Hacking immigration regulations

Blueseed gets a very nice writeup from the Canadian Broadcasting Corporation:

I asked him [Blueseed CEO Max Marty] if there wasn't something absurd about Blueseed — the idea of floating human beings outside an arbitrary line in the ocean because of some regulation that would appear to hobble the growth of a vital industry.

It seems like something out of science fiction. Does it mean America has become dystopian?

His answer was careful. "I wouldn't say the U.S. is a dystopian society so much as a place that has strayed from the idea of what it is supposed to be."

Marty reminds me Blueseed will be off the coast of California, not South Korea or Singapore or Tokyo, but a fast ferry ride from Silicon Valley. It's because that's where his future clients will want to be.

"Silicon Valley is still a beacon," he says.

In New Zealand's days of stupid, entrepreneurs commissioned Japanese TV makers to disassemble fully manufactured TVs and ship them to NZ in parts, there to be re-assembled, because the tariff rate on TV parts was low relative to the tariff on televisions. Bad regulations invite entrepreneurial innovation to route around the stupid and turn deadweight costs into surplus. It's not first best, but it's better. And, by helping to point out just how stupid the stupid is, it can help push us towards the first best.

The CBC piece does a nice job in pointing out just how stupid the American immigration regs on entrepreneurs are, and in pointing out why things stay as they are: They pull some particular insanity from Wired's comments section (never read comments sections, except at Worthwhile Canadian Initiative):

"So the slave ships of old have gone hi-tech?" wrote one commenter. "Lovely... I would want to be captively working for on an isolated ship away from the protections of the law. Golly, where do I sign up?"

Said another: "This is yet another greed driven excuse to bypass workplace and immigration law at the expense of shore-side economies and workforces. There are plenty of unemployed Americans willing to work for fair wages, not slave wages and as innovative as this idea is, it's a slap in the face to the middle class.

"Going to this extent to get cheap labor is as appalling as it is insulting to the American worker who can see right through this abhorrent BS."

The lump of labour fallacy is particularly fallacious when applied to entrepreneurs who are trying to start up new businesses. Blueseed will be most successful if there are enough people like those quoted above to keep US immigration law from changing, but not so many as to force regulatory tweaks that would keep Blueseed's residents from easily entering the US. Max, I'd expect, would count himself as more successful if, after the ship's earned enough to provide a nice return to its investors, immigration rules are loosened so the ship is no longer necessary. I wish Max every success.

HT: Erin Crampton

Grow for it!

New Zealand, population 15 million. That's the target for 2060 in a new NZIER working paper making the case for substantial New Zealand population growth.

A population target of 15 million by 2060 (2.5 times that now projected) is not only “feasible”, it is also likely to be sufficient to achieve the benefits from scale. It would allow four main cities with a population of three million or more each. This would foster competition within New Zealand to create conditions amenable to building local firms that can foot it internationally. It would bring New Zealand’s population into close proximity of the Netherlands (but still nowhere near the population density of that country).

There's an awfully good case to be made for growth. Ed Glaeser's recent book makes a compelling argument that ICT is far more a complement to than a substitute for density - it makes everything better, but it makes New York better faster than it improves New Zealand. Australia will continue to benefit from agglomeration effects; stagnation relative to Oz fuels out-migration and worsening outcomes. Bill Kaye-Blake says we're doing fine given our distance - and he's right.

This changes the tone of the policy recommendations. It isn’t about claiming that the institutions (the tax system, the science system, the education system) are messed up and need to be fixed. Instead, it is about recognising that we’re pushing this economy uphill and asking what tools might help.

I think increased immigration should be on the policy agenda as a tool that can help in that context.

New Zealand is shifting immigration priorities to de-emphasize the family route and pull in migrants from higher up the income ladder. TVHE reminds us of the harm we do to poor foreigners abroad by such moves; we also do harm to ourselves to the extent that lower skilled workers are complements to high skilled labour - I'd certainly appreciate lower-cost domestic help.

The best counterargument is that there are potential external costs from lower-skilled immigration if we expect that income correlates with intelligence, intelligence is heritable, and intelligence matters for the long-term quality of policy in a democratic system and for overall productivity. Here's Garett Jones on how IQ matters.

So it's not crazy on the face of it to try to encourage high skilled immigration to New Zealand if we care about outcomes here rather than overall global welfare (I care about the latter, but that's me). But I would note that income will be a poorer proxy for IQ or skill differences if we're looking at individuals in a pooled international cross-section than within countries. Moreover, there's no real "lump of migrants" beyond which we can't accept more people. Why not make it easier for high income, high skilled people to move here while keeping the current family immigration route?

