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Reforming immigration policy: a libertarian suggestion

By Jonathan J. Ariel - posted Friday, 8 May 2015

On Monday, Fairfax Media reported that the Productivity Commission ["PC"} will examine the possibility of upending the basis upon which Australia should choose its immigrants.

The current skills based and family reunion aspects of Australia's immigration system are being questioned and alternatives such as a "pay as you enter" scheme are being considered.

The genesis of this study was in a compromise between the Federal government and the libertarian Sen. David Leyonhjelm (Liberal Democratic Party – NSW). In exchange for the latter's consent last December to the reintroduction of temporary protection visas, the Abbott government agreed to direct the Productivity Commission to examine alternative means of determining the annual migrant intake.


And not before time.

Straight out of the libertarian cupboard, one kite being flown in recent days by the PC is that migrants rather than being assessed on their skill set or on their relationship to their kinfolk (who previously migrated to Australia), instead might be admitted based on their willingness to pay a tariff, that is an entrance fee. Assuming of course they pass all necessary security and probity checks by Federal agencies as well as health examinations.

With entry will come the right to work, but the right to citizenship will not be automatic.

Interestingly, the PC raised the concept of an "Immigration Tariff", a key tenet of the Liberal Democrats' platform, on the first anniversary of the death of Gary Becker, a former professor of economics at the University of Chicago.

Becker, a giant amongst giant economists died on 3 May last year. At the heart of Prof Becker's work was the view that "individuals maximise welfare as they conceive it." Welfare need not mean income; it could derive from the pleasure of altruism or the thrill of deviancy. But critically, the thesis implied that people respond to incentives-a realisation that opened the door to insights across the whole range of human activity, including attitudes towards divorce.

Becker's analysis for instance, implied that those in wealthy families would divorce at lower rates, a prediction borne out by data.


His work also considered immigration, where the right to immigrate (that is to abode) was for sale. Couched in the realities of better wages in advanced economies compared to undeveloped ones, coupled with a low birth rate in the former which can only lead to lower tax receipts from the "native" population as time marches on, advanced economies will attract migrants. The challenge is to attract the right kind of migrant.

Notwithstanding that Becker was a free trader at heart, he was alert to the nonsense of open slather immigration. Such a policy would seriously imperil advanced economies given, amongst other things, immigrants could not realistically or at least, not easily be denied the opportunity to dip their snouts in the welfare trough of education, health, social security, public infrastructure etc, that was and remains on offer to "natives".

Becker proposed (in the US context, but applicable to the Australian situation too) ditching the present jumbled system that incorporates skills and family reunion aspects in favour of charging a price that "clears the market" of would be migrants. That is, setting a price for entry but not a quantity on the number of entrants.

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About the Author

Jonathan J. Ariel is an economist and financial analyst. He holds a MBA from the Australian Graduate School of Management. He can be contacted at

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