Productivity Commission: Big increases to temporary migration, little tracking of effects

A new report has found that New Zealand’s rapidly expanding temporary and seasonal migrant programmes provide no obvious productivity boost either to the firms which employ them or to the horticultural sector generally.

The NZIER report suggested (from what they describe as limited available information) that Recognised Seasonal Employer scheme workers in particular are more productive than New Zealand contract labour and backpackers. But they said this productivity gain is “short term”.

The authors – Peter Wilson and Julia Fry – found no conclusive evidence that the greater productivity of some individual workers translates into more systematic long-term productivity gains, which are driven by catalysts like greater capital investment and automation.

The number of temporary workers in the country since the early 2000s has increased hugely, through the RSE scheme which brings in seasonal workers mainly from the Pacific Islands, and through working holiday visas for backpackers and international student visas. As a whole, these workers are typically both low cost and low skill.

In the peak year, 2017, close to a quarter of a million people in New Zealand were on one of these visas (numbers are much diminished since the start of the Covid-19 pandemic).

When the RSE scheme, which targets horticultural work, began in 2007, the number of seasonal visas available was 5000. Before Covid-19, the number had risen to 14,400.

Report co-author and economist Julie Fry said it is “extraordinary” that New Zealand has made such large changes to temporary migration policy without better information gathering and research to understand its effects.

“Many questions about the relative costs and benefits and dynamic impacts of temporary and seasonal migration on local workers and automation cannot be definitively answered based on the information currently available, and will require additional research,” the report concluded.

The Productivity Commission (an independent Crown Corporation) commissioned the work, ‘Picking cherries. Evidence on the effects of temporary and seasonal migrants on the New Zealand Economy’, and is searching for ways to boost the country’s lagging productivity growth. Increased productivity is the achievement of greater output for work, which raises per capita GDP and overall living standards.

It is distinct from an increase in overall business size; large increases in horticultural cultivation and harvests are clear in recent decades.

New Zealand’s per person income is stuck at roughly 70 per cent of that enjoyed by countries in the top half of the OECD. This lacklustre showing has endured through governments of all stripes for over 25 years, despite the relatively long hours worked in New Zealand.

Fry also has particular concerns for visa holders on the RSE scheme. While the programme remains highly thought of as an aid programme to the Pacific Islands – providing both skills development opportunities to visa holders and significant remittances to home countries – Fry said it may have become unbalanced.

“If I was the minister and I was receiving this, one of the things I would want to look at is whether we have the balance of the value of the programme split fairly between the employers and the employees,” Fry said.

“The employers really do get a lot of value out of the RSE workers and the way the scheme is designed, part of that is because the workers have very few choices, not just at home but within New Zealand. So compared to say a New Zealand-born worker of any ethnicity or a New Zealand-born worker of Pacific ethnicity, someone who comes in under the RSE scheme can work for one or a very small number of RSE employers and that’s it.”

Fry noted a variety of factors that prevent RSE workers from seeking wages that match their true productivity in New Zealand. These range from their visa’s restrictive terms (if they were granted general work visas they would likely command higher wages) to their ties to officials in their home countries who fear “trouble-making” will damage access to the scheme.

She said at least some displacement by RSEs of New Zealand workers likely occurs, especially for groups like the young and beneficiaries, though possibly only in rural areas.

Before Covid-19, the RSE scheme supplied roughly 16 per cent of horticultural workers, including those in viticulture.

Other migrants (backpackers and international students) supplied 29 per cent of the labour, some 55 per cent of workers in the sector were New Zealanders.

The report arrives as New Zealand migration policy-making finds itself at a crossroads since the borders have been largely closed to new arrivals for more than a year. Fewer than half the originally expected number of RSE workers are in the country this year. The fraction of international students and backpackers remaining is even smaller.

Before the pandemic, some 14,500 RSEs were expected to work over the period in horticulture. And a chronic labour shortage in the sector through the now concluding harvest season has resulted in up to $1b of unpicked fruit according to apple growers alone.

However, the Government has been lukewarm in its assurances to the horticultural sector that RSE numbers will return to previous levels any time soon.

Last month, Immigration Minister Kris Faafoi said he has regular discussions with industry representatives around workforce needs, including planning for the 2021/22 season.

“Those discussions include how the sector is working to attract, train and retain domestic workers for future seasons,” Faafoi said.

He noted, however, that “once Covid border and MIQ restrictions are no longer needed, the Government has indicated scheme numbers can return to normal annual intakes, if needed.”

The Productivity Commission has recommended the Government reduce large inflows of migrant workers and help the horticultural sector transition away from its reliance on this labour.

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