Potential policy moves that encourage immigration, and especially higher-skilled immigration? First on my list would be immediate permanent residence for any foreign student completing a Bachelor's degree at one of the New Zealand universities. This will not only boost foreign student enrolments (helping to cross-subsidize domestic students) but also provide a nice selection mechanism for those who are most likely to really make a contribution. We could also draw in high skilled American migrants by not losing our comparative advantage in civil liberties and sane copyright legislation.

Complementary to increased immigration would be fixing local land use policy that forces up housing prices, but that's also well worth doing for its own sake.

Me-utilitarianism: restaurant edition

If this story's right, the country now has a couple hundred fresh-off-the-boat Chinese chefs who haven't yet learned to adapt their offerings for the Kiwi palette.

Where are they? I want the list of restaurants! There are excellent Chinese restaurants in NZ (and Asian restaurants more generally), but if any foodies have heard anything about particularly good new chefs having turned up in Christchurch, I'd love to hear about it.

The National Distribution Union's upset about the whole thing, and especially by that some chefs might be taking salary offers including room and board that have cash components less than minimum wage.

I'm upset that we don't have a free trade agreement with Ethiopia bringing in a few dozen good Ethiopean chefs.

In praise of NZ residence

The Economist recommends that countries link rights and responsibilities to residence rather than citizenship and make it simple for folks to get multiple passports:

As for benefits, residency is surely the key. Live and pay your taxes in a country—and you should then be treated in the same way as any other resident, and better than a citizen who has lived overseas and not paid up.

Vote often

The thorniest problem for a residency-based system is voting—a right that has long been linked to citizenship. But there is room for compromise here. In France and Italy, for instance, citizens who live permanently abroad (often with dual nationality) have voting rights. That makes sense. Conversely, countries should give long-term resident non-citizens the right to vote, at least in local elections. European Union countries already allow that to each others’ citizens.

But looking at multiple citizenship purely on the basis of costs and problems is wrong. It also encourages links between diasporas (often wealthy and well connected) and their home countries (usually poorer), to the benefit of both. Multiple citizenship is inevitable and, at heart, rather liberal. Celebrate it.

We've not bothered getting NZ citizenship as yet; the opportunity cost of getting a pair of NZ passports is a new TV, and we have an 8-year old tiny cathode-ray tube. And NZ citizenship confers no particular benefits that aren't provided by permanent residence. And that is as it should be.

Exit!

I occasionally needle American libertarians that, if they really don't want to be contributing a fifth of their paid taxes to blowing up people with whom they'd prefer to be friends, and if they really don't like being molested or ogled by the kind of people who select into jobs that allow them to molest or ogle a captive audience and who then sue you if you call it what it is, then their best option is to leave. The elasticity of policy to your vote is trivial; why not just move to somewhere that's more free?

Bill Watson points to some new work by Davies and Winer showing that the potential for exit constrains national policy. Once the Americans made it hard for Canadians to escape to the US, we got Trudeau's policies; once the Americans opened things up to skilled workers through H1B and TN visas, Chrétien had to worry about the brain drain. Here's Watson:

In Closing the 49th Parallel, a fascinating new paper in the academic journal Canadian Public Policy, the Canadian economists Stanley Winer of Carleton University and James Davies of the University of Western Ontario argue that the Americans’ decision to foreclose the possibility of an easy escape to the United States created a captive tax base for the Canadian politicians of the 1960s and 1970s and lowered the political cost to them from raising taxes and building up the Canadian welfare state. As the chart shows, there does seem to be a widening of the gap between Canadian and American non-military spending that hinges around 1965. In effect, though the American government didn’t create Pierre Elliiott Trudeau and his Just Society, its closing of the immigration door substantially enabled him.
...
The spending and tax gap that did open up between Canada and the United States in the 1960s and 1970s closed somewhat during the 1990s. In part this may simply be a case of Canada having come to its senses: Government spending briefly hit 50% of GDP in the early 1990s and just about everybody but the far left of the NDP understood that unless tectonic change somehow floated us away from North America, that simply couldn’t last.

But Winer and Davis point to NAFTA’s re-liberalization of migration, at least for professionals, as having also contributed to the subsequent decline in the relative size of government here. The reopening of the safety valve to the United States, even on a partial and limited basis, contributed to the brain drain that became such a hot political issue here at the end of the 20th century and helped persuade the Chrétien government it needed to first do away with income surtaxes and then reduce the top marginal rate of income tax and raise the income at which it kicked in.

It isn't inconceivable that American libertarians do more good for American policy by leaving than by voting...doing well by doing good.

