Every so often the old bastard makes sense. Sadly, he can’t do so with any frequency because Domain profits come with a fatwa against criticism of immigration .
The productivity of labour hasn’t increased much because business hasn’t been spending much on labour-saving equipment. Mystery solved.
Almost to a person, economists are great believers in high rates of immigration. Immigration, they keep telling us, is great for economic growth. It’s true. There’s no easier way to grow an economy than to increase the number of people in it.
Businesses love high immigration because it gives them a bigger market to sell to. But whether that kind of economic growth leaves the rest of us better off is a different matter. As all the economists were taught at uni but keep forgetting to mention to the punters, the claim that immigration raises our material standard of living – which is the oft-stated benefit of economic growth – comes with a big proviso.
Which is? Productivity. If you get more people, but fail to provide them with the same capital equipment as the rest of us have – extra machines for the extra workers, extra houses for the extra families, and extra roads, public transport, schools and hospitals for the extra families – everyone’s standard of living goes down, not up.
In economists’ jargon, you have to ensure immigration doesn’t cause a decline in the “capital-to-labour ratio”. As well as the spending on “capital deepening” needed to raise our productivity, you also need spending on “capital widening” merely to stop our productivity worsening.
Guess what? We’ve had years of high immigration without the increased capital spending to go with it. Part of the problem is that the level of government with control over immigration, the feds, is not the level of government with responsibility for ensuring adequate additional investment in public infrastructure, the states.
As for the additional investment in machines to cover the needs of the bigger workforce, that’s down to the nation’s businesses. Guess what? They haven’t bothered. Our ratio of capital to labour is actually a little lower than it was a decade ago.
…So why have our businesses done so little to improve their productivity? Rod Sims, former boss of the Australian Competition and Consumer Commission, answers the last part of the puzzle.
He says that increasing productivity is just one way for a business to increase its profits. I think our guys have found it much easier to increase their profits by using legal loopholes such as casualisation and labour hire to screw down their wage costs.
The mass immigration economic model is awful:
- It kills wage growth.
- It kills productivity.
- It boosts profits anyway by growing the market size thus stalling business investment.
- It kills reform because pollies point to GDP as evidence everything is good, even as GDP per capita stalls and falls.
- It crush loads all public services and goods, including the environment.
It is a rentier model of exploitative capitalism that hollows out living standards at a speed that is politically manageable but over a few cycles is calamitous.
MB has argued this for a decade now. Gerard Minack produced the key charts long ago.
In short, the mass immigration economic model is corrupt and designed to do you harm as it fattens select bosses.
