About Tom

Hi, I'm Tom. I'm also a public servant, a media obsessive, a data nerd and a politics tragic. Views are my own.

Risk-taking Refugees – Entrepreneurship as a Humanitarian Service

Courtesy of the Department of Immigration and CitizenshipAustralia’s refugee program sparks a lot of heated political debate. Even more controversial is the issue of asylum seekers who arrive in Australia by boat.

The enduring popularity of an email hoax claiming that refugees receive more social security payments than pensioners highlights a strong concern of critics, that refugees are a drain on the public purse, and good intentions aside, they are a net economic loss for Australia.

But is this true? Not according to recent research by Professor Graeme Hugo. Hugo’s report, Economic, Social and Civic Contributions of First and Second Generation Humanitarian Entrants, was commissioned by the Department of Immigration and Citizenship (my employer, see disclosure below).

The research found that in the long term refugees are a net positive for the Australian economy. Not to mention the other ways that cultural and ethnic diversity has enriched Australia over the last 65 years.

Risky Refugees

Among the most striking findings of Hugo’s report is the above average entrepreneurial talent of refugees. For example, in 2005 five of Australia’s eight billionaires were first or second generation post-war refugees. Refugees are also over represented in small business ownership compared to non-refugee Australians.

An example of this that comes to mind is Frank Lowy, the Czech refugee who migrated to Australia via Israel. Lowy went on to found the Westfield group, the largest retail property group in the world.

Why are refugees such successful business people? The most likely reason, according to Hugo, is that refugees are a self-selected group of risk takers.

By taking the risk of fleeing in search of a better life refugees have shown a tolerance for risk that is higher than comfortable, affluent Australians. To be a successful entrepreneur, you need to take risks.

This appetite for risk of refugee migrants contrasts with our skilled migration programs’ migrants. They are selected for educational attainment, English proficiency and professional experience. All desirable traits certainly, but achieved by methodical hard work, not big gambles on business.

So, now that we know that refugees have shown they are more likely to succeed in business, what policy ramifications does this have for successfully settling refugees in Australia?

Australia’s settlement services

Australia’s (successful by world standards) settlement programs focus on assisting refugees to build their English skills, set up their households and navigate Australia’s complex consumer and government environments.

They don’t however focus on building on this recently identified talent for business among refugees.

These programs also cost serious money. Australia’s Settlement Grants Program alone costs 37 million dollars annually to deliver settlement services. Then there are the Adult Migrant English and Humanitarian Settlement Services programs which cost significantly more again.

I’m not arguing that this money is wasted. Far from it. But as we learn more about the contributions of refugees to Australia, we must ensure that our settlement services are as effective as possible.

Randomised refugee resettlement?

One approach to encourage these budding businessmen and women could use Tim Harford’s model for policy innovation (see my previous book review of Adapt for an explanation). This involves trying out risky new ideas on a small scale and conducting rigorous evaluation for success.

We could design a randomised trial to discover the best way to encourage refugee entrepreneurs. It may look somewhat like this:

  1. A control of refugees who simply receive the standard settlement services.
  2. A second control group would be provided information on starting businesses in Australia and provided with access to business mentors.
  3. A third group would also receive these business services, but in addition would receive start-up ‘micro-finance’ loans or even grants to kick start their businesses.

After a length of time, say 3 years, we could go back to each of these groups and evaluate their relative levels of success. We could look at the individual and their families health and education outcomes, income levels, English proficiency, and community involvement.

What might we find?

We may find that those who received the grants or loans were able to get their businesses off the ground more quickly. This head start may have allowed them to employ members of their family and thereby increase the wealth of their community in Australia. This might even flow back to their home country in the form of increased remittances.

On the other hand we may see that those who received money from the government saw it as a hand out. They did not value the money and wasted it. In fact it may be counter productive, and the control groups may have stronger business success.

Regardless of the outcome for the individuals we would know what helps refugees get started on an entrepreneurial pathway in Australia. And we would have hard evidence to back it up.

Too often service provision to the needy in Australia is not backed up by rigorous analysis. This weakens the argument for increased Government involvement.

And who knows, in thirty years this small amount of money may have provided the kick start that Australia’s next Frank Lowy needed to start a future mega-success in Australian business. Why don’t we try and find out?

Disclosure

I work for the Department of Immigration and Citizenship. I do not work in the refugee or settlement areas. Though I did previously work in the Department’s settlement branch. These views in no way represent those of the Department or Government and are mine and mine only.

Book Review: Tim Harford – Adapt: Why Succes Always Starts with Failure

Many of the low hanging public policy fruit in Australia have been picked. Reforms by successive governments in the 1980s and 1990s such as the opening of Australia’s markets to international competition, floating the Aussie dollar and introducing superannuation all place us in competitive shape economically.

What we are left with is a series of problems that have no obvious solutions. Examples such as aboriginal disadvantage, long term unemployment and climate change come to mind.

Tim Harford, author and columnist for the Financial Times in England, argues convincingly in his new book ‘Adapt: Why Success Always Starts with Failure’ that the key to solving problems in an ultra-complex world is to embrace failure.

