The price of a global market?

Are immigrants from third-world countries taking local IT jobs and pushing wages down? Several readers contacted me following a recent column and story on the contracting market.

Are immigrants from third-world countries taking local IT jobs and pushing wages down? Several readers contacted me following a recent column and story (Views from the contracting coalface and Contractors struggle in tight job market) on the contracting market.

One told me of a plastics manufacturer which recently employed two SAP staff, one each from India and Malaysia. Might lesser skilled Kiwis have been employed and trained to do the work? Or should one simply employ the best person for the job, in a global market?

Another told me of a Russian man who was so keen to gain New Zealand work experience he wanted to work for peanuts and undercut the locals. Should employers be able to take this approach? Does the benefit to the employer outweigh the impact on the industry?

The argument that immigrants take people’s jobs has been around for decades. Classical economic theory says that if the supply of something, labour in our case, increases, then, given everything else as a constant, its price will fall. Thus if immigrants with particular skills flood into a country, the labour supply in those industries rises and wage rates should drop. Magazines like The Economist, meanwhile, argue that immigrants make a country’s market bigger and help fuel economic growth.

The plastics manufacturer, Palmerston North-based Click Clack, said it prefers to recruit locally. But group chief executive John Heng says while suitably qualified SAP staff can be found in Auckland, Wellington and Sydney, no one was available to work in Palmerston North. And thus, he says, he had to turn to immigrants to fill the posts.

ITANZ CEO Jim O’Neill says the “letters of support” his organisation issues to foreign IT workers don't take local jobs from New Zealanders.

ITANZ provides letters to 30 or 40 foreigners a month who lack formal qualifications, but have been offered work by a New Zealand firm. These letters, stating that their skills are needed, help ease them through the immigration process. “By definition these people we give these letters to aren’t taking jobs from New Zealanders. They don’t get a letter unless they have a job offer,” says O’Neill.

He blames falling wages on the general global dot-com crash and related IT slump as firms invest far less in IT than they used to. “It’s no wonder rates are coming down. It’s a buyers' market at the moment,” O’Neill says.

Barry O’Brien of recruiters Enterprise says New Zealand firms prefer to employ Kiwis as this removes uncertainties over immigrants settling in a new country. The IT industry is global, he says, and based on transferable skills. But firms are wary of hiring cheap labour since, for example, “the cost of resolving poorly constructed software would by far and away exceed any benefits”. On the other hand, since New Zealand has such a small pool of skilled labour, firms must constantly examine candidates from overseas whose skills match demand, O'Brien says.

However, Employers and Manufacturers Association advisory services manager Peter Tritt says foreigners do take the jobs of New Zealanders, but Kiwis also take jobs from other foreigners.

“Higher-waged economies take our skilled people, and we in turn 'steal' them off lower-waged economies. The free flow of labour in and out is the price we pay and we can’t avoid it if we want to live in an open economy that participates in global markets."

ACT leader Richard Prebble appears to offer another argument. ACT has analysed data from the Department of Statistics and says only a minority of immigrants are skilled, so many go on welfare. Prebble also claims the post-September 11 influx of immigrants and returning Kiwis is already over and March figures should show the brain drain will be “in full flood again”.

But a further analysis, adds Prebble's spokesman, Chris Mole, suggests there is not a major issue here with IT professionals. Just 25 computing professionals came from India last year, while "we lost 216 Kiwi IT professionals overseas -- 124 to Australia, 49 to the UK and 28 to the US", Mole says.

A spokeswoman for Immigration Minister Lianne Dalziel says talk about a brain drain is “crap”. Government policy announced last October, meanwhile, targets 60% of residency approvals to be in the skilled or business category. “This means there will be at least 27,000 skilled and business migrants each year,” adds the Immigration Department website.

Dalziel's spokeswoman says details of proposed new "talent visa" categories will also be announced in coming weeks. They are an answer to businesses cries of a skills shortage and these immigrants will “need to be filling a niche”. As with Click Clack.

Greenwood is Computerworld's human resources reporter. Send letters for publication to Computerworld Letters.

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