THE CONTRIBUTION OF UNITED KINGDOM MIGRANTS TO AUSTRALIA’S POPULATION, EMPLOYMENT AND ECONOMIC GROWTH: FEDERATION TO THE DEPRESSION* DAVID POPE The University ofNew South Wales INTRODUCTION The National Population Enquiry has sparked renewed interest in the worth of popu- lation growth and immigration. For economists, one obvious framework for categorising and analysing the related effects of immigration is cost-benefit analysis. In practice the exercise is both mammoth and complex, and considerable difficulty must surround the quantification of secondary and indirect effects, particularly if one views immigration within some general rather than partial equilibrium system. This current paper is not so adventurous. Concerning migrants from the traditional source, the United Kingdom, it is limited to asking a number of specific questions about their primary impact on Australia’s population, and on the growth of (male equivalent) employment inputs. Finally, via a general production equation, we venture some estimates of the direct contribution of UK migration to Australia’s growth performance in the years that separate Federation and the Great Depression. BACKGROUND CONTOURS The most striking characteristic of Australian overseas passenger movements in these years was the predominance of one country, the United Kingdom. Table I suggests that something in the order of two-thirds to three-quarters of Australia’s net gain through overseas population transfers came from UK migration. The gross inflow from our neigh- bouring dominion, New Zealand was at times substantial. However, the ratio of New TABLE I Net Passenger Inflow ~~ All Countries United Kingdom UK Share 1901-14 395,414 265,s 06 .61 1909-14 298,589 224,196 .I5 1920- 30 334,103 255,029 .I6 1901-30 130,111 550,535 .I2 Source: Statistical Registers of the various States prior to 1904, thereafter Bureau of Census and Statistics, Overseas Shipping and Migration and Demography Bulletins. Note: UK includes Eire after 1923. *I am grateful for comments and criticism on a previous draft from Colin Forster, Alan Baxnard, Alan Hall, Charles Price and Reg Appleyard. They are not responsible for remaining errors of fact and interpretation.
Transcript
THE CONTRIBUTION OF UNITED KINGDOM MIGRANTS TO AUSTRALIA’S POPULATION, EMPLOYMENT AND ECONOMIC GROWTH:
FEDERATION TO THE DEPRESSION*
DAVID POPE
The University ofNew South Wales
INTRODUCTION
The National Population Enquiry has sparked renewed interest in the worth of popu- lation growth and immigration. For economists, one obvious framework for categorising and analysing the related effects of immigration is cost-benefit analysis. In practice the exercise is both mammoth and complex, and considerable difficulty must surround the quantification of secondary and indirect effects, particularly if one views immigration within some general rather than partial equilibrium system.
This current paper is not so adventurous. Concerning migrants from the traditional source, the United Kingdom, it is limited to asking a number of specific questions about their primary impact on Australia’s population, and on the growth of (male equivalent) employment inputs. Finally, via a general production equation, we venture some estimates of the direct contribution of UK migration to Australia’s growth performance in the years that separate Federation and the Great Depression.
BACKGROUND CONTOURS
The most striking characteristic of Australian overseas passenger movements in these years was the predominance of one country, the United Kingdom. Table I suggests that something in the order of two-thirds to three-quarters of Australia’s net gain through overseas population transfers came from UK migration. The gross inflow from our neigh- bouring dominion, New Zealand was at times substantial. However, the ratio of New
Source: Statistical Registers of the various States prior to 1904, thereafter Bureau of Census and Statistics, Overseas Shipping and Migration and Demography Bulletins. Note: UK includes Eire after 1923.
*I am grateful for comments and criticism on a previous draft from Colin Forster, Alan Baxnard, Alan Hall, Charles Price and Reg Appleyard. They are not responsible for remaining errors of fact and interpretation.
1977 CONTRIBUTION OF MIGRANTS 195
Zealand arrivals to departures was much lower, typically around unity, than was the cor- responding UK ratio of three to one. And from evidence that becomes available from 1925, about 80 per cent or more of the New Zealand gross inflows consisted of strictly short term movers. Passenger movements to and from foreign (non-British) ports were never very substantial. Their peak was in 1927, foreign movements representing 18 per cent of the total gross inflow and 14 per cent of the outflow. In the twenties, however, a new dimension was added to foreign flows. Southern Europeans (particularly Italians) were dominant, arriving in increasing numbers after the United States closed its doors with the Quota Restrictions of 1921 and 1924.' But the demographic and economic im- pact of these new arrivals was confined to geographic pockets, notably the canefields of northern Queensland, the mining towns of Western Australia, and the fishing community of Fremantle. On an economy wide basis their presence was negligible, though the story may well have been different had it not been for deliberate constraints imposed upon this
C H A R T I Australia: Gross a n d Net Inflows
from the United Kingdom a n d Assisted Arrivals.
