Tuesday, 3 August 2021

Economists on immigration

What would help boost wages in Australia? An Australian panel of economists evaluated some options.

Boosting productivity growth and business investment are supported. The rest of the options are not. And less than 10% of surveyed economists support cutting immigration as a way to increase wages. 
Michael Keane of The University of NSW said the idea that population growth and increased labour supply were constraining wage growth was “so naive as to not really be worthy of comment”.

Consultant Rana Roy said only a “cultivated amnesia” could ignore the near-uninterrupted growth in real wages in US, industrialised Europe and Australia amid record inbound immigration in the decades after the second world war.

Gabriela D'Souza of the Committee for Economic Development of Australia said the idea owed much to a “one dimensional view of the world” that saw only the direct impact of immigrants on particular wages and not the impact of their demand for goods and services on a broader range of wages.

Dozens of studies had identified the overall impact as “near zero”.

Productivity ‘almost everything’

Robert Breunig of the Australian National University said immigrants appeared to add to productivity rather than detract from it, meaning slowing down immigration could slow down rather than add to productivity and growth.

I wonder what a similar panel of Kiwi economists would say. 

It feels like there's just this massive gulf between what academic economists conclude and what Wellington policy people have convinced themselves is true. One person described the Wellington dynamic to me as the taking of a status-weighted average of the views in the room. It's easy for that kind of process to veer off into weird places. 

Monday, 2 August 2021

Broken bookings

Cameron Conradie has been keeping a close eye on how the MIQ booking system works, or doesn't. MIQ doesn't have nearly enough spaces to meet demand, and has been running well below capacity because the booking system doesn't work. 

Despite the reduction in operational capacity by 500 rooms, based on available data, the average occupancy for April was 67.4% (note a number of day’s data were not published), 57.1% for May, 67.1% for June and 71.1% for the first half (1-15) of July. This is taking occupied rooms against the advertised operational capacity.

By taking rooms actually occupied against full advertised operational capacity, and assuming a 14 day turn-around, I calculate that more than 13000 vouchers were not used/not issued since the beginning of this year. Each of those unused rooms represents a significant economic opportunity cost and an avoidable and unresolved human tragedy.

(Obviously the system cannot run perfectly to capacity at all times, but the scale of the underutilisation is upsetting.)

His tentative diagnosis?

I have chatted to multiple people who have successfully made bookings. Some have been through MI, or are currently completing their 14 day stay.

  • It is pretty clear that the system has minimal if any controls/cross checks in it’s coding to prevent/deter abuse.
  • It seems it is possible to make multiple bookings for the same passport number. It seems that people create multiple accounts in order to improve their chances of getting flights to match booked room vouchers.
  • Based on anecdotal evidence, It seems the only burden of proof on the traveller in order to finalise the booking within 48 hours of initial booking is to input a valid flight number (final leg of journey) for the corresponding day of arrival. It seems there is no requirement to prove that a flight ticket is held. Interestingly, the flight numbers are even made available on the site. Travellers are emailed, but it seems to be simply to confirm that everything is correct and that their other bookings can be cancelled. I’m not sure at what point this email confirmation is received.
  • I suspect that many people are hedging their bets on travel restrictions lifting and being able to secure flights matching bookings already confirmed.
  • I suspect many are hedging their bets on being granted permission to enter NZ.
  • I suspect that many are on a hamster wheel of repeat bookings in the hope that their travel plans might work out.
  • I suspect that many bookings are not being cancelled if travellers’ plans change or if they are unable to get flights with the flight number used to make the booking, hence the significant discrepancy in bookings vs actual arrivals.

So it looks like folks are making multiple bookings while trying to secure flights and the system doesn't wipe the consequent duplicate bookings when travel plans firm up. 

A year ago, the Initiative suggested flipping the system. Instead of government trying to charge some people for MIQ spaces after they go through MIQ, they should instead let MIQ facilities charge arriving visitors whatever they want. The government would charge the facility for the government's costs. And the government would provide eligible returning Kiwis with a voucher covering the equivalent of the cost of a stay at a mid-tier facility during off-peak times. That would be less than what facilities would charge during times of peak demand, but that's ok. Airlines charge a lot during peak travel periods too. 

