Australia’s skilled visa system needs radical overhaul

For the past five years, MB has frequently derided Australia’s ‘skilled’ visa system, which we have demonstrated is poorly targeted, ineffective, and is failing in its stated purpose of alleviating chronic ‘skills shortages’ across the economy.

Our concerns have been centred around three main areas.

First, around half of all migrants granted visas under the skilled stream are family members of the primary skilled visa holder. Therefore, according to the Productivity Commission, family immigrants from the skill and family stream still make up about 70 per cent of the Migration Programme:

Second, the overwhelming majority of migrants that have arrived in Australia under the skilled stream have gone into professions that are already oversupplied (see here).

Federal and skilled occupation lists have no requirement that an occupation is actually experiencing skills shortages. Therefore, we have a bizarre situation whereby oversupplied areas like engineering, accounting, and IT (among many others) continue to import workers en masse. And the ‘skilled’ visa system is being used by employers to access foreign workers for ulterior motives, such as to undercut local workers and lower wage costs, rather than to overcome genuine skills shortages.

Third, there is massive unemployment and underemployment among ‘skilled’ visa holders, and the actual pay rates for ‘skilled’ workers is below the general population.

According to the Department of Home Affairs’ Continuous Survey of Australia’s Migrants, the median full-time salary 18 months after being granted a skilled visa was just $72,000 in 2016, below the population median of $72,900. This is shocking given the population median includes unskilled workers, which obviously drags the nation-wide median full-time salary down.

With this background in mind, academics have warned that most ‘skilled’ migrants that have entered South Australia have been unable to gain a job in their field, with many either unemployed or underemployed:

Our research suggests the skilled migration program is failing to achieve its full economic potential, dashing personal dreams in the process. Many skilled migrants are simply not finding the opportunities they anticipated.

Our survey of more than 1,700 skilled migrants living in South Australia found 53% felt they were not utilising their skills and abilities, with 44% working in a job different to what they nominated in their visa application.

About 15% reported being unemployed at the time of the survey or for most of their time in Australia – double the South Australian jobless rate. This was despite having skills deemed by government planners to be in short supply.

Our results indicate a big mismatch between the expectations of new migrants and the reality of the labour market – in the jobs available and in employer expectations. In short, the skilled migration program simply isn’t working the way it is supposed to…

The majority of Australia’s immigration intake is intended to benefit the economy… The majority – about 68,000 – were part of the General Skilled Migration (GSM) program, based on having skills deemed in short supply. The federal government’s “Skilled Occupation List” now covers more than 670 occupations…

These findings point to a clear problem with the General Skilled Migration Program.

Migrants are being drawn to Australia on the basis their skills are needed, but many are finding employers reluctant to hire them…

So what is the purpose of Australia’s skilled visa system? Is it to lengthen the queues of un/underemployed? Is it to lower wages? Is it to rob developing nations of their talent? Because these are the outcomes.

Dr Jane O’Sullivan from the University of Queensland summed-up the farce best in the comments section:

A timely study, as South Australia is most vociferous about increasing its “sponsorship” of “regional” migration. I’ve also met skilled migrants who feel defrauded by Australia’s claim that their skills will be in demand. The solution is not to help them into jobs (which means taking jobs from Australian applicants) but for them not to come. (I don’t mean abandoning the ones who are here – they should be helped, as for any Australian disadvantaged job seeker – but this is a mitigation, not a solution.)

The skilled migration program should ONLY accept employer-sponsored migrants (i.e. those with a job to go to), and even then it should be on temporary visas initially, until the demand for their employment is shown to be ongoing after three years. The current 35,000 in this category (which presumably includes their family members) would be consistent with an overall immigration program around 60-70,000 per year – a sustainable number.

Precicely. Australia’s skilled visa system needs a complete overhaul to ensure that it only brings in migrants to fill genuine skills shortages.

The easiest solution is to make all skilled migrants employer-sponsored and require them to be paid at the 80th percentile of earnings, or indexed to double the median wage. This would ensure that the skilled visa system is used sparingly to import only the ‘best of the best’, not as a general labour market scheme to undercut local workers.

Unconventional Economist

Comments

    • That’s Salvatore Babones. Good piece albeit from 29 June in an early airing of the burgeoning bromance with LVO.

  1. On one hand, the slumlords say “get immigrants to move to Adelaide”. On the other hand, the slumlords say “Sydney will suddenly become fantastic if it imports 10 million serfs”.

