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Migration Trends & Outlook 2008/09

2 IMPACT OF THE GLOBAL ECONOMIC SLOWDOWN ON MIGRATION

2.1 Introduction

The past 12 months have been marked by rapid economic change. For migration, the global economic slowdown has generally had the effect of reversing many of the trends seen in recent years. The OECD reports that more than 30 million jobs were created in the 5 years from 2003 to 2007. The contribution of migrant labour to this employment growth was significant.^[3] The economic downturn has seen significant reductions in the flows of foreign workers to some countries as employment has fallen and governments look to reduce the flow of migrant labour.

Governments in countries with growing unemployment have used a range of immigration policy responses to reduce discretionary migrant flows.^[4] New Zealand's market-driven policies have meant discretionary migrant flows have decreased without significant policy intervention. Unlike many OECD countries, New Zealand has relatively low levels of non-discretionary migration. This means the number of migrants coming to work and live permanently in New Zealand can be managed without the interventions many countries have taken.

This chapter describes the impacts of the economic downturn on migration in OECD countries; the policy responses in light of the economic environment; and, more specifically, the impacts on migration trends in New Zealand. The discussion reflects the information that was available up to August 2009.

2.2 Impact on migration

The economic downturn has had a significant impact on migration globally-on the dynamics of the demand and supply of migrants, the unemployment rates of migrants, and the immigration policy responses by governments. The OECD's latest report on international migration states that the economic slowdown has reduced the demand for labour migration in almost all OECD countries.^[5]

The global economic recession has put a halt to, and in some cases reversed, the sustained employment growth that OECD countries have experienced in recent years. As economic growth has faltered, labour market conditions have deteriorated and unemployment has risen dramatically, which in some countries has affected migrants disproportionately.

In New Zealand, unemployment has risen rapidly from a 22-year low of 3.5 percent in the December 2007 quarter to 6.0 percent in the June 2009 quarter. A 1.0 percentage point increase over the June 2009 quarter was the largest since 1988.^[6] It is widely predicted that unemployment will continue to increase into 2010.^[7] As with other OECD countries, workers in some sectors of the economy have been affected much more than others.

Internationally, there have been widespread job losses in the construction sector and the manufacturing, retail trade, and finance industries. Migrants have been hard-hit where their labour is concentrated in these industries or has contributed to the growth of these sectors. For example, the construction sectors in Spain and Ireland have been boosted by migrant labour in recent years. The economic downturn and resulting impact on this sector have caused a substantial loss of job opportunities for these migrants.^[8]

In New Zealand, employment in the agricultural sector has also suffered as commodity prices have fallen.^[9] Business confidence in the agricultural sector remains low, and profit expectations are well below other sectors. Many expect unemployment to rise.^[10]

However, New Zealand's unemployment rate remains relatively low compared with other OECD countries. New Zealand ranked the ninth lowest in the OECD in June 2009. Figure 2.1 shows unemployment rates by country in June 2008 and June 2009. It shows, for example, that between June 2008 and June 2009, the unemployment rate in New Zealand increased 2.0 percentage points to 6.0 percent. The average unemployment rate in the OECD increased 2.5 percentage points over the same period, to reach 8.3 percent.

Figure 2. 1 Harmonised unemployment rates in selected OECD countries, June 2008 and June 2009

Source: OECD Key Economic Indicators, harmonised unemployment rate.

Data table for Figure 2.1

The OECD predicts labour market conditions will worsen. Projections in March 2009 showed unemployment rates in the OECD will increase in 2009 and 2010 to reach an average of 10.0 percent. This number equates to about 56 million people unemployed-the deepest and most widespread recession in the OECD for more than 50 years.^[11]

2.3 Immigration flows and policy responses

Rising unemployment has put pressure on governments to limit the inflow of foreign workers.^[12] As competition for jobs has increased, many OECD countries have responded by putting in place mechanisms to reduce temporary flows of migrant workers. The combination of falling demand and government intervention has seen the flow of temporary workers reduce in some countries.

In the United States, the number of migrants issued the H-1B visa (the main employment-related visa for temporary entry) decreased by 16 percent in 2008. Both the United Kingdom and Ireland have experienced substantially fewer new entries from the new members of the European Union (EU8 countries).^[13]

In Australia, employers have made fewer applications for temporary skilled workers (down 11 percent in the year to February 2009). Declines were most pronounced in construction, mining, and manufacturing.^[14] In New Zealand, the number of people granted a temporary work permit in 2008/09 through Essential Skills and seasonal work policies was 6 percent lower than in the previous year (see section 4.2).