1901 190s 1910 1914 1920 1925 1930
1 The largest volume of net migration fromaItaly was recorded in 1925, 5,662, which amounted to 70 per cent of 'net arrivals from foreign (non-British) ports. However, these flows did not represent a significant share of the total inflow. In 1925 net arrivals from Italian ports amounted to only 15 per cent of the total net inward movement whilst net arrivals from UK ports represented Over 80 per cent.
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inflow.’ The country looked upon by policy makers as the external source for augment- ing Australia’s population was the United Kingdom.
Chart I maps the time contours of UK gross and net inflows and assisted arrivals from Federation to the depression. A number of features are apparent. Firstly, migration rose rapidly towards the end of the first decade following Federation, reaching a peak in 19 12. On average, these remaining years to World War I showed a much higher volume of immigration, both in gross and net terms, than the average volume experienced in the twenties. Second, the outflow was relatively constant, so that fluctuations in the net in- flow principally reflected the volatility of gross arrivals. Third, about 60 per cent of the gross arrivals were directly assisted by Australian governments.
The first three decades of this century were marked by a conscious drive to people Australia, the basic objectives being development and defence. State and later Common- wealth governments directly attempted to affect immigration by advertising, subsidising fares and by (fateful) land settlement schemes. More roundabout means of quickening the pace of migration are to be found too, in the Australian Tariff and in public works (pub- lic investment) so prevalent in the twenties. As F.A. Bland remarked,
. . . we must not forget the many other efforts which are indirectly serving the same purpose. There are our [protected] secondary industries into which the war projected us headlong; our railway building which yearly throws the line of steel rails across our open spaces and gives us a greater mileage per head of population than any other country in the world; there are our storage dams, irrigation projects [and] our harbour works . . . [2, p. 741
It is not our purpose here to explore the interactions of the supply and demand for migrants nor the impact of government intervention in economic matters on these be- havioural relationships.’ Rather, against the backdrop of the drive to people Australia, what was the impact of the net UK migrant inflow on Australia’s population, increment- ally and cumulatively? How much smaller would our population have been without this net inflow from the UK? And how did UK migrants contribute to growth in employment inputs, and through this means, influence Australia’s aggregate growth performance? Finally, some speculative comments are ventured as to the impact of UK transfers on other dimensions of growth.
THE UK CONTRIBUTION TO GROWTH IN AUSTRALIA’S POPULATION
Table I1 chronicles some different measures of UK migrants’ contribution to Australian p ~ p u l a t i o n . ~ It can be seen from column 5 that migrants constituted an important com- ponent of the increment in Australia’s population during this period. In the pre-war years about 16 per cent of the incremental change in our population can be directly attributed to contemporaneous UK net migration. In the migration boom, the average (1909-14) was significantly higher, 31 per cent and in the peak of that boom (1911-13) about 38
The Commonwealth Government from the mid twenties imposed a system of quotas on visas issued by Australian Consuls in southern Europe and increased landing money requirements to a0-200. This compared with f3 demanded of UK immigrants. The supply and demand functions for population transfers and the role, directly and indirectly, of governments in affecting migration are explored and estimated at length in this writer’s doctoral study. UK migration is measured as the net passenger inflows from ports in England, Wales, Scotland and Ireland (after 1923), Northern Ireland and Eire).
8609 6436.2 80.5 1.3 10.6 0.14 4.12 1930 -6553 6500.7 64.5 1 .o -i0.2 -0.io 3.96 Source for net migration: prior to World War I, Commonwealth Bureau of Census and Statistics, Overseas Migration and Statistics; after the war, Demography Bulletins. Source for population: ibid. Note A : In the inaugural (1907) issue of Overseas Migration and Shipping, the Commonwealth pub- lished figures of migration classified by country of origin and destination only back to 1904. Move- ments to and from Australia prior to 1904 were derived by summing the separate State figures. Knibbs accepted the State migration data up to 1906 as it stood. However, we do find discrepancies between the State aggregates as published by Knibbs-in 1907 for 1904-1906 and the sum of the State figures as they appeared in the separate statistical journals of the States for the same years. The above figures are exlusive of all WW I troop movements and crews for the years 1901-3,1920- 29.
For the prewar period the contributions are cumulated from 1901, viz. i = o is 1901, for the post wax period the contributions are cumulated from 1920, viz. i = o is 1920.
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per cent of the incremental rise was due to UK population transfers. During the twenties the average incremental rise in population related to UK migration never attained these immediate pre-war levels, Nevertheless, about 22 per cent of the rise was traceable to net arrivals from the UK.
However, despite its role in contributing to these increments, the primary impact of UK migration on percentage growth in Australia’s population was small. Column 6 shows the annual percentage growth in population due to contemporaneous migration. Up to 1909, net UK transfers augmented the percentage population growth by less than one- tenth of one per cent per annum. After 1909, as net UK migration accelerated, the con- tribution of contemporaneous UK migrants did rise, but the resultant growth in popu- lation was still slightly less than one per cent per annum. In the twenties, the UK contri- bution to percentage growth in population dropped back to half a per cent per annum.
