The Opportunity Cost of Unrestricted Trans-Tasman Migration · Total opportunity cost 90m 79m 15-64 Per capita net benefit 4,572 6,385 2,864 Per capita opportunity cost 1,813 -1,708

The Institute, its contributors, employees and Board shall not be liable for any loss or damagesustained by any person relying on this report, whatever the cause of such loss or damage.

The Opportunity Cost ofUnrestricted Trans-Tasman

Migration

Report to Ministry of Social Policy

November 2000

NZ INSTITUTE OF ECONOMIC RESEARCH (INC.)

8 Halswell St. Thorndon

P O BOX 3479 WELLINGTON

Tel: (04) 472 1880

Fax: (04) 472 1211

NZIER – The Opportunity Cost of Unrestricted Trans-Tasman Migration ii

Preface

The New Zealand Inst i tute of Economic Research (NZIER),

based in Well ington, was founded in 1958 as a non-profit

making trust to provide economic research and consultancy

services. Best known for its long-established Quarterly Survey of

Business Opinion and forecasting publications, Quarterly

Predictions and the annual Industry Outlook with five-yearly

projections for 25 sectors, the Institute also undertakes a wide

range of consultancy activit ies for government and private

organisations. I t obtains most of i ts income from research

contracts obtained in a competit ive market and trades on its

reputation for delivering quality analysis in the right form, and

at the right time, for its clients. Quality assurance is provided

on the Institute’s work :

• by the interaction of team members on individual projects ;

• by exposure of the team’s work to the crit ical review of a

broader range of Institute staff members at internal

seminars;

• by providing for peer review at various stages through a

project by a senior staff member otherwise disinterested in

the project;

• and sometimes by external peer reviewers at the request of a

client, although this usually entails additional cost.

Authorship

This report has been prepared at NZIER by Vhari McWha and

Phil Briggs. The assistance of Peter Gardiner is gratefully

acknowledged.

NZIER – The Opportunity Cost of Unrestricted Trans-Tasman Migration iii

CONTENTS

1. Summary and Results....................................................................................... 1

2. Population ............................................................................................................ 6

2.1 Using the existing population..................................................................................6

2.2 Using a reference group .........................................................................................6

2.2.1 Existing migrant population.............................................................................7

2.2.2 Reference population ......................................................................................7

2.3 Characteristics of the reference group ...................................................................8

2.3.1 Age ..................................................................................................................8

2.3.2 Gender.............................................................................................................9

3. Tax........................................................................................................................10

3.1 Income ..................................................................................................................10

3.2 Income tax.............................................................................................................11

3.3 Indirect tax.............................................................................................................12

4. Expenditure........................................................................................................12

4.1 Social welfare benefits..........................................................................................12

4.2 Health....................................................................................................................13

4.3 Education ..............................................................................................................13

4.4 Corrections ...........................................................................................................15

APPENDICES

Appendix A: Social welfare details....................................................................16

FIGURES

Figure 1 Relative age of reference population ..................................................................9

Figure 2 Gender differences between migrant populations..............................................9

Figure 3 Average income by age group..........................................................................11

NZIER – The Opportunity Cost of Unrestricted Trans-Tasman Migration iv

TABLES

Table 1 Opportunity cost of unrestricted trans-Tasman migration, 1998/99 ....................2

Table 2 Net benefit per capita of Australian migrant populations.....................................4

Table 3 Reference population ...........................................................................................8

Table 4 Income tax rates .................................................................................................11

Table 5 Percent of population in receipt of benefit..........................................................13

Table 6 Participation in education ...................................................................................14

Table 7 Allocation of benefits by output group................................................................17

Table 8 Per capita expenditure on social welfare benefits, 1998/99 ..............................18

NZIER – The Opportunity Cost of Unrestricted Trans-Tasman Migration 1

1. SUMMARY AND RESULTS

The purpose of this report is to estimate the opportunity cost , to the Australian

government, of unrestricted trans-Tasman migration. The opportunity cost is taken to

be the cost associated with New Zealand migrants who do not meet the ‘usual’ criteria

for entry to Australia. We also take the opportunity cost to be the direct fiscal cost of

migration, rather than the economic cost. We do not look at issues such as the multiplier

effects of migrants on the Australian economy, or the displacement effects of migrants

in the Australian labour market.

