Case for a migration policy discriminating against entrants with above-average health costs

The recent case where parents with a child having Down's Syndrome were excluded from migrating permanently to Australia has aroused much emotion.  It is widely seen as discrimination against disabled people. It is nothing of the sort. It is discrimination against immigration applicants who may not provide net economic benefits to Australia if they are awarded migrant status.

The lifetime cost of supporting a Down's Syndrome child at a discount rate of 5% was  estimated 10 years ago at $235,000. With a public health system most of this cost will fall on the taxpayer.

Having new migrants usually increases the value of assets and non-wage incomes received by Australians so we derive economic gains from immigration. But Australia provides many public goods - social security benefits and health benefits are prominent examples.  There are incentive reasons to suppose that those with above-average health costs and poor employment prospects have incentives to migrate to Australia.  The restrictions placed on the immigration intake are those designed to screen against such 'adverse selection'.

I know that when I post these remarks that commentators will describe me as heartless in rejecting these children. But  I am not.  About 1 in 600 live births is a Down's Syndrome child so there are around 250,000 such children born per year around the world.  Any interest in improving the welfare of these children would be best addressed by intensifying pre-screening and treatment options rather than admitting a handful under our very limited migration quota.

Families who wish to bring Down's Syndrome children (or family with any preexisting health condition) to Australia should find it possible to guarantee private provision of all extra health costs.  But this is not feasible in Australia because 'Bleeding Heart' do-gooders will never allow enforcement of such a contract.  This lack of resolve means that people with pre-existing medical conditions will continue to be unfairly excluded from immigrant entry.  Being tough here - the alternative suggest - implies being reasonable and kind.

Immigration & Labor

One of the most despicable anti-Australian policies of the Hawke-Keating era was the devotion to bring many unskilled immigrants into Australia under the guise of the 'Family Migration' Program to bolster Labor's standing with the ethnic lobbies.  Whenever the global economy faltered the Labor Party pursued high immigration targets based on the 'family' program to bolster its re-election objectives. This earned the undying gratitude of the narrow range of families concerned (and those who spend much of their lives at CentreLink) but irritated the rest of the community who had to pay the taxes and got no immigration spinoffs. It undermined support for a legitimate immigration program based on securing well-educated immigrants who could get well-paid jobs and who could contribute intellectual and cultural talent to Australia.  Hawke - not conservative politicians - created the problem of Pauline Hanson.

Bringing migrants to Australia who convey skill externalities, who at least speak basic English and who do not despise the democratic values of a civilised society makes a lot more sense than turning Australia into an irreversible social experiment.  John Howard did a tremendous job of enlarging and reorienting the immigration program towards accepting those with skills.

Andrew Bolt makes some sensible criticisms of the current direction of Rudd-style migration policies.  I share his concern with Labor's apparent commitment to maintaining high levels of immigration as the economy looks likely to weaken.  This can only be done by expanding the import of unskilled workers and 'Family' migrants in the migration program. Rudd started off endorsing the skill orientation of the Howard immigration policies - although he lied his head off about the refugee program - which the Liberals had already expanded.

Bolt's observations remind us that, along with economic management, Labor cannot be trusted on immigration.  Their record is appalling.

If the families of unskilled immigrants living in Australia wish to be reunited with their loved ones CentreLink might well consider funding their tickets home.  Australia has zero obligation to accept family-based chain migration of the unskilled. None. In addition, seeking unskilled immigrants to meet short-term shortages is about as stupid and short-sighted a labor market program as you can imagine. Australia is an attractive destination and can insist on the best imnmigrant applicants available. Unfortunately admitting the riff-raff is just the sort of policy that will appeal to Labor since it expands a fair slab of their core constituency.

Refugees & the heartless Labor Party

I got this insight into traditional Labor insensitivity to refugees from Tim Blair. Blair points out that Rudd is doing his best to keep the insensitivity tradition alive. A nice quote from the still living treasure ‘Then-there-was-Gough’ in 1977:

"Any sovereign nation has the right to determine how it will exercise its compassion and how it will increase its population."

I think I have heard that sort of sentiment more recently – was it John Howard? Hard to believe since compared to his Labor predecessors Howard expanded both the refugee and migration intakes.

Rudd, when asked whether ‘Advance Australia Fair’ fills him with pride, said:

‘It does, and the reason it does is when you’ve got verses like ‘For those who come across the seas we’ve boundless plains to share’ that that should be the resolve of any Australian Government, unlike the one we replaced which seemed to pull up the shutters when it came to our proper international obligations, particularly to refugees who found themselves in real strife.

(Hat tip for the last quote to Andrew Bolt).

While his detractors might suggest that Rudd is knowingly lying his head off here I'd prefer to assume is just another instant of his compulsive grap for the glib phrase regardless of any issues of truth. Truth is secondary when those famous cliches start rolling off his tongue.

BTW, to be fair, Rudd has increased the skilled migration intake significantly. Probably reflects the fact that Aussies generally are more relaxed about having migrants – although only one-third want public support for preservation of ethnic cultural identity among migrants.

White flighting and the case for rethinking the migration & refugee program

Laurie Ferguson, parliamentary secretary for multicultural affairs, says that because Australian families are ‘white flighting’ - withdrawing their kids from public schools and placing them in church or private schools to avoid unsought impacts migrant communities on the schools - that more needs to be done to avoid children from places like Africa, who had grown up in refugee camps and had limited education, being heavily concentrated in some areas and schools.

A report by the NSW Secondary Principals Council in 2006 raised concerns about ‘white flight’ undermining the public education system and threatening social cohesion. It showed the percentage of Anglo-European students in public schools had decreased by a third in western NSW, by 42% in North Sydney and 37% in New England.

