Mass immigration is ungovernable for the labour market

At the AFR this time:

 The Fair Work Ombudsman is investigating Trek North director Leigh Alan Jorgensen from Cairns over fresh claims he engaged working holiday visa workers in “trials” or “internships” last month, during which they performed productive work but were paid nothing.

Mr Jorgensen was sentenced to 12 months prison for contempt of court in a landmark Federal Circuit Court ruling in May when he breached freezing orders by transferring company funds into a trust instead of paying fines or compensation for underpayments.

The latest underpayment claims, if proven true, make a mockery of the court’s decision that Mr Jorgensen should spend just 10 days of his 12-month sentence in jail because he was a changed man.

One 25-year-old visa worker, who wished to remain anonymous, said she worked an unpaid 36-hour week at the Cairns store as recently as the final week of June, including split morning and afternoon shifts and during the weekend.

Yes folks, mass immigration is ungovernable for the labour market:

  • For years we have seen Dominos, Caltex, 7-Eleven, Woolworths and many other fast food franchises busted for rorting migrant labour.
  • The issue culminated in 2016 when the Senate Education and Employment References Committee released a scathing report entitled A National Disgrace: The Exploitation of Temporary Work Visa Holders, which documented systemic abuses of Australia’s temporary visa system for foreign workers.
  • Mid last year, ABC’s 7.30 Report ran a disturbing expose on the modern day slavery occurring across Australia.
  • Meanwhile, Fair Work Ombudsman (FWO), Natalie James, told Fairfax in August last year that people on visas continue to be exploited at an alarming rate, particularly those with limited English-language skills. It was also revealed that foreign workers are involved in more than three-quarters of legal cases initiated by the FWO against unscrupulous employers.
  • Then The ABC reported that Australia’s horticulture industry is at the centre of yet another migrant slave scandal, according to an Australian Parliamentary Inquiry into the issue.
  • The same Parliamentary Inquiry was told by an undercover Malaysian journalist that foreign workers in Victoria were “brainwashed” and trapped in debt to keep them on farms.
  • A recent UNSW Sydney and UTS survey painted the most damning picture of all, reporting that wages theft is endemic among international students, backpackers and other temporary migrants.
  • A few months ago, Fair Work warned that most of Western Sydney had become a virtual special economic zone in which two-thirds of businesses were underpaying workers, with the worst offenders being high-migrant areas.
  • Dr Bob Birrell from the Australian Population Research Institute latest report, based on 2016 Census data, revealed that most recently arrived skilled migrants (i.e. arrived between 2011 and 2016) cannot find professional jobs, with only 24% of skilled migrants from Non-English-Speaking-Countries (who comprise 84% of the total skilled migrant intake) employed as professionals as of 2016, compared with 50% of skilled migrants from Main English-Speaking-Countries and 58% of the same aged Australian-born graduates. These results accord with a recent survey from the Bankwest Curtin Economics Centre, which found that 53% of skilled migrants in Western Australia said they are working in lower skilled jobs than before they arrived, with underemployment also rife.
  • The Australian Bureau of Statistics (ABS) latest Characteristics of Recent Migrants reportrevealed that migrants have generally worse labour market outcomes than the Australian born population, with recent migrants and temporary residents having an unemployment rate of 7.4% versus 5.4% for the Australian born population, and lower labour force participation (69.8%) than the Australian born population (70.2%).
  • ABC Radio recently highlighted the absurdity of Australia’s ‘skilled’ migration program in which skilled migrants have grown increasingly frustrated at not being able to gain work in Australia despite leaving their homelands to fill so-called ‘skills shortages’. As a result, they are now demanding that taxpayers provide government-sponsored internships to help skilled migrants gain local experience, and a chance to work in their chosen field.
  • In early 2018 the senate launched the”The operation and effectiveness of the Franchising Code of Conduct” owing in part to systematic abuse of migrant labour.
  • Then there is new research from the University of Sydney documenting the complete corruption of the temporary visas system, and arguing that Australia running a “de-facto low-skilled immigration policy” (also discussed here at the ABC).
  • In late June the government released new laws to combat modern slavery which, bizarrely, imposed zero punishment for enslaving coolies.

Back in November, Robert Skidelsky, Professor Emeritus of Political Economy at Warwick University, penned an excellent article in Project Syndicate which, among other things, explained why never-ending mass immigration pushes down wages growth:

Standard economic theory tells us that net inward migration, like free trade, benefits the native population only after a lag. The argument here is that if you increase the quantity of labor, its price (wages) falls. This will increase profits. The increase in profits leads to more investment, which will increase demand for labor, thereby reversing the initial fall in wages. Immigration thus enables a larger population to enjoy the same standard of living as the smaller population did before – a clear improvement in total welfare.

recent study by Cambridge University economist Robert Rowthorn, however, has shown that this argument is full of holes. The so-called temporary effects in terms of displaced native workers and lower wages may last five or ten years, while the beneficial effects assume an absence of recession. And, even with no recession, if there is a continuing inflow of migrants, rather than a one-off increase in the size of the labor force, demand for labor may constantly lag behind growth in supply.