The inflow of UK settlers did, however, have a cumulative effect which is not readily apparent in measures of contributions to annual growth. In these cumulative estimates,’ no account is taken of deaths among migrants nor children born to UK migrants. Given the youthfulness and the family orientation of the migrant intake,” this leads to some under-estimation. However, our results are unlikely to be very inaccurate bearing in mind the two short time periods (1901-14, 1920-30). Column 7 sets out how much smaller, ceteris paribus, Australia’s population stock would have been in the absence of the original transfers from the UK. Thus if migration had been halted after Federation, our population would have been almost one per cent smaller in 1909, 4.2 per cent smaller in 1912, and over five per cent smaller at the outbreak of WW I. Similarly without fresh UK inflows in the twenties, the stock would have been about four per cent smaller by 1930.
Whether the UK migrant contribution to our numbers was “sizeable” depends then on the frame of reference. The contemporaneous net inflow was an important component in the year to year increments in population, but relative to the total scale of our resident population, its effects on percentage growth in Australia’s population was insignificant. This latter conclusion is somewhat but not greatly modified when account is taken of the likely cumulative impact of migrants arriving throughout the pre-war and post-war periods.
One way of offering a tighter frame of reference is to pose the question of the impact of UK population transfers on employment-input and output growth.
THE UK CONTRIBUTION TO GROWTH IN AUSTRALIAN EMPLOYMENT INPUTS
As a first step, consider the contribution of contemporaneous net UK migration to the Australian workforce. This can be summarised as:
where = stock at end of year t of male equivalent workers added to the workforce
via net UK migration during year t
5 The formula is given in Note B to Table 11. Two-thirds of UK emigrants embarking for Australia were under 46 and about 40 per cent were between 18-30 years of age, and families comprised roughly two-thirds to three-quarters of the UK outflow to Australia,
1977 CONTRIBUTION OF MIGRANTS 199
m, f = superscripts denoting males, females respectively
OL = the fraction of net UK inflow in the working age group
/3 = the workforce participation rate of net UK inflow
y
M, = net UKinflow.
= the fractional male equivalent input for female workers from the UK
Equation 1 thus indicates for the end of each year, the increment in the labour stock due to net UK migration during that year. But how should these stocks of potential workers be converted into a surrogate for the flow variable, employment inputs?
As a proxy of the annual flow, the most appropriate stock concept is that of the aver- age stock during the year, not the end of year stock, *. The average stock associated with the current UK net inflow, of course, depends on the time distribution of arrivals and departures during the year. If, for instance, all arrivals and departures occurred on the first day of the year, then the end of year stock of migrant workers, *, corresponds perfectly with annual average number of migrant workers since, in essence, all changes took place before the year commenced. Vice-versa, if all UK arrivals and departures took place on the last day of the year, then the end of year stock estimates, SE;", overstate average annual migrant workers by a full 100 per cent - since the changes essentially occurred after the year was over. In the absence of detailed data on the seasonal variation in net UK migrant flows, it seems most reasonable to assume that the flow was evenly spread through the year. In this case, half the end of year stock of migrant workers indi- cates the average stock of labour furnished by UK migrants arriving during the current year, AT. Thus,
Since the available workforce was not uniformly utilised A* should be further ad- justed in order to allow for employment rates, (l-Ut); with these adjustments we can approximate average employment inputs contributed by contemporaneous net UK migra- tion, I+&?, as,
7 What is the analogous transform for estimating an average annual stock of additions to the labour force cumulated from year O? In this case, migrants who arrived in preceding years complete a full year's work in the current year, and hence it would be incorrect to continue counting their average annual contribution as Y L f l . Thus the change in the cumulative average annual stock represents partly the stock additions due to migrants who arrived last year, t-1, being in the workforce a full year now, (uiz. their contribution this year has changed from Y f l to fl), and partly due to migrants who arrived during the current year (contributing Y#). It follows that in deriving the cumulative average annual sum GI+, it is only for migrants who arrived during the current year that the transform of halving fl is needed. Thus. t-i
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It is from Equation (4) that UK migrant employment inputs were estimated. The para- metric values used in our estimates are given in Table 111; their derivation and limitations being discussed immediately below.
TABLE Ill Parametric Values
m f
.80 1.00
.80 S O .67
Firstly, the fraction of migrants in the working age group a is based on Demography Bulletin data of inflows and outflows, 1925-29. Second, we have made certain assump- tions about workforce participation rates. All net male movers aged 14-65 years are assumed to have been workers or working proprietors. British Board of Trade data of the occupations for the years 1913-14, and 1921-29, suggest that about half the female adult immigrants from the UK had occupations (other than housewives).8 Since we have no comparable information on female emigrants, we have here assumed that a corres- ponding proportion were in the workforce. Third, in an attempt to estimate male equiva- lent inputs for females, we have adopted N. G . Butlin’s suggestion of a weight of two thirds.[4] Finally, with regard to the variable (l-Ur), we have assumed that the prob- ability of employment for new arrivals was the same as for resident job searchers.’