The most direct approach to est imating the opportunity cost would be to est imate the

net benefit of those in the existing population of New Zealand migrants who would

not have gained entry under the criteria applied to non-New Zealand migrants. We

would need to be able to identify el igible migrants and their dependants and to track

their performance after they have sett led. Furthermore, we would also need to take

account of the additional migrants who later joined the original migrants, via policies

that allow for family reunification. Given current data sources, i t was not practical in

our view to fol low such an approach and achieve meaningful est imates of the

opportunity cost.

Instead then, we have used an indirect approach, which compares the performance of

New Zealand migrants with the performance of other migrants who have met the

entry criteria.

The logic of our approach is as fol lows. First , we assume that past migration f lows into

Australia –flows of all migrants – have been close to desired levels. That is , the

Austral ian government has each year made an assessment of how many New

Zealanders would arrive in the coming year, and has then set entry criteria for other

migrants that will result in the desired level of total migration being achieved.

Although we are assuming that past migration f lows have ref lected the desired levels of

migration, this is not the same as saying that the Austral ian government has been

happy with the composit ion of past migration.

We then make another assumption. Suppose that in the past the Austral ian

government had been able to change the composit ion of past migrat ion by applying

entry criteria to all migrants, including trans-Tasman migrants . I t could be argued that

the age/skil l composit ion of migrants who are New Zealand cit izens would have been

the same as the other foreign born. We can therefore take the total net f iscal benefit as

calculated for total New Zealand cit izens and compare this with the total net benefit for

an equivalent number of other foreign born. We can assume that the age/income

distribution of this group is the same as that of the other foreign born who are resident

in Australia. After all , this is the distribution that has resulted from controlled entry.

The difference between the total net benefit of the two groups will be the opportunity

cost of al lowing open entry for New Zealand cit izens. However, i t could be argued that

New Zealand migrants may not have been replaced with ‘normal’ foreign born, but

with high performing migrants . We therefore consider two possible replacement

groups:

� A population with the characteristics of the population of existing non-

New Zealand migrants .

� A population of high-performing migrants.


An earlier NZIER report details the derivation of the costs and benefits of

New Zealand cit izens in Australian and of al l other foreign born migrants.1 The

estimated costs and benefits relate to the year ended 30 June 1999.

Table 1 Opportunity cost of unrestricted trans-Tasmanmigration, 1998/99Australian dollars

NZ citizens Referencepopulation

Other foreignborn

Total Per capita net benefit 3,099 4,005 1,269

Per capita opportunity cost 906 -1,830

Population 344,514 344,514 344,514

Total net benefit 1,068m 1,380m 437m

Total opportunity cost 312m -630m

0-14 Per capita net benefit -4,120 -4,343 -4,453

Per capita opportunity cost -223 -333

Population 36,289 13,745 15,901

Total net benefit -150m -60m -71m

Total opportunity cost 90m 79m

15-64 Per capita net benefit 4,572 6,385 2,864

Per capita opportunity cost 1,813 -1,708

Population 283,293 262,063 267,714

Total net benefit 1,295m 1,673m 767m

Total opportunity cost 378m -528m

65+ Per capita net benefit -3,136 -3,405 -4,251

Per capita opportunity cost -269 -1,115

Population 24,932 68,707 60,899

Total net benefit -78m -234m -259m

Total opportunity cost -156m -181mSource: NZIER

We use this earlier work to examine the f irst scenario. The difference between the total

net benefit of existing New Zealand migrants and an equivalent number of other

foreign born migrants is the opportunity cost of al lowing open entry for New Zea land

citizens. Table 1 shows that the opportunity cost was -$630 mill ion ($AU) under this

scenario. That is , open entry for New Zealanders resulted in a net benefit of $630

mill ion to the Austral ian government. This value of the opportunity cost can be viewed

as a minimum, since resident New Zealand cit izens have been replaced by a ‘normal’

group of non-New Zealand migrants .