Critically, under that system, you couldn't use a voucher more than once. If you put the voucher toward the costs of your coming visit, you couldn't use it again when booking the next room if you were trying for multiple bookings. Facilities wouldn't want ghost or cancelled bookings so would be charging enough up-front to discourage that. And much of the problem would be resolved. 

I wonder how much of the problem would ease if even a quarter of MIQ rooms were just put up for auction at whatever price would clear the market, with the government putting the revenues toward improving the MIQ system. 

It's a dreadful mess and the government just seems to see no reason to fix it. 

Friday, 30 July 2021

Give them residence

Apologise, then make it right.

Oliver Hartwich makes the case for granting residence to those non-residents who have been in New Zealand through last March's lockdown and who have stuck with us since then. 

A few days ago, the Otaki Medical Centre posted about one of their doctors on Facebook: “We’re disappointed to have lost Dr Richards back to the UK after being unable to secure him and his family residency due to a Government freeze in place with COVID-19,” the GP practice wrote.

“Here is an amazing doctor, who cares about our community and wanted to make NZ home. Sadly - after months of fighting - we have had to close the practice to new patients.”

Dr Richards is one of many migrants affected by the government’s restrictive and inflexible residence policies. According to a Newshub report, there are at least 1,000 registered doctors and nurses waiting for a decision on their residence status. It is a nightmarish situation for them and their families.

While these migrants are waiting, they cannot open a KiwiSaver account, they cannot buy a house and, crucially, they cannot bring in their family.

It is not just medical professionals, either. The total queue of applications for residence from migrants already in the country exceeds 10,000 people.

It affects all walks of life, including many of those areas in which New Zealand desperately needs skilled workers.

Many of these workers have been with us since lockdown last year and have been treated terribly. Short term work visa extensions are issued at the last minute, leaving everyone on tenterhooks. Few employers are willing to take on staff whose visas could soon expire.

The government is effectively forcing skilled migrants to leave the country, while trying to find space in MIQ for other foreign workers to replace them. It is madness in a time of skill shortages and MIQ shortages.

There is a simple solution. It would ease some of the backlog difficulties at Immigration New Zealand. And it would go some way toward righting the wrongs suffered by those on temporary visas.

In the first instance, the Government should apologise to the thousands of migrants and their families for the distress caused. It was not the Kiwi way to treat people.

After that apology, the Government should fix the situation. Everyone who was legally here with us through last year’s lockdown, and who has stuck with us since then, could simply be given residence immediately.

If the migrants have dependent children and partners abroad from whom they have been separated for these past sixteen months, their family should be given residence as well, along with priority entry into the MIQ system.

It is that simple. The only question to the Government is: Why not?

Thursday, 29 July 2021

Supermarkets and land use planning

If you're going to read the Commerce Commission's market study on supermarkets in New Zealand, I'd suggest starting with the first half of Chapter 6. 

There, they go through the effective difficulties in entering the New Zealand market. As far as I'm concerned, evidence on margins and such really don't mean much unless there are substantial restrictions against new entry. High profits should motivate entry, if they're real. If they're not motivating entry, what's stopping entry?

ComCom's presentation of the issues in Chapter 6 reverses the sequencing of how I'd think about it, but gets to the same spot. I'll put it in the way that makes sense to me.

They note that opening a new supermarket retail chain requires having a lot of sites near potential customers.

At 6.102, the study starts in with the problem of planning regulations. They do not get into as much depth as would be warranted because Resource Managements is being reformed; I'd suggest that it should be gone into for precisely that reason, so that better RM systems can avoid old problems. 

They note that a site has to comply with zoning requirements within a District Plan. They don't note how few sites might exist that might comply with those zoning requirements. 

They note the ways that consenting processes get used to slow down new entry. It is a giant mess. If you want to open sites across the country, and consenting in some places could be tied up for a decade but move quickly in other places, how do you even start dealing with that as a new entrant? 