It is readily admitted that some of these assumptions are questionable. On the other hand our estimates of UK migrant employment inputs proved to be insensitivb to quite a wide range of alternative assumptions-it makes little difference, for instance, to the estimated impact of UK employment inputs on the growth in Australian employment in- puts E, if we double the rate of unemployment for new arrivals as opposed to resident labour.
Table IV sets out some results. These in general cover a shorter pre-war time span than our estimates of population contributions as data of Et and ( l - U t ) are only jointly and continuously available from 191 1. Nevertheless, some idea of the pre-war migration boom, and a comparison of it with the twenties, is possible.
Partly because of the extremely erratic nature of the year to year changes in total Australian employment inputs in the twenties (column 2), there was considerable annual variability in UK migrants’ contribution to the incremental change during this period (column 5). On average, however, before the war net UK migrant employment inputs
Another weakness is that some “housewives” may have been “helpers”. We have not made any ad- justments for these. However, the “helpers” would be most numerous in agriculture and only about 20 per cent on average of the male permanent inflow were so classified. Many of these were single men. The numbers of female helpers therefore would not have been very large and their effect, particularly if we follow Butlin in assigning them a weight of 0.33 of a male input, would have been small. The unemployment rates used are the Trade Union series from Labour Reports. These relate t o those absent from work for more than three days for any reason except strikes and lockouts. They cover sickness, accident and lack of work. For a seminal discussion of these data, see Colin Forster [ lo ] .
1977 CONTRIBUTION OF MIGRANTS 20 1
TABLE IV United Kingdom Migrants' Contribution to Australia's (Male Equivalents) Employment
Sources: See text. NOTEA: for 1901-14 this was computed as, Note B: The negative signs indicate
that positive migrant contribution in these years moved in the opposite direction to the change in the total Australian employment input base which shrank in these years.
antilog{ (IogEx - logEa) ( t - 1 ) b-1 where, x = 1914, a = 1901
accounted for about 34 per cent of the incremental rise in Australian employment. In the twenties their contribution was greater. Between 1921-27, 40per cent of the annual in- cremental increases can be attributed to contemporaneous UK net arrivals. And this figure amounts to an understatement of their impact during the twenties (1920-29), as in some years (1920, 1928, 1929), whilst the Australian employment base was actually shrinking, UK net transfers continued to add to it.
But the generally sizeable UK contribution to increments in employment inputs is not associated with a significant impact on the percentage growth rate in the employment
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input base (column 6).” During the years 1912-14 the UK contribution on average increased the employment input base by less than half a per cent per annum. After the war UK net migration had an even smaller impact on the Australian employment input base. On average it augmented this by merely a third of one per cent per annum.
Migration did, however, have a cumulative effect such that if all labour flows from and to the British Isles had been prohibited after 191 1, by 1914 the Australian employment base would have been, ceteris panbus, about 4 per cent smaller. Similarly if migration had been halted in the twenties, then by 1929 the base would have been almost 6 per cent smaller. On the other hand, in their absence upward pressure on wage rates may have in- duced more resident Australians into the work force to partly fill this gap and/or unemploy- ment might have been lower, and thus the resident employment base somewhat larger.
The general picture of the impact of UK net transfers on Australian employment in- puts is thus similar to impact of UK migrants on population. The UK impact on incre- mental changes in employment inputs was “sizeable”, but the Australian employment input base was so large that the current net UK migrant impact on its percentage growth was still rather small-with the caveat indicated by the cumulative series, that contempo- raneous measures underemphasise the longer term effects of UK transfers.
But what ramifications did UK employment inputs have for Australia’s growth per- formance?
THE CONTRIBUTION OF UK MIGRANT EMPLOYMENT INPUT GROWTH TO AUSTRALIAN OUTPUT GROWTH
A first measure of the direct impact on growth of net UK employment transfers, can be derived from the conventional production function,
where y = A ~ a K ( 1 - 5 2 )
Y = Australian aggregate output A = an “efficiency’ parameter E K = capital inputs 52 = positive fraction.
= Australian aggregate (male equivalent) employment inputs”
Differentiating ( 5 ) with regard to time and dividing by Y permits us to distinguish the contributions of “efficiency”, labour-employment and capital to growth in output: l 2
lo The yet more sizeable contributions to increments in the workforce computed by Colin Forster 19, p. 1761 stem partly from his interest in gross rather than net migration, in total rather than UK
1 1 flows, and also from his different definition of male equivalent units. 12 ~ e . , inclusive of UK migrant (male equivalent ) employment inputs.