  2. off course the purpose of Australia’s skilled visa system is it to lengthen the queues of un/underemployed, to lower wages, to rob developing nations of their talent.
    why would anyone think there is any other purpose? would would the other purpose even be?
    it makes prices lower (everyone likes cheap stuff), makes corporate profit season better (everyone likes profits – directly or trickled down), makes house prices higher (everyone likes being “rich”), … until they become unemployed, house prices drop and dividends disappear – than people start hating immigrants, blame them (not their government) for all the evil on this world, than fascism rises, concentration camps open, and …. you know
    this was tried, repeated, recycled, … so many times

    • Doc, you’re all over it.

      The people who deserve the approbation and the lamp posts are the people who ‘own’ this policy. I hope the citizens understand this when the time comes.

    • also, so people can pay huge debts and we don’t need the expense of feeding kids when we have to feed FIRE. just import the next gen.

    • Strange EconomicsMEMBER

      Yep, you’ve nailed it.
      This is the result of an unconscious (or concious?) plan. More people on Lower wages are good for the executive class. (and even better for celebrity chefs !)

  3. Also, Skill (non-family) entry, at about 110K, is increasingly irrelevant, as compared with overall net migration, about 270K.

    As someone who once managed the Occupation Demand Schedule for skilled migration, I strongly support the idea that ALL skill migrants should be direct employer-sponsored, with a wage floor. There would still be rorts, but nothing like the “listicles” of occupations supposedly in “shortage”, which will always be corrupted by government, industries, or professions.

    Sadly, the fake science and numbers of the AU “points system” don’t only fool our willing Australian academics, they even fool other countries. US and UK politicians commonly express a desire to copy our seemingly “objective” system.

    • Not really irrelevant in the long-term. All temporaries will eventually have to leave if they can’t transition to PR. Although that can take a decade in some cases.

      That said, I agree that “ALL skill migrants should be direct employer-sponsored, with a wage floor”. This wage floor should also be set at a high level.

    • years of data from USA actually shows that those coming via employer sponsored paths (that always include a period of limited freedom and semi-dependency on employer) are more likely to become mediocre citizens who do not stand out and just relatively soon become Medicare-dependent retirees. Reasons for this are numerous but all come to two major arguments: people who come on “safe” (agreed permanent employment) are less willing to risk and usually stay salaried employees all their life, and even those who are more adventurous are limited and legally constrained at least for a while when they are usually younger and childless.
      Even second generation – their kids are much less likely to stand out than kids of poorer and less educated immigrants who come without such arrangements.

      • I see I (and most people) have been reclassified as a “mediocre citizen” for not being an entrepreneur…

        • Yes.

          Please check in with Reusa for tips on how to become a successful super mega boom profits entrepreneur. Otherwise remain Mr Mediocre 😉

        • by the very definition of the word mediocre majority of people are mediocre (quite common criteria is 80% vs. 20%). The word only recently became derogatory term It used to be at one point of time even desirable – marking an ideal person.
          So, I didn’t reclassify anyone since large majority is already mediocre.
          One doesn’t have to be entrepreneur to be above average but a foreigner getting into a salaried job in a medium or large company is probably the best case to stay mediocre.

          When a country decides to import people (beside humanitarian immigration), while considering all the costs (infrastructure, diminishing share of national wealth, …) it is assumed it want to import people that will the country up, and that’s why I assume every country out there puts qualifying requirements like education, age, skills, work experience, whatever …
          Since Australia has all these requirements, my logical conclusion was that we want above average people

          If we don’t want to import people that are going to lift the average we should just scrap all the requirements and do first come, first served immigration, or lottery based one like USA did for ages, but we should stop pretending about reasons we are doing it.

        • I read an article sometime ago about H1B visa (basically the only kind that lets people apply for green card in USA) is very limiting factor because it forces people to stay with a sponsoring company for years sometimes over a decade during which period people cannot start their own business or take time (be unemployed or even part-time employed) to develop an idea, to write a book or anything that requires big commitment outside of that job.
          As I vaguely remember the recent data was from Kauffman foundation and some think-tank

  4. Please support the Australian Immigration Party (AIP).

    -We believe Immigration has been and can continue to benefit Australia.

    -We support sustainable immigration and are against excessive immigration which creates overcrowding and infrastructure defecits which reduces the quality of life for ordinary Australians.

    -We support immigration of people for humanitarian reasons as well as skilled immigration of people with special skills who can earn over a 100k on arrival including on temporary work visas.

    -We stand for limiting immigration to the long term sustainable annual average of 70k a year.

  5. The concept is serious however only hypothetical at the moment. The contradiction in the name is intentional because we need to shift the conversation from being just for or against immigration. Instead we should focus on how much is needed to benefit Australia. The spruikers are quick to label anyone who dosen’t support the current open borders levels as being anti immigration / racists. This needs to change. You can support immigration and still ask for it be at sustainable levels.