The steady influx of migrant workers that helped sustain Australia’s long boom has all but ended.
The federal government is predicting a 30% drop in the number of migrants this financial year, and an 85% drop in 2020-21 (compared with 2018-19). Some argue the coronavirus-induced slump offers an opportunity to rethink Australia’s migration program.
In a May 3 opinion piece, Labor’s immigration spokesperson, Kristina Keneally, said Australia should have a “migration program that puts Australian workers first”.
“Our post-COVID-19 economic recovery must ensure that Australia shifts away from its increasing reliance on a cheap supply of overseas, temporary labour that undercuts wages for Australian workers and takes jobs Australians could do,” Keneally wrote.
But the federal government has rejected the argument that migrants have been taking jobs ahead of Australians.
In an interview on ABC Radio National about Keneally’s article, Minister for Population, Cities and Urban Infrastructure Alan Tudge said the Coalition had scrapped the previous program for skilled temporary migrants, the 457 visa, because it had not been operating as it should under Labor, including “bringing in people to flip burgers”.
Tudge said the government had introduced a Temporary Skills Shortage (TSS) visa, and brought in new rules to ensure Australian workers are prioritised over foreigners for available positions.
“We’ve always been very, very careful to prioritise Australians and Australian jobs,” Tudge said. “We scrapped the 457 visa program when we came to office, we introduced labour market testing so the Australians would be prioritised for the jobs available.”
So, is it correct that Australian workers are being prioritised for jobs available?
Tudge’s claim is not the full story.
He homed in on a specific type of visa — the Temporary Skills Shortage (TSS) visa — to make the case that Australian workers are being prioritised.
The labour market testing rules referred to by Tudge, requiring employers to advertise locally before hiring temporary foreign workers, apply only to the TSS visa, and even then there are significant exemptions.
For example, labour market testing is not required when it would conflict with Australia’s international trade obligations. That means it does not apply to workers from China, Japan, Mexico, Thailand, Vietnam, Canada, Chile, South Korea, New Zealand or Singapore.
Moreover, the TSS visa represents a relatively small and shrinking proportion of the total number of visas issued in any given year that include work rights.
Whether the growing numbers of foreign workers with other types of temporary work visas — for example student visas or working holiday visas — have been undercutting wages and jobs that could be filled by Australian workers is not a simple question.
Some studies suggest skilled migration has had little if any impact on wages or employment.
Others suggest growing numbers of predominantly low-skilled workers, for example on student or working holiday visas, could be undercutting wages and employment, particularly for younger people.
But any evidence is anecdotal. As experts have pointed out the data is “ropey”, partly because employers and some migrant workers are unlikely to report the underpayment of minimum wages.
This makes assessing the impact of temporary migration — skilled or otherwise — problematic.
What is being debated?
In making his claim Tudge skirts Keneally’s argument.
In her opinion article, Keneally said migration had played a key role in Australia’s economic prosperity but in recent years the “shape and size” of the intake had hurt Australian workers. She singled out a growing reliance on a “cheap supply of overseas, temporary labour” as the culprit.
Asked to respond in the ABC Radio National interview, Tudge cites a Coalition decision to replace the 457 visa with the new TSS visa for temporary skilled migrants, including the introduction of labour market testing.
He points out that the biggest category of temporary migration is New Zealanders, who under a reciprocal agreement can freely enter and exit Australia.
“Is the Labor Party is saying that we should scrap that agreement?” Tudge asked. He also mentions student visas, saying they add enormous value to the community by spending money and creating jobs.
However, Tudge’s response does not address the broader question raised by Keneally of whether lower-skilled foreign workers, including those on student visas or working holiday visas, might be undercutting wages and employment for Australian workers.
Australia’s visa system
RMIT ABC Fact Check has previously examined the operation of Australia’s temporary visa system.
In March 2018, for example, Fact Check found a claim by Australian Council of Trade Unions secretary Sally McManus that one in 10 workers are now on temporary visas was “unsubstantiated”, mainly because McManus’ calculations assumed all temporary visa holders with the right to work were actually working.
As Fact Check noted at the time: “Most temporary visa holders are not required to work while in Australia, and data is not kept on their working habits.”