The need Ferguson thinks is to diversify the location of housing for refugees and humanitarian entrants.

A moment's reflection suggests this policy has no chance of success. Residents will just 'flight' further or relocate. Perhaps, instead, we need to rethink the current direction of the migration program to reduce the pace of migration from areas that are slow to gain acceptance in Australian communities.

Some weight in immigration policy should be placed on the attitudes of those communities accepting the migrants – it is wrong even in refugee policy – to consider only the needs of the immigrants.

This is quite apart from the fact that some migrants we are accepting seem to be completely inappropriate. Even in terms of general immigration and refugee policy the preferences of local residents matter.

My own preference is to switch the composition of our migrant intake towards accepting more migrants from Asia. The sons and daughters of these migrants do well in our schools and the families integrate well into local communities.

A strengthened citizenship test deserves strong support

I am a strong supporter of English language testing for migrants and of the principle of a citizenship test. An earlier post I made showed 85% of Australians support an English language test while in Germany, Britain and the US at least 80% of citizens support language plus citizenship tests. I am surprised the figures are in fact so low!

All Australians should speak English. Of course migrants may wish to retain and use their mother tongue – there are potential gains to Australia from them doing so - but English is and should be a single unifying national language. The advantages of having a universal means of communication based on our Anglo-Celtic origins are obvious. English is our national language and it is co-incidentally the international language of science and business.

Testing potential citizens can help ensure that migrants who seek citizenship understand that Australia has a history and a culture. It is also a surrogate for a very low-level general intelligence test if, as is the case with current Australian tests, all the answers to the test are pre-supplied in a short booklet.

Some migrants – and regrettably some resident Australians as well as those in the fashionable left - are openly derisive about the issues of Australian identity and culture. For example some migrants are openly dismissive of aboriginal culture. We cannot do much about post-school age residents in this regard but can certainly try to address ignorance among newcomers.

In addition people from dirt poor xenophobic societies, from totalitarian societies, from theocracies with zero tolerance for other religions (or for democracy) and from racist East Asian societies that have no immigration programs of their own, and who openly dismiss people of dark skin colour, need to appreciate that Australia rejects their primitive values. We have a better society than they had and don’t need a primitivist cultural injection. We cannot change the attitudes of migrants but can at least make them aware of some of the virtues Australia has through education.

Similar comments could be made about some migrant attitudes to women, to the natural environment and to recognising the possibility of a plurality of religious commitments. Questions on such issues might plausibly be included in an expanded and strengthened citizenship test.

The implicit assumption of extreme multiculturalists is that Australian culture is an empty slate into which migrants of any background, inject colour and content. This is a misleading paradigm. In terms of standards of living, respect for the environment, adherence to democratic values and tolerance Australia outperforms all our major migrant source countries – even countries like New Zealand and the UK. It certainly outperforms Asia, Eastern Europe or the Middle East.

Migrants coming to Australia here gain access to a range of tangible and intangible community assets – law and order, democracy, pre-paid infrastructure and social security entitlements – that deliver huge unpaid-for benefits to them. This is one of the reasons they come to live here.

There are economic gains to a recipient country from immigration but these gains are dwarfed by the economic and social gains migrants enjoy.

Australia should give away citizenship for nothing only if it sees citizenship as worth nothing. The early Fitzgerald Report into migration noted this and emphasised the case for assigning specific benefits to citizens that went beyond the right to vote.

It is eminently reasonable that Australia adheres to minimum standards for accepting migrants and for accepting the conversion of migrants into citizens. The minimum now is simply that migrants shall speak English and score 60% in a test based on a 46 page booklet on Australia’s history and culture. Australia offers too much in benefits to need to be, in any sense, a dumping ground, for the unintelligent and uninformed. The refugee and humanitarian program is an important possible exception to this view but the core of the migration program must emphasise the acceptance of skilled, intelligent people who understand what Australia is and what it has to offer.

But in fact more than 20% of those attempting the test cannot pass it or demonstrate reasonable English. The response suggested by some this week is to consider abolishing or modifying the test! My suggestion instead would be to review the migration entry guidelines and find out how such dim-witted test failures were ever granted entry. They must have lived in Australia for at least 4 years to be eligible to seek citizenship so it is not unreasonable that they have acquired something more than basic English language skills so that they are at the point where they can answer very simple questions from a 46 page book. These failures indicate a defect in the initial migrant selection process.

The citizenship and English language tests should be retained and, if anything, strengthened. It might for example include questions on environmental protection and the respect Australians have for the natural environment. We should not abolish the test simply because, in the past, we have made wrong immigrant entry decisions that has provided as with a cohort of migrants who are so stupid they cannot pass it. Hopefully too Mr Rudd will honour his pre-election promise to retain the test – this seems to be the case at present.

My concern is that mooting proposals of this sort is the first step by the left-dominated ethnic lobby to promote a return to the Hawke-Keating approach to migration policy. This involved almost all migrants being part of the so-called Family Program – based on the ‘family reunion’ idea*. These policies were used by that silver-haired blubberer and hypocrite Hawke to buy the ethnic vote in our large cities. This involved selling out the interests of Australia for the most modest political gains and was a total scandal. Labor showed, in the Hawke-Keating years, that it could not be trusted with immigration – it undermined confidence in the migration program, produced the Pauline Hansons of this world and generally reduced community acceptance of migrants.

Let us now stick with the far superior migration policies of the Coalition which emphasised skilled migration and which substantially increased the total migration intake. It was one of the better Coalition policy moves. It is essential to retain strong entry requirements for migrants coming to Australia and retain strong citizenship and English language requirements before granting citizenship.

