Lower wages are a consequence of immigration in the most standard economic models. People have tested whether wages fall much and found they don’t. But the fall in wages is the standard way gains-from-immigration are realised. Wages fall but total output increases and the value paid to other productive inputs increases.

Regarding your equating of liberal migration policies with free trade, my point is that this is a misleading comparison, because our migration policies are not liberal. You seem to be defending our current migration policy by praising the merits of an ideal that doesn’t exist.

Re lower wages, that’s refreshing you agree that’s an aim of migration. I’m accustomed to arguing with IT industry shills, including Amanda Vanstone, who dispute this. For example, Vanstone quotes average salaries that include those of doctors and senior managers, when the problem is with line professional and unskilled roles.

You refer to shortages, but some of the claimed shortages have been fraudulent.

You also claim that lower wages are good. Clearly they are not good for the people whose pay declines. If the declining pay deters students and workers from important fields, then the decline is also detrimental for the economy. Low wages don’t help African countries.

Also, what’s your view on the hypocrisy of Qantas management screaming for protection from other airlines, shortly after offshoring 400 IT jobs?

We know it is underpriced because we are depleting stocks of it - there is an excess demand for water.

Sorry Harry - this answer strikes me as a tautology, underpriced and excess demand amount to the same thing. The depleting stocks component requires a view as to how much water there should be in the dams. Clearly, that number is not 100%, nor 0%. I imagine it would be a function of the water delivery technology - so water can be easily pumped etc when dams are x% (or more) full. (I am open to correction on this point). The water restriction limits strike as being arbitrary. So JC’s point is sttill valid, without a theory of how much water there should be, we can’t say what the price should be either.

Migrants to Australia do now pay most of their costs - in the past English language teaching costs were signigficant.

I said liberal immigration policies were analogous to free trade in goods and that’s true. Its free trade in labour services rather than free trade in DVD recorders but has precisely the same gains associated with it.

These arguments that immigration is designed to drive down wages irritate me. Of course they are! That’s what a shortage is - an inability to secure labour at a low enough wage. Moreover basic immigration economics shows we get gains from immigration because wages fall. Its the reason we get gains from imported goods - their prices are lower.

1. Richard Freeman of NBER and Wolfgang Kasper of Australia’s CIS both propose that immigrants pay market value for access to their destination country, since they are the main beneficiaries of that migration.

2. One of the problems with current migration arrangements is that it’s nothing like free trade. Thus it is false to equate all migration with free trade, as Harry does. One is a complicated set of practices. The other is an ideal.

3. It is also wrong to accept that all skilled immigration addresses skill shortages. There is overwhelming evidence in IT that much so-called skilled migration had other agendas, such as reducing pay, developing dodgy labour hire businesses, and facilitating the Indian offshoring business. Core references on this are Matloff and Hira, but it’s a very big topic.

4. Much of the expansion of the 457 program in Australia was driven by labour hire businesses, and was probably modelled on the abuses in the IT sector.

Skuilled migration provides extra benefits diue to external benefits associated with having skills.

JC, water isn’t a public good. Consumption is excludable and generally rival. It is a publicly-provided private good.

We know it is underpriced because we are depleting stocks of it - there is an excess demand for water.

How does anyone know if the price of water is underpriced, or even over priced for that matter. We have no possible way of telling for a product that is treated as public good. The price mechanism has not been allowed to work. Meanwhile capacity is not allowed expand to meet demand which is hilarious if it wasn’t so tagic.

No major capacity has been added to the southern region in years yet the population and industry has grown and expanded.

We have shortages primarily because water is a public good. Period.

First, we have not been investing enough in our social and environmental infrastructure to offset the increased demands on it from our ambitious immigration policies (or at least the population boost it is generating). This is threatening productivity per hour worked and wellbeing. -

Secondly, high skill immigration is on balance positive even for unskilled workers (although free access to skilled migrants may be having a disincentive effect on employers to train their own e.g. computer programmers).

