In today's email we examine Michael Woodhouse's balancing act as he walks the tightrope between taking a "Kiwis first" line and reassuring employers who need migrant workers, and we also detail how 1989 was the year that rule changes triggered a massive inter-generational divide.
1. Kiwis First? Or tinkering?
Immigration Minister Michael Woodhouse tried yesterday in his speech about work visa changes to walk a tightrope between seeming tough on new migrants for potential New Zealand First voters, while also reassuring businesses they can still employ lower skilled workers from overseas -- albeit in a more temporary way than before.
He veered between tough-sounding rhetoric about putting "Kiwis First," which was picked up in international media such as the FT, and arguing that businesses still needed to recruit overseas, often for lower-skilled workers.
"We have a Kiwis first policy but it’s not always possible to find Kiwis to do the work," Woodhouse told an Otago and Queenstown Chambers of Commerce event in Queenstown.
He said employers were screaming out for workers, but barriers to employing Kiwis existed, including location, skills, training, attitude, drugs and alcohol.
He said the Government was working to remove those barriers and was increasing the number of youth in training and employment.
"But it the meantime, the fruit needs to be picked, the grapes harvested and employers need the workers do those jobs," he said.
"I want to make it clear that where there are genuine labour or skills shortages, employers will be able to continue to use migrant labour to fill those jobs."
2. Not at full employment
But it is worth challenging Woodhouse's view that everything has been done to employ Kiwis first and that the economy is at full employment.
Statistics NZ reported in February that the number of young people not in employment, education and training (NEET) actually rose to 91,000 or 13.6 percent of that age group in the December quarter, although it cautioned this may be affected by changes in its survey question.
It also reported that unemployment rose 10,000 to 139,000 and that the number of under-utilised workers (which includes people out of work, those not immediately available for work and people wanting to work more hours) rose 25,900 to 354,900.
Treasury estimated in December (page 15 of HYEFU) that its measure of full employment, the so-called NAIRU or non accelerating inflation rate of unemployment, was 4.25 percent. The unemployment rate in the December quarter rose 0.3 percentage points to 5.2 percent.
Woodhouse did not mention productivity once in the speech.
3. 'Show us the money'
The biggest change in the Government's policy was the move to using salary levels to test whether a job is low skilled enough to keep it a temporary job, rather than using the current ANZCO (Australian and New Zealand Standard Classification of Occupations) system to assess whether it is low skilled.
Our National Affairs Editor Shane Cowlishaw covered the changes in detail in this piece for Newsroom Pro yesterday, including looking at the risk that migrants and their employers may be tempted to game the system by inflating reported and actual salaries to hit the thresholds of $48,859 per year for skilled work and $73,299 for unskilled but well paid work.
Anyone under those thresholds can only get a three year temporary visa before having to take a one year stand-down overseas. Anyone over those thresholds can apply for residency.
Or, as Auckland migration lawyer Alastair McClymont pointed out to Shane, either migrants or the migration system could end up being abused.
Migrant workers could top up their own salary to reach the remuneration threshold, giving money to the employer who would bank it, take out taxes then pay it back to the worker.
“In my view that’s simply going to open it up to exploitation where you’re going to have a lot of employers who are going to demand that desperate migrant employees contribute towards their salaries - which is something that has already been happening as a general wider fraud situation, but I think this is really going to widen it up,” he said.
“There’s going to be a lot of employers of liquor stores, dairies, and superettes who are rubbing their hands with glee at the moment.”
4. 'Show us the hours'
Another possibility, McClymont warned Shane, would be an increase in migrants working huge hours for under the minimum wage.
This could mean an employer telling a worker they will pay them $48,000 to get them over the threshold, but demanding an 80-hour work week.
McClymont also believes introducing a higher salary band, which essentially guaranteed a path to residency, could lead to richer migrants paying the money directly to an employer for use as their salary.
Shane asked Woodhouse about the risk of the system being gamed and migrants being abused.
"We have acknowledged that the risk of that behaviour goes up with these changes and we’ll be working harder to check after visas are granted that the conditions are met," he said.
5. 'Show us the inspectors'
One potential problem, however, is the relatively low number of labour inspectors. New Zealand has around 55 labour inspectors to cover 2.5 million workers, which is around half the rate seen in Australia.
Immigration New Zealand granted 192,688 people work visas in the year to June 30, 2016, up 13 percent from the last year. That included 31,766 people granted work visas under the essential skills work visas system designed to ensure any job openings are given a work test to ensure New Zealanders are not available.
The remaining 160,922 were not work tested and included working holiday makers, international students and those here as family members of temporary work visa holders.
The migration changes announced yesterday did not include changes to international student work rights, which were expanded in 2013, or to working holiday maker schemes.
Labour, New Zealand First and unions picked up on the lack of changes to student and other non-work tested work visas in the announcement, describing the changes as tinkering.
The Government was also reluctant to say how much of an effect the changes would have on the number of temporary workers coming. MBIE said in a briefing note that it was not possible to accurately forecast the effects, but it noted that there were just over 1,700 lower skilled workers that had held an essential skills visa for three years or more.
6. Employers not unhappy
BusinessNZ, Federated Farmers and the New Zealand Initiative welcomed the changes, in particular the creation of a pathway to residence for 4,000 temporary visa holders and their families in the South Island who have been living here for more than five years.
That includes dairy farm workers from the Philippines and construction workers in Christchurch.
One area that may be affected more than others is seasonal work in orchards.
One change was to say that essential skills visas should only be for the length of the season linked to the job granted the temporary work visa. That length of season has yet to be determined.
7. 1989 as year Zero for Gen Rent
Separately, I've taken a look at how three big economic and planning changes in 1989 essentially set the course towards the boom in house prices, the bust in house building and the struggle many millennials face in buying their own home under their own steam.
The big three reforms included the changes in tax treatment of investments that gave housing a big advantage (as pointed out by Andrew Coleman), the RMA reforms started in 1989 and the creation of the modern Reserve Bank Act.
8. A carbon trading deal with China?
Meanwhile, Eloise Gibson has a fascinating interview with Bell Gully's climate change expert Simon Watt about the potential for New Zealand to join its emissions trading scheme with one in China.