New research: Australia’s immigration system undercuts workers

By Leith van Onselen

Yesterday, a group of labour academics released a book, entitled The Wages Crisis in Australia, which bemoans Australia’s anaemic wages growth and offers policy prescriptions.

Locked away in chapters 13 and 14 are incendiary analyses on the great Australian migrant wage rort, which is unambiguously lowering employment standards and undercutting local workers.

Below are key excepts from Chapter 13 entitled Temporary migrant workers (TMWs), underpayment and predatory business models, written by Iain Campbell:

This chapter argues that the expansion of temporary labour migration is a significant development in Australia and that it has implications for wage stagnation…

Three main facts about their presence in Australia are relevant to the discussion of wage stagnation. First, there are large numbers of TMWs in Australia, currently around 1.2 million persons. Second, those numbers have increased strongly over the past 15 years. Third, when employed, many TMWs are subject to exploitation, including wage payments that fall below — sometimes well below — the minimum levels specified in employment regulation…

One link to slow wages growth, as highlighted by orthodox economics, stems from the simple fact of increased numbers, which add to labour supply and thereby help to moderate wages growth. This chapter argues, however, that the more salient point concerns the way many TMWs are mistreated within the workplace in industry sectors such as food services, horticulture, construction, personal services and cleaning. TMW underpayments, which appear both widespread in these sectors and systemic, offer insights into labour market dynamics that are also relevant to the general problem of slow wages growth…

Official stock data indicate that the visa programmes for international students, temporary skilled workers and working holiday makers have tripled in numbers since the late 1990s… In all, the total number of TMWs in Australia is around 1.2 million persons. If we include New Zealand citizens and permanent residents, who can enter Australia under a special subclass 444 visa, without time limits on their stay and with unrestricted work rights (though without access to most social security payments), then the total is close to 2 million persons… TMWs now make up around 6% of the total Australian workforce…

Decisions by the federal Coalition government under John Howard to introduce easier pathways to permanent residency for temporary visa holders, especially international students and temporary skilled workers, gave a major impetus to TMW visa programmes.

Most international students and temporary skilled workers, together with many working holiday makers, see themselves as involved in a project of ‘staggered’ or ‘multi-step’ migration, whereby they hope to leap from their present status into a more long-term visa status, ideally permanent residency. One result, as temporary migration expands while the permanent stream remains effectively capped, is a lengthening queue of onshore applicants for permanent residency…

Though standard accounts describe Australian immigration as oriented to skilled labour, this characterisation stands at odds with the abundant evidence on expanding temporary migration and the character of TMW jobs. It is true that many TMWs, like their counterparts in the permanent stream, are highly qualified and in this sense skilled. However, the fact that their work is primarily in lower-skilled jobs suggests that it is more accurate, as several scholars point out, to speak of a shift in Australia towards a de facto low-skilled migration programme

A focus on raw numbers of TMWs may miss the main link to slow wages growth. It is the third point concerning underpayments and predatory business models that seems richest in implications. This point suggests, first and most obviously, added drag on wages growth in sectors where such underpayments and predatory business models have become embedded. If they become more widely practised, underpayments pull down average hourly wages. If a substantial number of firms in a specific labour market intensify strategies of labour cost minimisation by pushing wage rates below the legal floor, it can unleash a dynamic of competition around wage rates that foreshadows wage decline rather than wage growth for employees…

Increases in labour supply allow employers in sectors already oriented to flexible and low-wage employment, such as horticulture and food services, to sustain and extend strategies of labour cost minimisation… The arguments and evidence cited above suggest a spread of predatory business models within low-wage industries.37 They suggest an unfolding process of degradation in these labour markets…

And below are extracts from Chapter 14, entitled Is there a wages crisis facing skilled temporary migrants?, by Joanna Howe:

Scarcely a day goes by without another headline of wage theft involving temporary migrant workers…

In this chapter we explore a largely untold story in relation to temporary migrant workers… it exposes a very real wages crisis facing workers on the Temporary Skill Shortage (TSS) visa (formerly the 457 visa) in Australia. This crisis has been precipitated by the federal government’s decision to freeze the salary floor for temporary skilled migrant workers since 2013… the government has chosen to put downward pressure on real wages for temporary skilled migrants, thereby surreptitiously allowing the TSS visa to be used in lower-paid jobs…

