Exploitative visa system undercuts Australian workers

Federal Minister for Employment Michaelia Cash has called on businesses to invest more in workforce training. Noting that it costs companies on average $28,000 to replace an employee, Cash claims that one of the main reasons why people leave their job is that they are unsatisfied with their skills development. Cash says that spending more on workforce training would help to boost productivity. From The AFR:

“The reality is that business investment in workplace training has been going in the wrong direction for some time,” Senator Cash said.

“But business needs to play its part. Workforce planning is not simply a problem for government, and the solution will lie with industry as well.”

Work-related training has fallen across all age groups, dropping from 26.9 per cent in 2013 to 21.5 per cent in 2016–17…

“That’s stark evidence and a call for employers to invest more in the skills development of their employees to make their businesses more sustainable. A trained workforce brings greater productivity returns and better wages,” Senator Cash said.

Why would Australian businesses bother to employ and train locals when they can instead grab a cheap migrant worker?

The pool of migrant workers has swelled across Australia, many of whom work for below-market rates:

The federal government has also set the pay floor for temporary ‘skilled’ migrant workers at just $53,900, which is $34,349 below the current average full-time Australian salary of $88,249, as well as $14,720 below the median full-time wage of $68,620, each of which comprise both skilled and unskilled workers.

This appallingly low pay floor has strongly incentivised businesses to ‘grab’ a cheap migrant worker over employing and training a local. As noted by Joanna Howe in the recent book, Wage Crisis in Australia:

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

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’. 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…

Not surprisingly then, migrants took 83% of Australian jobs created between 2011 and 2016, according to research from Professor Peter McDonald from Melbourne University:

From July 2011 to July 2016, employment in Australia increased by 738,800. Immigrants accounted for 613,400 of the total increase…

The ACTU has also blamed unfettered employer access to migrant workers for limiting the job opportunities and training of local workers [my emphasis]:

Wright and Constantin (2015) surveyed employers using the 457 visa scheme and found that 86% state that they have experienced challenges recruiting workers locally. Despite identified recruiting difficulties, the survey found that fewer than 1 in one hundred employers surveyed had addressed ‘skill shortages’ by raising the salary being offered. Labour ‘shortages’ should first be addressed through a readjustment in the price of labour – increased wages. An inability to find local workers to work at a specified wage rate, coupled with an unwillingness to offer higher wages, does not necessarily imply a skill shortage – particularly where local workers would be willing and able to work if the wage rate was lifted. This differs from a skill shortage in which there are simply not enough people with a particular skill to meet demand.

The relatively recent availability of a large and vulnerable pool of temporary migrant workers has undoubtedly contributed to current record low levels of wages growth and a growing reluctance by employers to train local workers…

While there are approximately 1.5 million temporary entrants with work rights, the overseas worker team at the Fair Work Ombudsman consists of only 17 full time inspectors to investigate cases of exploitation – over 80,000 visa workers per inspector. Inadequate enforcement and penalties act as an incentive for employers to exploit temporary workers when the benefit from doing so outweighs the cost of the penalty. or where the probability of being caught is sufficiently low….

Allowing the mass importation of migrant workers bypasses the ordinary functioning of the labour market by enabling employers to source cheap foreign labour in lieu of raising wages, as well as abrogating the need for training.

So rather than waxing lyrical about investing in workforce training, the federal government should place a minimum salary floor of $100,000 on each skilled visa, both temporary and permanent, as well as stem the flow of international students into Australia’s universities, which has hit plague proportions.

Implementing these measures would ensure the visa system is used only for specialised high skilled workers that Australia cannot foster domestically, rather than being used by employers as a general labour market tool to undercut local workers and reduce wage costs.

Australia’s weak wage growth, and the lack of job opportunities and training, won’t improve otherwise.