In order to estimate a maximum opportunity cost of unrestricted t rans-Tasman

migration we compiled a hypothetical population of high-performing migrants . We

call this the reference population. The reference population includes all migrant

1 NZIER (2000) The net fiscal cost of sub-groups of the Australian population, report to the Ministry of Social

Policy .


populations with a higher average income in 1998/99 than New Zealand born

migrants and with a resident population of more than 10,000. The size restrict ion was

imposed to l imit the complexity of the reference group and to ensure that there was a

realistic chance that the New Zealand migrants could actually be replaced with

migrants from that country. The reference group is composed of migrants from:

� UK and Ireland

� India

� South Africa

� US

� Canada

It is important to remember that in reality the replacement group of migrants would

come from a combination of various countries and may not produce net benefi ts as

high as the reference group. The groups of migrants in the reference population

comprise 37.1% of the total exist ing population of non-New Zealand migrants in

Australia. Table 1 shows that on this basis unrestricted trans-Tasman migration results

in an opportunity cost of $312m ($AU). That is , al lowing open entry of New Zea land

cit izens to Australia rather than allowing the immigration of a group of high-

performing migrants results in a net annual cost to the Australian Government of

$312m.

Table 2 shows the calculation of the net benefit result broken down by benefit and cost

components. Higher tax payments and lower social welfare costs are the main factors

driving the higher net benefit associated with the reference population.


Table 2 Net benefit per capita of Australian migrantpopulationsAustralian dollars

Age NZ citizens Referencepopulation

Other foreignborn

Total Benefits

Income tax 5,045 5,652 4,288

Indirect tax 2,151 2,307 1,971

less Costs

Social welfare benefits 2,218 1,995 2,910

Health 1,108 1,513 1,421

Education 692 378 589

Corrections 78 68 70

Net benefit 3,099 4,005 1,269Population 344,514 344,514 344,514

0-14 Benefits

Income tax 0 0 0

Indirect tax 0 0 0

less Costs

Social welfare benefits 5 0 2

Health 757 757 757

Education 3,358 3,585 3,694

Corrections 0 0 0

Net benefit -4,120 -4,343 -4,453Population 36,289 13,745 15,901

15-64 Benefits

Income tax 5,935 6,921 5,118

Indirect tax 2,484 2,659 2,231

less Costs


Health 962 1,055 1,037

Education 411 309 539

Corrections 94 89 89

Net benefit 4,572 6,385 2,864Population 283,293 262,063 267,714


Age NZ citizens Referencepopulation

Other foreignborn

65+ Benefits

Income tax 2,268 1,941 1,758

Indirect tax 1,492 1,429 1,341

less Costs


Health 3,284 3,415 3,280

Education 0 0 0

Corrections 13 3 3

Net benefit -3,136 -3,405 -4,251Population 24,932 68,707 60,899

Source: NZIER


2. POPULATION

2.1 Using the existing population

The ideal approach to estimating the additional cost or benefit associated with

unrestricted trans-Tasman migration would be to examine the exist ing population of

New Zealand cit izens in Australia. This populat ion would be divided into two groups

depending on whether or not they would get entry under the exist ing criteria. The task

would then be to separately identify the costs and benefits of each group. The total net

benefit of those New Zealanders who would not have gained entry would represent

the opportunity cost of al lowing New Zealanders unrestricted access. The net benefit of

those New Zealanders who would not have gained entry under the cri teria would

likely be less than the net benefit of those that would have gained entry. In fact i t may

be negative, that is a net cost.

There are a number of data constraints that mean that this approach is not possible.

The first is that it is not possible to accurately identify the population who would have

gained entry under the criteria. This is because there is insufficient data gathered at the

border. In particular, el igible immigrants in non-economic categories are diff icult to

identify. Even if the eligibility of the principal migrant could be ascertained, it would

not be possible to accurately identify the other migrants that travelled with the

principal migrant, such as a spouse, dependants or other family.

The second problem comes in tracking the migrants after they enter Australia. I t is not

possible to match data on the performance of the migrants after they have sett led. For

example, the income, benefit receipt, or level of uptake of education of a specific

migrant cannot be ascertained.

2.2 Using a reference group

Since it is not possible to estimate the opportunity cost of only those New Zea land

migrants who would not have met the eligibil ity criteria, we chose to estimate the

opportunity cost of the whole population of New Zealand migrants in comparison to a

group of migrants from other countries that were subject to the criteria.2

The validity of this approach depends upon the veracity of the assumption that the

total number of migrants to Australia, i .e . including New Zealanders, has been close to

desired levels . This means that the Austral ian government has made an assessment of

the number of New Zealanders that will arrive in a given year and set entry criteria for

other migrants that will result in the desired total level of migration. So although the

composition of migrants is not what the Australian government considers ideal , the level

of migration is satisfactory. This assumption is important since we cannot estimate

what the level of immigration would be i f other migrants were not granted entry to

replace those New Zealand cit izens who did not meet the criteria.

