Jock Collins

Should a country put immigrant places up for auction?

Pedestrians in Sydney's Central Business District on March 3, 2015. -- PHOTO: AFP
Pedestrians in Sydney's Central Business District on March 3, 2015. -- PHOTO: AFP

Should Australia auction scarce immigration places to the highest bidder as canvassed by the Australian Productivity Commission's current review of immigration policy?

In per capita terms, Australia is arguably the world's greatest immigration nation, so it is sensible to regularly review the immigration experience and policy.

The problem with a suggestion to auction immigration places is that it puts the focus on short-term revenue-raising, rather than immigration's more important medium- to long-term nation-building role. The proposal also reflects a misplaced belief that the free market is the most efficient and effective solution to all areas of Australia society.

How does immigration work now? Australia sets annual targets for the permanent immigration programme and, within it, targets for skilled, family and business visas. It separately sets an annual humanitarian immigration quota for the refugee intake. As the Productivity Commission's Issues Paper notes, the 2014-2015 migration programme is for 190,00 people.

Since the 1970s, Australia has followed Canada in allocating these places by merit. Points are allocated for an applicant's education qualifications, skills and employment history, age, English language ability and other factors.

A "skilled occupations list" already gives priority to those applicants with skills in demand. These are revised over time.

How would the market decide intakes?

Economic rationalists believe that the market is an infallible and efficient way of allocating all goods and services.

Milton Friedman, father of the Chicago school of monetarism and champion of the free market, favoured the auction as the best way to allocate public goods such as education.

More recently, Professor Gary Becker, a Nobel laureate in economics who coined the term "human capital", argued that the US immigration places set by targets or quotas should be allocated by auction to those most willing to pay.

Prof Becker argued that charging US$50,000 (S$66,000) per visa would attract those who would gain the most by migration. Assuming that the current annual quota of one million immigrants was maintained, that would raise US$50 billion. This revenue could be used to improve the United States' public finances and, hence, garner more public support for immigration.

The Centre for Independent Studies in Australia has embraced these free-market immigration ideas. In this instance, the good in the market is a visa to enter Australia as a permanent residence. Certainly this is a scarce good: Some million people or more inquire each year about getting a permanent residence visa. Many more would come if they could.

The assumption is that those who are willing to pay the most will be the best migrants.

This auction immigration model presents many problems.

The first is that it derives from the economic rationalist's fervent belief in the efficient and rational free market in the national and international context. It is quickly forgotten how the folly of the free market in practice, not in theory, led inexorably to the global financial crisis.

Free-market economics simply doesn't appeal as a solution for such an interdisciplinary phenomenon as contemporary immigration.

Second, excluding all but the richest applicants raises serious ethical questions. One possibility raised by Prof Becker is that employers will lend immigrants the money to be repaid over time. This smacks of indentured labour in a modern form. It is even more unethical when applied to choosing which refugees enter Australia.

Third, the richest do not necessarily make the best migrants. Australia has a long history of "rags to riches" immigration stories. Frank Lowy, for example, arrived in Australia as a penniless refugee.

Fourth, immigration policy is not about short-term revenue-raising. It should instead promote medium- to long-term nation-building. Immigration has economic, social, political, religious and cultural impacts and dimensions.

Neoclassical economics always reduces things to the material-maximising decision-making of individuals. It has never been able to predict or explain contemporary patterns of global migration. It cannot handle unmeasurable, multi-faceted social costs or externalities.

It is simply not possible to quantify and simplify these dimensions into a "market price".

Fifth, immigrants not only become workers but also neighbours. Social cohesion is as important a measure of the success of an immigration policy as is economic growth, standard of living or productivity.

Racism is a key barrier to immigration. This is one reason that freeing up international labour markets has not been as successful as freeing up flows of capital and trade under the neo-liberal globalisation agenda.

Sixth, immigration is politically controversial. As a consequence, racism and political opportunism influence immigration policy, whatever free-market purists might desire.

Economic rationalists attempt to treat labour as a commodity no different from goods and services or capital. Their view of immigration is a narrow market-oriented one with a fixation on price and a blindness to the social and political realities of contemporary cosmopolitan Australian and global society.

The current policy of a points-test selection for permanent immigrants - tried successfully over the past four decades of Australia immigration policy - may not be perfect but it is meritocratic, ethical and efficient.

The writer is Professor of Social Economics, UTS Business School at University of Technology, Sydney.