Land might be thought another input. However, most land, particularly in the eastern States was occupied by Federation (mostly under lease from the Crown). As leases of large areas of the public estate expired they were in many cases not renewed but the land cut up for the purpose of settle- ment under systems of deferred payment; the State governments also acquired by repurchase con- siderable areas under provisions of the various Closer Settlement Acts after 1901. Thus the “ex- pansion” in land took the form of more intensive utilisation via labour and capital inputs-in the case of the latter this often just involved new breeds of wheat, fertilisers and fallowing. The growth in the land base, t e . , the proportion of land never occupied in any form to the total stock of land, was very small. However this conclusion needs some qualification insofar as there was only a token or legal occupation of some land prior t o Federation-the taking out of nominal leases for small sums did not always imply an “effective” occupation of the land.
1977 CONTRIBUTION OF MIGRANTS 203
(dY/d t ) /Y = (dA/d t ) / A + S2(dE/dt) / E t (1 -a) (dkfdt) / K (6 )
It is common following Robert Solow, [ 151 to view (dA/dt) / A as an “efficiency index” which with words of caution is then interpreted as growth attributable to disembodied technical progress. Our purpose here involves no such interpretation. Our focus rests on gauging the contribution to output growth of UK migrants via employment input growth. This exercise is not of course assumption free, the most questioned being that the sum of the exponents of equation (5) equal unity, implying constant returns to scale in the eco- nomy as a wh01e.l~ There are examples of likely scale economies in individual industries, one of the best known being the steel industry after WW I. But some early empirical work by the formulator of this production function, Paul Douglas, failed to find in studies of Australian manufacturing as a whole, evidence of greater than unity combined exponents during our period.14 This suggests, at a minimum, that any quick dismissal of the assump- tion is too cavalier. In the following commentary the share of output accruing to labour, a, is taken as .60, a figure suggested by the work of Douglas and Donnelley.” Finally, although in the concluding sections of this paper we offer some comments on how our conclusions would be altered by allowing for the migrant impact on other factors and on the general production function, in this section these impacts are assumed zero. In other words, at this stage, we examine the increase in employment inputs resulting from UK net migration as if such migration did not foster the growth of other inputs, most import- antly, the capital stock, and as if it did not alter the nature of the Australian production function.
Under these assumptions, the contribution of UK migrant employment inputs, fl, can be derived from Equation (6) as,
fi = S2(1&Y/Et-l) (7)
The results are in column 2 of Table V. Between 1912-14, the years for which we have data of both inputs and output, the economy expanded fairly sluggishly at an annual average rate of 2.7 per cent:16 much of the poor performance being related to declining rural production associated with the bad season of 1911.l7 In these years injections of UK labour moved the economy along at half a per cent per annum. In other words, if there had been no UK transfers of labour the economy would have expanded at 2.2, not at 2.7 per cent per annum.
In the twenties performance was mixed. In 1920 GDP at 1911 prices was E310 m, accelerating to E379 m the following year. Thereafter, with the exception of 1924 and
l 3 The other assumptions being that factors are paid the marginal product, that the elasticity of sub- stitution is unity and that diminishing returns pertain if one factor is increased while the other in-
14 puts are held constant. Douglas [8] separately estimated the exponents for two time series (Victoria 1907-27, N.S.W. 1901 -27) and nine cross-section studies. The combined coefficients generally showed a slight suggestion of diminishing not increasing returns though were not statistically different from unity. Unfortunately, there are no corresponding studies for other sectors of the economy, nor for the aggregate Australian production function.
l5 In the Douglas study previously referred to [8] the average of all Commonwealth and State studies suggest a labour share of output of 0.600 (inclusive of working proprietors). In another study L. P. Donnelley [7] found it to be 0.605 (1904-11!, 0.576 (1919-29). t: Output growth in all cases is derived from Buthn [S] In the Australian context Solow’s “residual” often largely measures the impact of drought (ex.. FY, 1912) and favourable rains (FY, 1920-21) on output growth.
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TABLE V The Contribution of Net UK Migrant Employment Inputs to Australian Output Growth
1923 -23 0.26 -1.27 -0.01 1.11 -.30 1924 3.71 0.25 2.71 -0.01 1.55 -.36 1925 10.05 0.24 8.95 -0.02 1.99 -.39 1926 -4.38 0.25 -5.38 -0.02 2.44 -.42 1927 1.76 0.24 0.76 -0.04 2.89 -.46 1928 -1.12 0.19 -2.12 -0.03 3.14 -.67 1929 -0.54 0.10 -1.34 -0.02 3.40 -.64A Source: See text. Note A : Decline is because of the negative growth in the total employment input base in the preced. ing year.
1925, economic expansion was extremely modest. But in consequence of the booms of 1921 and 1925, the record of average growth in real GDP during the twenties (1920-29) of 4.2 per cent per annum suggests a briskness, at least compared with 1912-14. Even more rapid is the record over the span 1921-27, in which the economy expanded at 6.3 per cent per annum. Performance then is clearly highly sensitive to the time span adopted. However, does the choice of time spans, and, thus differing records of growth, greatly influence our conclusions about the relative significance of the UK contribution? Con- sider the latter two periods.