The issue that then needs to be addressed is what is the difference in net benefit

between the group of New Zealanders that has actually migrated to Australia, and the

2 Migrants that are in the comparison groups may not have met current entry criteria depending on when

they immigrated. Our approach assumes that the replacement group of migrants would met past criteria

for entry.


group of migrants that could otherwise have entered under the criteria. The f irst

question then is what characterist ics would the replacement group of migrants have.

We consider two possible replacement groups:

• A population with the characteristics of the population of existing non-

New Zealand migrants .

• A population of high-performing migrants.

2.2.1 Existing migrant population

It could be argued that i f the Australian government had, in the past , been able to

apply entry criteria to all migrants, including trans-Tasman migrants , then the

age/skil l composit ion of New Zealand migrants would have been the same as the

“other foreign born”. We can use our earlier work to examine this scenario.3

We can take the total net benefit for all New Zealand cit izens and compare this with

the total net benefit for an equivalent number of other foreign born. We would assume

that the age/income distribution of these people is the same as that of the other foreign

born who are resident in Australia. After all , this is the distribution that has resulted

from controlled entry. The difference between the net benefit totals of the two groups

will be the opportunity cost of al lowing open entry for New Zealand cit izens.

2.2.2 Reference population

We also est imated the maximum opportunity cost of unrestricted t rans-Tasman

migrat ion. Some may argue that the Austral ian government would not have replaced

the New Zealand cit izens with average foreign born, but with higher performing

migrants . We therefore compiled a hypothetical populat ion of migrants made up of

high performers. We call this the reference population. It is important to remember that

in reality the replacement group of migrants would come from a combination of various

countries and may not produce net benefits as high as the reference group.

The f irst step in compiling the reference population was to identify those groups of

migrants that performed better than New Zealand-born migrants. We did this on the

basis of income.

The Australian Bureau of Statist ics provided data on average income by birthplace, age

and gender of al l Australian residents. The reference group we selected contains all

migrant groups with an average income above New Zealand born migrants’ average

income 4 and with more than 10,000 people in them. The reason for selecting only those

with more than 10,000 people was partly to l imit the complexity of the reference group,

but more importantly because there had to be a real ist ic chance that the New Zea land

migrants could be replaced with migrants from that country.

The reference group is composed of migrants from:

• US

• South Africa

• Canada

• UK and Ireland

• India

3 Ibid.

4 Income data was not available by citizenship.


We had antic ipated that speaking English would be an advantage in terms of income.

In fact , the average income data shows that most major English-speaking migrant

groups outperform New Zealand born migrants . This seems to contrast with our

earlier results that showed that New Zealand migrants have higher average incomes

than other foreign born Australian residents. The reason for this disparity is that these

high income migrants come from relatively small migrant groups in Australia. In fact ,

of the ten largest migrant groups only the UK appears in the reference group.

2.3 Characteristics of the reference group

Table 3 Reference population30 June 1999

Place of birth Total population Percent of total referencegroup

UK & Ireland 1,227,193 81.5

India 100,711 6.7

South Africa 75,730 5.0

US 69,827 4.6

Canada 32,007 2.1

Total 1,505,468 100.0Source: Australian Bureau of Statistics

Table 3 sets out the composition of the reference group in more detail . The final

reference group was scaled to the size of the population of New Zealand cit izens

resident in Australia, using the ratio of the size of the population of New Zealand

citizens to the size of the reference population. This means that the group retains all the

characteristics of the whole reference population in the relevant proportions.

2.3.1 Age

All our analysis was undertaken at the most disaggregated level possible before being

finally aggregated for the presentation of the results. Figure 1 shows the age

distribution of the reference population in comparison to the population of

New Zealand cit izens resident in Australia. The graph also includes the distribution of

the other foreign born migrant population for comparison.


Figure 1 Relative age of reference population30 June 1999

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

0-4

5-9

10-1

415

-19

20-2

425

-29

30-3

435

-39

40-4

445

-49

50-5

455

-59

60-6

465

-69

70-7

475

-79

80-8

485

+

NZ citizens

Referencepopulation

Otherforeign born

Source: Australian Bureau of Statistics

The graph shows that in comparison to the populat ion of New Zealand cit izens, the

reference population has fewer chi ld dependants . The population of New Zea land

citizens is concentrated in younger people with the largest concentration of people in

the early working life.