Update: The Ethnic Communities Council has directly asked the Government to abolish the test. Minister Evans has apparently refused to do this. Good.

* The best way migrant families can prevent being disunited is for members to avoid emigration. Of course Australia has no obligation to re-unite those who voluntarily choose to split-up with those who originally did not emigrate.

Freeing up international trade with poor countries & wage inequality

Paul Krugman in today’s NYT summarises a widely-held assessment of the impact of trade with low wage countries on US growth and inequality. There is nothing radical about his claim - free trade with poor countries increases growth but increases wage inequality by driving down unskilled wages.

The same general message applies to effects on Australian labour markets of promoting freer trade here with poor countries.

The US now imports more manufactured goods from poor than from other advanced economies so most industrial trade is with countries that pay their workers much lower wages. This reduces the real wages of many and he claims ‘perhaps most' workers in the US. Krugman's claim: Trade between countries at very different levels of economic development tends to create large classes of losers as well as winners.

Workers with less formal education either see their jobs shipped overseas or find their wages driven down as other workers with similar qualifications crowd into their industries and look for employment to replace the jobs they lost to foreign competition. And lower prices of goods that these unskilled workers purchase are not, in themselves, sufficient compensation.

Textbook economics says that free trade normally makes a country richer – growth prospects are in aggregate improved - but it doesn’t say that it’s normally good for everyone. Still, when the effects of third-world exports on U.S. wages first became an issue in the 1990s, a number of economists looked at the data and concluded that any negative effects on US wages were modest. These effects may no longer be as modest as they were, because imports of manufactured goods from the third world have grown dramatically — from 2.5% of G.D.P. in 1990 to 6% in 2006.

And the biggest growth in imports has come from countries with very low wages. The original “newly industrializing economies” exporting manufactured goods — South Korea, Taiwan, Hong Kong and Singapore — paid wages that were 25% of US levels in 1990. Since then, the sources of imports have shifted to Mexico, where wages are only 11% of the U.S. level, and China, where they’re only 3-4%.

There are some qualifications. Many made-in-China goods contain components made in Japan and other high-wage economies. Still, there’s little doubt that the pressure of globalization on American wages has increased.

Krugman sums up:

‘So am I arguing for protectionism? No. Those who think that globalization is always and everywhere a bad thing are wrong. On the contrary, keeping world markets relatively open is crucial to the hopes of billions of people.

But I am arguing for an end to the finger-wagging, the accusation either of not understanding economics or of kowtowing to special interests that tends to be the editorial response to politicians who express scepticism about the benefits of free-trade agreements.

It’s often claimed that limits on trade benefit only a small number of Americans, while hurting the vast majority. That’s still true of things like the import quota on sugar. But when it comes to manufactured goods, it’s at least arguable that the reverse is true. The highly educated workers who clearly benefit from growing trade with third-world economies are a minority, greatly outnumbered by those who probably lose.

As I said, I’m not a protectionist. For the sake of the world as a whole, I hope that we respond to the trouble with trade not by shutting trade down, but by doing things like strengthening the social safety net. But those who are worried about trade have a point, and deserve some respect’. (my bold)

Greg Mankiw points out that Krugman’s argument is totally a priori and begs for empirical evidence – the bolded passages need to be demonstrated though Krugman’s overall claims seems intuitive. To this point empirical evidence supports the direction of the effects suggested by Krugman but not their extent. Moreover, Krugman’s claim is supported by evidence of low US wage growth. But this evidence is also consistent with the high immigration policies of low-skilled labour that the US has pursued. Some econometrics is called for here to back up the claims. (My own preference for Australia is to do as it did under the Howard Government and emphasise high-skilled migration which does not harm the less skilled but creates better job opportunities for these low-paid workers).

It is also clear that theory predicts that returns to inputs other than unskilled labour (namely skilled labour and capital) must be increased more than the losses to unskilled labour. Thus incomes overall do rise with freer trade it is just that low income earners lose out. Overall the US economy must enjoy uncompensated gains from improved opportunities to trade with countries such as China provided that China pays for all of its inputs*.

There are two types of policies I believe can ensure free trade benefits all:

1. One policy approach is to effect transfers which bring about the requisite compensations. Taxes on capital and on high income skilled labour need to be increased not cut, if all sections of the community are to benefit from freer trade with the developed world. It is a lesson Australia needs to remember. This is a variant of Krugman's policy to 'strengthen the social safety net'.

2.. Another approach is to try to provide an increasingly skilled workforce. This is a more positive policy which recognises that having people doing unskilled, unpleasant work in poorer countries creates opportunities for people in wealthier countries to do more skilled, creative work and to enjoy their lives even more. This can only occur however if private individuals are motivated to invest more in their own skills and human capital. On the demand side this does not seem to be the pattern at present – kids in Asia (and Asian migrants to developed countries) seem to have a much higher motivation to acquire skills than residents. On the supply side Australians seem to want a cheap education system heavily dependent on full-fee income Asian students and that is what they are getting. This needs to change.

Adopting these sorts of policies will enable countries to fully enjoy the benefits of free trade while limiting the distributional damages. Not addressing distributional concerns will ultimatetely undermine the case for free trade.

*Paul Samuelson in the link points out that if China 'steals' technology by importing educational services at less than the value of such services that the US can be immiserised by trade – its per capita income can fall. But even in this case Samuelson still supports free trade on the grounds that the losses from restricting trade will be more than the losses from the theft-induced immiserisation.

