Thursday, 30 January 2014

Ponzi Economics: Immigration and Infrastructure

"Jersey States has revealed a new population policy - to limit immigration to 325 people a year. The temporary law would give the government more control over the number of migrants coming to the island. Assistant Chief Minister, Senator Paul Routier, said: "We are controlling the number of licences to non-locals. But it is important to keep a level of immigration, so that we have a workforce that can support an ageing population." (1)
 
"I have no choice but to provide extra capacity in primary schools in 18 months to two years." The Education department had hoped to build a new school, but could not find a suitable site and so decided to spend £10m on extending six primary schools. Projected figures show a steady rise in the number of children expected to come into education in the next few years. Births in Jersey have risen from 944 in 2006 to 1125 births in 2012." (2)
 
There seems to be an assumption that one can "grow" the population by immigration to support an ageing population, and that this can be wholly divorced from considerations of infrastructure. Projected figures show increased numbers of children - who presumably will be part of this diminishing workforce - are putting such pressure on the education system that primary schools need to be expanded.
 
And that is quite apart from increased demands on power, water, sewage treatment, hospitals, etc etc, all of which need increased, and sometimes very costly capacity.
 
It is an illusion to assume that adopting a strategy of immigration to curb problems over an ageing population. Assuming the bulk of the immigration is within the working age span, that will increase the total in that bracket and mitigate the problem of support for the retired people. But in time, those new immigrants will increase the retired population, because they themselves age. But now there are more within that age bracket to get older and retire, and the only solution is more immigration.
 
It's rather like taking out loans to replay loans plus interest, and the interest cumulating, so that higher and higher loans are needed. The more the size of the loan increases, the greater the interest to pay, and the greater value that another loan would need to be to repay it.
 
And just as you cannot evade repayment of a loan by endless borrowing, so too the ageing population cannot be solved by endless immigration. Since immigrants age too, all this can do is put off the evil hour for future generations. To continue postponing the crunch you have to keep increasing the dose of immigration. This is Ponzi scheme economics.
 
Dr Andrew Geddes has also noted this in his observation on the UK:
 
"The argument in support of newcomers is beguilingly appealing. The effects of an ageing population on the labour market and welfare state require immigration because immigrants can fill labour market gaps and sustain pensions and health care. The UK population of state pensionable age is projected to increase from 10.8 million in 2000 to 11.9 million in 2011 and to peak at around 16 million in 2040."
 
"But this replacement migration argument has a flaw: immigrants require replacements given that they settle down, have children and get old too. More and more immigration is then needed." (3)
 
And even the UK Home Office's report International Migration and the United Kingdom: Patterns and Trends (2001) could see the flaw:
 
"The impact of immigration in mitigating population ageing is widely acknowledged to be small because immigrants also age. For a substantial effect, net inflows of migrants would not only need to occur on an annual basis, but would have to rise continuously. Despite these and other findings, debate about the link between changing demography and a migration 'fix' refuses to go away."(6)
 
To solve the problem today by immigration is to burden future generations with the real cost. a point made by Leith van Onselen commenting on the same situation in Australia:
 
"Immigration only helps to delay population ageing by pushing the problem onto future generations (whilst creating potential problems in other areas). Indeed, when the current batch of migrants inevitably grow old and retire, Australia will find itself in exactly the same position, with policy makers once again seeking to kick-the-can down the road via more immigration." (4)
 
"Simply importing more workers to cover the retirement of the Baby Boomers only delays the ageing problem, pushing the problem onto future generations. Further, what will be the solution in 30 years time when current migrants grow old, retire and need taxpayer support? More immigration and an even larger Australia?" (5)
 
And Leith also notes the infrastructure problem which is so often simply bracketed off any discussion as somehow magically solvable:
 
"A big negative of high rates of population growth is that it places increasing pressure on the pre-existing (already strained) stock of infrastructure and housing, reducing productivity and living standards unless costly new investments are made. Indeed, controversial investments like desalination plants would arguably not have been required absent population growth." (5)
 
Conclusions:
 
If we follow the adoption of a migration strategy to mitigate ageing population, then at 2050 we would be left with exactly the same challenge now of adjusting to an ageing society, but with a vastly greater population. In the long term it is a Ponzi scheme, paying dividends for the present by burdening the future with the real task of tackling the problem.
 
The demand on infrastructure cannot simply be adjusted by throwing more resources at the problem. There is a limited water supply within the Island. The capacity from France can be increased, but the ability to deploy local power in an emergency will grow steadily more problematic. There will be increased pressure of traffic on the roads, more children needing larger schools, more hospital resources, more social housing.
 
What are urgently needed are calculations of the effect of each increase in 1,000 of the population on the Island's resources, and no such calculation and projections have been made. What is certain is that uncontrolled immigration is unsustainable, and immigration is not a "silver bullet", an easy panacea for solving the economic problems of an ageing society.
 
Links
(1)   http://www.bbc.co.uk/news/world/europe/jersey/
(2)   http://www.bbc.co.uk/news/world-europe-jersey-24615602
(3)   http://fpc.org.uk/articles/178
(4)   http://www.macrobusiness.com.au/2013/11/demographics-australias-irrevocable-growth-challenge/
(5)   http://www.macrobusiness.com.au/2013/09/does-australias-prosperity-depend-on-immigration/
(6)   http://www.civitas.org.uk/pdf/cs23.pdf

4 comments:

Mark Forskitt said...

I agree with your analysis. Am I alone in thinking it is repugnant to treat people as mere units of tax revenue, as implied by Sen Routier's justification of the policy?

The core problem is that the pension system he is trying to prop up with immigration is itself predicated on continuous growth. Expectations and promises made decades ago when times were seemingly propserous cannot simply be rolled forward into the future. One day the promises and expectations will have to be delivered up, just like the person who keeps borrowing to pay of their current debts.

Perhaps we should start by having it confessed that the assumptions underlying that whole system were erroneous, and particularly get it understood by all that there are limits to growth whether we like them or not.

James said...

You miss one significant thing. Every year some hundreds of bright 18 year olds leave the island to attend university. The existing situation means that unless they can move back in with their parents there is no way back onto the island for them. The housing costs are too great, and the ability to find work outside tax eva^D^D^D^D^D^D^D the finance sector isn't there. So a good half of your educational investment is never going to be recouped financially.

Fix that problem and you would probably need no immigration at all. But that problem is more difficult to fix than implementing badly-designed dog-whistle legislation like the Routier plan.

TonyTheProf said...

I'm not saying there should not be immigration for other reasons, i.e. skills shortage. But the reason for addressing the ageing population just does not stack up.

Melvern mignot said...

Unfortunately we governed by a neo-liberal status quo whose thinking revolves around the mantra that all problems are solved by continuous growth and greed. The world is a finite entity and this model of thinking has to change or it will come round as sure as night follows day and bite you in the ass. I am one of those baby boomers, but I despair how this island has turned out. The quality of life here is now sh!t. When I was a youngster a 50k population was the going rate. I'm not saying everything in the garden was rosy, it was not. There will all ways be problems in society to solve. The problem is not just this Island but is a global problem. it needs a mind set change and some politicians who have the balls of their conviction to stand up and be counted instead of of the foot stamping shower which are at present sitting in the States of Jersey. I don't pretend to know all the answers, that would be total ignorance, but I do know things must change and one of the prerequisites is we all need to live a simpler life style if this planet is to survive.