This analysis followed an empirical study by the Bank of England, which found that immigration into the UK had pulled down average wages:

This paper asks whether immigration to Britain has had any impact on average wages. There seems to be a broad consensus among academics that the share of immigrants in the workforce has little or no effect on native wages…

We find that the immigrant to native ratio has a small negative impact on average British wages. This finding is important for monetary policy makers, who are interested in the impact that supply shocks, such as immigration, have on average wages and overall inflation. Our results also reveal that the biggest impact of immigration on wages is within the semi/unskilled services occupational group… where a 10 percentage point rise in the proportion of immigrants is associated with a 2 percent reduction in pay.

…the impact of immigration on wages in semi/unskilled services is much larger than can be accounted for by purely compositional effects, suggesting that the vast majority of this effect refers to the impact on native workers.

Or try UBS:

Q3-17 population strong at 1.6% y/y; migration surges 250k, most since 2009

Population growth lifted 0.4% q/q & 1.6% y/y in Q3-17, the equal fastest annual pace since 2013. The larger driver of the total rise of 396k was a surge in migration to 250k.

Implications: labour market spare capacity still too high for a large lift in wages

The labour market is strangely mixed. Jobs – especially full-time – are around as strong as possibly could be expected at this stage of the cycle. This is supporting housing activity. However, booming population (especially migration) & a spike in participation is a massive ‘positive labour supply shock’, seeing unemployment ~steady for 2 years now. There is still likely more spare capacity in Australia’s labour market compared with other major economies which are at or below NAIRU – and hence we still don’t see a large lift in wages in the near-term. Overall, we still see the RBA on hold in 2018.

It is basic economics that if you flood an already oversupplied labour market with cheap foreign workers then prices will fall. This was explained beautifully by The Australia Institute’s chief economist, Richard Denniss, last year when he noted that the very purpose of foreign worker visas is to “suppress wage growth by allowing employers to recruit from a global pool of labour to compete with Australian workers”.  That is, in a normal functioning labour market, “when demand for workers rises, employers would need to bid against each other for the available scarce talent”. But this mechanism has been bypassed by enabling employers to recruit labour globally. “It is only in recent years that the wage rises that accompany the normal functioning of the labour market have been rebranded as a ‘skills shortage’”.

Comments

      • ErmingtonPlumbing

        Thats an easy one,…lack of oversight by a large, robust and active membership base.

        There are no “Great leaders” waiting to be discovered in the ranks of ANY party, to save us from the corrupted minority of people who run our political parties and always seem to sell us all out.
        Unaccountable power ALWAYS corrupts, irrespective of whatever ideology or philosophy one embraces, this is why REAL Democracy works,…by giving people without Power, controll over those that do.

        It is hard to understate the indoctrination and propaganda victory our Ruling establishment has achieved, when one looks at the fact that less than 100,000 people, are members of a Political party in this country!
        In my 3 years in the ALP I have witnessed almost Zero effort by my parties establishment at recruiting new members,…they are always courting donors at fundraisers and put on many shindigs,…lots of political advertising,…but no recruitment drives,…why do you think this is.?
        Its because a large membership base is harder to manipulate and controll,…and is more likley to effectively hold those in power to account,…turning up on election day and casting your vote for some donkey 3rd party is no blow against them.
        But to vote down (from within the party) one of their policy initiatives designed to benefit a Favored lobbyist,…well that is a truly feared blow that you can and should strike against their careeist ambitions, as a responsible rank and file member.

        People need to look at themselves, before going of on a rant, blaming “Others” for our much less than superlative Democracy.

        Are you doing your bit Marcus,….mmm?
        https://www.alp.org.au/joinlabor

  1. In a normally functioning labour market, if a job pays $70k/year, it attracts more Aussies to the profession and the salary of the job goes back down to $60k/year. But the Greens prefer foreign “students” rather than refugees and therefore there is an endless supply of 3rd world passport holders willing to work in IT for $2000/month.

  2. This reminds me of stories I’ve been told following the dissolution of the Soviet Union. Like, during total collapse of civil society and the complete exploitation of low/unskilled people. I don’t think people understand from a cultural perspective how depraved Australia has become over the last few decades. This is now endemic in Australian culture and government policy. Nobody should be surprised.

    As mentioned in another comment today, Australia truly is a DM – declining market. It’s far from third world but heading towards Argentina-type decline from a once prosperous nation to banana republic. A place where a lot of people have very little, but a very few have a lot.

    This is standard fare for the Liberal Party, but the Labor Party is a complete joke. It is supposed to be the great protector of the “worker” but advocates policies that produces such exploitation. Just goes to show all the pollies are nothing more than common criminals.

  3. There is a “skills shortage”. It is a shortage of very cheap labour.

    Atlassian import almost half their workers from overseas because they can’t find anyone willing to work locally for slave wages. The possibility of PR is a powerful motivator, as the the threat of being sent home if you complain. Powerful men like Gerry Harvey and Scott Farquhar are currently lobbying the government for legislation to pay migrants half the wages of expensive unionised local labor.