Changes made to immigration policies in New Zealand, Australia, Canada, and the United Kingdom have focused on adjusting numerical limits; strengthening the labour-market test and revising occupational-shortage lists; and limiting possibilities for migrants to change status or renew permits. Some other countries have offered incentives for migrants to return home or applied conditions to non-discretionary flows.^[15]

Table 2.1 gives examples of the types of policy changes different countries have made. New Zealand's immigration policy responses are discussed later in this chapter.

Table 2.1: Policy changes made by different countries

Policy change		Country
Temporary migration	Adjusting numerical limits	Australia, Canada, EU15 countries, Italy, South Korea, Spain
	Limiting possibilities to change/renew permits	Canada, Ireland, Italy, Malaysia, Spain, United Kingdom, United States
	Promoting return migration	Czech Republic, Japan, Spain
	Strengthening labour market tests/reviewing shortage lists	New Zealand, Australia, Canada, Ireland, Italy, Spain, Sweden, United Kingdom, United States
	Changing permanent migration policy	Australia, Spain, United Kingdom, Italy

2.3.1 Changes to Australian immigration policies

In Australia, the permanent residence programme has been adjusted. Within the overall programme, the cap for skilled permanent migrants was increased to 133,500 in 2008/09, but was later reduced to 115,000.^[16] In July 2009, the target was further reduced to 108,100 for 2009/10, returning the planning level to the target set in 2007/08.^[17]

Australia also revised its occupational shortage lists. Most trade skills such as carpenters, welders, and plumbers were removed from the Critical Skills List.^{[18] [19]} The remaining occupations are mostly health and engineering occupations. The occupational shortage list for sponsorship under the 457 visa program was revised in May 2009. The list now includes only occupations in the Australian Standard Classification of Occupations (ASCO) major groups 1 to 4.^[20]

2.3.2 Changes to Canadian immigration policies

Canada kept its 2009 target for permanent economic migrants similar to the level for 2008 (139,000-154,000 people), but this level had already been reduced from 141,000-158,000 people in 2007. Canada enforced the requirement for sponsored migrants to prove they are employed before their permits are renewed.^[21] In addition, the shortage list for temporary foreign workers was eliminated and replaced with more rigorous job advertising requirements, especially for lower-skilled positions.^[22]

2.3.3 Changes to United Kingdom immigration policies

The United Kingdom has reduced the entry of skilled non-European Union citizens by tightening entry requirements, which is estimated will reduce skilled migrants from 26,000 last year to 14,000 this year.^[23] The United Kingdom also requires that, to renew their permit, sponsored migrants must prove they are employed. Like Canada, the United Kingdom enforced this requirement and revised its shortage list. In March 2008, the United Kingdom removed 38 healthcare-related occupations from the national shortage occupation list for work permits, with further revisions to the list in July 2008.^[24]

2.3.4 Changes to immigration policies in other countries

Some countries have offered incentives for migrants to return home. For example, Spain has offered lump-sum payments to unemployed migrants to leave voluntarily and to not return to Spain for at least 3 years.^[25] The Czech Republic launched a similar scheme for unemployed contract workers. In April 2009, Japan initiated a programme of incentives for Brazilian and other Latin American guest workers to return home and agree never to work in Japan again.^[26]

2.4 Impact on migration to New Zealand

The economic downturn has had mixed impacts on New Zealand's temporary migration flows. The demand for temporary migrant workers has decreased as employment has fallen in many sectors. Tourism has followed international trends, with a decrease in the number of visitors. In contrast, export education has continued to increase. Because New Zealand's immigration policy settings are sensitive to the changing labour market conditions, they have required little intervention compared with other OECD countries. This section describes the impact of the economic downturn on temporary work, export education, and tourism.

2.4.1 Impact on temporary work: Decline in labour migration

For temporary migrants, the main entry into New Zealand's labour market is through the Essential Skills Policy or through seasonal work policies, all of which are labour market-tested.^[27] The other main types of temporary migrants with work rights include working holidaymakers, people with work to residence permits, and people with work permits granted through partnership.^[28] The primary focus of this section is labour market-tested work permits, because these permits are the most sensitive to changing economic circumstances.