In Australia, these workers are employed via the TSS visa and they must be paid no less than a salary floor. This salary floor is called the Temporary Skilled Migration Income Threshold (TSMIT). TSMIT was introduced in 2009 in response to widespread concerns during the Howard Government years of migrant worker exploitation. This protection was considered important because an independent review found that many 457 visa workers were not receiving wages equivalent to those received by Australian workers…

In effect, TSMIT is intended to act as a proxy for the skill level of a particular occupation. It prevents unscrupulous employers misclassifying an occupation at a higher skill level in order to employ a TSS visa holder at a lower level…

TSMIT’s protective ability is only as strong as the level at which it is set. In its original iteration back in 2009, it was set at A$45 220. This level was determined by reference to average weekly earnings for Australians, with the intention that TSMIT would be pegged to this because the Australian government considered it ‘important that TSMIT keep pace with wage growth across the Australian labour market’. This indexation occurred like clockwork for five years. But since 1 July 2013, TSMIT has been frozen at a level of A$53 900. ..

There is now a gap of more than A$26 000 between the salary floor for temporary skilled migrant workers and annual average salaries for Australian workers. This means that the TSS visa can increasingly be used to employ temporary migrant workers in occupations that attract a far lower salary than that earned by the average Australian worker. This begs the question — is the erosion of TSMIT allowing the TSS visa to morph into a general labour supply visa rather than a visa restricted to filling labour market gaps in skilled, high-wage occupations?..

But why would employers go to all the effort of hiring a temporary migrant worker on a TSS visa over an Australian worker?

Renowned Australian demographer Graeme Hugo observed that employers ‘will always have a “demand” for foreign workers if it results in a lowering of their costs’.17 The simplistic notion that employers will only go to the trouble and expense of making a TSS visa application when they want to meet a skill shortage skims over a range of motives an employer may have for using the TSS visa. These could be a reluctance to invest in training for existing or prospective staff, or a desire to move towards a deunionised workforce. Additionally, for some employers, there could be a belief that, despite the requirement that TSS visa workers be employed on equivalent terms to locals, it is easier to avoid paying market salary rates and conditions for temporary migrant workers who have been recognised as being in a vulnerable labour market position. A recent example of this is the massive underpayments of chefs and cooks employed by Australia’s largest high-end restaurant business, Rockpool Dining Group, which found that visa holders were being paid at levels just above TSMIT but well below the award when taking into account the amount of overtime being done…

Put simply, temporary demand for migrant workers often creates a permanent need for them in the labour market. Research shows that in industries where employers have turned to temporary migrants en masse, it erodes wages and conditions in these industries over time, making them less attractive to locals…

A national survey of temporary migrant workers found that 24% of 457 visa holders who responded to the survey were paid less than A$18 an hour.  Not only are these workers not being paid in according with TSMIT, but they are also receiving less than the minimum wage. A number of cases also expose creative attempts by employers to subvert TSMIT. Given the challenges many temporary migrants face in accessing legal remedies, these cases are likely only scratching the surface in terms of employer non-compliance with TSMIT…

Combined, then, with the problems with enforcement and compliance, it is not hard to conclude that the failure to index TSMIT is contributing to a wages crisis for skilled temporary migrant workers… So the failure to index the salary floor for skilled migrant workers is likely to affect wages growth for these workers, as well as to have broader implications for all workers in the Australian labour market.

While the book has done an excellent job of dissecting the systemic rorting of temporary migrant workers, which is undermining broader wages growth, it unfortunately has not also addressed the rorting of Australia’s permanent ‘skilled’ migrant program.

As noted previously, not one of the top five occupations granted permanent visas in the skilled stream in 2017-18 were in labour shortage over the past four years, according to the Department of Jobs and Small Business’ “historical list of skills shortages in Australia”.

