Labor to attack temporary migrant wages smash

Via Domain:

…In a speech to be delivered ahead of ALP national conference this weekend, Mr O’Conner [Shadow Minister for Employment and Workplace Relations] will focus on how the market is “not delivering, particularly for low and middle income earners”.

“[A] Labor government will tackle the issues in the workplace relations system that are contributing to wage stagnation – the modern precariousness of work, widespread underpayment of workers, and declining collective bargaining,” he says.

Mr O’Connor will say there were more than 1.6 million temporary visa holders with work rights in Australia who should not be used as “cheap labour”. He says it was not surprising many Australians felt insecure in their jobs when work was being outsourced.

He says no worker on a skilled visa should be doing a job for a day longer than it takes to train an Australian worker. “Local workers should always be given the first shot at local jobs,” he says.

OK, so it looks like Labor is set to do something around temporary workers and labour hire. Both are welcome. As recent excellent research has shown, these two are gutting wages, entitled The Wages Crisis in Australia, which was released last month by a group of labour market academics:

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…

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…

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… 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…

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. They suggest an unfolding process of degradation in these labour markets…

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…

TSMIT’s protective ability is only as strong as the level at which it is set… 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?..

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…

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.

But, will Labor’s approach work? If all it does is apply more rigorous labour market testing provisions then I very much doubt it. There are lots of ways to rort that system.

The better approach is to lift the minimum salary for which a “skilled” migrant can be sort. TSMIT must be raised in line with annual average salaries above $80k at least. It is a complete joke that supposedly skilled migrants are paid $53,900. How skilled can they be on that pittance? Once the floor is raised materially then the foreign labour gouge will end and, if in need of labour, employers will be required to compete for workers (ie raise wages). The time frame in which that actually delivers wage gains will hang on the broader macro environment.

Labor also needs to address the widespread rorting of the permanent migration system.

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.