Now Labor even ‘me-toos’ Howard on ‘border protection’

That foul-mouthed, upstart of a former Prime Minister, Keating has wailed that ‘Australia has lost its moral compass under Howard’s rule’. Keating, has, in fact, never forgiven JWH for giving him a well-deserved kick in the rear end in 1996.

Among the Bankstown boy’s misrepresentations on this occasion:

Think about his tacit endorsement of Hanson's racism during his first government, his WASP-divined jihad against refugees — those wretched individuals who had enough faith in us to try to reach us in old tubs, while his wicked detention policy was presided over by that other psalm singer, Philip Ruddock. This is the John Howard the press gallery in Canberra went out of its way to sell to the public during 1995. The new-made person on immigration, not the old suburban, picket-fence racist of the 1980s, no, the enlightened unifier who now accepted Australia's ethnic diversity; the opposition leader who was going to maintain Keating Labor's social policies on industrial relations, on superannuation at 15%, on reconciliation, on native title, and on the unique labour market programs for the unemployed. (my bold)

Howard is no racist and he has expanded the immigration and refugee programs well beyond the levels provided by this guttersnipe. The press gallery didn’t defeat Keating in 1996 Keating - Australians just hated you – one of the most divisive leader Australia has had in the post-war period. It is a message you must learn to accept Paul. Your ‘labour market programs’ have been replaced and Australia now has its lowest unemployment for 33 years.

But will Labor offer an immigration alternative under Rudd? This is impossible to believe. They will just ‘me-too’ the Government on its record immigration intakes (or cut them slightly in response to the views of their anti-migration, trade union dominated front bench).

Consider what Mr Rudd said yesterday on turning back the ‘boat people’ queue jumpers:

Kevin Rudd has taken a tough line on border security, warning that a Labor Government will turn the boats back and deter asylum-seekers, using the threat of detention and the nation's close ties with Indonesia. (my bold)

In other words the Liberal policy that the Labor Party and its motley gang of quarter-brainers are grizzling about intensely is Labor policy. When I read this border protection policy expressed so starkly I almost fell over but I should not have been surprised – it has in fact been Labor policy for a decade. What grates are the assertions by people like Keating that Labor will restore what it considers to be a 'moral basis' to Australian politics. It won’t and Labor claims about morality are hypocrisy.

Border protection is one issue that has been repeatedly used as a means of attacking the Coalition. The Labor Party has clearly endorsed the policy it simultaneously criticises. To its masses of supporters this will be yet another instance of Kevin Rudd avoiding 'wedge politics' - avoiding stating what he believes to gain power. If that is so then Rudd is a liar rather than a hypocrite.

Rethinking the refugee & humanitarian program

Mr. Kevin Andrews has initiated a discussion on the way entrants to Australia are selected via the refugee and humanitarian (r&h) program. This is separate part of Australia’s migration program – the r&h program took in around 13,000 people over 2006/07.

Andrews at one point suggests lowering entry levels from Africa on the grounds that migrants from these areas had problems settling in Australia, were more likely to be involved in crime and so on. These increased proclivities it is claimed stem from difficult upbringings in countries such as the Sudan.

Applications for entry via the r&h program vastly exceed any plausible quota that will ever be agreed to in Australia. Thus selectivity must be practised. The issue is whether selectivity should be practised on the basis of migrant need or suitability for resettlement in Australia.

Those left-wingers who see Australia as a social planning experiment conducted by pop sociologists and political scientists – rather than the home to Australian people - put all weight on the needs of those seeking to migrate (Pravda in Melbourne of course holds this view) whereas I think the welfare of the recipient community also needs to be a factor. On this basis it seems to me that entry should reflect both refugee need and resettlement prospects. Not exclusively one or the other.

On this basis switching the direction of the intake to accepting more Asian refugees – perhaps those displaced by the current events in Burma – is an option worth considering. I say it is an option because migrants from South East Asia seem to have integrated well into the Australian community, built good businesses and for the most part become exemplary citizens. Moreover, there are issues of economic self-interest in having communities of such migrants in Australia as well as reduced resettlement costs given existing family and community ties such people have here.

One major issue in evaluating this option is that hard data on the resettlement and crime costs associated with different groups of migrants are hard to come by. Almost all claims reflect anecdote rather than careful study. Indeed one could imagine the left wing savagery that would emerge were an academic report to be published showing a particular group faced higher costs.

Immigration authorities over the years, and groups such as the former Bureau of Immigration Research, have refused to carry out such studies. Yet it does seem to me that there are problems with the resettlement experiences of those coming from Africa. This is made clear when one reads accounts from those supporting such migrations.

Toby Hall writing in The Age this morning criticises the ‘stories’ and untruths’ associated with African migrants and the proclivity to ‘demonise’ them but then goes on to write:

It's true that these groups face a unique set of challenges in this country, but we knew that would be the case, and their issues have either gone unaddressed, or been exacerbated, because of poor planning and a lack of services.

Victoria is the second-most popular settlement area for newly arrived communities from the Horn of Africa, receiving about 24 per cent of the new settlers. In 2004-05, Sudanese refugees were the largest component of Australia's humanitarian program, and have predominantly settled in Melbourne.

About half of the arrivals are children and young people with poor literacy and numeracy. Some have not been to school at all. Some have spent years in camps. Many have suffered abuse. Their families have typically experienced torture and trauma, the loss of relatives and spent considerable time in refugee camps.

As a result of the violence, many families are headed by single mothers who are themselves victims of sexual assault and abuse.

As families wrestle with the massive cultural differences in Australia, a new set of tensions and challenges have arisen. Young arrivals rub up against traditionally minded parents as they take on Western values and culture to fit in at their schools'.

