Wednesday, 13 March 2013

Mistaken views on population, immigration

By Ng Yew-kwang, Published The Straits Times, 12 Mar 2013

THOSE people who have reservations or even strong objections towards immigration and a larger population must know that their negative views are largely based on mistaken reasoning.

One common mistake is this. When people encounter serious congestion, it is very common to think: "If the number of cars on the road is halved, how nice it would be!" or "If the number of passengers in the carriage is halved, how nice it would be!"

Thus, many people blame congestion and pollution on the population size.

Should one also consider this: Given the amount of per capita investment, had Singapore had (or was going to have for the future) a much lower rate of population growth - so we would now have, say, 2.65 million people only - our roads would be less wide, our MRT network much smaller, the frequency of buses much lower. The transportation situation would probably be less, not more, convenient.

If we have more people from overseas without improving transport and other facilities, of course congestion will become worse. However, with more people, the economy becomes larger, tax revenues become larger (with per capita tax unchanged) and facilities will be expanded correspondingly in the long run. The Government is trying to catch up on some inadequacies or lags from the past, and hopefully the current congested situation will be significantly reduced, despite the further increases in population size.

I live on the Nanyang Technology University campus, and have occasion to catch bus service 179. Once, just before reaching the bus stop, I saw two 179 buses pass by. I thought I had to wait at least 15 minutes for the next one, but it came in about one or two minutes. This is the advantage of a larger population that most people ignore.

I was an undergraduate at Nantah in the mid-1960s, and I can see that Singapore, with its current 5.3 million population, has much more convenient transportation than in the 1960s, when the population was slightly over one million.

I also prefer to be in Singapore without a car, than in Bangkok with a car, but stuck in traffic for hours. When people complain about the high prices of the certificate of entitlement or road pricing, they should think more about this. Moreover, the high revenues collected serve to reduce taxes elsewhere. But again, most people ignore or are unaware of this indirect effect.

Some mistaken views over population may be dispelled by looking at the rest of the world. For any country, do people in the sparsely populated countryside or do people in the densely populated cities have higher per capita incomes? Do people in the most densely populated continent (Europe) or do people in the least densely populated Africa (ignoring Australia, with only 2.3 million) have higher incomes?

Did the spectacular scientific/ technological flowering and the Industrial Revolution take place in sparsely populated or densely populated areas?

Another common belief is that immigration reduces the per capita amount of resources and hence is bad for locals by reducing per capita incomes. This is wrong because, generally, immigrants cannot take away the resources owned by local people and the government without payment.

Immigration need not reduce per capita incomes; even if it does, it does not normally make locals worse off economically. The immigration of unskilled workers may lower the wages of local unskilled workers and make them worse off. It can be shown rigorously that, even in the absence of economies of large-scale production, the gain in other factors of production will be more than the loss of local unskilled workers.

As unskilled workers tend to have low incomes, the greater gains of richer people in monetary terms need not be enough to offset the loss in welfare terms. True. However, it is better to help the poor through the general tax/transfer policy rather than by violating the principle of efficiency. By focusing only on efficiency (a dollar is a dollar) for specific issues, including immigration, we can achieve the same degree of equality at a lower cost. Thus, instead of limiting immigration, we will be better off having stronger measures to lift the incomes of the poor. Singapore is in a good economic and financial position to pursue this front further.

From a wider regional or global perspective, while limiting the immigration of unskilled workers may benefit local unskilled workers, it actually lowers the wages of potential immigrants who have income levels even lower than the unskilled workers in Singapore.

Thus, an anti-migration policy is "equality unfriendly" in this wider perspective.

The writer is Nanyang Technological University's Winsemius Chair Professor of Economics.

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