So we start from there. As a new entrant, you'd have to find a lot of sites that comply with existing zoning requirements (ComCom doesn't note the extent to which existing zoning knocks back the range of potential sites), and you might spend years with a scattershot of stores as different places take different amounts of time to get zoning permission.

At 6.55, earlier in the report, they go through the site requirements. You need spots that work well for supermarkets. There might not be a ton of those, even if zoning were permissive - but it will depend on your business model. 

But among the sites that might be suitable, ComCom describes at 6.65 rather a few problems. Existing supermarkets either own those sites already, or previously owned them and sold them off with encumbrances on the title restricting any future owner against using the site as a supermarket, or the site is part of an existing shopping centre where the supermarket has an exclusivity restriction. 

Now in a sensible world, this just couldn't be an obstacle to development. Run a proper city set on a grid where a block can be basically anything, and you'd have to buy up the entire city to stop a new entrant. It's impossible. But if planning rules have already sharply limited the number of feasible sites, in part because infrastructure constraints mean few sites may be viable, well, that's another matter entirely. If you set the rules so that only a half-dozen places can be a supermarket, it seems odd to complain afterwards that there isn't much competition. 

There can be very good reasons for exclusivity covenants in leases. If you're setting up a shopping centre and you want a big supermarket as anchor tenant to cover a fair share of the cost, that anchor tenant isn't going to be happy about its competitor showing up after those fixed costs have been sunk. If you can't guarantee exclusivity over a reasonable period, the supermarket will not be willing to bear as big a chunk of those costs. And that can matter. ComCom has some discussion of this at 6.86.

But if those exclusivity arrangements are over a very long period, they can wind up mattering. And, at 6.77, ComCom notes the cumulative effect of these things in places where there isn't much land appropriate for retail grocery and where that land which might be appropriate has covenants on it preventing its use in selling groceries. At 6.86.3, ComCom notes that it's unlikely that efficiency rationales explain exclusivity periods in excess of twenty years, as seem to here be the norm. 

And they note that Section 28 of the Commerce Act would make anticompetitive covenants unenforceable.

Then, from 6.92 they get into land banking. They note the difficulty in determining whether potential sites have been acquired with a view to very long-term growth, or as a way of blocking others' entry. 

In general, as discussed at paragraph 6.82, the preferred strategy from the major grocery retailers appears to be to use restrictive covenants or exclusivity covenants in leases to impede store development by competitors. We have seen relatively few instances of the major grocery retailers buying and holding land for significant lengths of time primarily for this purpose. 409 These sites generally appear to be sold once their purpose is fulfilled (potentially after lodging a restrictive covenant). 410 

Overall, it looks damned hard to open a new supermarket chain in New Zealand. 

You'd have the Overseas Investment Act to deal with in buying properties. 

Then you have to find any properties with the right zoning.

Then you'd find that there aren't many properties with the right zoning where a covenant on the property doesn't ban you from using it for a supermarket.

Among the ones you do find, you'll get crazy lags in consenting that mean you can't just open everywhere. You'll have hit-and-miss opening where things can get drawn out in some places for years depending on the whims of the consenting authority in that District. And not in any way that lets you plan a distribution network. 

Look at all that, consider that NZ is at the far end of the world, and that you'll have capital tied up for years while all the permissions go through, and you could be forgiven if you decided we just aren't worth the hassle. 

Small places at the far end of the world cannot afford to have these kinds of barriers against entry. 

The report has a few suggestions around policy remedy, including potentially mandated access to the supermarkets' owned wholesalers. That one seems an impossible nightmare. How can you prove that access is being provided on the same terms - or otherwise? With telecom, it's easier. You can measure service speeds reliably. Could you ever tell whether a retailer was having its wholesaler send the day-olds to its competitors rather than the fresh stuff? How? What enforcement mechanism would you need to set up around it?

As a first cut, I'd start in instead on the real restrictions against entry. Note that these are draft views on a draft report - they'd be subject to change on more careful thought. 