Hall then goes on to write about the need to spend more public money resettling such people - further confirming that there is an issue of concern here.

If one places weight not only on the welfare of immigrants but also on their host community then it is reasonable to consider options which more selectively target high resettlement cost groups and put increased weight instead on settlers who better satisfy the other relevant group of people whose welfare needs to be considered here namely resident Australians.

Doctor Do No Harm

The arrest of an Indian doctor (Mohammed Haneef) based in Queensland in connection with the attempted terrorist bombings in Britain is a fearful development for Australia. This takes the number of arrested doctors to 6 in total. As I write another doctor is being interviewed in Queensland although as yet he has not been arrested.

The arrest strengthens my conviction that a terrorist attack within Australia is inevitable. While the probability of any individual being killed or injured is low the damage to Australian society will be significant (though contained). To the people harmed it will be little comfort that they were the unlucky ones.

Haneef came to Australia on a 457 visa. Screening procedures for these visas clearly should be reviewed and attention directed to what are clearly high risk categories. It would be prudent to tighten eligibility for entry into Australia under this class of visa. Skill shortages need to give way to more important considerations. Most importantly, are security concerns being overlooked when supposedly skilled potential migrants are being considered for entry?

As a matter of long-term planning I am assuming that the most stringent eligibility restrictions are being applied to the regular immigration program and the refugee/humanitarian program. We are admitting 144,000 under the regular program and 13,000 under the humanitarian program in 2006/07. A low error rate here in detecting terrorists here, if maintained over a number of years, would significantly augment supplies of local terrorists and leave us in the position of Britain.

Professor Max Corden on Immigration

I am attending the Dynamics, Economic Growth and International Trade Conference organised by the Asian Economics Centre, University of Melbourne. Apart from participating in a panel on Climate Change and Economic Growth I am also providing a brief commentary on the contributions to the economics of immigration of one of Australia's most important contributors to international economics, Professor W. Max Corden. My draft remarks are below - reader comments are very welcome.

Max Corden has intersected with immigration debates in three ways:

(i) Max is an immigrant who arrived in Australia as a young boy in 1939. He is also someone who has spent a lot of time living outside Australia both in the UK and the United States as he reveals in his discussion with William Coleman in The Economic Record in December 2006.
This means that Max, who has always had an applied interest in the Australian economy, has looked at issues both from the viewpoint of an insider and an outsider. His attitudes to immigration I would characterise as ‘radically liberal’ and I think that this partly reflects Max’s understanding of sound economic theory which I believe points in this liberal direction. But Max’s liberal and tolerant attitudes towards immigrants and different cultures also reflect his background.

(ii) The second intersection that Max has had with immigration discussions arose from his interactions with Harry Johnson and James Meade (his PhD thesis supervisor) while Max was a student at the LSE. Harry Johnson was interested in the links between economic expansion (including expansion caused by population growth) on international trade and the terms of trade. Drawing on some thinking of Meade, Max provided an ingenious, geometrical framework for analysing the effects of a wide range of growth shocks on the terms of trade and the pattern on trade (Corden (1956)).

Max emphasised that both the production and demand consequences of such shocks must be assessed. For fixed terms of trade the production effects of factor endowment changes can be assessed via Rybczynski ‘s (1955) analysis. This suggested that the increased endowment of a scarce factor (specifically, labour in Australia) would lead to an expansion of the sector that used that input intensively (the labour-using, import-competing, manufacturing sector in Australia) and to a contraction in other export-oriented sectors (primarily, in Australia, agriculture). This would create an excess world demand for agricultural output thereby suggesting an improvement in the Australian terms of trade. Max’s key insight was that these effects could potentially be overruled if the growth was also associated with particular changes in consumer preferences. For example suppose the increase in labour supplies arose from immigration, and the preferences of the immigrant workers were strongly biased towards manufactures. These latter effects need to be very strong indeed to overrule the production effects, but, if they are, the terms-of-trade effects suggested on the production side can be reversed and these terms of trade can in fact deteriorate.

It is worth noting however that it is these perverse demand effects that are relied on in settings, such as in the Monash model and in the recent use of this model by the Productivity Commission (2006) to generate the startling and, in my view incorrect conclusion, that immigration of even skilled migrants generates unfavourable effects on the terms of trade which adversely impacts on the economic welfare of incumbent residents and their progeny (Clarke (2007)).

Max applied this analysis to studying the effects of population increase on a country’s trade in a broader setting in The Economic Record (Corden (1955)). Max examined the arguments that immigration might increase unemployment, create internal inflation and cause deterioration in the balance of payments. The argument he adopted inconsistently followed the style of James Meade. Like Meade’s total utility maximisation rule for determining optimal population – the optimal immigration intake for Max occurred once the fall in consumption per head that was a consequence of having more people was no longer compensated for by the political and other non-economic advantages of immigration. The slight inconsistency in Max’s use of this criterion is that, at one stage, he writes of determining optimal population in terms of maximising the average product of labour which I think Meade would not have done. Maximising the average product of labour leads to average utilitarian rules for optimal population of the type discussed by John Pitchford (1974) which focus naturally on ‘scale economies’ and ‘diseconomies’ issues.

Max is modest about these early papers but I think they initiated a valuable discussion that raised most of the key issues in analysing the economic implications of increasing human populations: Specifically Max discusses effects on fixed resource stocks, on incentives to invest and most importantly on the composition of international trade. Max makes the interesting insight that opening an economy up to trade reduces the size of the optimal population although, of course, living standards will be higher as the economy opens up. This insight is linked to the Brigden Committee’s (1929) famous ‘Australian case for protection’ which argued that the optimal population is lower if tariff protection is removed because protection will defend the level of real wages.

