population growth – the _

[2573] A pretty sizable legal migration into Malaysia between 2000 and 2010

I was reading, or rather re-reading, the Economic Transformation Program and I was a bit obsessed with its projection of 3.3 million total new jobs between whenever the program was supposed to begin up to year 2020. The figure sounds a bit too optimistic that I do not think there will enough workers to take up the jobs, especially the geometric average growth between 2000 and 2010 was just below 2.0% per year and when population growth for 2010 was at the measly 1.5% per year. The population growth rate is slowing down.

So, I did a bit of investigation and was planning to do some back-of-the-envelope modeling until a different but related matter attracted my attention. It is the population profile for Malaysia.

The chart was pulled directly from the Department of Statistics because I was too lazy to pull out the numbers from a database available to me at work. It was already 5PM at the time I started writing this and I did not want to stay in the office for too long today, especially when I had to pack my belongings to catch a plane early the day after tomorrow.

Anyway, what interested me here was the population increase. Specifically, population increase according to cohorts.

The chart shows how important (legal) immigration is to Malaysian population growth.

How do you spot immigration from the graph?

Well, under an autarkic case where there is no immigration, it is impossible for a cohort in a particular year to increase in size in later years.

Yet, if you look at the chart, all cohorts between 0 and 34 actually increased in size in the 10 years that passed between the two population surveys (2000 and 2010). To be clear, the 0-34 cohorts in 2000 should be compared with those aged from 10 to 44 in 2010.

There are two explanations that I can think of. One, which is less likely or probably insignificant, error in one of the surveys, or both. Two, which is likelier, is immigration.

That was a pretty sizable legal immigration between 2000 and 2010. Easily more than 1 million legal immigrants in 10 years.

Most of the immigrants were in their prime years. In other words, they were young, productive and probably contributed to economic growth.

But there is one peculiarity. Look at the 65-69 cohort in 2000. In 2010, the above 75-year-old cohort increased. Odd is it not? Or maybe Malaysian longevity is getting really good.

Other cohorts exhibited a decreasing trend.

[2259] Of more open immigration as a source of growth

Foreigners from poorer countries working in unglamorous low-skilled industries in Malaysia have it tough. Stereotyped, some Malaysians associate them with the worst.

They are blamed for various problems — from the high crime rate to stagnating wages — while their contributions to the local economy are ignored. Seeing low-skilled foreigners as a source of trouble, there are Malaysians who want to limit the number of these foreigners in the country.

In times when economic growth is an obsession, that protectionist sentiment needs to be kept in check. It needs to be kept in check because immigration can be a key to economic growth.

More generally, population growth can lead to economic growth. High population growth rate enlarges the size of an economy in absolute terms. In this respect, immigration is the easiest route to take.

That is not the main reason why immigration is a powerful tool for long-term economic growth, however. Instead, it is the potential of their children along with ours.

The larger a particular society is, the likelier it would organically host inherently exceptionally talented individuals. Creation of talents does depend on multiple factors such as quality education quality but it is impossible to deny that some people are exceptionally brilliant compared to others. In a perfectly level-playing field stripped of other effects, these individuals would distinguish themselves from the masses, regardless of environmental factors.

Economist Robert Lucas once explained this to demonstrate the link between population growth, technical progress and economic growth. He wrote: ”If I could re-do the history of the world, halving population size each year from the beginning of time on some random basis, I would not do it for fear of losing Mozart in the process.”

These highly talented individuals would contribute to society and make it richer. By richer, it is not only in terms of material wealth but also other aspects that make life worth living.

If Malaysia is to enjoy the benefits of a larger population in the long run, it has to adopt a relatively open immigration policy. This can easily be done by granting productive foreigners who have spent considerable time in the country a pathway to citizenship, or at least a shot at permanent residency.

Some may consider this as an overly liberal policy. It is not and in fact, it is a realistic policy. Consider for a moment that there are more or less two million foreigners in Malaysia. That figure is before accounting for illegal aliens. One surely cannot believe that the government can reduce the number by a significant margin, much less boot of all of them out without hurting the economy.

Many of them have lived in Malaysia for some time. Many do speak Malay. They are acclimatized to Malaysian culture. In other words, the cost of accommodation and integration for them and for Malaysian society would not be too great.

At the same time, Malaysia does not have a comprehensive welfare system, which is a typical barrier to open immigration policy. As new citizens, they will have to work their way through. They have the necessary motivation to work and to contribute to society. This reduces the short-term cost of such liberal policy.

Implementation of the liberal policy may even give a short run boost to the local economy. Foreign workers face radical changes in their future given that they have to return to their home country once their stay permit expires.

It is reasonable to speculate that that places a limit on their spending within the local economy. If one has no future in the country, one has little reason to spend too much in that country — little incentive for them to undertake large, long-term purchases or investments at individual levels.

If they are given the chance to pursue Malaysian citizenship or permanent residency status, and if such speculation is a fact, then that limit could be removed. This could boost private demand in Malaysia.

In fact, some of these foreigners have proven to be entrepreneurial sorts. Citizenship will grant them security. That encourages them to establish private enterprises, which can only enhance the vigor of the free market and reduces the need for government involvement in business, if there is ever a need for such statist involvement in the first place.

This cannot be bad for the local economy in both the short and long run.

Mohd Hafiz Noor Shams. Some rights reserved

First published in The Malaysian Insider on October 1 2010.