Skilled immigrants add economic growth and jobs

Why is it that scientists, engineers, doctors and other highly skilled workers must often wait months, and in some cases years, before they are allowed to stay permanently in SA? More importantly, why is it that they have to wait at least 12-18 months before their applications for work visas are processed? SA needs to greatly increase the number of highly skilled professionals entering the country and should entice them to stay here permanently.

Highly skilled individuals create jobs and opportunities for others and are unlikely to keep other skilled people out of jobs. They may at times compete for highly prized positions that natural born South Africans would have liked to occupy but they will not keep them out of jobs altogether. The additional competition will encourage South Africans to improve their skills so that they can beat off competitors, no matter where they hail from.

Throughout the 1990’s levels of immigration to SA fell dramatically. Indeed, the number of individuals granted permanent residence in South Africa fell from approximately 14,000 per annum at the beginning of the decade to less than 4,000 by the end of the decade. A significant explanation for the decline in numbers was the restrictive immigration policies adopted by the government, not a lack of people wanting to work in or emigrate to SA.

Broadening the skills base will increase the number of actual and potential jobs. Estimates suggest that for every additional skilled worker, five to six less skilled positions are created. Consider the following hypothetical example. According to conservative estimates approximately 4 million people are currently unemployed in SA. This means that if we allow approximately 800,000 skilled foreigners to enter the country our mass unemployment problem could be solved. All that is needed is for our tedious immigration laws to be amended.

The shortage of skilled professionals can probably be explained by the fact that our schools are generally unsatisfactory. Indeed, a United Nations report, which monitored the standard of schools worldwide, concluded that despite some improvements over recent years, the effectiveness of the schooling system in SA was still low. According to the report, ‘every major cross-national study… has placed South Africa very low in the international league tables’. Therefore it is not difficult to understand why Dr. Iraj Abedian, former chief economist of Standard Bank, estimated in 2002 that there are between 300,000 and 500,000 unfilled posts for skilled workers in hospitals, clinics, schools, universities, financial firms and the civil service.

Too few South Africans are skilled enough to fill the vacancies and the situation is being compounded by the fact that many school leavers are illiterate, innumerate or otherwise unemployable, except in menial jobs. Clearly more apprenticeships and education reforms would help. However, a quick and simple solution to the problem would be to allow skilled foreigners to fill the gaps. But a suspicious attitude towards foreigners and an impossibly bureaucratic immigration process has prevented the implementation of this potential solution.

If foreigners are expected to have a minimum of R2.5-million to invest before they can apply for a business permit, potential small and medium size foreign entrepreneurs are certain to be deterred. Moreover, if foreigners want to bring in their own employees they have to prove to the Ministry of Home Affairs that a local person could not do the job equally well, which is inevitably going to be a long and troublesome process.

Some of the skills shortages could in part be the result of the so-called ‘brain drain’. However, just as in the free trade of goods, migration of labour is a positive-sum game, provided that there are not onerous restrictions preventing potential workers from entering the market. SA should not prevent foreigners from entering our borders, when we have other countries, including the highly industrialised countries, actively welcoming our own professionals. Emigrants tend to send remittances to family members back home. According to official records it was estimated that in 2002, $4 billion was remitted back to SA. However, the actual amount is likely to be significantly higher since a great deal of money returns in suitcases and through other informal channels. For small countries, such as Cape Verde and Lesotho, remittances make up 21.5 per cent and 26 per cent of GDP respectively.

In order for SA to become more attractive to foreign professionals wishing to immigrate, we need to remove as many of the obstacles as possible that prevent or deter immigration. For instance, S A’s marginal tax rate of 40% is one of the highest of all middle-income countries. In contrast, other middle-income countries have relatively low top marginal rates. Consider the following examples: Brazil (28%), Botswana (25 %), Malaysia (28%), Mauritius (25%), Namibia (35%) and Uruguay (0%).

Tax laws and immigration policies are two issues that the government can immediately address to send positive signals to potential immigrants that SA is a good place in which to further their careers and raise their families.

Author: Jasson Urbach is an economic researcher at the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Free Market Foundation.

FMF Feature Article/ 31 January 2006 - Policy Bulletin / 08 September 2009