Over 1921-27 in the absence of net UK transfers, the economy would have grown at 6.1 and not 6.3 per cent per annum. Similarly we found that the direct effect of UK net transfers on growth in the alternate sub-period, 1922-27, was also modest. Without the UK migrant employment transfers, the economy would have grown at an average annual rate of 3.4, not the 3.6 per cent per annum that it actually did. In both instances then the impact on growth was very modest. But is growth, defined in absolute terms, the most pertinent criterion against which to measure migration's contribution?
One fairly common measure of economic "welfare" is income per head. And migra- tion, because of its skewed age distribution, might be expected, a priori, to have had a more favourable effect upon growth in per capita income than on absolute growth.18
l 8 Because of the youthfulness of migrants a higher proportion of the new arrivals are in the working age group, than the proportion of resident workers in the total population.
1977 CONTRIBUTION OF MIGRANTS 205
The impact of UK transfers of employment inputs on per capita growth can be derived by dividing both sides of equation (5) by p , population, then totally differentiating this expression with respect to time and finally dividing both sides by Y / p . From this the contribution of UK migrant employment transfers to income growth per head is then obtained as A&< of equation (8).
The Appendix offers a derivation of this equation. Certain adjustments to the popula- tion series were, in fact, necessary before estimating the equation.” The resultant esti- mates of equation (8) are given in Table V.
These suggest that the net contribution to per capita growth was, in fact, slightly negative (column 4, Table V). Similarly, the cumulative impact (during the pre-war boom and in the twenties) of UK employment transfers was negative (column 6) . The favour- able “age distribution effect” of migration upon the average Australian workforce partici- pation rate failed, it would seem, to offset the effect of diminishing returns as more migrant labour arrived. To put it another way, UK migrants’ contribution to employment input growth was only slightly above their contribution to Australia’s population growth and as a consequence, the transfers somewhat depressed growth in Australian output per head.?’
Migrants could, however, have influenced growth in a number of othei ways. What were these ways and to what extent is the above conclusion in need of drastic revision? If we continue for the moment with a production model as a frame of reference, output growth could be influenced via UK migrants’ impact on growth in the capital stock and/or their presence could have oiled in some fashion the cogs of the growth machine-Solow’s “efficiency parameter”.
l9 In estimating equation (8), and deriving comparable per capita measures for the economy as a whole, the population series of Table I1 could not be used. Firstly, Table I1 refers to calendar years, whereas the employment input data is in fiscal years, Second, Table I1 considers end of year stocks, whereas the relevant population variable for per cupira income is the average annual stock. Assum- ing that net population increases smoothly during the year the annual income or output flow is, on average, shared only by the original population plus half the annual population increment.
?’ From equation (8), is positive provided that
Developing this requirement more explicitly in terms of workforce participation ratios, r , the con- dition for #‘ to be positive is that the migrants change r and P so that,
(2*) Proof: From Equation (Bl) of the Appendix assuming that A and K are constant, and substituting for E according to the relation,
then,
mdr ld t ) / r > (1 -a) (dP/dr) / P
E = rP, (3*)
[d(Y/P)/dt] / ( Y / P ) = n [ ( d r / d t ) / r + (dP/dt)/P] - (dP/dt)/P (4*) = n(dr /d t ) / r - (1-52) (dP /d t ) /P
>o provided that first term on RHS exceeds the second. But this is the condition of (2*).
206 AUSTRALIAN ECONOMIC PAPERS DECEMBER
SOME SPECULATIVE COMMENTS ON OTHER DIMENSIONS OF UK MIGRANTS’ CONTRIBUTION TO GROWTH
It is not possible to explore these issues in any depth at this time. However, some ex- tremely tentative points may be briefly advanced. Firstly, migrants might influence capi- tal formation” in three ways: they might have transferred funds; their savings behaviour may have raised the average Australian gross savings ratio; capital formation may have been heightened by migrant-generated demand, for example, residential construction, social overhead capital and so forth.22 may have been heightened by migrant-generated demand, for example, residential con- struction, social overhead capital and so forth.22
Growth in the capital stock from the first source was negligible. Using Roland Wilson’s estimates of savings brought by migrants [ 16, p. 201 - which in turn were mainly based on Benham’s earlier estimates [ l , p. 2461 - only 1.5 per cent of Australian gross savings in the pre-war migration boom years can be attributed to migrants.23 Thus given the size of the base capital stock, growth in it attributable to savings transferred by migrants was clearly in~ ign i f i can t .~~ The second point is slightly less clear. Once having arrived, mig rants may have been more frugal than resident Australians, thus raising the average savings ratio. However as migrants represented such a small addition to the base of Aust- ralian savers, it is difficult to see how they could have greatly influenced Australia’s savings. The third effect, namely the demands initiated by migrants, for instance for housing and infrastructure, has been the basis of much of the analysis of nineteenth cen- tury growth in Australia. In the twentieth century we might presume too that it was by this avenue that migrants exercised a sizeable effect upon growth. Yet the question to be asked here is the proportional impact of migrant arrivals upon capital formation.