Most visas issued in Australia are temporary. Of these, the vast bulk are tourist or business visitor visas, with no work rights.
But what about temporary visas with work rights?
The largest number are issued to New Zealanders, who are free to live and work in Australia for as long as they want (barring health or legal problems) under a longstanding trans-Tasman agreement.
Student visas represent the next most common category in any given year. For most students (with some exceptions), this visa allows up to 40 hours of paid work per fortnight during semester, with no limit during semester breaks.
Working holiday visas, allowing the visa holder to work (if they wish) in one place for a maximum of six months, are another significant category.
There are also “other employment” visas, a catchall class covering postgraduates, entertainers, specialists, seasonal workers, diplomats and people visiting for cultural or religious purposes.
The Department of Home Affairs describes this category as visas that “allow people to undertake short-term, non-ongoing highly specialised work, enrich social and cultural development, strengthen international relations, or provide training opportunities of benefit to Australia”.
But the type of visa that has attracted perhaps the most controversy in recent years is also one of the smallest categories: temporary resident skilled employment visas.
This category includes the now-abolished 457 visa, which allowed skilled migrants to work in specialty fields in Australia for up to four years; and its replacement, the TSS visa referred to by Tudge, which includes short- and long-term options allowing migrants to live and work in Australia for periods up to two or four years.
As with student visas and some other temporary visas, the TSS visa is issued in two classes: “primary” or “secondary”, with primary visas granted to the applicant and secondary visa to the applicant’s partner or dependants.
There are no work restrictions placed on secondary visa holders.
How has the make-up of Australia’s visa system changed?
Chris F. Wright, an associate professor at the University of Sydney Business School, said the immigration policy framework had changed profoundly in recent years, with a growing emphasis on temporary visa holders.
“Until 1996 virtually all migrants who came to Australia were given permanent residency with the same rights and protections as citizens,” Wright says.
“Since 1996 there has been a greater and increasing focus on temporary residency with visa holders not receiving many of the rights and protections available to citizens.”
This table shows the major types of visas that include work rights. It excludes from the totals business and tourist visas and various miscellaneous visas such as crew and transit visas not directly relevant to the debate.
It compares visas issued in 2018-19, the latest financial year for which data is available, with 2012-13, Labor’s final full financial year in office.
The figures do not show the total number of people in Australia at any given time on different types of visas, or net arrivals (arrivals minus departures) by visa type.
In 2018-19 permanent skilled visas made up about 3.7% of the total visas with work rights.
That was down from 4.9% in 2012-13 under Labor.
Permanent family visas have also become relatively less important, making up 1.6% in 2018-19, compared to 2.1% in 2012-13.
Over the same period the share of student visas has increased significantly, from 9.8% of the total to 13.7%, although the share of working holiday visas fell from 9.8% to 7.1%.
As this graph shows, temporary skilled visas — the visa class highlighted by Tudge — make up a small and shrinking share, equivalent to 2.8% of the total in 2018-19, compared to 4.8% in 2012-13.
More on temporary skilled visas
In April 2017 then-prime minister Malcolm Turnbull announced he was scrapping the controversial 457 visa, warning the temporary skilled migration program had “lost its credibility”.
The replacement TSS visa came into effect in March 2018, with Turnbull promising it would be “manifestly, rigorously, resolutely conducted in the national interest to put Australians and Australian jobs first”.
The new rules included tougher English language requirements, mandatory criminal checks and a minimum of two years’ experience in a relevant job.
Prospective employers were also required to undertake labour market testing by advertising for local workers first before hiring a foreign worker.
Appearing at Turnbull’s media conference, the then immigration minister Peter Dutton said: “In relation to the advertising, the advertising will be required, whereas it is not at the moment”.
Turnbull spoke of “mandatory labour market testing” which he said was “a very significant change”.
In his Radio National interview Tudge says the Coalition introduced labour market testing after scrapping the 457 visa. He also says the Coalition “strengthened” the labour market testing provisions.
In fact, when the Howard government introduced the 457 visa in 1996, labour market testing was required under some circumstances. As a 2016 Senate inquiry report set out, labour market testing was dropped, reinstated and changed on several occasions over the years.