The reference populat ion also has a higher weighting towards older people than the

total population of non-New Zealand migrants. This population distribution suggests

that they are more l ikely to stay in Australia after they have retired and are into their

later years than are New Zealand ci t izens. This may be because New Zealand is a lot

closer, geographically, than the countries from which members of the reference

population migrated. The reference population’s age distribution is a lot more similar

to the non-New Zealand migrant populat ion than the New Zealand population.

2.3.2 Gender

Figure 2 Gender differences between migrantpopulationsPercent, 30 June 1999

30

40

50

60

70

NZ citizens Reference population Other foreign born

Male

Female



Figure 2 shows the percentage of each population of each gender. This shows that there

are more male migrants than female migrants from al l country groupings. I t also

shows that the difference is sl ightly greater for the reference population than for either

of the other two populations.

3. TAX

We used the same method for calculating the tax take as in our earl ier report . The basic

process was to determine the income distr ibution based on census data and then

calculate the average tax paid by an individual in each income category. This average

tax paid was then mult ipl ied by the number of people in each income category to

estimate the total tax paid by the population.

3.1 Income

Our est imates of income are derived from data from the 1996 Austral ian Census. The

Census collects data on weekly income, with respondents t icking the appropriate

income category.

We obtained data on the f ive population groups in the reference population. We

adjusted the data in two ways, separately for each country of birth, to get estimates for

the June year 1999:

• We adjusted the boundaries of each income group in l ine with the movement in the

average weekly wages between 1996 and 1999. We used the movement in male

wages to adjust the male income categories and the movement in female wages to

adjust the female income categories.

• For each gender/age group we factored up the populations in the income categories

so that the total population in each age/gender group – which was previously the

1996 total – matched the 1999 total . The factoring was done in a pro-rata fashion

across the income groups.

A f inal minor adjustment was to distr ibute the respondents in each gender/age group

who were in the “not-stated” income category across the other income categories.

In updating the 1996 income data to 1999 we therefore made two major assumptions:

• That al l incomes would move in l ine with the movement in the average weekly

wage.

• That the general shape of the income distr ibution for each gender/age group

remained the same, despite changes in the size of the group.

Once we had made these adjustments to the data for each country, we aggregated the

income data across countries . This s imply meant that we summed the number of

people in each age/gender/income group to get a distr ibution for the whole reference

population.

The f inal adjustment we needed to make was to scale the reference population to the

size of the population they were to replace. To do this, and yet retain the characteristics

of the whole population, we mult ipl ied the number of people in each

age/gender/income group by the same factor. That factor was the ratio of the size of

the populat ion of New Zealand citizens to the initial size of the reference population.

Our est imates of average income by age group are shown in Figure 3. The average

incomes shown for each age group were calculated using the mid-points of income


categories. We used the same average income for the top income category as we had

used in our earl ier report . This was based on adjusted wage data obtained separately

by the Ministry of Social Policy.5

Figure 3 Average income by age groupAustralian dollars, 1999

0

5000

10000

15000

20000

25000

30000

35000

40000

0-4

5-9

10-1

415

-19

20-2

425

-29

30-3

435

-39

40-4

445

-49

50-5

455

-59

60-6

465

-69

70-7

475

-79

80-8

485

+

Reference population

NZ citizens

Other foreign born

Source: Australian Bureau of Statistics, New Zealand Institute of EconomicResearch

Figure 3 shows that the other foreign born consistently have the lowest average

income. The reference population has a higher average income than the population of

New Zealand cit izens for age groups from 25-29 through to 50-54. But in both the

youngest and the older age groups New Zealand cit izens have a higher average

income than the reference population.

3.2 Income tax

We now have total income for each income category within each gender/age group;

this is s imply the number of people in the income category t imes the average income in

the category.

The next step is to calculate income tax. The following income tax rates were used;

these were in force during the year ended June 1999.

Table 4 Income tax rates$0-5,400 Nil

$5,401-27,100 20 cents per dollar



$50,000+ 47 cents per dollarSource: Commonwealth Department of the Treasury

This data was used to calculate the average tax paid by a person in each income

category. This average tax was then multiplied by the number of people in that

category.