Moreover, overall skilled migration – both permanent and temporary – continues to run at extreme levels despite actual skills shortages running near recessionary levels, according to the same Department of Jobs and Small Business data:

Remember, it is the permanent migrant intake that is primarily behind Australia’s population increase and therefore the choking of infrastructure and rising housing costs, in addition to dragging down wages. Many migrants also come to Australia initially on temporary visas with the hope of transitioning to one of the many permanent non-humanitarian visas handed out each year (numbering roughly 160,000 in 2017-18).

Therefore, if Australia was to remove the carrot of permanent residency by slashing the intake, it would also automatically reduce the flow of temporary migrants, since the two areas are intrinsically linked. In turn, workers’ bargaining power would be increased.

More broadly, ordinary workers’ cost of living would be reduced through lowering immigration, for example via cheaper housing (both prices and rents) and infrastructure, not to mention sinking the Australian dollar, thereby making trade exposed industries more competitive.

Ultimately, Australia’s so-called skilled immigration system is one giant rort that’s all about lowering labour costs for employers by crushing wages and abrogating their responsibility for training, while also feeding the growth lobby more consumers.

It needs root-and-branch reform, starting with dramatically lowering the overall permanent migrant intake, as well as setting a wage floor for ‘skilled’ migrants at the 80th to 90th percentile of earnings, thus ensuring the scheme is used sparingly by employers on only the highest skilled migrants, not as a general labour market tool for accessing cheap foreign labour.

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Comments

  1. Good news regarding immigration:

    Labor backs government in crackdown on migrant welfare

    The laws will only effect skilled migrants and their families, with refugees exempted.

    https://www.sbs.com.au/news/exclusive-coalition-s-migrant-welfare-crackdown-only-passed-with-labor-support

    Good move. Why should “skilled” immigrants be allowed to get welfare immediately?

    By definition, all skilled immigrants should be on high salaries and self-funded.

    No wait times will apply to single parent migrant families or those with one income earner.

    https://www.dailymail.co.uk/news/article-6440963/Centrelink-crackdown-Immigrants-wait-four-years-welfare-payments.html

    Huh? A massive chunk of immigrant families are single-income dual-parent families.

  2. “Ultimately, Australia’s so-called skilled migration program is one giant rort that’s all about lowering labour costs for employers by crushing wages, while also feeding the growth lobby more consumers.”

    It’s also about industry not having to pay for on the job training.

    Some time in the mid 90s universities decided that they were vocational institutions and industry demanded that public money should be used to make graduates work-ready and made to measure. That meant that industry and government got out of training, with a massive savings and cost passed to the taxpayer.

    Skilled migration takes it a step further; the taxpayer simply (on the face of it) steals people from developing countries who have already been trained by an investment of some other nation’s public money. But in reality we often get people with ok technical skills who have very poor English language and communications skills, who need training that industry is not prepared to pay for. Such skilled migrants end up driving taxis, waiting tables and believing that Australian’s are racists for not giving them the job that was implied to be there for them in the first place.

    Industry has to be forced to invest in training again. It’s not the taxpayer’s role to subsidise vocational training for specific industries and then collect little in tax revenue from the same corporations to make a return on the investment.

    • Clive wise up
      how much training do you need to approve a home loan
      $6500 in the pocket , a pop.
      you could near automate that, almost a perpetual money making machine.

      so now that little earner has been exposed, what now??
      maybe journalism, $375k pa, for 1 article pw??

  3. And some shocking news:

    Greens senator Mehreen Faruqi said she and her partner had migrated to Australia with plans to work as engineers but had needed the support of social security payments “for the first few months” they spent in the country.

    “We were told that there was an acute shortage of engineers in Australia and there were lots of jobs available for us. But when we got here, things were quite different,” Senator Faruqi told the chamber.

    Holy cow! She came over in 1992 and AUS still has the same rotten immigration policy! It is called the 189 visa and it should have been abolished years ago.

    While she studied, her husband drove taxis

    https://www.smh.com.au/national/nsw/greens-mehreen-faruqi-an-engineer-with-a-vision-of-diversity-20140131-31sa3.html

    Sounds like a few years rather than a few months. Abolish the 189 visa.

    • We all know that they didn’t get jobs as engineers because Australians are racist. It would have nothing to do with the low quality of their degree and need for training on the job would it? Because when you think of ‘structural engineering’, high OH&S practice, fabulous building standards and a lack of professional graft you first think of Lahore in Pakistan as the bright shining light of the engineering profession. Don’t you?

