Points of Difference: Does the Skilled Migrant Category Points System Predict Wages?
3.1 Longitudinal Immigration Survey: New�Zealand
The Longitudinal Immigration Survey: New�Zealand (LisNZ) targeted migrants whose residence was approved between November 2004 and October 2005. Interviews were conducted in three waves at 6, 18, and 36 months after taking up residence in New�Zealand; around 5,000 interviews were completed at the last wave.
Design of the survey
The survey was designed to increase the understanding of immigration and the settlement process. LisNZ collected data on various characteristics that had not been captured previously in New�Zealand surveys (the census for instance), notably the immigration category, but also English language ability, previous experience of New�Zealand before gaining residence, and family networks in New�Zealand.
The sample studied here is composed of migrants who gained residency through the Skilled Migrant Category (SMC) as the principal applicants. The outcomes of secondary applicants are not included in the analysis.
The sample is further restricted to respondents at wave�3 in order to focus on medium-term outcomes. This restriction might lead to self-selection bias, if those who leave have noticeably different characteristics to those who stay. Previous studies of the attrition in LisNZ showed that respondents who left the sample are statistically significantly different from those who stayed. However, given the small scale of the bias and the small proportion who left, the studies concluded that the sample is still representative of the original population.
Our analysis is conducted using weights designed to represent the original population of migrants. The sample size is about 1,700 individuals.
Standard errors were adjusted to account for the survey's complex sample design.
Characteristics of the sample
Demographic characteristics of the sample are reported in Table 2, and human capital characteristics are reported in Table 3, as well as employment rates and mean wages at wave�3.
The employment rate is the proportion of the sample that is working at the time of the interview, including migrants who are self-employed or in part-time work. Mean wages are derived from a subsample, excluding the self-employed and missing values. Percentages are derived from rounded counts. All demographic and human capital characteristics are observed at wave�1.
As can be seen in Table 2, principal skilled migrants are most commonly in their twenties or thirties. They are more likely to be male, and a fifth of them applied from offshore.
Skilled migrants settle mainly in the Auckland region.
The employment rate (94�percent) and average hourly wage ($30 per hour) of skilled migrants are high. By comparison, in 2008, the mean hourly earnings from salaries and wages in New�Zealand was about $31 for legislators, administrators, and managers, $29 for professionals, and $22 overall.
Male and offshore applicants have better outcomes than female and onshore applicants, in terms of both the employment rate and wages. The employment rate among males is 96�percent whereas it is only 89�percent among females; the average wage for males in employment is $31 per hour compared with $27 for females.
The main countries of origin are the United Kingdom, South Africa, China, and India. As a result, almost half of the principal applicants come from Europe (46�percent) and almost a third coming from Asia (29�percent). Migrants from Asia have a lower employment rate (91�percent) and earn lower wages (mean hourly earnings of $24) than average. They also have different characteristics than other migrants; they are younger, less experienced, more qualified, and more likely to have gained their qualification in New�Zealand (see Appendix�B). Migrants from the Pacific also earn relatively low wages but are more likely to be in paid work, whereas migrants from North America have a lower employment rate but the highest wages on average.
|Characteristics||Percentage (%)||Employment rate at wave�3 (%)||Wave�3 hourly income (mean $)|
|Composition of household ���|
|In couple without children||20||97||33|
|Single without children||16||96||27|
|In couple with children||30||96||32|
|Single with children||C||C||C|
|In couple without children||11||94||28|
|Single without children||13||86||25|
|In couple with children||9||88||28|
|Single with children||1||67||20|
|North Island outside Auckland||34||95||31|
|Location at approval date���|
Source: Longitudinal Immigration Survey: New�Zealand.
Note: C = suppressed for confidentiality.
Skilled migrants are highly educated and experienced (see Table 3). More than half of them have at least a bachelors degree (57�percent), and 35�percent of them have a vocational qualification. Most have more than 10�years of potential work experience. Seventy-five percent of the skilled migrants have had work experience in New�Zealand before gaining residency (consistent with the 80�percent of applications made onshore). This reflects the common pathway to residence that includes a period of temporary employment (driven by the central role of skilled New�Zealand employment in the points system). Less than a fifth (17�percent) of the skilled migrants had been to New�Zealand before without working (for example, as students or visitors), and 7�percent had never been to New�Zealand.
The LisNZ data reports a measure of English language ability, derived from information declared by the respondent about his or her capacity to speak, write, and understand English. Consistent with the large numbers of United Kingdom and Ireland and South African migrants, 70�percent speak English as one of their main languages. Eligibility for SMC is conditional on a minimum level of English, so it is unsurprising that only 1�percent are reported to speak poor to moderate English 6�months after arrival.
The skill level of the most recent occupation before the residence approval is reported in Table 3. The skill levels are derived from the occupation according to the Australian and New�Zealand Standard Classification of Occupations (ANZSCO). The five skill levels in ANZSCO are defined in terms of formal education and training, previous experience, and on-the-job training.
Level 1 corresponds to the highest skill level. As an illustration, managers and professionals would have a skill level of 1 or 2, technicians and trade workers correspond to level 2 or 3, and labourers to level 4 or 5. In the sample, 59�percent of the migrants have a skill level�1 occupation. The information is missing for 3�percent of the sample.