(iii) The third recognisable intersection that Max has made with contemporary immigration debates. I have enjoyed conversations with Max where he displays wide knowledge of the social and cultural impacts of immigration on settler countries like Australia and the United States. Max remains interested in immigration economics – as evidenced by his 2003 Richard Snape Lecture (Corden (2003)) but he is also keenly interested in broader assimilation and cultural diversity issues.

In the Snape Lecture Max assesses contemporary Australian immigration debates. He argues that the sensible population options for Australia are for moderate intakes of 100,000 migrants per year leading to a population of about 26 million by 2050 or for a more ‘radical’ policy that would raise intakes to 200,000 thereby leading to a population of 40 million by 2081. Max prefers the more expansionary option but argues that it is unlikely to be realised because of ‘the conservative approach to immigration policy by the public and the pragmatic approach by government’.

I wish to close by questioning this presumption. Many things are changing in Australia’s immigration environment. The Coalition Parties in Australia have substantially increased the size of the Australian immigration intake – the 2006/07 program involves up to 144,000 places while the Humanitarian Program has an intake of up to 13,000 (Fact Sheet 20 (2007)). The reasons for this expansion relate as much to macroeconomic conditions in the Australian economy as ideology. Australia is approaching the 17th consecutive year of its economic expansion and is enjoying low inflation, low unemployment and strong economic growth.

Moreover, we have substantially reduced the family component of the migration program thereby diffusing community concerns that the program was become interest-group driven. About two-thirds of those entering as migrants during 2006/07 did so because of the work or business skills they had. The rigidity in labour markets has been reduced through the Hawke-Keating government’s promotion of enterprise bargaining and later reforms.

With low unemployment concerns about the unemployment consequences of immigration fade. Indeed immigration is increasingly being seen as a means of containing demand-side pressures in the economy that emerge because of the unparalleled growth in commodity demands from countries such as China. In addition, since the migration intake is primarily oriented to accepting those with skills, concerns raised by earlier critics of the program (discussed in Lloyd (1993)), that sectional interest groups were driving immigration have faded. The shrill voices have become less strident.

If unemployment continues to it might yet be the case that Max’s enthusiasm for a much expanded immigration program will gain more general support.

References

J.B. Brigden, D.B. Copland, E.C. Dyason, L.F. Giblin & C.H. Wickens, The Australian Tariff: An Economic Inquiry, Melbourne University Press, Melbourne , 1929.

H. Clarke, “Comment on James Giesecke: The Economic Impact of a General Increase in Skilled Migration”, People and Place, 15, 2, 2007, 12-14.

W. Coleman, ‘A Conversation with Max Corden’ The Economic Record, December 2006, 379-395.

W. M. Corden, ‘Economic Expansion and International Trade: A Geometric Approach’, Oxford Economic Papers, June 1956, 223-228.

W.M. Corden, ’40 Million Aussies? The Immigration Debate Revisited’, Inaugural Richard Snape Lecture, Productivity Commission, 30 October 2003.

W.M. Corden, ‘The Economic Limits to Population Increase’, The Economic Record, November 1955, 242-260.

Department of Immigration and Citizenship, Australian Immigration Fact Sheet, Migration Program Planning Levels, 20, June 2007.

P.J. Lloyd, ‘The Political Economy of Immigration’ in J.J. Jupp & M. Kabala (eds), The Politics of Australian Immigration, Bureau of Immigration Research, AGPS, Canberra, 1993.

J.E. Meade, The Theory of International Economic Policy, vol 2, Trade and Welfare, Oxford University Press, London, 1955.

J.D. Pitchford, Population in Economic Growth, North Holland, Amsterdam 1974.

Productivity Commission, Economic Impacts of Migration and Population Growth, Productivity Commission, Final Report, Melbourne, 2006.

T.M. Rybczynski, ‘Factor Endowment and Relative Commodity Prices’, Economica, November, 1955.

Don't admit immigrants with HIV to Australia

John Howard reiterated Government policy when he said that those with HIV should not be admitted as migrants to Australia.

Under Australia's existing immigration arrangements, all people over the age of 15 who apply for permanent residence are tested for HIV. People under 15 are tested if either of their parents is HIV-positive, if they are an applicant for an adoption or child visa or an unaccompanied humanitarian visa, or if there are clinical indications or a history of possible infection. Temporary visa applicants are screened for HIV if they are seeking to work as a doctor, dentist or nurse.

Permanent visa applicants with a medical condition are automatically knocked back if the lifetime cost of their treatment exceeds $21,000.

The Immigration Department estimates the lifetime cost of an HIV-positive person is $240,000 to $250,000. In 2005-06, HIV-positive people accounted for 48% of requests for health waivers in cases where lifetime medical costs exceeded $200,000.

So Australia is being used by non-resident HIV sufferers who gain a health waver as a way of paying for the medical costs of their HIV infection. Australian Federation of AIDS Organisations spokesman Don Baxter said people with HIV ‘contribute enormously to Australia's benefit’. They would want to be contributing a lot given the infection risks they pose in the Australian community and the huge health costs they pose on us.

Australia’s HIV infection rate has soared since 1998. It would be negligent of any government to admit to Australia immigrants it knew was suffering from HIV. Do not admit them and do not give health waivers to those who come here with HIV.