Harford begins by painting a picture of the extreme complexity of the world we live in. He describes the futile efforts of a design student to create an electric toaster from scratch. He informs the reader that in a modern consumer economy we have access to over ten billion distinct products. No wonder I have trouble working out which toilet paper to buy.

This complexity leads to problems that can not be solved by simply asking experts and implementing their solutions. In fact the problems that Australia faces that I listed earlier have many ‘experts’ that propose all manner of different, and often contradictory solutions. How do we know which expert solution to adapt?

Then, drawing on evolution as a model of unconscious problem solving in complex systems Harford presents a new model for solving problems:

  1. Variation
  2. Fail on a survivable scale
  3. Selection

Variation

The key to evolutionary adaptation is mutation. Tiny variations that constantly present new ways of solving the problem of survival and reproduction.

Harford argues that a similar process applies in the marketplace – successful companies that adapt to changing conditions thrive, companies that don’t adapt disappear and new companies are constantly trying new approaches to loosen consumers’ grips on their money.

The fit companies survive and other companies disappear. Former giants are quickly replaced by upstarts with a different approach. IBM’s mantel as tech-king was usurped by Microsoft, who have gone on to lose to Google, who are now threatened by the likes of Facebook.

Fail on a survivable scale

The problem with this approach, at least for Government and public servants is that the tolerance for failure in Government is extremely low. This risk-averse approach leads to solutions which while less likely to fail, are also less likely to be extremely successful. Without the instant feedback of consumers voting with their wallets, sub-par solutions in Government can continue for a long time without attempts to change them.

The key then, is to fail on a small scale.

Selection

Harford then goes on to discuss how these public policy issues can be selected for their suitability. Echoing Andrew Leigh’s enthusiasm for randomised trials, Harford argues that the key to finding new solutions is through rigorous data analysis of randomised experiments.

Buy this book

I believe that the model discussed in this book could have profound and positive effects on public policy in Australia and elsewhere. Harford presents his view entertainingly and convincingly. Adapt is a thought-provoking and interesting read, and I would recommend it to anyone interested in changing the world for the better. You can get it from Amazon here: Amazon Store.

Harford gave a talk at TED recently that presents an overview of the book. Have a look here:

NSW Labor Sec Sam Dastyari wants 50 50 primaries

As part of what is turning into a series of posts on the future of Australian political parties, I thought I’d share a video with you.

Sam Dastyari, NSW Labor General Secretary, went on Sky News’ Agenda program to talk about the future of the Labor party. Confronted by a conservative panel, Dastyari proposed the following measures as a way of bringing Labor in NSW back from the brink:

I’m proposing two major sets of reforms [...], my solution is to say we have to re-engage with the community and we have to move towards a fifty-fifty model where the community gets a fifty per cent say in who their labor representative is going to be.

And secondly I’m arguing for a complete re-think in how we develop our policy, we need a policy agenda where we’re actually talking [...] to the community. [...] The answer to Labor’s problems is a re-engagement with the community.

The idea of 50-50 primaries is a good one. But it is also a pretty radical one. Particularly in NSW. I hope that Sam gets these reforms up, and that the rest of the country can see what happens when Labor is prepared to take some risks to fix itself.

It’s a fascinating video, have a watch:

You can also read Dastyari’s piece in the Australian on primaries here:

ALP must look to primary system

Malcolm Turnbull on Party Membership

Further to my last post on political party membership, watch this great video from the ABC’s ‘Big Ideas’ show on modern Australian democracy. Chaired by Fran Kelly featuring Malcolm Fraser, Malcolm Turnbull, Lindsay Tanner and Margaret Simmons.

Malcolm Turnbull hits on what I was talking about in my blog post from last week at around the 35 minute mark.

“The structure of membership of political parties is no longer consonant with the lifestyle and worklife balance et cetera of people in 2011 […] I think that’s the reason why you don’t have anything like the same number of people joining political parties.”

Watch from 30 mins on:

Hat tip to @graciedaniel for the link.

The Labor party: fighting over the first class seats on a plane that is about to crash into the mountain

Tonight I went to a poorly attended Labor party meeting to discuss the Faulkner et al review of the party. The presenter, ALP National Vice President Jenny McCallister spoke about her vision for a modern Labor party. One of the startling graphs that she showed from the review was this:

ALP Review Image

This graph shows that the Labor party nationally has lost 25 per cent of its membership base in the last five years. 25 per cent! In a country of 22 million people, the ruling national political party has the equivalent of 0.17 per cent of the population as members.

What do you call a party where no-one turns up?

Not only has the party lost all these members, but they also have no idea why they have lost these members. No surveying of the party membership has been conducted. In a party where the parliamentary wing is criticised for excess polling, focus groups and a lack of leadership, the party has no idea what its membership think about anything.

