A Greater Australia: Population, policies and governance - CEDA

Section 4.1ConclusionThis chapter has considered the economic impact of population growth and migration.Not only should attention be focused on the “intensive” margin – that is the impacton per capita income and output – but consideration should also be given to the distributionof the benefits and costs between the resident population and the migrantsthemselves.While population growth is the result of natural increase and net overseas migration,the government’s potential policy levers really affect only the second flow. It is thereforefitting to emphasise the role of migration in driving population growth and affecting thecomposition of the population and the labour force.It is absolutely clear that countries with large populations and countries with smallpopulations can be equally prosperous. And more rapid population growth is not necessarilyassociated with higher per capita income growth. There are other importantfactors at play.For studies that use models with the assumption of constant returns-to-scale and thestandard national accounting framework, a typical result is that the impact of populationgrowth via an increased migration intake is small, lagged and positive. Moreover,the gains largely accrue to the migrants, although the research of Docquier et al (2010)points to an increase in average wages across-the-board for Australia. In addition,some segments of the existing population can gain from immigration-driven populationgrowth (for example land owners and developers, employers facing labour shortagesand consumers of labour-intensive services).Interpreting the economic research on the impact of migration is made difficult becausethe nature of models, and the assumptions contained in them, can significantly affectthe answer to the question. As a consequence, there are reasons to rely on the researchabout the labour market impacts of migration that is subject to fewer qualifications. Wenote the importance of the distinction between migrant workers being either substitutesof or complements for local workers. The research in this area cannot be regarded assettled; however, the evidence suggests that migrant workers are complements for anumber of categories of local workers. Taking into account demand at a macro level,real wages overall appear to rise with an increased migration intake.New theories about the economic impact of population growth and migration highlightthe importance of new ideas, the diffusion of those ideas and the benefits of large cities.By the same token, there are clearly offsetting costs associated with rapid populationgrowth and larger cities. Optimal policies to deal with this scenario are useful, but donot entirely remove the costs for incumbents. Many of these new theories are not highlyamenable to empirical research; they are interesting nonetheless.Overall, there is an argument, albeit not an overwhelmingly strong one, that a countrycan be well-served by implementing a measured migration program focused on skills.A Greater Australia: Population, Policies and Governance183