One claim cited in the Arab Times is that Australia might be guilty of discrimination. It is discrimination but what a great idea discrimination in this instance. Australian citizens with HIV should receive normal health assistance. Those with HIV who live elsewhere should continue to live elsewhere. Australians who want to live with their HIV-infected partner in Australia should post a non-refundable $245,000 bond with the Commonwealth Government covering their partner’s heath costs attributable to HIV/AIDS. They should also be liable for any damage costs incurred by the partner as a consequence of spreading the HIV virus.

The claim that immigrants provide only a small component of HIV cases in Australia is not an argument for admitting those who are affected by HIV. Its an argument shoewing that the costs of excluding those with a serious disease that works against our national interest HIV is a small one to those excluded.

Hakeem Hakeem & limits to compassion

Hakeem Hakeem has been sentenced to 24 years jail for the violent rape of a 63 year old woman and for raping and assaulting 3 teenagers all in a period of 3 days. Before the attacks he had been chroming and using amphetamines. The 63 year-old woman he attacked spent more than a week in hospital recovering from fractures to her eye socket, nose and cheek that she suffered during the savage beating.

Hakeem entered Australia only a month before the attacks as a refugee from Sudan. In his defence it was argued that Hakeem was young and had experienced violence in both Sudan and Egypt. He had also been forced to leave his infant son and girlfriend behind in Egypt and apparently didn’t want to be in Australia.

Immigration Minister Kevin Andrews has ordered an investigation into how the troubled Sudanese refugee was allowed to settle in Australia and will consider deporting him after the 21-year-old has served his time in jail.

I am interested in the outcome of this inquiry. The unfortunate Hakeem has had a miserable life but granting him refugee status was a mistake. Compassion has been stretched too far. Noone develops a drug dependence in a month. As Neil Mitchell points out there are problems in the Sudanese community in Australia that cannot be glossed over by appealing to their difficult circumstances back in the Sudan. As Mitchell continues:

‘There is now increasing evidence of a culture of violence imported to this country with some refugees. There is no point dodging around that fact for fear of being called racist’.

Noble Park riots

Noble Park is 30 km south east of Melbourne’s CBD. It’s a rapidly urbanizing part of Melbourne with fairly cheap land and a high migrant population. During the 1980s it had one of the most notorious street gangs in Melbourne. Last Friday night it had a fully-fledged riot with a clearly criminal element supported by a mindless mob.

1500 drag racing morons and their brainless supporters (some with kids in prams) rioted, threw flares and rocks, at a hopelessly inadequate police response, and smashed up property including a video store. The rioters were proud of their achievements and put video clips of their rioting on YouTube – see here and particularly here.

Police, of course, were quick to use these clips to identify these bright sparks. 5 offenders were arrested at the site but hopefully a lot more arrests will come.

Some of the YouTube clips have been taken down by those who had posted them – but the police already have them. In addition the TV stations have their own video footage and the Herald Sun has run photos of the louts trashing the video store on their web page. This might help to catch them.

You can wail on about disadvantaged youth and so on but zero tolerance is called for here. The drag racers could kill themselves or – more significantly – innocent parties. And rioters who smash up shops and attack police are an aberration in Australia that is intolerable. Take back the streets.

85% support English language citizenship test

Despite widespread criticism of the proposed citizenship pledge and the test of knowledge of Australia to be posed in English The Australian newspaper reports that 85% of Australians support this test. My surprise is that the figure is so low.

The release of Cabinet Papers yesterday also shows that Liberal ex-Prime Minister, Malcolm Fraser, can be brought to account for what some euphemistically refer to as 'problems of multiculturalism' rampant among Lebanese Muslim communities in south-west Sydney. Fraser allowed into Australia, in the late 1970s, refugee migrants that then immigration authorities described as lacking requisite qualities for integration - many were illiterate, unskilled and had questionable characters (and even personal hygiene).

There were warnings at the time that terrorists and criminals could be seeking to enter Australia. The then Immigration Minister, Michael MacKellar, stated that the Lebanese refugee program was 'scraping the bottom of the barrel with regard to quality'. Even the local Lebanese community indicated they would not oppose more stringent requirements on Lebanese seeking entry.

The high-unemployment, high-crime communities established in Sydney’s south-west and the associated social problems are attributable to Fraser’s poor decisions. These migrants, and their progeny, are the same minority who cry out for jihad, participate in riots at Cronulla and generally hold in contempt Australia's democracy. As John Howard has stated, they have ‘attitudes utterly antagonistic to our kind of society’.

Fraser is a patrician hypocrite, loved by the left, who damns Howard for inducing divisiveness.

But Howard has increased the immigration intake and refocused it to include skilled migrants who add economically and culturally to Australia. It was Fraser’s inept policies, not John Howard, that has led to the fiasco in Sydney’s south-west.

Hamilton on immigration

Clive Hamilton has a piece on congestion in Sydney and its implications for immigration policy. Responses came from Jason Soon at Catallaxy and Phil at LP.

I agree with Hamilton that Australia should be seeking quality immigrants with good moral character and not riff-raff who don’t share our values. I also agree that congestion is a serious cost to our society – although it is a cost that tends to be exaggerated – figures for Melbourne of up to $3 billion annually are bandied around by groups, such as the Productivity Commission, when the correct figure is closer to $700 million. But I disagree with Hamilton’s conclusion that we necessarily cannot have more migrants without reducing our living standards because of congestion effects – we can if we price the congestion away. This is a simple proposition that I propounded with Kwang Ng from Monash University more than 10 years ago (Harry Clarke & Yew-Kwang Ng, "Population Growth and the Benefits From Optimally Priced Externalities", Australian Economic Papers, June 1995, pp. 113-119).