5 Op cit. Refer to p.17 for additional details.


3.3 Indirect tax

Our calculation of indirect tax was the same simple approach that was used in our

earlier report. We calculated the after-tax income of the reference population by

subtracting our est imates of income tax from the est imates of total income. From our

earl ier work we knew the total after-tax income of the Australian population and the

total indirect tax collected by the government. We assumed that spending was a direct

reflection of after-tax income, and that indirect tax paid would therefore be

proportional to after-tax income. Therefore we simply calculated the proportion of total

after-tax income that was paid in indirect tax and allocated that proportion of the

reference population’s after-tax income to indirect tax payments.

There are two problems with this approach. The first is that it is difficult to accurately

apportion tax to age groups. For example, s ince the 0-14 years group has no income

they are assumed to pay no indirect tax. This is not realistic given the spending of

people in this age group. However, this group’s spending will be reflected in the after-

tax incomes of older age groups, which contain their parents. Despite this problem of

al locating indirect tax to age groups, the method should produce reasonably accurate

assessments of total indirect tax paid by the whole population.

The second issue is that the approach assumes that the same proportion of every dollar

of income is spent. This may not be the case, s ince those on higher incomes may save

more than those on lower incomes. We do not consider this is l ikely to be a significant

problem. We ran some sensit ivity analysis in our earl ier report . This analysis showed

that assuming a uniform marginal propensity to save had l i t t le impact on indirect tax

paid per capita. This analysis has not been repeated here.

4. EXPENDITURE

4.1 Social welfare benefits

We used broadly the same method as in our earl ier report to calculate the per capita

expenditure on social welfare benefits. Data on the population of beneficiaries by age,

gender, place of birth and benefit type was obtained from Centrel ink.

We calculated the average number of beneficiaries base on quarterly data for

September 1998 to June 1999. Earl ier problems with the data were resolved by

Centrelink, the Australian data provider. Only one set of numbers proved

unrecoverable from the database. This was the March 1999 number of recipients of the

Childcare Allowance; a three quarter average was used for this benefit type only.

Costs were calculated separately by output groups, as used in the government

accounts. The al location of benefits to output groups, and the per capita cost by output

group are given in Appendix A.

We obtained data on al l the sub-populations in the reference group separately. The cost

per beneficiary in a part icular output group was calculated using Commonwealth

Budget data in the earlier report. These costs were used to get a total cost of all

beneficiaries in the reference population. This was divided by the total number of

people in these population groups to obtain an average per capita cost for the reference

population.


In general , the proportion of the reference population receiving a benefit was lower

than for the other population sub-groups. Table 5 shows the proportion of the

population in receipt of a benefit by output group. It shows that a higher proportion of

the reference population receive the Age Pension. This is a result of the higher

proportion of people in older age groups in the reference population compared to the

population of NZ cit izens.

Table 5 Percent of population in receipt of benefitPercent

NZ born Referencepopulation

Other foreignborn

Australian

Family assistance 18.5 8.5 15.0 15.8

Youth and student support 1.7 0.4 1.5 2.4

Housing support 8.4 3.8 5.8 5.1

Labour market assistance– Newstart

4.9 2.0 3.9 3.7

Labour market assistance– Parenting payment

5.0 1.6 3.3 3.7

Labour market assistance– Other

0.7 1.0 1.8 0.7

Support for people with adisability

2.4 2.4 4.7 3.3

Support for carers 0.6 0.4 0.6 0.7

Support for the aged 6.5 10.6 21.8 11.0

Childcare support 4.5 2.4 2.5 3.0

Notes: (1) The figures given in the above table are not mutually exclusive,since a person may receive more than one type of benefit.

Source: Centrelink

4.2 Health

In our earl ier work, we derived Commonwealth government health expenditure by

gender/age group based on Australian Institute of Health and Welfare data. Data by

country of birth is not available.6 We applied this data to the age distribution of the

reference population to obtain the per capita costs reported in Table 2.7

4.3 Education

Again we used the same method as applied in the earl ier report . The population of

students was obtained from two Australian Bureau of Statist ics publications: Education

to Work (TEW) (6227.0) and the main schools publication (4221.0) .