New Zealand's temporary labour migration policies are market driven. Requiring a job offer to obtain a permit through the Essential Skills Policy ensures that migrant labour is not over supplied when the labour market tightens. Rising unemployment in New Zealand has lessened opportunities for new migrants to enter the labour market.

One of the key principles of temporary work policies is that opportunities for New Zealanders are protected. The Department of Labour administers two skill-shortage lists, which are reviewed twice a year.^[29] The review ensures that the listed occupations are still in shortage, and provides an opportunity to add new occupations that have moved into shortage.

The shortage lists identify occupations that are in genuine shortage, so that applications for such positions (from suitably qualified and experienced migrants) are not labour market-tested. The recession has resulted in job losses in many sectors of the economy, increasing the pool of people seeking work and posing the risk of temporary migrant workers displacing local workers. In July 2009, 44 occupations were removed from the Immediate Skill Shortage List and 8 from the Long Term Skill Shortage List.

An additional work policy change that came into effect in July 2009 reduced the duration of permits issued to lower-skilled workers. Work permits issued through the Essential Skills Policy for jobs in an occupation at ANZSCO levels 4 and 5 are now issued for 1 year.^[30] Higher-skilled workers may still get a permit for up to 3 years, or 5 years in some circumstances. The number of times a further permit can be granted is unlimited.

The demand for migrant workers through the Essential Skills Policy and seasonal work policies decreased steadily from October 2008.^[31] In the last quarter of 2008/09, the number of applications accepted was down 26 percent on the corresponding quarter in 2007/08 (see Figure 2.2). The reduced demand, together with higher-than-average decline rates on Essential Skills Policy applications, meant the number of temporary workers approved through these policies was 6 percent lower than in the previous year.

Figure 2. 2 Percentage change in the number of applications accepted through Essential Skills Policy and seasonal work policies from the same month 1 year earlier

*Rolling 6-month average

Source: Department of Labour

Data table for Figure 2.2

The decrease in essential skills workers was offset by increasing numbers in various other policies; therefore, the total number approved to work in 2008/09 was about 136,500, or 2 percent more than in 2007/08. This increase compares with an average growth in temporary workers of about 15 percent per financial year over the previous decade.

In 2008/09, seasonal worker numbers were up 61 percent on the previous year, after the limit for the number of permits granted under the Recognised Seasonal Employer Policy was increased from 5,000 to 8,000 a year.^[32] Working holidaymaker numbers were up 12 percent on 2007/08, and family-related temporary workers were up 8 percent. Two new Working Holiday Schemes were introduced in 2008/09 with China and Chile, each with 1,000 places available.

The decline rate for Essential Skills Policy decisions was relatively high in the second half of the year, peaking at 19 percent in April 2009.^[33] The overall decline rate for Essential Skills Policy decisions for 2008/09 was 14 percent, compared with 8 percent in 2007/08. The decline rate for all other work applications in 2008/09 was 4 percent.

Figure 2.3 shows that decline rates were relatively high for offshore decisions, peaking at 31 percent in February 2009, although only 16 percent of decisions were made offshore in 2008/09. The increasing decline rate for onshore decisions had a much greater impact on overall numbers. The onshore decline rate averaged 17 percent over the last quarter in 2008/09.

Figure 2. 3 Decline rate for Essential Skills Policy decisions in 2008/09 by branch location.

Source: Department of Labour

Data table for Figure 2.3

2.4.2 Impact on export education: Growth in international student numbers

Export education is one of New Zealand's top five export industries. International students generate more than $2.1 billion in foreign exchange annually to New Zealand's economy.^[34] The number of people approved to study in 2008/09 (about 74,000) was 6 percent higher than in 2007/08. International student numbers have continued to fall from some of the Asian countries that students have traditionally come from (China, South Korea, and Japan). However, the decrease in the number coming from China has largely been offset by increasing numbers from many of the other main source countries.

India is emerging as an important source country for international education. It is now New Zealand's third largest, behind China and South Korea. The number of Indian students approved has increased, on average, more than 50 percent a year since 2005/06. The numbers have increased from an average of 2,200 students in each financial year between 2001/02 and 2005/06, to more than 8,200 in 2008/09.