However immigration of the short-term 457 Visa kind, which includes relatively low-skilled workers, has the potential to further weaken the position of many workers relative to employers (compounding the adverse effects of out-sourcing and IR/welfare reforms). While it might benefit the migrants and their families, it is viewed by many Australians as ‘unfair’ and could create an unpredictable backlash at home.

Thirdly, everyone accepts it is creating housing problems and adding to our rental crisis. In my view, and as I outlined earlier, the social gains (from capital gains for vendors) do not outweigh the social costs by any means.

Fourthly, although some doubt that the environment effects (natural and urban) are significant, most are concerned about them.

Fifth, no one is losing any sleep over potential effects on the external account deficit.

Sixth, I sense an undercurrent of concern about the extent of cultural diversity we can absorb (the pace of entry).

Seventh, with one exception, I do not detect much concern about the morality of “plundering” skilled professionals and tradesmen from developing or emerging countries.

In short, skill-intensive immigration (although not the import of low-skilled workers) is generally a plus for the economy but it can have undesirable effects on distribution and strain our housing and public infrastructure resources and the environment.

But - and this is the final theme that comes through strongly - undesirable side-effects are generally avoidable if the right policies are pursued.

So I finish with another question: what if the solutions to the esocial and environmental effects ‒ such as greater government investment in infrastructure and low-cost housing, economic pricing of water, tax reform, more land releases, tighter regulation of employers, additional redistribution etc. ‒ are all “too politically difficult”? In those circumstances, I would opt for slower immigration.

But you are right that distributionally the effects might be unfair given that capital gains on owner-occupied housing are untaxed. And taxing these gains - whatever the intrinsic worth of the proposal - is not on. I don’t have any simple second-best policy to address this distributional concern other than just boosting transfers to low income people from general taxation.

Generally liberal immigration policies hurt labour and increase property incomes. Its an old efficiency/equity argument that in my view suggests we need to maintain moderate rates of migrant intakes and concentrate on migrants with skills.

Harry, I know you are an expert in this field and I very much appreciate your intervention - most of which I agree with. But I think we may differ on housing.

You seem to accept that high and rising immigration is creating housing problems and adding to our rental crisis. But you say that “local vendors get bigger gains than local home purchasers lose”. I suspect the former (while far more numerous) are generally well-off to start with and the gains they are making are ‘on paper’ and would not be greatly utility-enhancing to them (assuming they want to continue living in Australia). On the other hand, those who are being squeezed out of home‒ownership and currently facing soaring rents are low-income people and their losses deserve a much higher utility weight.

More importantly, there are externalities to consider: the wealth effects of higher house prices generate mostly consumption and possibly worsen inflation (with secondary effects on interest rates). On the other hand forcing our workers into the fringes where jobs are scarce and commuting costs high is adding to structural joblessness (i.e. raising the NAIRU). Altogether I see a lot of very significant negative externalities.

Of course I appreciate that immigration is not the main culprit and that some of our other misguided policies have been having perverse effects too. But imigration is not helping.

1.migrants can free ride of existing infrastructure but make above average contributions to the public purse through relatively low unemployment ooverall and relatively low dependency ratios.

2. who cares if migrants blow out the current account - historically it has but there are no welfare costs at all.

3. water is underpriced so population growth creates distortions. The better our environmental policies the more migrants - and the greater the consequent immigration we can have.

4. politics - I think the pace of entry matters. There are in my view some problems with Muslim migration.

5. I don’t know.

6. skilled migration probably has complementary effects in driving up unskilled wages. Unskilled migration is distributionally harmful - it hurts the local unskilled and gives low efficiency gains.

7. Basic economics says that broadening the market for non-traded assets is welfare improving. Local vendors get bigger gains than local home purchasers lose.

8. I think this is a serious moral concern.

On Robert Braby’s point. The PC report on the effects of skilled immigration on the Australian economy is the worst argued piece of baloney I have seen on immigration issues in the 20 years I have worked in the field.

