Immigrant Selection and the Returns on Human Capital in New Zealand and Australia

Commissioned by the Department of Labour as IMSED Research Report.

This paper reports findings from the first part of a larger project examining for the New Zealand-born and Australian-born as well as immigrants the economic dimensions of the decision to reside in Australia or New Zealand. The research examines the relationship between education, work experience and wages in New Zealand and Australia for individuals born in different countries in order to examine the skill transferability for migrants from different countries and backgrounds.

In this paper, we use unit record survey data from the 2008 and 2009 New Zealand Income Survey (NZIS) and the 2006, 2007 and 2008 Household, Income and Labour Dynamics in Australia survey (HILDA) to examine four aspects of trans-Tasman migration.

First, we describe how the observed human capital of the New Zealand-born living in New Zealand compares with that of the Australian-born living in Australia, trans-Tasman migrants and other migrants to both countries.

Second, we use regression analysis to estimate the relationship between observed human capital and wages for the above groups, controlling for other factors that are related to individual wages.

Third, we extend this analysis to examine whether the relationship between human capital and wages varies for immigrants from different source countries and by where the human capital was acquired.

Fourth, we discuss how this information can be used to tell us something about whether particular migrants are positively or negatively selected on unobservable characteristics (eg, ambition).