How does labour market testing work?
The broad purpose is to make sure that qualified Australians are not available for jobs being filled by temporary skilled migrant workers.
In August 2018 various changes were introduced to strengthen these requirements.
Businesses wanting to hire a temporary skilled foreign worker must demonstrate that they have tested the local labour market within the four months prior to nominating a skilled overseas worker for a TSS visa, over at least four weeks.
Advertisements must be in English; must specify skill and experience requirements; and they must specify salaries for all positions paying less than $96,400.
They must include at least two advertisements using the same approach as a national recruitment website, print media or radio with national reach, or the business website of the sponsors.
The Department of Home Affairs told a recent Senate inquiry that between July 1, 2018 and February 28, 2019, there were 1952 Temporary Skill Shortage visas that were refused for failing to meet the labour market testing criteria. That represented about 5% total applications.
Is labour market testing always required?
There are exemptions.
In particular, labour market testing is not required when it would conflict with Australia’s international trade obligations — either because of general World Trade Organisation rules or because of a specific free trade agreement between Australia and another country.
That means it’s not needed when the workers being nominated by an Australian sponsor are from China, Japan, Mexico, Thailand, Vietnam, Canada, Chile, South Korea, New Zealand or Singapore.
What are the criticisms of labour market testing?
The system has been criticised by both business groups and unions.
For example, in a 2019 Senate submission, the Australian Chamber of Commerce and Industry argues labour market testing “does not add much value to achieving the recruitment of Australians first” but it significantly adds to the red tape burden.
It said employers looking to hire foreign temporary workers would have likely already made “numerous attempts” to hire locally.
“Australia is a large country, where mobility of labour is often limited, and obtaining a skilled worker in a particular business, in a specified location at a particular point in time is a challenge for any business, and especially for regional businesses,” the submission said.
Unions, on the other hand, argue the labour market testing rules are being flouted, for example by businesses offering unreasonably poor wages and conditions in local advertising to access cheaper workers through temporary skilled migrants; or setting unrealistic and unwarranted skills and experience requirements for vacant positions to exclude otherwise suitable Australian applicants, among other things.
The final report, by the Senate’s Labor-dominated Legal and Constitutional Affairs Reference Committee, recommended the government introduce “more stringent evidentiary requirements” for labour market testing regime to help better protect Australian jobs.
It also said the government should not enter into any future free trade agreements involving labour market testing waivers.
But a dissenting report written by Coalition committee members, like Tudge, strongly rejected the argument that the system has not been working as intended.
“Government members of the committee are deeply saddened by this insular and parochial position,” the dissenting report says.
“Government senators take an alternate view which is that the holders of skilled visas can bring great energy, diversity and opportunity to the Australian labour market.”
Are Australian jobs and wages being undercut?
According to some labour market experts the relationship between migration levels and wages and employment is not simple.
In a March 2017 paper, Australian National University economics professor Robert Breunig and colleagues Nathan Deutscher and Hang Thi To, modelled the impact of skilled migration on employment and wages by examining different segments of the jobs market.
Breunig said although migration added to the labour supply, which placed downward pressure on wages, it also added to productivity and boosted growth, which had the opposite effect, lifting wages.
The net impact was in most cases zero.
“We found a big fat zero,” Breunig said:
It suggests these kinds of effects are basically balancing out — more workers coming in suppresses wages, but this also adds to productivity in other ways, so there is no net effect on wages.
Similarly, a 2019 report by the Committee for Economic Development of Australia concluded temporary skilled migrants were among Australia’s most productive workers.
“The modelling … shows that recent migrants in some cases are associated with increased labour force participation and wages for local workers although the impacts are small in magnitude,” the report said.
It is likely that immigration also adds to the productivity of the nation, and fuels technological innovation.
However, those two reports largely examined the impact of permanent visas and temporary skilled visas.
Associate Professor Wright pointed out that while these types of visas had played an important role in the past, they were forming an increasingly small proportion of Australia’s immigration intake, which had been increasingly dominated by other temporary visas such as working holiday maker visas and international student visas.