The main schools publication is a census of 5-14 year olds in primary and secondary

school. I t is undertaken on the f irst or second Friday of August each year. The 1998

census was used. No country of birth or cit izenship data is collected. This means that

6 Op cit. Refer to pp24-25 for additional details.

7 The youngest age bracket available was 0-14 years. Hence, per capita health expenditure estimates for the

0-14 age group are the same for all population groups.


we have assumed that people of al l nationalit ies are equally l ikely to attend school

between 5-14. This is not unreasonable as the participation rate is close to 100%.

TEW is a twice yearly survey. The September survey is restricted to 15-24 years olds,

while the May survey covers 15-64 year olds. This analysis used the May 1999 survey.

The survey identif ies the gender/age group of the individual. I t also records part-

t ime/full-t ime status. We have assumed that a part-t ime student costs on average one

half an equivalent full-t ime student. Although the TEW survey separately identif ies

place of birth in some detail (Australia, NZ, Melanesia, Micronesia, Polynesia, UK and

Ireland and Other) the survey sample in most of these groups is too small to yield

statistically certain results. For this reason our previous work restricted the place of

birth analysis to Australia, NZ and Other.

This t ime we decided to analyse the data on UK and Ireland since this population

makes up over 80% of the reference group. We wanted to i l luminate any potential

differences between the reference population and the population of al l non-

New Zealand migrants. The table below contrasts the participation rates for the UK

and Ireland migrant population with those of the whole population of resident

Austral ians and with the New Zealand born.

Table 6 Participation in educationPercent of total age group

Population School Tertiary

15-19 15-19 20-24 25-29

All 51 27 34 15

New Zealand 53 16 24 11

UK & Ireland 44 30 17 8


The table shows that migrants from the UK and Ireland are in general less l ikely to

undertake education in Austral ia than the general population. In the 15-19 age bracket ,

they are more l ikely to be at university than secondary school than the whole

population, but their participation in tertiary education subsequently falls more

rapidly than for the rest of the population. This is interesting given the higher earning

capacity of people of this nationality and suggests that they may migrate with skil ls , or

perhaps return to their homeland to undertake education. This latter explanation is

consistent with higher fees for international students at Australian universities. We

have assumed that the participation rates for the reference population are the same as

for those born in the UK and Ireland.

We assumed that those 65 years and over do not have an educational cost .

Expenditure per student was taken directly from our earl ier work. The data on primary

and secondary schools was based on a Product ivi ty Commission report . 8 This includes

total spending by Commonwealth and State/Terri tory governments .

For tert iary education the per student cost was obtained from a departmental

publicat ion on higher education funding. 9 Capital expenditure has been excluded for

three reasons:

8 Steering committee for the review of Commonwealth/State service provision: Report on Government

Services 2000 www.pc.gov.au/services/gsp/2000


• It is inappropriate to consider the impact of the marginal student on capital

expenditure as there is unlikely to be additional capital expenditure at the margin.

• The total capital expended in a given year should not be al located only to students

in that year as the benefits can last for generations.

• Capital is not required solely for teaching; research and other activities undertaken

by universities require capital.

The aggregate results of these calculations are presented in Table 2.

4.4 Corrections

The Australian Bureau of Statist ics undertakes a Census of Prisons each year on 30

June. This records the age, gender and place of birth (Australia, New Zealand and

Other) of each prisoner. It also indicates the length of sentence being served.

Because the data available is insufficiently detailed to allow scrutiny of the reference

population in isolation we have used the estimates for the ‘Other’ category made in our

earlier report.

This est imate makes an adjustment for the length of sentence, so that where the

sentence is less than a year the cost of that prisoner is correspondingly lower. As the

analysis seeks to determine the fiscal cost in 1998/99 only, any differences in sentence

length over one year are not relevant. No account is taken of the relative cost of

differing security levels.

We made the adjustment for sentence length by normalis ing the average prison

sentence on the Austral ian average. The population of prisoners of non-Austral ian

nationality was transformed into a number of “equivalent Australians”. Because

prisoners of non-Australian nationality serve less t ime on average than do Australians,

the number of non-Australian prisoners expressed as “equivalent Australians” was

lower than the actual population of prisoners. The average non-Austral ian prisoner

therefore costs less on this measure.

Data on expenditure on correct ions comes from a Productivi ty Commission report . 10

This includes both commonwealth and state expenditure on prisons and community

corrections.

