Migration won’t ‘solve’ ageing (and it definitely won’t solve it everywhere)

Every so often, someone wheels out the claim that migration is the obvious solution to population ageing. My previous research with Natalie Jackson (ungated version here) showed this for New Zealand overall, and for subnational (territorial authority) areas within New Zealand.

However, things are not straightforward at the subnational level. Local labour markets differ, as do the housing markets, educational and other institutions, local amenities, and job opportunities. All of these things will affect the age distribution of migrants, both into and out of a particular place. Some places attract retirees. Other places attract tertiary students, or young families. Some places do a bit of both. Other places just seem to be places that people want to flee.

In a new working paper with Courtenay Baker, we look at what’s happened to New Zealand’s working-age population (15–64) over the last quarter century (from 1998 to 2023), broken down across 66 territorial authorities and 21 Auckland local boards (TALBs), and five-year time periods. The key idea is simple: if the working-age population changes, where did that change come from?

Specifically, we disaggregate changes in the working age population into three components. The first component is 'cohort turnover', which is the the number of people ageing into the working-age population (basically, those aged 15-19 years) minus the number ageing out of the working-age population (basically, those aged 65-69 years). The second component is deaths among the working-age population. The third component is net migration at working ages, which we measures a a residual, because it can't easily be measured directly (and it is basically the change in the working age population, adjusted for deaths and cohort turnover).

Nationally, the working-age population grew in every five-year period we look at (see the table below). But the reason for that growth changes dramatically over time. In 1998-2003, the working-age population (WAP) grew 6.6 percent, and most of that change came from cohort turnover (5.5 percentage points). Migration helped (+2.1 percentage points), and deaths nudged things down a bit (-1.0 percentage points). However, by 2018-2023, the working-age population grew 5.1%, and net migration contributed 4.6 percentage points of that change. Cohort turnover only contributed 1.3 percentage points (and deaths contributed -0.8 percentage points).

So yes, the working age population is growing at the national level. And yes, migration is contributing a bigger proportion of that change over time. However, the real story here is the decline in cohort turnover as the population ages, as well as how this is playing out at the subnational level. For many TALBs, negative cohort turnover has become a reality. There were no TALBs with negative cohort turnover in the 1998-2003 period, but there were 30 TALBs that had negative cohort turnover in the 2018-2023 period. In other words, more than one-third of all areas are experiencing more people ageing out of the working-age population than the number of people entering the working-age population at young ages. This overall shift towards more negative (and less positive) cohort turnover is demonstrated in the leftward shift of points between Figure 1 (on the left, showing 1998-2003) and Figure 2 (on the right, showing 2018-2023) from the paper:

A natural response might be to say, "Those places should just try to attract more migrants." And sometimes they do! Across TALBs, cohort turnover and net migration tend to move in opposite directions (there is a moderately strong negative correlation between cohort turnover and net migration). Notice that in the two figures above, there is a downward-sloping trend line in each of them (and in each of the other five-year periods as well).

But 'sometimes' and 'tend to' are not a reliable policy prescription. When we look specifically at places with negative cohort turnover, most places do indeed offset it with positive migration, but not universally, and not consistently. In 2018-2023, two areas only partially offset negative cohort turnover (Kaikōura District and Dunedin City), and two had migration that actually made things worse (Waitematā local board and Chatham Islands Territory).

The takeaway is, again, that migration cannot be relied on to solve population ageing (or cohort turnover, in this case). Our decomposition basically shows that some places are increasingly reliant on migration to keep their working-age population from shrinking, and migration is highly unstable and cannot be relied on. In particular, migration is sensitive to policy changes at the national level, as well as sensitive to business cycle changes (and international migration, in particular, is sensitive to changes in Australia). These are things that local policy makers and planners have little control over.

To be clear, this doesn't mean that TALBs should be fatalistic about changes in the working-age population. But they need to be realistic. Not every area is Hamilton, with a young population and a growing university, attracting busloads of young people and maintaining a relatively young age structure and a growing working-age population. Not every area can aspire to have those features.

A realistic approach to planning for population ageing and a declining working-age population involves treating cohort turnover as a sort of 'warning light', and recognising that migration may not be a realistic solution. The good news is that our 'migration won’t save us' result isn’t a dead end for local areas that have declining working-age populations. It's an opportunity to improve their planning. They should treat negative cohort turnover as an early warning sign, work on realistic migration scenarios, and stress-test the basics, such as workforce needs, housing, infrastructure, and local services. Migration is a bonus when it arrives, but resilience is what they need to design for.