You would think then, that this incredible drop in numbers would have been the focus of tonight’s meeting. Nope. Here is a selection of the topics people brought up:

  • Primaries should not be introduced (or trialled!) because that would devalue membership. Apparently primaries would also allow the socialist alternative (all 4 of them) to influence the selection of Labor party candidates.
  • Various arcana regarding rules to how people are selected to national conference (just a reminder at the last one there was no debate at all)
  • The lack of attention paid by the party to policy committees
  • The scourge of factions (in a territory where the factions are so powerless that their nominated candidates were not preselected at the last election)

Now these are all interesting, and somewhat important issues, but they all pale into comparison with the fact that NO-ONE IN AUSTRALIA BELONGS TO THE LABOR PARTY. This is a massive problem. Who cares about valuing the membership if no-one else is a member? Who cares about factions when there are only 2 people in them?

The situation in the ACT is slightly less catastrophic. ALP membership as a percentage of population is 0.37 per cent. This is still tiny, but it’s better than the country as a whole. But the ACT is a freak exception. The fact that there are only 1,300 people in the Labor party in Canberra is bizarre. If you can’t get people in Canberra to care about your political party, they’re not going to care anywhere.

The barriers to entry to the Labor party in Australia are way too high:

  • You have to be a member of a union, which can cost over 500 dollars per year
  • To have any power or real involvement you must attend countless meetings and join bizarre committees that have no influence in and of themselves, but you will get to know people through them
  • You have to be interested in adversarial, political discussion where you could well be harassed for just having an opinion on something

Now I, and apparently 37 thousand other people like this. But most people don’t.

A few random people choose your MPs

Despite these tiny numbers, Labor members still possess a lot of power. In the ACT where there are genuine preselections, and the seats are very strong Labor seats. Therefore, a small amount of people get to choose who our MPs are.

For example I am told that Andrew Leigh was pre-selected by roughly 140 Labor party members. Then the rest of the seat of Fraser duly elected a Labor member at the 2010 election, and there he is in parliament. If you could organise 100 people in the next two years, you could probably kick Andrew Leigh out at the next election, and elect whoever you like to parliament.

Once the community finally catches on to the fact that the Labor party, who choose Labor candidates, is made up by a few random political die hards that do not represent any one’s views, the potential for electoral oblivion is obvious.

A few deep breaths, there may be a solution

I don’t think this tiny participation in the Labor party means that no-one cares about centre left politics in Australia. Or that everyone has decided to become a green because of disillusionment with the Labor party. I think there is a massive proportion of the population who care deeply about centre-left politics. However, the Labor party does not seem to want to engage with them.

Labor’s online engagement, in stark contrast to GetUp (which boasts 570 000 ‘members’) is simply another implement to spew out the party line. There is no organisation around particular issues of importance. The recent community initiative to support the pricing of carbon came from outside the party. This is despite the fact that most people within the Labor party care deeply about the environment and the importance of introducing a scheme to protect it that doesn’t jeopardise the Australian economy. And despite the fact that the government is being slammed by interest groups on both sides of the debate.

These models for political engagement exist. The Labor party needs to start to use them or it will die. It’s that simple.

The days of people joining the party to attend branch meetings, and have meaningless discussions about rules and policy are over. The days of having real engagement with people online who are passionate about the future of Australia are here. The Labor party needs to seize this opportunity, or get out of the way.

The party needs to provide an avenue for ‘low intensity’ party engagement. We need to invite people to become a part of the centre-left political debate in Australia who are reluctant to commit to fully joining a party. Once people become involved, providing they like what they see, they will naturally join the party.

Labor needs its equivalent of GetUp and it needs it fast. I don’t even care if it’s called something lame like eLabor or iLabor 2.0. It’s not expensive, but it will mean taking some risks. It will also mean that people will say things that don’t fit the focus group tested, will-go-down-great-in-Western-Sydney worldview. But so what – have you seen Newspoll? It’s not like that is working great anyway. The risk from inaction is far greater than the risk of action.

I want to do something about this. I need other people to join me who do too. Let me know what you think on twitter, facebook or via email.

Why you should force your kids to play cricket instead of footy – An Economics Perspective

If you somehow managed to ignore the trivia posing as analysis in this year’s budget, you may have stumbled on some of the excellent economic analysis done by the boffins at treasury.

One graph from Budget Statement 4 that jumped out at me was this:

Middle Class Projection

This graph shows the projected size of the global middle class out to 2030. In 2009 Europe and North America make up the majority of the world’s middle class with roughly 1 billion people. By 2030 the global middle class will be dominated by the Asia Pacific region with in excess of 3 billion people.

What the hell does this have to do with cricket?!

The implications of such a huge shift in consumer power to Asia are countless. One massive impact will be felt in the world of professional sport. Last year’s IPL auction valued 123 players at 56 million dollars. That’s an average of over 460 thousand dollars per player. This makes the IPL one of the highest paid sports competitions in the world – and that is today!

IPL Cricket

Imagine a future of literally billions of rich, cricket-loving Indian sports fans. The marketers are probably already salivating over this opportunity. Future salaries of professional cricket players will make today’s European Football salaries look puny.

So, if you want to become super rich courtesy of your kids ability to whack a ball – Cricket is the sport of tomorrow! Time to set up the nets in the backyard…

If instead you’d just like an insight into Australia’s economic future, read the budget statements, they’re awesome.

2011-12 Budget Paper No. 1

What implications can you see this massive growth in the world’s middle class having? Let me know on twitter or facebook.