9 1997 Department of Employment, Education, Training and Youth Affairs Higher Education Funding for the

1998-2000 Triennium

10 Steering committee for the review of Commonwealth/State service provision: Report on Government

Services 2000 www.pc.gov.au/services/gsp/2000


APPENDIX A: SOCIAL WELFARE DETAILS

The table below shows the al location of benefi ts to output groups. Two output groups

were excluded from the analysis :

• 1.3 Child support – this is a relatively small output group for which no population

data was available. This group covers the shortfall in the child support account,

through which child support monies presumably pass from one parent to another.

The total output group accounted for $685,000.

• 2.2 Community support – this was a larger output group with $191.2 mil l ion of

expenditure. This group comprises disaster rel ief and similar payments that would

be expected to go to towns or other large groups. I t is assumed that this amount

would not vary with the nationality of the population; hence it could be al located

evenly per head. It has been excluded from the analysis, as i t was in the earlier

report. This does not affect the relative per capita cost of social welfare payments.


Table 7 Allocation of benefits by output groupOutput group Benefit types Expenditure

($ thousands)

1.1 Family assistance Family payment

Family tax payment

Farm household support

Double orphans pension

Parenting allowance

7,163,350

1.2 Youth and student support Austudy

Youth allowance

Youth training allowance

2,119,341

2.1 Housing support Rent assistance 1,045,822

3.1 Labour market assistance –

Newstart Newstart 5,649,619

Parenting Payment Parenting payment single

Parenting payment partnered

5,362,102

Other Newstart MAA

Mature age allowance

Mature age partner allowance

Bereavement allowance

Exceptional circumstances

Partner allowance

Special benefit

Widow allowance

1,367,383

3.2 Support for people with a disability Disability support pension

Mobility allowance

Sickness allowance

Wife pension

6,182,777

3.3 Support for carers Carer payment

Child disability allowance

551,183

3.4 Support for the aged Age pension

Pension deferred bonus

Widow Class B

Wife pension

13,928,216

3.5 Childcare support Childcare assistance

Sole parent pension

989,762

Notes: (1) Wife pension appears in the budget for both output groups 3.2 and 3.4. The population

was pro rated between the two output groups on the basis of the wife pension expenditure in each outputgroup. This should ensure that the cost of a wife pension is the same no matter where it was classified.

Source: Department of Family and Community Services


The table below breaks down the expenditure on social welfare benefits presented in

the body of the report into output groups. This al lows us to identify the main

differences in welfare receipt by place of birth and age.

Table 8 Per capita expenditure on social welfare benefits, 1998/99

By age and place of birth, Australian dollars

Place of birth

Age Reference

population

New Zealand Other

Total 1.1 Family assistance 261 445 361

1.2 Youth and student

support

26 86 78

1.3 Child support (1)

2.1 Housing support 53 87 60

2.2 Community support (2)

3.1 Labour market assistance

Newstart 214 389 310

Parenting payment 198 383 258

Other 102 52 136

3.2 Support for people with a

disability

289 216 429

3.3 Support for carers 23 25 25

3.4 Support for the aged 784 361 1,208

3.5 Childcare support 43 81 45

Total 1995 2,126 2,910

0-14 1.1 Family assistance 0 0 0


support

0 2 1

1.3 Child support


2.2 Community support


Newstart 0 0 0


Other 0 1 0


disability

0 0 0


3.4 Support for the aged 0 0 0


Total 0 5 2


Place of birth

Age Reference

population

New Zealand Other

15-64 1.1 Family assistance 343 532 463


support

35 102 101

1.3 Child support




Newstart 282 465 398


Other 130 62 149


disability

379 257 546


3.4 Support for the aged 178 189 683


Total 1742 2,287 2,819

65+ 1.1 Family assistance 2 9 7


support

0 0 0

1.3 Child support




Newstart 0 0 0


Other 18 3 119


disability

4 14 28


3.4 Support for the aged 3249 3,233 3,831


Total 3358 3,391 4,067

Notes: (1) There was no population data associated with this group so it was not included in the

analysis. The total expenditure was $685,000.

(2) This output group appears to have been allocated to communities that were experiencinghardship (for example associated with natural disaster relief). As there are likely to be a variety of

individuals in each population it was not allocated.

(3) Columns may not add due to rounding.Source: New Zealand Institute of Economic Research


Documents

The Opportunity Cost of Unrestricted Trans-Tasman Migration · Total opportunity cost 90m 79m 15-64 Per capita net benefit 4,572 6,385 2,864 Per capita opportunity cost 1,813 -1,708