Youth unemployment and beating up on migrants

Colin James wonders whether more migrant workers on temporary work visas may have worsened outcomes for youths:

That ignored that thousands of foreigners are brought in to do low-skill jobs beneficiaries cannot or will not do, because they lack the skill even to turn up for work and stick at it. Labour itself recognised this by starting the temporary work visa system when in government.
...
Sir Roger quoted Canterbury University economist Eric Crampton's estimate that "up to 13,100 young people are out of work as consequence of the youth wage being abolished; in 2008. Sir Roger, too, seemed oblivious to the temporary visa phenomenon.

First, it's likely the case that workers on temporary visas are complements to domestic labour rather than substitutes for it. See the work of Giovanni Peri for starters. Then read this: massive unskilled migration from the Chinese hinterland to the cities has, if anything, positive employment effects for urban workers. Cowen talks here about how immigration creates more jobs. Here's Dustmann, Hatton and Preston in the EJ, summarizing articles in a feature issue:

His [David Card] conclusions on employment and wage impact are in line with much of the previous literature: although immigration has strong effects on relative supplies of different skill groups, local labour market outcomes for low skilled natives are not much affected by these relative supply shocks.

Then also see this nice NBER survey:

The large majority of studies suggest that immigration does not exert significant effects on native labor market outcomes. Even large, sudden inflows of immigrants were not found to reduce native wages or employment significantly. Effects that do exist tend to be relatively small and concentrated among natives or past immigrants that are close substitutes (e.g., Okkerse 2008). Overall, the limited substitutability of immigrants for natives in many European economies would suggest that displacement effects are likely to be small.
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For example, Angrist and Kugler (2003) found that European labor market rigidities exacerbated the negative impact of immigration on native employment. These labor market rigidities include, for example, centralized wage setting that does not allow for downward wage adjustment and restrictive employment protection laws.

So where we get employment displacement effects, small though they may be, it's through interaction with labour market rigidities that prevent downwards wage adjustment. What's a high youth minimum wage? A labour market rigidity that prevents downwards wage adjustment. So even if James is right that temporary workers are a factor, it's likely that they're only a factor because of the crazy high $13/hr youth minimum wage.


Ok. Now let's assume that all that empirical lit is wrong and that immigrants have strong negative effects on native employment outcomes. Now, correct me if I'm wrong here, but I'm pretty sure that New Zealand admits more temporary migrant workers when the economy's booming and tightens up when we're in recession. In that case, youths are now facing less competition from unskilled migrant workers than they were facing in the mid 2000s. I'd expect that this attenuates my results rather than leading to their being overstated, but I'd need the time series to check things properly. You could imagine things going the other way if the flow of migrants dries up but there's a big stock. But these temporary visas are only good for two years. So if they started being clawed back when the recession really hit end-2008, that stock would be pretty low by end-2010. And youth unemployment outcomes are worse now relative to adult unemployment than they were end-2008.

It's not particularly plausible that temporary migrant workers are the cause of any substantial portion of current youth unemployment outcomes.

Colin James has one interesting quote from the PM though:

Key discounts (though does not dismiss) the youth wage factor and notes his offsetting policy that employers can hire young workers for 90 days without risking an unfair dismissal claim.

Again, that attenuates the effects. In the absence of the 90-day bill, outcomes for risky workers (like youths) would have been even worse.

I'm more than open to that there are plenty of other things that could have caused the massive ramp-up in youth unemployment relative to adult unemployment. Something really weird happened starting end 2008. I've suggested the abolition of the differential lower youth minimum wage as being the most likely culprit. Labour's been pushing changes in apprenticeship and training funding as alternative explanation, but there's no way the effects there are big enough to explain things and the time pattern doesn't fit well. I don't think James's blame-the-migrants explanation works either.

Wasting Josh Gans's time

Josh Gans left Australia to take up a position at the University of Toronto. And now he gets to deal with Canadian Immigration, who've made him spend four hours proving that he can indeed function in English. Presumably he could have chosen to sit the test in French instead. Despite having more published papers than I care to count, Josh still had to sit through this kind of nonsense:

The first part was a speaking test. This is where a tester sat across from you and carried on the most unlikely conversation for someone you just met. He read a scripted piece which I filled in the other side of the conversation from. It started off standard and friendly enough with some exchange of basic information before he somewhat ominously decided to put a question to me where I would be allowed some “thinking time” before I answered. The question was to describe a job that I believed helped the world and to explain why I thought that. Of course, my first thought was “well, not your job because this is clearly a waste time in some broad sense.” But as I was the only person in our family required to take this test, I had been ordered to be on good behaviour. So I went with scientists and put in a solid discussion of the microfoundations of endogenous growth theory for a minute. I don’t think he was that intrigued because when my minute was up he cut me off mid-word — apparently more desperate to be free of this than I was. He then decided to provoke me by asking whether I thought that “industry destroyed the environment.” I said I thought that by definition all human activity, including industry, destroyed the environment, what of it? We then meandered back into whether technology was making people’s lives more enjoyable (I said, “it is me! I have an iPad”) but before I could get onto the Easterlin Paradox, my time was done.