Begin thusly: "Henceforth, supermarkets are automatically approved under the Overseas Investment Act." 

Get rid of the uncertainty that the OIA provides by wiping it. It seems just stupid to think that Aldi or whoever would need to prove that their entry is in the national interest, and have things held up in those processes, when ComCom has just pointed to that an increase in grocery competition is in the national interest. 

If the covenants really are void under the Commerce Act, wipe them. Make sure that competition and the promotion of competition is in the new RM reforms, and that District Plans have tons of permissive zoning allowing lots of different shops in lots of places. Limit the duration of exclusivity contracts at the malls if those are anticompetitive. 

Let that rip, and see what happens. Doesn't that make more sense than trying to set up some new government-sponsored KiwiGrocer alternative that would have to wrangle its way through the consenting processes too?

Wednesday, 28 July 2021

The post-vaccination future

This week's column in the Stuff papers got me angry letters from the anti-vax people. 

I mostly look out to the US and Canada, and what things they're up to now that vaccination rates are high. There's a lot of support for vaccine passports in helping people avoid venues that have a lot of riskier people in them. 

Majorities of Canadians surveyed in late May, when only 54% of Canadians had had at least a first vaccination dose, and again in July, supported proof-of-vaccination requirements to board commercial airline flights; to travel internationally; to attend public events or large gatherings; to visit public places like restaurants, movie theatres and churches; and, to attend one’s own place of work.

Quebec will be requiring proof of vaccination for entry into high-risk places like gyms, concerts, and festivals in any fourth wave. And, last week, the University of British Columbia’s alumni association urged the university to require vaccination for students in the residence halls – a measure supported by 82% of students.

Across the US border, vaccination rates have plateaued at about 56% and the costs of low vaccination rates are more obvious.

America’s National Football League last week set a new policy. If a vaccinated player returns a positive test, without symptoms, he can return to play after two negative tests a day apart; unvaccinated players must quarantine for ten days.

If a game is cancelled due to a Covid outbreak among unvaccinated players, the team with unvaccinated players does not just forfeit the game. It also bears responsibility for any resulting financial losses.

The League’s policy does not mandate vaccination. It simply ensures that the costs of not being vaccinated fall where they should.

Once vaccination is readily available, I will be happy to pay a premium at venues that cater exclusively to the vaccinated, to use airlines making vaccination a condition of carriage, and so on. 

I would prefer to drink at a bar that allowed smoking but mandated vaccination, than to drink at a bar that forbade smoking but did not require vaccination. And similarly for restaurants, even though the smell of smoke while eating puts me off my food. The risks of second-hand smoke, at any levels to which I might be exposed occasionally at bars and restaurants, are far lower than the risks of fleeting exposure to Covid. 

Before Covid, and during the measles outbreak, I'd written a short bit on compulsion and vaccination

Were I suggesting policy targeting vaccination, rather than playing into other things, I'd be looking at:

  • Compulsory vaccination as employment condition in the state-funded health sector, for both new and existing staff. They impose substantial direct risk. And how many antivaxxers will look at the recent reporting on low sector uptake and take it as reaffirming their beliefs? 
  • Compulsory parental notification of vaccination status of employees at ECE centres, and consider making it a condition of receipt for 30-hours free. Like, the government made it compulsory that piles of workers in ECE have qualifications - even where there's no good justification for it - but we don't even know whether ECE workers are vaccinated? Come on. 
  • Bring back the BPS targets around vaccination, penalise DHBs for vaccination rates less than 90%, reward them for rates above that. The DHB-level vaccination stats are hardly secret, but DHBs have no particular incentive to go and figure out what works or learn from each other. If DHBs faced financial incentives to ensure broad immunisation coverage, they might decide it's worthwhile to send somebody out to see just what Canterbury is getting right - or whatever DHB has population most comparable to theirs but higher immunisation rates. 
    • There are piles of things you can imagine DHBs trying out. Catch-up vaccinations at school for those who missed them. Making sure that all schools get a visit from the nurse with the jabs. Sending a public health nurse along on Plunket visits. Sending public health nurses along to ECEs where vaccination rates are known to be low. How far can you get just by making it really really easy for folks to be vaccinated?
  • Tell the Health Research Council that funding for research in public health, aimed at policy changes or behavioural interventions, should focus on the traditional remit of public health in vaccination and contagious disease rather than noncommunicable disease. I have OIA requests in now with MoH trying to get a handle on whether they've been putting any funding at all into vaccination work. We get piles of HRC grants for stuff like discouraging youth smoking and drinking and advocating for sugar taxes; it's hard to see anything like it for vaccination. It looks like they made a grant to Auckland Uni's immunisation centre. But there just hasn't been much research work there yet on encouraging vaccination uptake. They've done literature reviews, and they have an annual set of charts that come out of the Tier One vaccination stats, but nothing like the research push that HRC makes into noncontagious disease. I suspect that Janet Hoek, all on her own, gets more funding for anti-tobacco work than the government's provided for research into encouraging vaccination. But I'd like to know. 