With regard to the demand for Australian housing, there is evidence of a kinked age distribution bulge from the second half of the first decade.25 But only some part of this can be attributed to new arrivals, rather than to the dynamics of resident population growth based on past migration and natural increase dating as far back as the eighties, and even to the gold rushes of the fifties.26 The effect of immigration after 1909 was probably to reinforce an existing bulge. In the twenties, the housing boom reflects a com- plex of stimuli at work: backlogs in demand caused by the war and returning servicemen, demands triggered by new styles and standards in housing, immigration, and the drift of population to the cities. Hall has argued that as the rate of growth of the non-immigrant population in the housebuilding age groups was negligible, then the explanation for the
21 Remember, capital formation or investment is designated here dK, and the impact of growth in K on growth in output is (l-n)(dK/dt)/K. Here we are speculating on the migrants’ share in dK
22 and through it, on the whole square bracketed expression. These first two sources are also, of course, indirect-money transfers and savings are not auto- matically capital investment, e.g., out of funds transferred, there is consumption and the problem
23 of idle oversease reserves. The amounts accorded per net migrant by Wilson were &12 (1904-14), &15 (1920), 220 (1921- 30). The pre-war figure was based on evidence given to the Report of the Dominions Royal Com-
24 mission and the &20 by Benham’s investigations. Assuming that all these funds were translated into capital stock, then their contribution to growth via growth in the stock of capital was the negligible (1-52) (0.015dK/dt)/(K), where (1-52) is
25 approximately 0.4. See A. R. Hall [12].
26 SeeA.C.Kelley [13].
1977 CONTRIBUTION OF MIGRANTS 207
high plateau in housebuilding activity in the twenties is to be found in heavy migration and the effects of the war. Butlin has argued, however, that the demand for housebuilding was influenced perhaps above all by the “drift to the cities” [3], implying that a rising demand by Australian residents would be quite consistent with negligible growth in non- immigrant population in the traditional housebuilding age groups. Nevertheless, immigra- tion was a force, although exactly how significant, quantitatively, is still an open issue. Public investment also coincided with the boom in private residential capital formation. But here again a number of factors were at work-long standing backlogs in demand for sewerage, water and street improvement, the innovation of the telephone and the growth of local government bodies. All of these were a function of urban growth. But it is im- portant to realise that the ground swell in demand in urban centres was only in part traceable to contemporaneous UK migration.
Public capital formation was not simply confined to the cities. Policy pronouncements regularly linked investment to the nexus of development, closer settlement and UK immi- gration. How much rural investment can be traced to the latter? For one thing, only a very small proportion of the UK migrant inflow probably got beyond the metropoli. Our composite picture formed from the British Board of Trade data of the outflow to Aust- ralia is that about three quarters of the emigrants arrived in Sydney and Melbourne; they came from the most urban areas ofthe UK, and they came in search of urban based skilled and semi-skilled jobs. Only about 30 per cent of adult male permanent inflow prior to WW I and on average 20 per cent after the war, claimed to be agriculturalists or rural workers. And the offer of substantially more attractive passage subsidies t o this group probably inflates the true proportion bound for rural life. On top of this, few migrants were ever directly settled upon the land and the extent to which they were, the schemes were all quite dismal and costly failures. A fair complaint against this line of argument is that although UK migrants ex post had little direct effect upon the course of rural deve- lopment, ex ante public investment in the rural sector may still have been based upon expected UK migrant inflows. The evidence, however, is not so strong. For instance, Gullett, Commonwealth Superintendent of Immigration and one of Hughes’ advisors, viewed the purpose of investment proposed in the &34 Million Migration Agreement (of which 80 per cent was never spent) as a token device “to silence narrow selfish opposition to immigration” and as an “employment support for immigrant and non-immigrant, rural and urban labour in general”[6] . To disentangle immigrant and non-immigrant incentives to rural development as they affected government investment expectations is clearly a task for the brave. All that we can venture here is that expected as distinct from realised rural migrant inflows were one factor behind public rural outlays-how important re- mains an open q ~ e s t i o n . ’ ~ However, the extent to which rural capital development pro- jects assisted Australia’s output growth has itself been recently questioned. w. A. Sinclair’s basic contentioh is that rural outlays, and for that matter outlays in the cities, were essentially “unproductive” in nature which fostered poor not good growth performance in these years-particularly in the twenties.”
27 The other dimension is that UK capital exports may not have been so large if UK investors had not 28 expected substantial outflows of men to Australia.
In the rural sector he argues that there was a severe erosion of the economic criteria of investment and that much of public capital never had the desired effect of inducing follow up private invest- ment and activity. See [ 141.
