Immigration and Unemployment in 2014: Did they take our jobs?

There are major issues with Bob Birrell and Ernest Healy’s latest publication, Immigration and Unemployment in 2014.

The central claim (p.3):

“Net Overseas Migration (NOM) is running at some 240,000 a year. The result is that, as of May 2014, the number of overseas born persons aged 15 plus in Australia, who arrived since the beginning of 2011, was around 709,000. Most of these people are job hungry. According to the Australian Bureau of Statistics (ABS) Labour Force Survey, 380,000 of these recent arrivals were employed as of May 2014. Over the same three years, the net growth in jobs in Australia is estimated by the ABS to have been only 400,000. This means that these recent overseas born arrivals have taken almost all of the net growth in jobs over this period.” (My emphasis)

This research was picked up extensively. Birrell’s own op-ed ran in Fairfax papers. Fairfax picked it up as a story, including it in a series on Thursday called “Broken Borders”. Business Spectator ran Callum Pickering. MacroBusiness ran Leith Van Onselen. All of these articles and op-eds focused exclusively on the theme of Australian’s missing out on jobs being created in the last three years. MacroBusiness even ran the title “Migrants take 95% of jobs created since 2011”.

But is it true? Have recent overseas born arrivals taken almost all of the net growth in jobs between 2011 and 2014? Have only 20,000 new jobs out of 400,000 since 2011 have been filled by Australians?

This is highly unlikely.

By conflating the number of recent overseas arrivals with the net growth in jobs, the authors are comparing apples with oranges. By using the gross number of migrant arrivals, they are excluding a key variable: overseas departures. Using the net employment figure while dismissing parts of the labour market which make it a “net” figure leads to some confusion.

To explain. Migrants come, many stay and work. However some leave the workforce also. This has an impact on employment but is hidden from the net employment growth figures Birrell and Healy source their research on, if the migrant who departs is replaced by another worker.

A basic example:

There are three jobs at a firm. Each person is a migrant. They quit their jobs and leave the country. Another three migrants are hired who move to Australia.

We have three new arrivals working in the labour market but as the firm has the same number of jobs available, no change appears in the net employment figure.

This has been understood for sometime. Some of Australia’s best migration researchers – such as Graeme Hugo – have worked extensively since the 1970s on how circular migration has evolved over time. Circular migration means people come and go as opposed to settle in one place. Labour market churn coupled with circular migration mean figures based only on arrival numbers are misleading.

Using this Birrell and Healy methodology, we do not know one way or the other how many recently arrived migrants ended up in newly created jobs for the period 2011-14. We don’t have enough information about the labour market or migration trends. It is possible newly arrived migrants accounted for 380,000 of the 400,000 created jobs from 2011-14 but it could also be any number from 0 to 399,999. The point is: we don’t know from this analysis. The authors certainty is misplaced and damaging.

So what is a more appropriate figure for these types of questions?

DIBP provide good forecasts of overseas departures to key into assumptions and estimates. Looking at a detailed breakdown of the Net Overseas Migration figures (table 3) we can conservatively estimate about 50 per cent of new arrivals are offset by new departures.

Using this NOM data and using the same figures as Birrell and Healy, 380,000 migrants are employed who arrived between 2011 and 2014. However we also assume 190,000 people departed Australia in the same time who were in employment. By using the net migration figure (arrivals minus departures) – 190,000 – for the 2011 and 2014 period, we have a better understanding of potentially how many migrants filled newly created employment positions.

This leaves us with approximately 190,000 net migrants filling about half of the 400,000 net employment growth for 2011-2014. Is this high? For comparison, this migration contribution to the net jobs figure is actually less than the net migration contribution to our rising population, which runs at about 60 per cent migration to 40 per cent natural increase (births minus deaths).

Perhaps we don’t have enough migrants in the labour market?

However I’d like to issue a note of caution regarding this entire methodology. Birrell and Healy themselves are aware of the key flaw in this methodology when they state (p.8):

“DIBP cannot provide data on the labour market participation of the people added to Australia’s population each year. Thus, it is not possible to identify precisely the contribution of NOM to the growth in the labour force shown in Table 1.”

“It is not possible to identify precisely the contribution of NOM to the growth in the labour force shown in Table 1”. By itself, this is a pretty damning statement against their own research findings. Unfortunately this was not noted in any of the publicity the research received.

As I said, I find this research misleading. From experience, the authors know a report like this will reach a broad audience, many of whom are more worried about daily life than they were previously (despite rising prosperity). Their message provides a simple answer to the wrong question: The government is at fault because there are too many migrants in the labour market.

In fact, this is likely not the case at all. Bob Birrell knows about how net migration operates and should have done better to justify these claims. Mistakes have been made in immigration policy – particularly in student policy which Birrell helped document – but debates over the labour market where passions run high should be argued on evidence grounded in rigorous analysis, not numbers thrown together in haste.

A deep and growing global research agenda shows the impact of immigration on the domestic population is either neutral or benignly positive. This is especially the case when discussing skilled migration for a developed country. Simultaneously, the benefits for the migrants themselves and often the countries they come from is large and significant.

Work such as Birrell and Healy’s research crowds out space for the questions we should be asking on immigration policy. How does this global agenda relate to Australia? Should immigration be used to reduce inequality? What role can immigration play in global development?

The authors use this research to push a singular, particular message: to limit further immigration to Australia. Sadly, it appears to have been taken on face value and pushed through the media cycle without question lending credence to this message. This feeds into the public discourse about immigration as something to fear. There are reasons to have a debate about immigration and Australia’s population but researchers have an obligation to present their best attempt to explain what is going on and then move onto policy preferences.

A more thorough analysis and the headline could have read: “We don’t know. But highly unlikely migrants are filling 95 per cent of new jobs.”

(This is my 200th post. Thanks to those who have provided feedback, commented and/or shared content. I appreciate it and I hope you enjoy reading.)

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