New Zealand's millennial migration boom
A case study using Streamlit to visualise compositional data
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New Zealand is currently experiencing a surge in international migration following its border reopening post-Covid. Although the sheer numbers have made headlines, the composition of the current migration wave is also noteworthy. Dominated by Millennials (ages 30-39) and a shift from student to work visas, this demographic change could significantly impact the economy, echoing patterns from past cycles.
The visuals in this post are taken from this interactive dashboard that I developed using Streamlit. Streamlit is an excellent tool for creating interactive dashboards purely with Python, and these dashboards can be shared with anyone via a URL link. I plan to provide a basic template in a future post so you can apply it to your own projects. Please share your feedback on the dashboard or report any bugs in the comments below.
Understanding the drivers of the past three migration waves
International net migration (arrivals less departures) flows1 can be split into two categories: New Zealand citizens and non-New Zealand citizens. While the movement of NZ citizens is largely influenced by relative economic conditions, especially with Australia, non-NZ migration can be shaped by government policy.
Three distinct migration waves are evident in the data: Wave 1 (2001-2009), Wave 2 (2013-2020), and Wave 3 (2022-present). Although net outflows of New Zealanders were a factor in Waves 2 and 3, the net inflow during these periods was primarily driven by an influx of non-New Zealanders. Wave 1 saw a more balanced mix of the two groups.
Throughout these waves, citizens from China and India have consistently been major contributors. In Wave 3, India ascended to the top position and China dropped to third, overtaken by the Philippines. Meanwhile, the contribution of other countries, like the UK, South Korea, and South Africa, to net migration has diminished since Wave 1.
The current wave sees a higher proportion of individuals in their 30s, constituting around 35% of migrants, an increase from 25% in Wave 2. Conversely, the share of 15-29-year-olds has decreased from 37% to 27%. The relative dominance of the 30-year-old age groups in this cycle also holds true when normalizing the age groups over time by the working age population.
The shift in migration trends from younger to older, more experienced migrants is also reflected in the currently high proportion of work visas. This illustrates a change in policy emphasis towards addressing specific skill shortages. During Wave 2, the policy environment was geared towards attracting international students, evident in measures like the expansion of their work rights in 2013.
We will likely continue to see a high concentration of work visas in the data as applications for the work to residency 'Green List' became available in October 2023.
According to data from Immigration NZ, a significant portion of the recent work visas have been allocated to construction and hospitality, although many applications do not specify the job type. This trend is consistent with a higher proportion of men aged 30-39 in this net migration cycle.
The current wave is having an outsized influence over the economy
The post-Covid reopening led to a sharp increase in net migration, an event that stands out against the challenges of a constrained labour market and high inflation.
The growth in the domestic labour force from early 2022 to the end of 2023 aligns closely with the total inflow of net migrants over the same period. This is a marked difference compared to previous migration waves, where the domestic labour force participation rate also increased alongside a growing pool of migrant labour.
This suggests that we might need alternative methods to expand (or better utilise) the labour supply if net migration eventually slows to avoid a labor market squeeze—a point alluded to by the Reserve Bank Governor:
The current composition of older migrants, who are coming to work rather than study, is more akin to the wave in the early 2000s, when migration had a large demand impulse.
Past research from the Reserve Bank of New Zealand indicates that a net inflow of the 30-49 age group has a much larger impact on the demand side of the economy than the 15-29 group.2 The older age group not only spends more on goods and services but also exerts greater pressure on the housing market, leading to higher house prices and rents. This dynamic partially explains why domestic demand pressure in the student-heavy Wave 2 was subdued compared to other cycles.
The same paper also found that the demand effects are highest about two years after the initial migration surge. This suggests that the demand pressure from the current wave might start materializing in the near future.
All this suggests that while the initial post-pandemic surge may have peaked, the current wave and its strong influence over the supply and demand sides of the economy will be felt for some time to come.
The estimates of international migration from Statistics NZ use the 12/16 month rule to classify long time migrants. You can find more information about the dataset here.
See the Analytical Note: ‘The macroeconomic impact of the age composition of migration’.