This article was published on 21 April 2009. Some information may be out of date.

Sloppy thinking unfair to immigrants, 2-worker families

Every time the economy is looking iffy, people start saying, “Stop immigration,” or even, “Send home the immigrants.” Their reason: “They’re stealing our jobs.” This is sloppy economic thinking — not looking down the track at the consequences of a policy change.

Let’s look at two examples of this sloppy thinking, starting with immigration and jobs.

There are, of course, also moral issues here. Should we necessarily favour a New Zealander over someone born elsewhere — often in much less privileged circumstances?

But before we get to that argument, we should look more closely at whether immigrants do, in fact, hurt our job market.

Let’s say the government turned away Joe Immigrant — someone who would otherwise have taken a job that a New Zealander now gets. What does that mean?

Firstly, we probably have an inferior worker in the job. If Joe would have beaten the Kiwi into that position if he were in the country, chances are Joe would have been not just better, but much better at it — given that some employers tend to be prejudiced against immigrants.

Secondly, we miss out on Joe working, earning money, and spending that money in New Zealand. And what happens when Joe spends? Whenever he buys an item, that purchase contributes in a tiny way to the creation of the jobs of the people who made, distributed and sold the item. Without purchasers, they would be out of work.

If you stop to think about it, every person who takes a job must then create roughly one job. In an economy of 100 people, let’s say two thirds of them work. If that economy grows to a million people, we would still expect around two thirds to work. Each new person adds not only to the supply of labour but also to the demand for goods and services, and hence to the demand for labour.

True, some immigrants might save — rather than spend — more of their income than most New Zealanders. Or they might send a portion of their income back to their home country.

On the other hand, many immigrants — eager to do well in their new land — end up setting themselves up in business, hiring locals and creating not just one but several jobs.

Over all, immigrants probably help our employment situation rather than threaten it.

Another example of not considering the consequences of a policy change is pushing for New Zealanders to be taxed as families, rather than individuals.

People with this view might ask, “Why should a family with one partner earning $80,000 and the other at home looking after children pay higher tax than a family with two partners each earning $40,000?”

Often the arguers say they are “pro family”, and want to encourage mothers to stay home with children. They seem to ignore that fact that — assuming the government will still want the same total tax revenue — their proposal would raise taxes for the two-worker family.

Theoretically that might encourage one of the two partners to quit work and stay home. But that might not be feasible on lower incomes. Given the struggles that many two-worker families already have, with too little time and often too little money, adding to their tax burden is hardly pro-family.

What’s more, the two workers will realise they would pay lower tax if they were in two separate families. While it’s hard to imagine people splitting up for such reasons, in countries that tax families rather than individuals you certainly find couples who don’t marry because of tax. Again, that’s hardly pro-family.

The moral of these stories: Think beyond the first step.

Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it.