And it gets better from there; read the whole thing. He concludes:

Anyhow, I cannot recommend against doing this enough. There has got to be a better and quicker way to assess language — maybe some two step procedure. I’m glad it is over — assuming I pass that is. If I don’t pass, it will turn out I am not recognisably proficient in any language!

Take Josh's experience, multiply it across all the thousands of English-speaking immigrants to Canada, multiply it by the value of their time, add in the bureaucracy's cost, subtract the bureau's cost of an alternative triage method: there's a social cost for you!

At least it sets people up with proper expectations of the Canadian bureaucracy. When I was home in Manitoba, a friend was talking about somebody who was trying to get into farmed fish. They'd gotten all the permissions for the fishing operation, but hadn't realised that their meat processing facility, already certified and registered, couldn't be used also for fish without an extensive additional permitting process. Instead of anger at the bureaucracy, folks instead puzzled over why the would-be entrepreneur hadn't made sure from three potentially relevant certification agencies that everything was allowed; the default assumption is that something is forbidden unless permitted in triplicate. That's no way to live. I was reminded of how Ellis Redding, paroled after decades in prison, still couldn't stop asking for permission to use the bathroom.

Meanwhile, here's how Immigration New Zealand solves the English-language problem:

The principal applicant is the person making the application. If you are the principal applicant, you must meet our standards of English. The minimum standard of English is an International English Language Testing Systems (IELTS) certificate, with a band score of 6.5 or better in the General or Academic modules. This certificate must be less than two years old.

However, we may consider one of the following as evidence if you can show us that you:

• have a recognised qualification from a course taught entirely in English,
• have ongoing skilled employment in New Zealand, and have been in the job for at least the last 12 months, or
• have other evidence proof of competency in English. We will consider a number of factors.

When I made my application a few years ago, in the third of the page where it asked for evidence of English competence, I listed a few publications and offered a copy of my dissertation. That was good enough.

Kiwis have no clue how bad things are elsewhere.

Emigration

I've often argued that American libertarians should give up on changing America and experience more freedom today by moving to New Zealand. I doubt it'll happen: the more obnoxious the TSA becomes, the more convinced I am that there's no point at which American libertarians who talk a lot about the value of freedom would ever be willing to give up the minor conveniences of living close to relatives in a police state.

New Zealand's no utopia, and the earthquakes are a bit annoying, but New Zealand does better in providing the bundle of freedoms I value. Today's example: business freedom. While you can't even open a food cart in New York, businesses in Christchurch whose buildings have been destroyed have been reopening in all kinds of ersatz locations. A great Lyttelton coffee shop, with food service, now runs out of a house's garage and driveway. Imagine the permits and food safety processes you'd need to go through to do anything similar in North America.

For those interested in potential migration, here's Immigration New Zealand's new priority list for speedy immigration consideration. Here's the Immigration New Zealand site with the new skill category listings. Here's the full Essential Skills in Demand list; I think the new changes haven't yet been incorporated into that list. From The Press:

Pig farmers, poultry breeders and motorcycle mechanics are among the skilled workers who will be afforded an easier ride through New Zealand's immigration process from next week.

Immigration New Zealand has updated its Immediate Skill Shortage List, which aims to attract temporary foreign workers to supply skills scarce in the workforce.

Other vocations added to the list include medical technician, electronic equipment trades worker, metal machinist, foundry moulder, clinical coder and baker.

Only one occupation – optometrist – was removed from the list.

Eighteen others were removed from the ISSL but remained on the extended version of the scheme, the Long Term Skills Shortage List, which opens a door for migrant workers to apply for residency at the end of two years.

That list is still populated by engineers, oncologists, surgeons and general practitioners.

Though skill shortages in the medical professions have been much publicised in recent years, the paucity of pig-farming professionals is also high, New Zealand Pork chief executive Sam McIvor said.

"Pig farming, as with many other types of agricultural production, has evolved into a highly skilled occupation requiring technical know-how and accuracy in a host of areas, ranging from animal welfare and disease treatment and diagnosis to optimising livestock nutrition – and everything in between.

"We've welcomed farmers from around the world, particularly southern Africa, the European Union, the Philippines and other Asian countries, with the necessary skills, qualifications and attitude to work."

If it were up to me, and I were constrained against open borders, I'd open a special category for folks willing to open restaurants in underrepresented cuisines. New Zealand is great on Asian and European restaurants, but seriously lacking in Middle Eastern (other than kebab), South American, and African (other than South African) restaurants. There's one Ethiopean restaurant in the country and it's only open one day a week. I'd love to see that change.