We are better off with efficient pricing of un-priced resources such as roads (with or without immigration) provided transaction costs of pricing are not excessive - and with some qualifications they probably are not. We also get welfare gains from immigration provided all resources subject to external costs are priced. Indeed efficient pricing amplifies the benefits we get from migration.

But immigration which increases congestion costs enough because the congestion is un-priced will not make preexisting people better-off – they will necessarily be worse-off. In this case Hamilton is correct. Moreover he is correct more generally that we will lose with immigration if natural resources (such as water) are under-priced enough.

The inferences by Jason Soon and moral guardian Skepticlawyer in their comments that Hamilton’s observations are borderline racist are offensive and I tire of this type of attempt to muzzle the immigration debate. The argument suggests that if, as an Australian, one seeks any limitation on migration to Australia – the country comprising the citizens of Australia – you are a 'racist' who should be excluded from any civilized debate. That piece of dodgy logic has seen better days - particularly here when Hamilton made no reference to ethnicity.

To be clear. Hamilton’s views are correct if road pricing is ruled out and this is not a bizarre position. No city in the world, other than Singapore, has ever introduced comprehensive road pricing and many countries under-price water and other natural resources. Moreover, it is not racist to say that we prefer immigrants with good moral character who share our values – most Australians do.

Phil gets the main point about pricing correct (to be fair Jason recognizes this) and it is certainly true that cities much larger than Sydney have much appeal. But some commentators to Phil’s post are effectively asserting that Australia has no right to determine who we admit as migrants at all. As I say this seems to me such a ridiculous claim that I would not bother responding to it except that it gets raised so frequently in immigration debates. As Australians we have every right to decide who comes here – open door immigration policies, no way – most Australians want active policies to guide our immigration program and ideologues on the left or libertarian right of politics won’t change this.

Citizenship test & affirmation of values

Prime Minister Howard’s citizenship test requiring those seeking citizenship to demonstrate an understanding of English and to pass a test on Australian history, culture and values is a sensible way of promoting integration and of signaling to those electing to become Australians that our society is not an empty slate – a cultural void without history – that is always enriched by having greater cultural diversity. It isn’t – some forms of diversity and some cultural values we should not accept.

Australia is a remarkable country with high living standards, a soundly-functioning democracy, high levels of gender equality and low levels of religious and political conflict. These are not negligible achievements and need to be appreciated by migrants coming from cultures without such achievements. Moreover, Australia does have a history of white settlement that has played an important role in conditioning the national character. Australia’s aboriginal history, extending back 40,000 years or more, is one of the oldest on earth and needs to be appreciated by all those who live here.

Likewise the need to confirm a signed agreement to adhere to the Australian way of life and to Australian values is a useful way of signaling to migrants that Australian residents do place value on our cultural successes. People who come from cultures that are thousands of years old but who still see women as pieces of meat and those who see it as reasonable to kill women seeking to gain an education or to kill those who seek to practice their own religion are not welcome here whatever the cultural ‘enrichment’ they can transfer. Nor do we want migrants in Australia who are prepared to use violence to thwart Australian government policies, including our foreign policies.

Labor’s immigration spokesperson, Tony Bourke, almost predictably described the proposed test (without having seen it) as a ‘trivia night’ test. Like other Labor politicians (and those on the left) he apparently sees Australian history and culture as a blank slate and hence as ‘trivia’.

The citizenship test and the signed affirmation can be criticized – it will not screen out the religious nuts and fanatics who can deceive their way around the test and affirmation - but it will signal to them the Australian intent to affirm certain values.

There is the legitimate claim that some useful people will not seek citizenship because of the test. This is partly true because citizenship in many cases – for example with respect to British citizens living in Australia - does not increase advantage over simple residency. This is another policy failure that needs to be addressed. But the citizenship test and the affirmation fill an important gap in our citizenship procedures.

Migration policy & the mufti

It is inevitable than the remarks of the 'cat meat' Mufti will reignite Australian migration debates - Michael Baume has made a start in today's AFR (subscription only). The issue of changes in Australian migration laws are already being recognised in the Middle East and are implicit in the remarks of Pru Goward that the Mufti should be deported - as a matter of law he probably cannot be.

The difficulty is that the Mufti and his supporters hold basic values that diverge from those of most Australians. Leftwing skeptics and the multiculturalists will make foolish remarks about the absence of real Australian values beyond booze and a bet. I have never agreed with these foolish caricatures of our national identity - at least Australia has a highly prosperous society remarkably free of political violence and civil strife.

More intelligent commentators will focus on the difficulties of characterising some of the less tangible Australian social values and I agree it isn't easy. But one thing is certain - most Australians completely reject the contemptible views of relations between men and women (as well as the intolerant social values) espoused by the Mufti. We don't support intolerant religious views and support for Jihadism and terrorism.

John Stone stated recently in an issue of Quadrant, in an article on immigration policy, that once policy-makers find that they have dug themselves into a hole they should at least stop digging. Its time to think seriously about the types of migrants we accept. The unrestrained pursuit of diversity via multiculturalism policies is failing.

This is not my kneejerk reaction to recent events concerning the Mufti although his statements do make me focus on the migrant selection issue. For more than a decade I have argued that Australia has an absolute right to determine what sorts of people are accepted here as migrants. Our lands are not an international common property resource that is at the disposal of social romantics and multiculturalists. Our society is not a social experiment.

People who clearly support international terrorism, who show open contempt for democracy and for core Australian values of tolerance and respect for women, should not be welcome in this country. Let us end self-destructive immigration policies that threaten our long-term social cohesion and which populate our country with people whose values most of us reject. Let us think seriously about being more selective at the immigration gate.