrants is far from notable. In 18 years, assisted immigrants have totalled 64,470 from the United Kingdom, 6261 from the Netherlands, and 1237 from other foreign sources—in a total of all migrants arriving of 435,122. It is now two years since the last assisted Dutch migrants landed here. In the year ended March 31 last, only 100 foreign assisted migrants entered the country. Mr Shand said that last year (the year ended March 31), New Zealand had “brought in” 35,000 migrants—a greater rate of migration than Australia was trying to achieve. The official figures show that though 35,446 migrants entered this country in the period, the number of assisted migrants—that is, the number the Government could fairly claim to have “brought in” —was only 4400. All but 100 of these came from the United Kingdom. All the others, including 12,116 from Britain, 9920 from Australia, 903 from Holland, and 2946 from other foreign countries, paid their own way. and presumably contributed some capital to the “settingup” process which, according to economists and Government spokesmen, intensifies inflation. On the “non-assist-ed” list were 332 migrants sponsored and brought in from the United Kingdom by private firms, which for some years have been carrying out their own migration programme in search of needed staff.