Migration has been a big part of Australia’s heritage. Immigration policies adopted by Australia have served the country well. Immigration has boosted Australia’s gross domestic product, budget revenue, and even improved labour productivity. The country has been able to attract highly qualified migrants under its skilled migration system. However, many of these skills seem to have been wasted or underutilised. Recent studies and government reports have highlighted issues such as skills mismatch, the wrong composition of permanent skilled migrant intake, and mistreatment of temporary migrants which poses a serious challenge for Australia’s immigration policy.
Immigration and Australia’s Labour Market
In recent years, there has been a constant debate about whether immigration has harmed the labour market outcomes of native workers. There are claims that migrants take away their jobs and have a negative effect on their wages. However, there is little evidence that suggests that immigration has harmed the wages of native workers. If at all, immigration has a slightly positive impact on their wages. Moreover, immigrants are seen as complements to the existing workforce rather than substitutes. Immigrants add to the overall productivity instead of subtracting from it [i]. Research by CEDA conveys that there is a net positive impact of temporary migration on the Australian economy. Temporary migrants help in filling the gaps where there is an undersupply of workers and add to the knowledge and experience of Australian workers [ii].
Composition of Skilled Permanent Migrant Intake Gone Wrong
Given the evidence supporting the positive impact of immigration on the Australian community and economy, it is important to focus on some recently arising policy concerns and ways to address them.
Permanent migration has played a crucial role in Australia’s economic development. Skilled migration constitutes a larger part of Australia’s permanent migration system. The country’s permanent migration policy has been historically targeted towards younger skilled migrants. In recent years focus has shifted towards older, less skilled migrants with poorer English language skills. According to a Grattan Institute report, this shift could potentially result in huge economic costs for Australia [iii].
Younger skilled migrants can generate significant fiscal benefits for Australians. This is because they tend to earn higher incomes and have an extended period where they pay substantial taxes but utilise fewer government services. As a result, the incumbent workers end up paying fewer taxes for more government services drawn. The Business Innovation and Investment Program (BIIP) focuses on migrants who would bring capital investment to Australia or add to the Australian community in terms of entrepreneurship and investment. Migrants who are offered residency through this path are generally older, have poorer English language skills, and tend to earn low income compared to those who are selected through the points system or sponsorship by employers [iii].
The BIIP needs to be abolished. Doing so would reduce the average age of permanent migrants by almost 2 years. This would also yield an extra 3.7 billion in personal income tax receipts over the lifetime of each migrant group annually [iii]. Reforming permanent migration intake by putting emphasis on younger high skilled migrants is more likely to reduce wage inequality by raising wages of low skilled workers. This can also help the economy to recover from the post-COVID-19 pandemic.
Skills mismatch Could Cost Wages of Incumbents
A study by CEDA has shown that one in four permanent skilled migrants are employed in a job below their skill level. Around 40% of the immigrants have qualifications higher than required, compared to 7% among native-born Australians. This poses a barrier for migrants to find suitable work. The current skilled migration program can lead to a mismatch between skills that employers value and those that are available in the market. A plausible reason for this is the difference in time when immigration authorities are informed about the skills that employers require and the time when migrants enter a workplace which could be several months afterwards. If the migrants cannot acquire Australian work experience timely their entry into the labour market either delays or they end up changing their field. This potentially results in skill wastage and skills underutilisation [iv] . As a result of this skill mismatch, it would cost at least $1.25 Billion in foregone wages for migrants arriving between 2012-2018 [v].
To address this issue, there needs to be better coordination between the migration system and employment policies. One of the solutions proposed by CEDA is to create a government-regulated skills-matching platform. This system would allow migrants and employers to interact before the migrants come to Australia. As soon as workers receive a job offer, they can then be fast-tracked through the permanent residency process and start their new job.
Another recommendation is to update the Australian and New Zealand Standard Classification of Occupations (ANZSCO) codes which are inflexible and outdated. For instance, the demand for data scientists has been increasing since 2015. However, there is no mention of this occupation on the skilled occupation list [v].
Temporary Migration and Workplace Exploitation
Temporary migration remains an important component of Australia’s migration system. The current system of temporary migration has also raised some policy concerns. There have been increasing concerns about how temporary migrants are exploited at their workplaces. Many of them are not given any workplace protection and social assistance. Mistreatment of temporary migrants, especially when compared to the treatment of permanent migrants has also been exposed during the COVID-19 pandemic. There is evidence of employer non-compliance with the minimum wage standards, especially for holidaymakers and international students in the hospitality sector [vi]. These problems exist due to various factors such as residency status, lack of institutional protection, restrictions on mobility, and skill underutilisation. For example, some visa arrangements may force employees to continue working in exploitative conditions and prevent them from seeking a remedy.
There is a need to reform the Migration Act 1958 Cth and the Fair Work Act 2009 (Cth) to ensure that all employees, regardless of whether they are temporary or permanent migrants, face the same minimum employment standards [vi]. Upon their arrival, temporary migrants should also be provided with some basic information regarding work rights, minimum wages, and sources of assistance if they are mistreated or suffer underpayment.
Border closures because of the COVID-19 pandemic have halted the migration process. At the same time, it provides Australia with an opportunity to reassess its migration policy to ensure that the economic and social benefits are fully realised.
Access to the right skills at the right time, improving migrant selection and preventing workplace exploitation is critical to maximising the benefits from migration.
[i] Breunig, R., Deutscher, N., & To, H. (2016, January). The relationship between immigration to Australia and labour market of Australian workers. The Australian Government. https://www.pc.gov.au/inquiries/completed/migrant-intake/report/migrant-intake-supplementa.pdf
[ii] Sherrell, H., D’Souza, G., & Ball, J. (2019). Effects of Temporary Migration. Committee for Economic Development of Australia. https://www.ceda.com.au/ResearchAndPolicies/Research/Population/Effects-of-temporary-migration
[iii] Coates, B., Sherrell, H., & Mackey, W. (2021). Rethinking Permanent skilled migration after the pandemic. Grattan Institute. https://grattan.edu.au/wp-content/uploads/2021/05/Rethinking-permanent-skilled-migration-Grattan-Report.pdf
[iv] Tani, M. (2018, January). Australia’s jobs and migration policies are not making best use of migration policies. The Conversation. https://theconversation.com/australias-jobs-and-migration-policies-are-not-making-the-best-use-of-qualified-migrants-90944
[v] CEDA. (2021). A good match: Optimising Australia’s permanent skilled migration. Committee for Economic Development of Australia. https://www.ceda.com.au/ResearchAndPolicies/Research/Population/A-good-match-Optimising-Australia-s-permanent-skil
[vi] Clibborn, S., & Wright, C. (2020, March). Reforming Australia’s Temporary Migrant Labour Policy Regime. Parliament of Australia. https://www.aph.gov.au/DocumentStore.ashx?id=67541f62-4445-48f8-9ec8-9bef52308fb7&subId=679742