More than 70 years ago, Australia’s first ever Minister of Immigration, Arthur Calwell, wrote:

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In our expanding economy, and with the Government’s policy of full employment, immigrants will make jobs as well as take them.  We need more and more workers for our developing industries, and these new Australian citizens, by increasing the consumer population, will create extra work for others.  Side by side with this factor is the steadily increasing flow into Australia of new industries, which will provide vast employment fields for immigrant workers and for Australians as well. 

Source: A A Caldwell 1946, Immigration means more – not less – work, Information for the Sydney Standard.

The Minister got a lot of things right.  His wisdom and foresight that migrants can expand the productive capacity of the nation, increase consumption and create jobs would appear to be lost on many of today’s public and public-appeasing politicians.  But this is only part of the story of how migrants can fuel growth. 

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Arthur Calwell also got some things very wrong.  During his second term, he was a staunch advocate of the White Australia Policy: while the British were welcomed to Australia, Calwell attempted to deport many Malayan, Indochinese and Chinese wartime refugees.  It would be nice to think that we are now more enlightened. 

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So what is the correct and full story?  Let’s deal first with how migrants can and have expanded productive capacity, and turn next to consumption-stimulated growth.  As we proceed, let’s also address what Arthur Caldwell got right, omitted, and got wrong.

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Skilled migrants have expanded the productive capacity of the nation

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What Arthur Calwell understood was that to gain maximum benefit from our land and resources Australia needed more people.  In his first and nation changing speech to the House of Representatives, delivered in a barely unfolding post-war era, Arthur Calwell articulated his vision:

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If Australians have learned one lesson from the Pacific War … it is surely that we cannot continue to hold our island continent for ourselves and our descendants unless we greatly increase our numbers.  We are but 7,000,000 people and we hold 3,000,000 square miles of this earth's surface … and our density of population is only 2.5 persons per square mile … much development and settlement have yet to be undertaken.  Our need to undertake it is urgent and imperative if we are to survive.

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In 1945 the fertility rate was 2.7 births per woman and rising in the post war era.  Today the rate is below replacement level at 1.8.  That is, without migration, Australia’s population would dwindle.  Those who subscribe to Malthusian’s teachings might argue that that is a good thing; that a population count of over 23 million is quite enough thank you very much.  I beg to differ.  But within reason.

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While the population has tripled, Australia remains a large, resource rich and relatively sparsely populated continental island.  This is not to say that we should let in everyone who wishes to enter.  To grow the wellbeing of all necessitates that the Government is selective in who it allows to migrate, and influences migrant settlement patterns.  The focus here is on the former. 

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For many decades border controls were light as the tyranny of distance limited flows of migrants to those who could afford to come, thereby availing Australia of their wealth.  As travel costs have fallen more stringent entry criteria emerged.  This led to Australia increasingly preferencing skilled migrants from the mid 1980s.  In 1983-84 the number of skilled migrants to Australia numbered less than 10,000 and accounted for less than a fifth of all migrants.  Today closer to 128,000 of migrants enter through the skilled stream, representing more than two thirds of the total.  This is a good thing, as skilled migrants have expanded the productive capacity of the nation by lifting all three of the “Ps” of Intergenerational Report fame – Population, Participation and Productivity.  Here’s how.

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With regards to the first “P” for Population, it is not just size that matters, but composition, notably age.  (Ethnicity also matters, but that discussion is best left for later under the third “P” for Productivity.)  It is no secret that Australia’s population is ageing.  An ageing population, if left unchecked, will reduce a nation’s productive capacity by decreasing labour utilisation.  That is, as more and more people retire, either in part or in full, the number of hours worked per capita declines.  Skilled migrants act to alleviate this.  Three quarters of skilled migrants who have settled in Australia over the last 10 years were aged between 25 and 44 years on arrival (derived from Australian Bureau of Statistic survey data).  This has increased the proportions of the population of working and child-bearing age, and brought about an immediate as well as longer-term benefit to labour utilisation. 

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Arthur Calwell’s speeches and writings suggest that he understood this as his focus was on the need for more workers.  What he may not have fully appreciated is that migrant workers have provided an added boost to labour utilisation by working longer hours.  A Productivity Commission report on the benefits and costs of migration evidences that since at least the mid-1980s migrants have persistently worked on average for longer hours each week than Australian born workers.  This work ethic is not consistent across the different streams.  Primary applicants under the skilled stream have worked the longest hours, averaging 38.5 hours a week compared to 35 hours by Australian born workers.

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