On the whole, the association between human capital characteristics and wages is as expected: a better qualification, more potential experience, a higher skill level, and better language ability are associated with higher wages. Migrants who have never been to or worked in New�Zealand before gaining residence earn on average more than others. As can be seen, employment rates are high for every group. Therefore, the following analysis focuses on wages.
|Characteristics||Percentage (%)||Employment rate at wave�3 (%)||Wave�3 hourly income
|No post-school qualification||8||95||25|
|Masters or higher degree||26||92||34|
|1 year or less||2||95||31|
|10 years or more||67||95||31|
|Previous experience in New�Zealand���|
|Never been to New�Zealand||7||94||33|
|Been to New�Zealand: not employed||17||95||32|
|Been to New�Zealand: employed||75||94||29|
|Most recent skill level before residence���|
|Level 4 or 5||11||90||24|
|No working spells recorded||3||89||31|
|English language ability ���|
|Moderate or poor||1||93||19|
Source: Longitudinal Immigration Survey: New�Zealand.
3.2 Assessing eligibility for points
The LisNZ data does not contain the actual points that were awarded in migrants' applications. Instead, the information contained in LisNZ is used to assess whether applicants were eligible for points for each factor. The level of information available does not allow the SMC Policy to be reproduced exactly. For example, no estimates are derived for bonus points related to identified future growth area or areas of absolute skill shortage. These areas are based on a list of occupations that is reviewed every 6�months and includes further tests (for example, with regard to qualification and credential recognition). Therefore, this part of the policy is difficult to replicate in a robust and meaningful way.
On the other hand, because the points that migrants claim have to be verified, a disincentive may exist to claim points above the level that entitles them to progress to the next stage of the application process. Therefore, the amount of points actually claimed is likely to be lower than the amount of points applicants were eligible for. In addition, some changes have been made to SMC policy since LisNZ was administered. To make this research more relevant to policy, this research attempts to replicate current SMC Policy as much as possible, rather than the policy that was in force when LisNZ participants applied for residence.
To evaluate the quality of the estimates, the percentage of SMC migrants who could have claimed points for each factor, according to LisNZ data, is compared with the actual percentage of those claiming points over the sample period, derived from the residence approvals from Immigration New�Zealand's Application Management System. The results are reported in Table 4, as well as the labour market outcomes for each group. The match is generally good, in particular for the human capital and employment factors, which are the ones of primary interest in this study and have the highest weights.
Percentages for the partner's offer of employment, partner's qualification, and close family support in New�Zealand seem to be largely under-reported. Because of their relatively low weighting and the need to produce proof, applicants are unlikely to claim points for these factors unless they need to. Also, in some cases, the data may not allow accurate estimation of the points.
The age distribution of migrants in the LisNZ sample is older than the actual points claimed for age. This is because migrants have up to 12�months to take up residence. Further, wave�1 is 6�months after residence so migrants could be up to 18�months older in the LisNZ sample than as the appear in the administrative data.
|Factor||Points||Actual % claiming points||Estimated % eligible for points||Employ-ment rate (%)||Hourly wage (mean $)|
|Current employment for 12 months or more||60||29||26||95||29|
|Current employment for fewer than 12�months||50||37||32||95||29|
|Bonus points for employment or an offer of employment|
|IFGA or AASS||10||29||No estimates|
|Region outside Auckland||10||47||45||96||30|
|Partner employment or job offer||20||5||17||9||31|
|Relevant work experience in comparable labour market|
|Bonus points for New�Zealand work experience|
|3 years or more||15||3||95||28|
|Additional bonus points for work experience in a IFGA or AASS|
|2-5 years||10||27*||No estimates|
|6 years or more||15|
|Vocational (levels 3-6)||40||68*||35||94||27|
|Bachelor (levels 7-8)||50||31||93||30|
|Postgraduate (levels 9-10)||60||10||26||92||34|
|Bonus points for recognised qualification|
|Bachelor (level 7) or postgraduate (levels 8-10)||10||NA||8||90||23|
|Postgrad gained after 2�years' study in NZ (levels 9-10)||15||NA||3||89||24|
|Qualification in IFGA or AASS||10||32||No estimates|
|Partner's recognised qualification Vocational (levels 3-6)||10||16*||12||97||30|
|Partner's recognised qualification Higher (levels 7-10)||20||14||94||34|
|Close family support in NZ||10||3||17||95||28|
Source: Application Management System, skilled principal applicants approved between 1 November 2004 and 31 October 2005 who took up residence within 1�year. Longitudinal Immigration Survey: New�Zealand (LisNZ). Mean hourly wage at wave�3, in $/hour, missing values excluded.
Notes: IFGA = identified future growth area; AASS = area of absolute skills shortage.
* These categories were grouped in 2004/05.
NA = not available (policy change between 2005 and 2007).
 J Bryant and F Krsinich (2009) ‘Attrition in the Longitudinal Immigration Survey: New�Zealand.’ Paper presented at New Zealand Association of Economists Conference in Wellington, 2009; J Luo (2011) Attrition in the Longitudinal Immigration Survey: New�Zealand wave 1 to wave 3). Wellington: Statistics New�Zealand.
 Statistics New Zealand (2008) New�Zealand Income Survey: June 2008 quarter. Wellington: Statistics New�Zealand.
 Australian Bureau of Statistics, cat�No�1220.0. Australian and New Zealand Standard Classification of Occupations, First Edition, Revision 1