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The final way in which UK migrants could have promoted growth-outside their con- tributions to capital and employment-is through improvements in “efficiency”: they may have brought with them special skills and/or, as consumers, permitted industries to obtain scale economies (which invalidates our invocation of Euler’s theorem). With regard to skills, the Board of Trade data suggest that about one third of the adult permanent in- flow, before and after WW I , were skilled workers. Because of classification difficulties, it is extremely difficult, however, to compare this proportion with the proportion of skilled workers in the Australian workforce. But in any case, Table IV does suggest thqt their numbers were probably small relative to the total employment base. One suspects that it is unlikely that new arrivals could have greatly influenced growth in average quality. Like- wise even if significant scale economies were realised through population expansion,’’ then Table I1 strongly suggests that it was via the growth in the resident population, not via contemporaneous UK population transfers. One final possibility is that net UK migra- tion may have actually been detrimental to efficiency, reducing the (Solow) efficiency parameter: migrants may have damaged Australia’s terms of trade, for Australia was per- haps sufficiently large to face less than perfectly elastic demand curves for some exports, and less than perfectly elastic overseas supply curves for some imports.
CONCLUDING COMMENTS
Our principal goal has been to offer some picture of the direct effects of UK migration on the contours of Australia’s population and employment growth in the first three de- cades of this century. Through the latter, we have also ventured some estimates of the direct effects on per capita growth in output. Inherent measurement errors and choice of parameter values prevent, of course, these estimates from being very accurate. But the order of magnitude of the results does strongly imply, we believe, that the economy would have grown at approximately the same rate in the absence of contemporaneous net UK labour transfers. This suggests that the higher worker participation rate implied by the age distribution of migrants did not offset the diminishing returns. Put more simply, migrants pressed harder on population relative to their contribution to output growth, and as a consequence per capita performance failed to improve.
In the last section of this paper, we have offered some highly speculative comments on other dimensions of population transfers, without attempting to quantify their effects. However, it would seem that if our impressions of the contribution of net labour transfers to growth patterns are to be substantially revised, then two areas demand attention: the impact of migration on residential housing, and the effects of expected migration on lumpy public capital formation in rural Australia. In neither case is there, we think, a definite presumption for the dominance of contemporaneous migration among all the factors that chartered their course.
It is necessary, however, t o end on a note of caution. The results of all empirical work are always tentative. In addition readers may disagree with some of the explicit assump- tions, particularly those underlying the form of the production function. Finally, we
*’ See Paul Douglas [ 8 ] and Colin Forster [ l l ] . Forster’s view is that among the range of simple industries existing in the early part of the century, constant returns applied. As the century pro- gressed, some of the new industries, steel, autos, for instance, were probably established with be- low optimal plant size. However, over the whole sector, Douglas’ results suggest constant returns, a finding not inconsistent with Forster.
1977 CONTRIBUTION OF MIGRANTS 209
stress that our study is highly aggregative in nature, and as such may conceal more than it reveals.30 The effects of injections of foreign manpower on contemporaneous growth within subsections of the economy may have differed vastly from those on the economy as a whole. Accordingly, our conclusions are most appropriately viewed as merely a be- ginning to understanding the impact of UK migration on Australian growth in the early twentieth century.31
APPENDIX
Derivation of UK Migrants' Contribution to Per Capita Output Via Net Employment Transfers
By assumption, where, n 1-n Y = A E K
symbols as defined in text.
Therefore, per capita income can be written as,
YIP = A E ~ K ' - ~ / P where,
P = total population
Writing YIP = y
P = P + p M E = E R . E M
where, R denotes residents exclusive of migrants who arrive during the year. M denotes migrants who arrive during the year.
Totally differentiating with respect to time and dividing both sides of equation ( B l ) by y
-= dyfd t m[# + #]alK1-n[@ + f l ] - ' / d# fd t ] Y Y
30 An example is the way in which rural output expansion in FY 1921 dominated average output growth in the twenties. The next step is clearly to disaggregate the overall production function into rural and non rural sectors, and to estimate migrants' contributions to each of these separately. On
31 the other hand, omitting FY 1921 did not alter our ultimate conclusions. Nor do judgments about the impact on growth-either at the aggregate or disaggregate level-fully answer the question of whether the net benefits of migration were positive. For instance, more people implied greater defence against aggression. Thus the benefits associated with more people might have been disproportionate to their contribution to growth in output. Furthermore, the general strategy of policy makers was to absorb more people without lowering living standards, so in this sense the contemporary policy met with some success. This last point is explored at length in the author's doctoral study.
2 10 AUSTRALIAN ECONOMIC PAPERS DECEMBER
Substituting for y using equations (Bl ) and (B2)
d p / d t -
= . . . a [ d f l / d t ]
E P (B8)
Assuming that the migrant impact affects only the population and employment variables, and that the derivatives can be approximated by the average annual change in the subsequent year, then equation (B8) can be restated in the notation of the text as,
where,
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