      Regularly you hear board room discussions about multi-billion dollar infrastructure projects where the the project engineers lament that “If only we had more highly trained civil engineers from Lahore in Pakistan!”

      If the skilled migration program worked as it is supposed to industry would make a killing. Yet the harsh reality is that an immigration process has no ability to test the quality of engineers – that’s done by the profession in the same cruel selection process as all engineers go through in Australia. Anyone who thinks that private industry looks a gift horse in the mouth and says “no thanks” to a bargain has never worked in private industry. Because there would be a very good reason why they did not get a job, but no one wants to be honest – least of all them. It does not serve their narrative.

      Fortunately they have brought so much refreshing vibrancy that they now channel into votes for The Greens in the inner city 189 constituency and that’s what counts – and that’s the reason that The Greens are never going to change their policy.

      • Because when you think of ‘structural engineering’, high OH&S practice, fabulous building standards and a lack of professional graft you first think of Lahore in Pakistan as the bright shining light of the engineering profession. Don’t you?

        ha ha ha!

        Anyone who thinks that private industry looks a gift horse in the mouth and says “no thanks” to a bargain has never worked in private industry.

        Here is a video of a soon-to-be skilled immigrant typing “/heaf>” instead of “/head>” :

        (at 8m30s)

        https://www.youtube.com/watch?v=6mDsa-AqNcQ#t=8m30s

    • Many Australian born IT workers in their 50s/60s have Engineering qualifications but unable to find even a half-decent paying engineering job. Another sellout by Hawke/Keating government.

      • That’s okay – they can spend their free time going to schools and encouraging the next generation to pursue promising careers In STEM. Apparently there’s a skills shortage!

  4. Another reason for low wages in general of course is the ridiculously low count for the CPI that doesn’t account for monetary inflation.
    The Chapwood Index is famously more reliable and realistic.
    “The Chapwood Index is comprised of a fixed basket of 500 goods and services, typically bought by the average middle-class American in 50 major cities. It is calculated twice a year and for the last five years the average annual price increase of these inputs has been 9.8% That means a dollar today has a buying power of only 62.8 2013 cents. But the government’s version of price inflation says it has averaged 1.53%, and that the dollar buys 92.7
    2013 cents. It is an enormous difference.”
    — Alasdair Macleod
    Also see: http://www.chapwoodindex.com

  5. the french protest in the streets

    we just write letters to the paper and whinge on MB

    our country is stuffed. I know many nursing students who cant get a job when they finish and yet hospitals bring in overseas workers who are hungry and will take whatever they can get no questions asked…and the same hospitals moan about nurses ‘not having enough experience’

    most aged care facilities scarcely have any australians working there as well

    a nice surprise for the boomers when they get old and frail….

    • This is true. But it is also true that most of the immigrant workers being exploited by the aged-care corporations are in fact decent human beings who do their best for the old people in their care. Their english is poor but they get on well enough with the other Aussies and other immigrants on the job. It was the same in the 60’s and 70’s when the migrant men worked blue collar and other low-level jobs in Sydney. The difference was then they could get a decent house and live a decent life.

  6. sorry what is this skilled migration you talk of??

    brazilian uber eats drivers?
    indian taxi drivers?
    farm workers from the pacific??

    it seems as if only big business can import cheap workers…why cant we import cheap housemaids like in HK then??? why should big business get all the benefits…

    • The housemaids are given the PC term “au-pair”. You can import them and pay ’em very little, but you need to know Peter Dutton to organise it.

  7. St JacquesMEMBER

    There’s a serious skills shortage – wages must be rocketing up in the affected sectors….oh wait…
    der
    Hello! Is there any intelligent life out there in Australian politics? Any at all ?????