China is still New Zealand's largest market, making up about 20 percent of the international students approved to study in 2008/09, but China's stake in the international student market has fallen from almost 50 percent in 2002/03.

Figure 2. 4 Percentage change in the number of students from the main source countries: Difference between 2007/08 and 2008/09*

*The 10 largest source countries in 2008/09 are listed.

Source: Department of Labour.

Data table for Figure 2.4

The increasing numbers of international students can be attributed to a number of factors. New Zealand's exchange rate undoubtedly plays a role in influencing students' choice of study destination, but there are other factors that set New Zealand apart.

The New Zealand dollar weakened against the United States dollar over the first half of 2008/09, creating a more favourable exchange rate for international students. However, the movement of the New Zealand dollar against the United States dollar has been relatively similar to that of the Australian dollar and the British pound over the last 12 months. As Australia and the United Kingdom are our main competitors, the result has been little price advantage for New Zealand.^[35]

Research has shown that international students choose New Zealand because it is English speaking and for its safety, quality of education, and international recognition of qualifications, rather than for the cost of study.^[36] Factors such as New Zealand's scenery, lifestyle, and opportunities for travel and adventure also feature highly in the decisions of those who study here.

Research by the Ministry of Education in 2007 found that New Zealand was not the first choice for 36 percent of international students, which indicates the high level of competition to attract students. Australia and the United Kingdom both tightened entry criteria for students in 2008/09, limiting study opportunities for some prospective students, possibly to New Zealand's advantage.

The United Kingdom released the Student Tier (Tier 4) of its new points system, with tighter rules for educational institutions, international students, and any accompanying family members. In Australia, student assessment levels were increased for students from countries presenting a higher immigration risk (such as India), whereas for countries such as China and South Korea, the assessment levels were lowered.^[37] In practice, a higher assessment level means applicants must submit more evidence of their English language ability, academic qualifications, and capacity to support themselves financially during their studies in Australia.

It is difficult to gauge the effect on New Zealand of students' real or perceived difficulties in getting a visa for the United Kingdom or Australia (because of the policy changes). The Ministry of Education's research has shown that ease of obtaining a visa is important to students. However, for genuine students who could meet immigration requirements in any number of countries, there are clearly other factors involved. The uniqueness of New Zealand's lifestyle opportunities, along with its reputation for safety and high-quality education, will ensure New Zealand continues to attract international students.

2.4.3 Impact on tourism: Decline in international visitor numbers

New Zealand's tourism industry has been adversely affected by the global economic recession, as has the tourism industry around the world. Europe, the Asia-Pacific region, North America, and the Middle East have all recorded falling tourist numbers.^[38] In New Zealand, visitor numbers in 2008/09 were down 3 percent on the previous year, but very different trends were seen across our key markets.^[39]

Visitor arrivals from the Oceania region remained strong, with those coming from Australia reaching just over 1 million in 2008/09, up 4 percent on the previous year. The positive growth in tourism from Australia and other parts of Oceania helped to offset the decreasing numbers from Asia, Europe, and the Americas.

Tourism from the Asian region has been most adversely affected by the economic downturn, with a 15 percent fall in visitor arrivals in the year to June 2009. There was a large decrease in the number of visitors from China (down 13 percent), Japan (down 23 percent), South Korea (down 31 percent), and Taiwan (down 24 percent). Tourism from the Asian region was further affected by the global influenza A (H1N1) pandemic, which compounded the weakening of this market in May and June 2009 and continues to do so.^[40]

The trend for visitors from Europe and the Americas was mixed, with falling numbers from the largest source countries, including the United Kingdom (down 10 percent) and the United States (down 9 percent), but gains from smaller source countries such as France, Germany, and Spain. Overall, visitor numbers fell 5 percent from Europe and 7 percent from the Americas in the year to June 2009.

Figure 2. 5 Percentage change in visitor arrivals from New Zealand’s largest visitor source countries: Difference between years to June 2008 and June 2009

Source: Statistics New Zealand, International Travel and Migration: June 2009.

