November 30, 2020

A report for the New Zealand Productivity Commission.

The goal of this study is to better understand how changes in migration policy could influence firms in New Zealand to make greater use of technology and innovation relative to imported labour.

Here, we look specifically at migration and frontier firms: firms that are at the top of the game when it comes to converting resources into products. We explore both how migration can help frontier firms stay at the top of the class and how immigration settings more generally might have been holding firms back.

As well as being relevant to the Productivity Commission’s current inquiry into frontier firms, this report is also timely due to COVID-19. New Zealand has an opportunity to re-think migration policy, as we consider under what conditions we might eventually re-open the border.
In practice, identifying such firms in advance is very difficult. Despite this, we consider that current policy for inviting skilled migrants to New Zealand is close to international best practice already.
Migration policies that allow all New Zealand firms access to low-cost foreign labour are likely to inhibit many of those firms from moving closer to the domestic productivity frontier. These policies reinforce a low-skills, low-wage, low-capital status quo. Worse, they shield important parts of the wider government sector – education and training, but also
the social policy, health and community sectors – from the consequences of not addressing long-standing issues of disadvantage and under-delivery.
This sort of policy has dominated modern migration settings in New Zealand.
Migration policy needs to be more targeted, with far less emphasis on allowing large numbers of entrants who aren't directly connected to actual or potential frontier firms.