    • And in other news
      Rio says its new mine will be automated to the max
      generally, humans need not apply.
      same for the Adani mine, automated to the max
      same as your I phone, automated to the max
      get used to it
      (er, same as spambot here, automated to the max)

      • reusachtigeMEMBER

        I’m totes looking forward to eventually automating my relations when the Real Dolls become, well, real. My recent test drives in Amsterdam have shown that they aint far off. They need to tone down the whole “I love you. You have such a big d…” stuff though. That’s the crap you get from real fake chicks. (Although I did have her set to “dirty sl..”, couldn’t help myself)

    • As a company, you have to demonstrate a skills shortage. Ever wondered why you see ads for highly qualified positions with very low pay? Yep, no one applies and then they justify the 457/487 visa.

  8. reusachtigeMEMBER

    Most people don’t care about trivial things like this but they love the vibrancy freshly imported human capital brings to our society!

    • TailorTrashMEMBER

      People could always get their vibrancy from a vibrator ……..it might not have the same detrimental effect on their quality of life

  9. ErmingtonPlumbingMEMBER

    Ive started reiterating your figures at my ALP branch meetings Mike,….I hope they are accurate,….but I also hope they are not!
    Long Sigh.

  10. I can’t fault you for your “Australia First” mentality but reality is that for many Aussie jobs these days the competition is an overseas supplier. Higher Aussie wages just makes local firms uncompetitive and they lose the whole contract, Immigration and reduced wages lets you keep part of the contract especially if local on-site expertise for certain functions creates end customer value.
    Personally I’d rather see a competitive Aussie work force develop but competitive means either cost matching the lowest cost player OR providing differentiated highly valued skills.
    Ideally the heavy lifting would be done via the Aussie Dollar dropping so that Aussie wages “as is” are competitive but that’s dreaming the impossible dream and won’t / can’t happen while we still have things of greater value to sell (including our own and our Kids future and future earnings)….first we must understand economic slavery than maybe ….

    • Land rent funded UBI for one’s welfare. Competitively priced pay for labour on top of that. What’s not to like?

    • mild colonialMEMBER

      This is the prism through which immigration is viewed and rationalised, our leaders are doing us a kindness getting our wages down to global levels.

  11. Sigh..
    Look the Temporary Resident intake onshore is now over 2.2 million.
    We also have 8.8 million Tourist/Visitors with an estimated 5% or 440,000 working illegally.
    Plus 65,000 Overstayers.

    => That’s 2.7 million non resident Migrant Guestworkers onshore with over 1.5 million in some visa pretext working & living illegally.
    That’s 14.5 years of PR / citizen grant intake.

    These TR & TV are third world adult unskilled, 80% plus in our cities. Most working & living illegally.

    One third or 690,000 of the TR are NZ SCV permanent stay.
    So they aren’t going away in a PR reduction.
    One third or of the NZ 230,000 SCV in Australia are now non NZ born unskilled Indians & Asians sneaking in via the SCV loophole.
    The answer is to shut down the NZ back door.
    Put all non NZ born SCV on a non work rights visa & exited back to NZ as NZ problem.
    And restrict the SCV to only Aust / NZ born.

    One third (624,001 2017, 673,000 2018 +8%) are very long stay Foriegn Students & partners.
    480,000 are doing nonsense courses with no international recognition & 53,000 as ‘partners’ working full time.
    With a 4 to 9 year stay in common.
    They also aren’t going away in a PR reduction.
    The numbers & duration of stay esp with visa churn is going thru the roof. It would take decades to exit them.
    Now if we had OECD education standards of post grad only, full funded, paid upfront, no work rights & enforced visa conditions there would be less than 35,000.
    That the action that is needed.

    And the other third 700,000 plus TR are skilled visa, bridging visa, working holiday & special visa.
    All long stay, very long stay, visa extension & churn.
    They also aren’t going away in any PR reduction.
    -/-
    In fact the TR visa numbers are growing 7-8% year to year and have doubled from 1.1 million to 2.2 million in the last 10 years.

    So the belief by ‘reducing the PR will reduce the TR’ is naive and simply not supported by the facts, numbers or trends.

    It’s the TR issue & impact that needs to be dealt with immediately & sensibly.
    And then the illegally working Tourist/Visitors.

    Over 1.5 million TR, TV O/S living & working illegally in visa breach, or on a visa pretext – need to be rounded up & exited.

    That’s the immediate & most urgent priority needed.
    And then reduce the PR as the second longer term priority.