Valuation, diversity and cultural mis‐match: immigration in New Zealand
| Published date | 18 January 2011 |
| Pages | 98-118 |
| DOI | https://doi.org/10.1108/15587891111100822 |
| Date | 18 January 2011 |
| Author | Greg Clydesdale |
| Subject Matter | Strategy |
Valuation, diversity and cultural mis-match:
immigration in New Zealand
Greg Clydesdale
Abstract
Purpose – This paper aims to examine the economic effect of immigration, in particular, government’s
ability to select human capital that benefits the economy.
Design/methodology/approach – The effects of recent migration to New Zealand are examined,
drawing on government statistics. Outcomes are contrasted with policy intentions, and the effect of
diversity is considered before examining the economic effect on Auckland city.
Findings – The government’s assessment of human capital does not reflect market assessment.
Reasons include systemic abuse, government valuation of qualifications that are not transferable, and
insufficient value placed on language, culture, nor time required for adaptation. The best performing
immigrants are those with similar cultures to the dominant NZ ethnic group.
Research limitations/implications – More research is needed to quantify impacts, however migration
can also be linked to some barriers to growth including congestion costsand diversion of investment to
low growth areas.
Practical implications – Government policies need to recognise culture is not neutral and the
economic benefits of diversity may vary in time and region.
Social implications – Failure to recognise culture results in unemployment and under-employment
while migrants endure un-met expectations. Migrants not assessed for human capital also exhibit
cultural mis-match, and is in danger of creating an emerging underclass.
Originality/value – There is a need to distinguish between economic leadingimmigrants and economic
followers. Migrants from different cultures can lead economic growth by developing export markets but
the market for such migrants can get saturated. The effects of migration change over time and each
situation requires its own analysis.
Keywords Immigration, Human capital, Diversification, National cultures, New Zealand
Paper type Conceptual paper
Introduction
Immigration for many countries has been a welcome source of human capital vital for
economic development. People can be imported with specific skills while un-skilled
immigrants can help sustain cost-sensitive businesses. In both cases, immigration bolsters
economic development through the acquisition of human capital. Nevertheless, immigration
remains one of the most contentious issues in economic development; the debate heating
up in the after-math of the September 11 bombings. This paper extends the debate by
drawing on the recent experience of New Zealand, a nation which has experienced a high
rate of immigration in recent years.
The main focus of New Zealand immigration policy has been on attracting human capital.
However other arguments have been proposed for attracting immigrants including the
desire to reach an ‘‘optimum population’ ’. For example, Lowe (1997) analysed the availability
of good quality soils and the average person’s resourceuse, and came to the conclusion that
4 million was the optimal population, a figure that has now been passed.
PAGE 98
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JOURNAL OF ASIA BUSINESS STUDIES
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VOL. 5 NO. 1 2011, pp. 98-118, QEmerald Group Publishing Limited, ISSN 1558-7894 DOI 10.1108/15587891111100822
Greg Clydesdale is a Senior
Lecturer based in the
Faculty of Commerce at
Lincoln University, Lincoln,
New Zealand.
A number of econometric models have indicated that immigration has favourable effects on
the New Zealand economy. The most influential was that done by Poot et al. (1988) who
found that immigration accelerates economic growth and reduces unemployment. However,
such models have been criticised as the results are strongly influenced by the assumptions
and parameter built in by the model makers (Chapple et al., 1994). The limits of such models
were illustrated by Peter (1993) who revealed that assumptions regarding economies of
scale, labour force participation, spending and productivity of migrants are crucial to results.
By changing his assumptions to equally plausible alternatives, Peter found he could reverse
the findings on the benefit of migrants on the Australian economy.
Poot et al.’s (1988) model was based on the assumptions of economies of scale and
technological change allowing for 1.5 percent less in-puts per unit of output. However, there
is little evidence that New Zealand’s industries benefit from economies of scale. New
Zealand’sbiggest and most successful industries such as dairying, tourism, fisheries, do not
rely on domestic economies of scale. Nor did their model consider any diseconomies of
scale such as the infrastructural congestion caused by increased population density. This
influential research is now 20 years old and in that time, the industries most likely to benefit
from economies of scale i.e.: manufacturing have gone into decline as more production is
located off-shore. Globalisation would also imply exporting to off-shore markets is a more
logical approach of obtaining economies of scale given the size of these markets vis-a
`-vis a
domestic base. Ironically,in this way, globalisation is actually decreasing the rationale for the
free flow of labour.
Immigration has also been proposed to facilitate technological transfer but little evidence
exists to support such claims. Research by the New Zealand Immigration Service shows that
even among business immigrants, who might be most expected to introduce new
technologies, it was found that that only 2 percent were introducing ‘‘any new skills or
technology’’ into the country (New Zealand Immigration Service, 2002, p. 76). An inflow of
migrants could encourage technical progress but it is dependent on the characteristics of
the migrants (Barwell, 2007). Highly skilled immigrants should be able to produce more
output from complex machinery than those with lower skills, thereby encouraging
companies to introduce capital-intensive technologies. Progress also occurs if the
migrants can do innovative work in the R&D sector. Although low-skilled migrants are less
likely to contribute to technical progress, they can have a positive impact on inflation, albeit
through reducing wage growth.
It has been argued that immigration assists exports, but the evidence is not strong. Although
immigration has a small effect on export growth, it has been found to have a greater effect on
imports, as immigrants import products they are previously consumed in their country of
birth, thereby having a negative effect on balance of payments (Bryant and Genc, 2004).
Another argument for immigration is that it increases diversity and thereby increases
creativity and innovation. Page (2007) has championed the benefits of diversity arguing that
if an organisation has a diverse workforce it has a broader range of knowledge, heuristics
and perspectives which increases the toolbox that a group can work with and solve
problems.
Balanced against the claims that migration benefits the nation are the negative effects of
immigration. For example, Easton (1991) suggested that population growth was a key
reason for New Zealand’s poor post-war economic performance. Other arguments against
immigration include costs to environment, social and cul tural charges, inflationary
pressures, and the displacement of local entrepreneurs by wealthier immigrants. The
debate has not been resolved. In a Treasury paper, Moody (2006, p. 40) concludes that
‘‘overall, it is equivocal whether there is enough robust evidence to support the claim that
immigration is always positive for per capita growth’’. The Treasury paper concurs with the
observations of the OECD which stated ‘‘there is not sufficient or detailed enough data on the
behaviour of the New Zealand economy to give clear answers on the overall effects on per
capita incomes of existing residents.’’ Helping to complicate the debate are the strongly
held views on the subject. It has been noted that ‘‘a number of researchers in this emotive
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