A study by the Grattan Institute’s John Daley, prepared for a 2019 conference organised by the Reserve Bank of Australia, argues that growing numbers of working holiday makers and student visa holders could be helping to suppress wages growth and adding to unemployment and underemployment, particularly for younger workers.
“Australia is now running a predominantly low-skill migration system,” Daley wrote.
People from this system form a material proportion of the younger workforce.
Daley said many of these migrants had incentives to work for less than minimum wages.
He said while there was anecdotal evidence of this, “it is impossible for data sources on the Australian labour force to pick up all of this phenomenon”.
“It is possible that the scale of the influx to the labour market is depressing wages and increasing under-employment specifically for low-skill younger workers,” he said.
Daley said data on underpayment of minimum wages was “inherently ropey”, with employers unlikely to fess up if they are paying less than the minimum wage.
He said while migration could have led to lower wages growth and higher unemployment for younger workers, “it cannot be the primary culprit behind the broad-based slowdown in wage growth”.
Is labour market testing working as intended?
Some economists have questioned whether labour market testing is the best way of targeting genuine skills shortages.
In Australia — unlike some other countries such as the United Kingdom — the process of labour market testing does not involve an independent assessment of whether the skills shortage is genuine.
Associate Professor Wright said employer sponsorship was a “fundamental design feature” of Australia’s temporary skilled visa scheme, both the 482 visa and the 457 visa before it.
He and colleague Andreea Constantin used a survey of 1602 employers who sponsored temporary skilled visa holders in Australia to show that a large share of employers in some industries, particularly hospitality, used temporary skilled migration stream not necessarily to find suitably qualified workers, but rather to recruit workers with particular “behavioural traits”, such as being hard working.
“Our article found that only 1% of employers surveyed claimed they would increase wages or provide other incentives to potential candidates as a means of addressing their recruitment challenges,” Wright said.
“This suggests that even if employers recruited temporary sponsored skilled migrants because of skill shortages that meet the generally accepted technical definition of a lack of suitably qualified workers, the skill shortages that existed were not acute.”
Principal researcher: Josh Gordon, economics and finance editor
- Alan Tudge, RN Breakfast, May 4, 2020
- Kristina Keneally, Sydney Morning Herald, May 3, 2020
- Department of Home Affairs, Australia’s Migration Trends, 2018–19 Highlights
- Department of Home Affairs, Compendium, Australia’s Migration Trends 2018–19
- Department of Home Affairs, 2018 – 19 Migration Program Report Program year to 30 June 2019
- Committee for Economic Development of Australia, Effects of temporary Migration: Shaping Australia’s society and economy, 2019
- Legal and Constitutional Affairs References Committee, Inquiry into the effectiveness of the current temporary skilled visa system in targeting genuine skills shortages, April 2, 2019
- Legal and Constitutional Affairs References Committee, Dissenting report of Government Committee Members
- Australian Council of Trade Unions, ACTU Submission to Senate Standing Committee on Legal and Constitutional Affairs, submission no. 11, December 2018
- Australian Chamber of Commerce and Industry, Submission to the Senate Legal and Constitutional Affairs References Committee, submission no. 12, December 2018
- Joint submission from the Department of Home Affairs, Department of Jobs and Small Business, and Department of Education and Training, Inquiry into the effectiveness of the current temporary skilled visa system in targeting genuine skills shortages, submission no. 40, January 2019
- RMIT ABC Fact Check, Is Australia’s population growth mostly the result of migration, and is that underpinning the budget? July 31, 2019
- RMIT ABC Fact Check, Are one in 10 workers in Australia on temporary work visas? March 27, 2018
- Robert Breunig, Nathan Deutscher and Hang Thi To, The relationship between immigration to Australia and the labour market outcomes of Australian-born workers, Economic Record, Volume 89, Issue 301
- The Treasury and the Department of Home Affairs, Population growth and immigration over time, 16 April 2018
- John Daley, Immigration and wage growth Discussant paper, Low Wage Growth, RBA Conference 2019, Grattan Institute
- Chris F Wright, Andreea Constantin, Why recruit temporary sponsored skilled migrants? A human capital theory analysis of employer motivations in Australia, Australian Journal of Management
- Department of Home Affairs, Nominating a position, labour market testing