705-625 The Economies of Cities and Regions

Is Immigration Good for the Economy of Australia?

Salome RomeroMalhar RavaliaEvandren Moodley

Immigration & benefits of Brain Gain

• Contribution to shared knowledge in a competitive market

• Contributions to to knowledge spillover

• Alleviates the negative effects of ‘brain drain’

Benefits low-skilled Immigrants

• Low skilled immigrants can alleviate the shortage of employees willing to fill the positions of low cost labour intensive jobs: they are prepared to take on these positions.

• E.G. The case of workers from the Pacific Islands

Benefits to Regional Australia

• Opportunity to retain international students and increase brain gain.

• E.G Bendigo benefited by $1 million due to international students in the region. Could this be increased?

Counter Arguments to Immigration

• Risk to Australian job opportunity

• We should skill up our own unskilled workers

• It would jeopardize a sustainable population

However…

• Is immigration the only factor to population growth?

• What about: personal consumption?

• Should we look at population growth in the global context?

Conclusion

• Immigration is good for the economy, it helps to secure business, grain gain and knowledge transfer.

• It can provide economic stimulus to regional areas.

Thank - you

Property Development Sector in Australia

• Immigration contributes to population growth of Australia.

• Population growth means an increased demand for goods and services.

• Quantifying impacts of the property development sector on the Australian economy.

GDP

Employment

Affordability Crisis

Solutions

• Planning Policy

• Taxation Policies: Provisions like Negative Gearing

Immigration and the Labour Force

Economic Modelling for an Aging Population

Our Position

Immigration is a useful way of alleviating

the labour impacts caused by aging.

1. What constitutes a desirable level of immigration?

2. What is the statistical impact thereof on an aging workforce?

3. Is the worker: retiree ratio reliable in assessing future trends?

Immigration and Age Structure

• Immigrants are generally younger than the average age of the population

• Immigrants have higher fertility rates than the rest of the population

• Canada and Europe provide examples of how immigration has slowed the rate of population aging

Major

Area,

region

and

country

1950 2000 2050

World 5.2% 6.9% 19.3%

Africa 3.2% 3.3% 6.9%

and the 3.7% 5.4% 16.9%

China 4.5% 6.9% 22.7%

India 3.3% 5.0% 14.8%

Japan 4.9% 17.2% 36.4%

Europe 8.2% 14.7% 29.2%

Italy 8.3% 18.1% 35.9%

Germany 9.7% 16.4% 31.0%

Sweden 10.3% 17.4% 30.4%

U.S.A. 8.3% 12.3% 21.1%

Table 1. Dynamics of Population Aging in the Modern WorldObserved and Forecasted Percentages of the Elderly (65+ years) in Selected Areas, Regions, and Countries of the World: 1950, 2000 and 2050

(United Nations, 2001)

Figure 2. Proportion of Immigrants to Native-born Canadians according to Age Group

Economic Benefits of Immigration

• fills a need for workers in particular sectors of the economy

• drives population growth, and in turn promotes the growth of the labour force that will provide the impetus for economic growth

• Increases the worker: retiree ratio in order to maintain social security and healthcare structures

• expands the tax base and therefore help subsidise government programs

Economic Benefits of Immigration

• the labour force participation rate is higher for immigrants (68.6%) than for the native-born in the United States (65.8%), with the former also having lower levels of unemployment

• in the decade leading up to 2007, unemployment rates for people born in the US dropped from 5.4% to 4.7% as average hourly wages increased, all as the proportion of foreign-born workers went up

(Carpenter, 2007)

Economic Benefits of Immigration

• In the US, the foreign born workforce as a whole is younger than its aging native born counterpart – 47% of it is in the 25 – 39 age bracket, compared to just 31% of the native born workforce.

• foreign born individuals now account for most of the growth of the U.S. labour force. Between 2000 and 2006, their share of total labour growth was 54%

(Suro, 2008)

Economic Benefits of Immigration

• In the US, the worker: retiree ratio, which was 42:1 in 1940, decreased in the intervening six decades to 3.3:1, and is forecast to reach 2:1 by 2050

(Goodman and Moore, 2001)

• In Australia, the worker: retiree ratio is expected to decrease from 5:1 in 2007 to 3:1 in 2056

(ABS, 2010)

The counter-arguments

• a model for low immigration and high economic growth

• the proposition that any gains from immigration are offset by high fiscal costs

• a view that immigration has no significant impact on an aging population

• and an argument that the social security costs associated with the elderly are entirely manageable due to productivity increases and the relatively small proportion of aged people in the overall population.

Low Immigration and Economic Growth

• America’s experience with a low level of immigration provides a useful test of how that affects the nation’s economic performance.

• Between 1925 and 1965 immigrant admissions averaged less than 180,000 persons per year.

• During that period, the share of women in the workforce nearly doubled and minorities gained access to new job opportunities.

• Over those decades, the economy not only grew significantly, it grew more rapidly than it has since mass immigration was again unleashed by legislation enacted in 1965.

Figure 3. Rise in GDP per capita (adjusted for inflation) in the United States from 1925-2005 (Source: FAIR, 2010)

Low Immigration and Economic Growth

• From 1925-1966 GDP per capita increased by 168.4 percent. That is an average annual increase of 4.0 percent

• In 1965 the Immigration Act was passed, resulting in increased immigration to the United States

• During the period since then (1966-2005) the increase in GDP per capita has been 114.2 percent. That is an annual average increase of 2.9 percent