Data table for Figure 2.5

The Ministry of Tourism expects substantial falls in the number of visitors from Asia and Europe in 2009, but predicts strong growth from some markets from 2010. Visitor arrivals from Australia are forecast to grow 3.1 percent per year to 2015, while China's predicted growth rate is 7.2 percent per year.^[41]

2.5 Employment and business confidence

The impact of the recession is not distributed evenly across the labour force. In the OECD, some countries have reported much higher rates of unemployment among migrants than among native-born workers.^[42] This is particularly the case where the industry affected by the downturn is one with a high concentration of migrant labour, or where migration has contributed to the economic growth of that sector. Skilled migrants are likely to be an exception to this, as many work in sectors that are less affected by the recession or in areas of skill shortage. While shortages persist, employers may be more likely to retain migrants with certain skills.

The current recession has seen New Zealand's unemployment rate rise from a 22-year low of 3.5 percent at the end of 2007 to 6.0 percent in June 2009. Given that the labour market usually lags behind economic activity, the unemployment rate is expected to rise throughout 2009 and into 2010^[43] The New Zealand Institute of Economic Research (NZIER) consensus forecast^[44] indicate that the worst is yet to come for New Zealand households, predicting unemployment to reach 7.2 percent in 2010.

Business confidence was low for much of 2008/09, but it picked up steadily over the June 2009 quarter.^[45] The National Bank's survey of business confidence showed that in July 2009, a net^[46] 19 percent of respondents expected general business conditions to improve over the next 12 months, which was 13 percentage points higher than in the previous month. This represents the highest level of business confidence since March 2002. Firms' expectations of their own activity were also positive, with a net 13 percent expecting improvements in the year ahead (up from a net 8 percent in June).

The National Bank survey also showed improvements in other key indicators (investment, employment, and profit), although respondents were still more pessimistic than optimistic on these measures. For example, a net 14 percent of firms expected lower profits over the next 12 months, and many firms still expected to reduce staff. A net 7 percent of firms expected to hire fewer staff over the next year, and most firms (74 percent) expected the unemployment rate to rise.

2.6 Permanent and long-term migration

In the year to June 2009, net migration was 12,500, compared with 4,700 in the previous year to June 2008 (see section 3.3). Net inward migration is expected to continue to increase over the next year.^[47] Eight percent fewer New Zealanders moved to Australia in the year to June 2009, indicating a higher degree of uncertainty about opportunities abroad. The slowdown in New Zealanders departing had the greatest impact on net migration in the year to June 2009.

Higher net migration will increase demand in the housing sector, but it may exacerbate the softening labour market. Increasing inward migration at a time of rising unemployment may mean people are not absorbed into the labour market quickly. This is likely to have a negative impact on temporary labour migration (fewer Essential Skills Policy work permits), and may mean recent permanent migrants take longer to find work.

2.7 Looking forward

The current recession has so far seen the unemployment rate rise to 6.0 percent, and it is widely expected to increase in 2009 and 2010. Increasing net migration and decreasing employment in many sectors have created a growing pool of unemployed people. In the short term, the need for temporary migrant workers in some sectors will decrease as employers find the labour and skills they need internally.

In New Zealand, as in other countries, skill shortages persist in a range of occupations, such as engineering, teaching, and healthcare. Furthermore, temporary workers play a vital role in New Zealand's seasonal industries. Migration will continue to be an important means of alleviating shortages, and New Zealand has maintained the New Zealand Residence Programme (NZRP) planning level of 45,000-50,000 for 2009/10.

In New Zealand, there is a strong link between temporary and permanent migration. The majority of permanent migrants (81 percent in 2008/09) have had prior experience in New Zealand. Lack of New Zealand work experience is reported by migrants as the biggest barrier to employment.^[48] The fact that many permanent migrants do have work experience in New Zealand may help maintain their employability as competition for jobs increases.

Because New Zealand's temporary work policies are market driven, reduced demand saw an immediate effect on the number of work permit applications and on the decline rate. The decreased flow of workers may have a flow-on effect for the NZRP, which draws heavily from the pool of people already in New Zealand on a temporary permit. Fewer temporary workers, together with increasing difficulties that prospective permanent migrants may face in finding work, may reduce the number of permanent applications from skilled migrants.

Although the global economic recession has limited migration opportunities for many people, New Zealand still maintains a number of advantages over other migrant destination countries. Many migrants choose New Zealand for the lifestyle it has to offer, its environment, and its relative safety. Research has shown these factors are important for permanent residents and international students, but must inevitably be some of the drivers of tourism and working holidaymakers. These advantages will ensure New Zealand remains a competitive destination for temporary migrants and continues to attract skills and investment through permanent migration.

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