Environmental effects had no role in this analysis - the immiserising effects of skilled migration are (it is claimed) due to terms-of-trade effects. Migrants import more so we must export more to balance the trade account. Since we have some monopoly power in our export markets this means we must cut export prices which means the TOT deteriorate.

What a load of bloody crap. Think about this Robert. If skilled migration is bad so is any form of migration. Any form of migration would reduce standards of living of people who already live here oif you believe the PC argument.

Thus if we wanted to maximise GDP/head we should hand Australia back to the aboriginees.

The PC generally produce good reseach but this is a total load of crap.

Regarding water, Cameron’s figures are misleading. They are for overall water use, if correct. But the figures that concern us are urban water usage, and there we find that residential usage comprises 61 percent in the Sydney basin.

According to a NSW Parliamentary briefing paper, Sydney is already using 106 percent of the annual sustainable yield of its water supplies. By 2021, on current trends, we will be short of water to the extent of 140,000 ML each year.

On skilled worker migration, that has clearly been used to weaken the bargaining power and wages of local workers, including migrants. It’s also been abused by the large Indian offshoring firms, who are critically dependent on being able to site about a third of their staff locally in Australia, using 457 visas. That’s an abuse of the intent of skilled worker visas.

Researcher Bob Kinnaird highlighted that the universities and the immigration system expanded the supply of programmers by 80 percent at a time when IT graduates were facing 30 percent unemployment. (Kinnaird, B, The impact of the skilled migration policy on domestic opportunity in information technology, People and Place, Vol 13, No 4, 2005 pp 67 ‒ 79)

Now the universities and government whinge that bright students won’t study computer science.

As to question 8, when we take doctors for our rural areas, they typically come from the rural areas of poor countries, so there is something wrong there. A lot of our migration policy indicates laziness and pandering to weak businesses. For example, even Milton Friedman has described the American guest worker visa as a subsidy to big business.

Fred’s third question on water and environmental pressures, and arguably some of his others, are actually about the effects/implications of additions to our overall population level; not about immigration specifically. Yet population and its growth come from two sources: immigration and domestic reproduction. Surely, to the extent that additional population growth is seen as a problem (and I, for one, am inclined to the view that we may already have exceeded our optimum population), it is appropriate to question not just immigration levels but also the massive governmental support provided for domestic reproduction; and to examine the merits of cutting back the latter rather than the former.

(Of course, Fred’s other questions are relevant to that debate too. However, we should not automatically assume, as many often appear to, that perceived population pressures should be addressed simply by cutting back on immigration).

The strategy of high levels of immigration as a way of keeping downward pressure on wages is a clear tendency in most of the OECD. There is a further interesting question here, concerning the future of the nation state as we have grown used to it, and the clear preference for short term labour on visas, as an alternative to immigration programs. Recent moves in the US to introduce a massive ‘guest worker’ program is typical of the tendency to ‘offshore’ the costs of labour reproduction to poor countries, whilst enjoying the benfits of ready formed labour power which is infinitely flexible (can be sent back at any time) and has the useful and novel quality (at least since the 19th century) of being without a vote. The US proposals would limit the time a guest worker can work in the US to a maximium of six years. The 457 Visa scheme here is similar, and is being used to deploy semi and unskilled workers across a range of industries. The relatively bold and so far uncontested strategy of deploying deliberately disenfranchised labour power across nation states that are otherwise part of the liberal democratic ‘order’, is disempowering for the native working class, whilst providing much needed money for the families of the ‘guest workers’ and relieving their home countries of social and economic pressures which might otherwise arise. Whether a global movement that can link the interests of both the guest workers and their native counterparts as well as the families of the guest workers in their own contries can be built is an open question, but there is no doubt that the return to disenfranchised labour power in western emocracies will have a number of unforseen consequences, and not all of them will be benign. even for those who on the face of it, benefit from these arrangements.