UK voters go the polls tomorrow for the EU membership referendum. Of the two polls of polls I follow, one has a very slight lead to the Leave side, and the other a very slight lead to Remain.
You might have thought – rightly – that New Zealand’s productivity performance over recent years had been pretty poor. But here is what happens if we add the United Kingdom to the chart of real GDP per hour worked (labour productivity) that I ran the other day.
But even cyclically the story isn’t all bad in the UK. Take unemployment for example. Going into the 2008/09 recession, the OECD reckons that if anything the UK had a slightly larger positive output gap than New Zealand did. British labour market regulation seems to generate a higher “natural” rate of unemployment than New Zealand’s does – over the decades, the UK unemployment rate has averaged a bit higher than New Zealand’s. And yet right now, not only is the UK unemployment rate materially below New Zealand’s, but it is right back to where it was – around 5 per cent – going into the recession.
By contrast, in New Zealand the unemployment rate is still more than 2 percentage points higher than it was pre-recession.
The British productivity record in recent years has been pretty dismal. Then again, taking a slightly longer-term perspective, we are the ones with something to complain about, not them. There are no perfect starting points for any of these sorts of comparisons, but I’ve started this one from the end of 1990. That was just before our 1991 recession, and before the stresses and disruption that Britain faced culminating in the exit from the ERM exchange rate system in late 1992.
I’ll take the British performance over that full period over ours.
Incidentally, I noticed George Soros yesterday suggesting that if the vote went in favour of Brexit, the outcome would be more disruptive for Britain than the ERM exit in 1992. Even though that exit – or rather the foolhardy effort to avoid it – transferred a lot of money from the British taxpayer to Soros and his clients, the economic outcomes were generally pretty positive. In the chart above, for example, there is no dip in productivity growth in 1992. Yes, a Brexit would be quite disruptive, but were I a British voter I’m not sure I’d looking for advice from Soros as to whether to stay or go.
Despite my interest in immigration issues, the centrality of immigration in the Brexit debate has intrigued me. Even in the UK context, I’m don’t find particularly persuasive the case that British citizens have had any particular economic benefit from increased immigration. Then again, immigration to the UK has been on a much smaller scale than that to, say, New Zealand (or Australia and Canada), and the UK seems to face fewer of the constraints that lead me to question whether New Zealand’s immigration policy is right for us.
Part of the explanation is, no doubt, captured in this chart.
I showed the NZ and “more developed regions” of the world lines yesterday. This time, I’ve added population growth rates for the UK.
For a long time, the UK was predominantly a country of emigration. Yes, they had waves of inward migration – West Indian and South Asian in particular – but it wasn’t until the policy changes of the late 1990s that the UK had had population growth rates even matching those of the advanced countries as a group. With quite limited rates of natural increase, their immigration policy has now delivered population growth rates averaging higher than those experienced on average in the baby boom years of the 1950s and 1960s. Whatever the economic impact of that change, seeing it in this perspective makes it a bit easier to understand the salience of the issue in the current debate.
The short answer to the question in my title is probably “less than we do”. But at least we get to make our own decisions, not having subordinated a huge part of domestic law-making to unelected people in Brussels.
Featured image: CC YouTube