    “Australia doesn’t have cheap labour. Many overseas workers would be prepared to move here for a much better life and half the money Australians earn,” Mr Norman said.

    “I’ve got horse studs and it’s difficult to get staff.”[1]

    Cheap imported labour is a great way to kill unions. The Liberals know this.
    [1]http://www.news.com.au/finance/billionaire-plea-for-cheap-labour/news-story/21bb2c176d529532929714bbfdd10ef6

  4. HadronCollision

    Amazing that the Nant fraud hasn’t appeared in front of FWO and FSRC
    Stealing staff wages/super
    Buying yachts
    Company credit cards for private holidays and purchases
    Who knows what into trusts

  5. There is also ongoing rackets where farm employers are selling fake farm work references to working holiday maker visa holders so that they can qualify for an extra years stay in Australia. Very difficult to monitor as all the ABF’s investigators are mainly based in the eastern state capitals.

    • St JacquesMEMBER

      Nice bit of on the ground info there brian. Maybe a real journo like a Michael West or Adele Ferguson could follow it up.

  6. Might be interesting for MB’s IT crowd, ACS President says that migrants not the answer to fill our skills shortage.

    https://www.theaustralian.com.au/business/technology/migrant-workers-not-the-answer-to-address-ict-skills-shortage/news-story/0c252a17115fc2ee65e211038c1ad320

    In case link is locked:

    Is Australia going to be a driver or a passenger in the next technology wave? That’s the question we’ve been wrestling with ever since the World Economic Forum coined the term “fourth industrial revolution”.

    It’s clear that the world is headed towards a substantial realignment. Traditional industries are going to be transformed. Up to a half of current work activities are susceptible to automation, and the winners on the global stage will be those nations that can capitalise on the opportunities presented by new technology.

    This is why it’s so concerning that Australia might not have the skills it needs to succeed in a transforming world. The latest edition of Australia’s Digital Pulse produced by Deloitte Access for ACS has revealed that Australia will need nearly 200,000 more ICT workers in the next five years to become a world leader in ICT. It needs nearly 100,000 to just to keep up with current demand.

    What’s more, employers are finding it increasingly difficult to fill specialised roles, particularly in the exploding fields of artificial intelligence, cyber security, data science and blockchain.

    We’re not producing nearly enough new professionals quickly enough to ensure that Australia is positioned to weather the coming storm. Many of the professionals that we are producing are being lured away, with wages for AI experts in the US and China, for example, often exceeding $US300,000 ($400,000). This is being exacerbated by a decline in interest from our younger generation for technical roles.

    In 2003, for example, there were 6580 domestic undergraduate IT degrees completed. In 2016, there were fewer than 4000, well short of the 20,000 plus per year we need just to keep up with the demand for new ICT workers.

    At the same time, Australian students’ performance in science and mathematics has declined over the last decade. There are long-term signs of hope. The new digital technologies curriculum introduced in schools over the past few years is promising to engage students in ICT earlier and make digital topics more appealing.

    In the meantime, skills need be on the lips of every politician, every business leader. We can’t permanently rely on migrant workers to fill in for our skills shortages. Most countries are racing to foster, attract, grow and retain the skills for the future and we need to do the same.

    We need existing worker retraining programs that are laser-focused on the jobs of the future, and to engage an ageing workforce. As traditional disciplines converge, we need businesses to get proactive about staff capability through micro-credentialling. Businesses that currently employ large numbers of migrant workers should be required to upskill Australian workers, transferring those skills into the workforce.

    We need soft and transferable skills to be taught in schools, universities and business.

    Yohan Ramasundara is president of ACS.

    • Yohan

      You speak through your arse.

      Australia does not suffer from a skills shortage.

      This is an agenda pushed by vested interest groups to keep flooding Australia with cheap IT labour.

  7. All of the stuff mentioned in this article/s is a blueprint for a 3rd world society. Every issue with worker exploitation and zero real oversight is mirroring 3rd world corrupt crony capitalism. Even the employer from QLD getting a prison sentence was for contempt of court, not for what he had done to workers. 5 years ago almost my poor now departed brother was sacked from his job for getting cancer and taking off a week for treatment, was replaced with a foreign worker through a labour hire company. Took it to fair work who said they were entitled to do this however should have paid him 3 weeks severance pay rather than the nothing they gave him. These employers have little to fear, only when it gets to contempt of court or something of such magnitude will they back down and they care nothing about negative publicity.
    In my last McJob(driving a bus) before leaving the country, my employer, against a workplace agreement cut my daily hours from 6 to 4 and introduced peak hour split shifts to add insult to injury, all with zero repercussions. Applying for other jobs was a waste of time. Very low level jobs are just about always given to a foreigner on less than min wage, semi skilled jobs require a 2 month process of 3 interviews and skilled jobs for which I am experienced and qualified are not even on the horizon on account of my age. (would not have happened so soon in life sans mass immigration)