It applies in the current case as well, particularly around BPS targets for DHBs to encourage them to find what works in encouraging vaccination. I note that in my old home province of Manitoba, they're sending out vaccination teams into the provincial parks to find people where they are at the weekend and jab them. Here it's all bookings. And that'll be great for those who are happy to get a booking. What happens after that?

Thursday, 22 July 2021

Afternoon roundup

If I'm lucky, this will close a third of the browser tabs.

Wednesday, 21 July 2021

Not a systems problem?

Were you aware that all the queues outside the old Soviet shops weren't a systems problem, but a problem of demand just being too high?

Here's the head of MIQ, last week, on the MIQ booking system. 

The joint head of MIQ has responded to allegations the booking system is broken, saying a current high demand for rooms explains the difficulties travellers have had trying to lock down a spot.

Speaking from Parliament on Wednesday, joint head of MIQ Megan Main said high demand had put pressure on the room allocation system for the 31 MIQ facilities across New Zealand - although the Government was looking for a solution.

“This isn’t a systems problem so much as a demand versus supply problem. Right now, the demand is high.”

Meanwhile, the Ministry of Health finally admitted that its vaccine roll-out graph was just made-up stuff intended on illustrating their high-level intentions, despite it being made to look like there were more thought through numbers and projections underlying it. 

Emails show one official, faced with six different reporters asking for the data behind the graph under the Official Information Act, wanted to claim the figures were commercially sensitive.

"The data doesn't match that illustration as that illustration was a smoothed and high level visual of our plan," he wrote.

"Can we please go with the approach that the picture is an illustration at a high level and the underlying data is subject to commercial sensitive information as an approach?"

But a staff member from the Director-General of Health's office knocked back the idea.

"To say that the numbers doesn't match the illustration would require us to say under the Act that the information didn't exist (section 18(e)). Given I have seen the numbers that underlie the diagram, and you've noted that it does exist, I don't think this would stand scrutiny should the requesters complain to the Ombudsman, which I suggest they would probably do. Refusing on the grounds that the information is commercially sensitive doesn't appear to be a strong reason either."

The ministry eventually responded to journalists saying there was no specific data that informed the graph and declined the Official Information Act requests. Forecast data was released, but it didn't match what was in the illustration, or split out forecast first and second doses.

RNZ sent a further Official Information Act request asking for communications regarding the graph but the response was delayed. When a second deadline went unmet, RNZ complained to the Ombudsman.

The Ministry of Health released the information before the Ombudsman investigated the complaint.

RNZ asked the Ministry of Health if it had updated internal guidelines regarding the creation or release of graphs or illustrations following the incident.

A spokesperson responded: "As with any piece of information we publish, we take care to ensure that the information is helpful and accurate.

"As noted in our OIA response, the original graph was based on forecasts and was created to be a visual representation of what the vaccine rollout would look like. Our vaccination programme is largely tracking in line with these projections."

The ministry has since released a new graph that makes sense.