Expert: Migrant visa flood choking wages

David Alexander, managing director of government relations firm Barton Deakin, has penned a thoughtful article in The Australian explaining how the never-ending flood of cheap migrant workers is lowering Australian wages:

The expansion in imported labour numbers in recent years has been dramatic. According to the Migrant Worker Taskforce Report, as at June 30 last year there were more than 878,912 people in Australia on a temporary visa with a work right (excluding New Zealand citizens), an increase of more than 300,000 people since 2008, which was itself a major increase from a decade earlier…

The third era of cheap labour imports properly began in 1996 with the creation of the 457 visa for temporary workers, and the numbers and pathways have multiplied as some businesses look to source lower-cost labour.

Many of the policy themes of recent years echo those of earlier eras. Labour-importing businesses argue that they shouldn’t be expected to pay market rates for labour, and on this basis deem there to be labour shortages that government must assist with. These businesses have increased competitiveness against those that do not use cheaper imported labour, and this is contributing to the structure of industries such as agriculture reverting to a more manorial model.

Looking across historical episodes, we can identify the economic principles at work: high differentials between wealthy-country wages and poorer-country wages will always create incen­tives for some businesses to arbi­trage away the difference through labour mobility schemes…

Is it reasonable to deem a labour shortage on the basis of declining to pay the market rate? Should government give a structural advantage to labour-importing firms vis-a-vis local-employing firms? And, ultimately, is our aim still to be a high-wage country or should we have Australian wages arbitraged to converge with poorer countries?

Too right. The rapid expansion of migrant workers is unambiguously lowering Australian wages.

As explained by The Australia Institute’s chief economist, Richard Denniss, 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’”

The $53,900 Temporary Skilled Migration Income Threshold (TSMIT) that applies to Temporary Skills Shortage (TSS) visas has been purposely frozen in place since 2013-14, and has fallen $23,000 below the median full-time Australian salary of $76,900, and is even $3,300 below the median income of all Australians (which includes part-time and unskilled workers).

Not surprisingly, then, the actual pay levels of ‘skilled’ migrants in Australia is also abysmally low.

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.

The ABS’ Personal Income of Migrants survey also recorded a median employee income of migrants under the skilled stream of just $59,300 in 2016-17.

In a similar vein, separate ABS data shows that Temporary Work (Skilled) visa holders earned a median income of only $59,436 in 2016.

To restore integrity to the visa system, all skilled migrants should be required to be employer-sponsored and 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.

Of course, ‘skilled’ visas are only part of the issue, with international students and graduate visas arguably an even bigger problem, as illustrated by the explosion in temporary visas:

Regardless, all forms of visas represent a massive labour supply shock that has lowered the bargaining power of local workers and placed downward pressure on wages.

Sadly, our policy makers have no intention of actually fixing the system. To them, mass immigration is a tool to juice headline growth and to feed the growth lobby both consumers and cheap foreign workers. The welfare of ordinary voters is ignored entirely.

Leith van Onselen

Comments

  1. is our aim still to be a high-wage country or should we have Australian wages arbitraged to converge with poorer countries?

    Brilliantly put!

  2. Don’t worry, the imports can do food deliveries and the low-skill / no-skill locals can collect the dole.

    It’s all fine.

  3. “To restore integrity to the visa system, all skilled migrants should be required to be employer-sponsored and 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.”

    Umm, no. Not for STEM jobs.

    My initial 457 salary was well above those figures.

    And it was still half of what my income had been in America (this was when the dollars were roughly at parity). Imagine what it would be like now.

    And yes, when I joined a more reputable firm, my income went back up. Unfortunately with the decline in the dollar’s worth on the international market, my compensation is back down to 2005 levels when converted to USD this year. 🙁

    • May I ask what profession you are in?

      The 457 has been renamed a 482 visa, but the list of “skills” includes almost everything you could imagine, and some you couldn’t like an “Angora rabbit fluffer”.

    • Your salary is back to 2005 levels due to the mass importation of males from a certain third world nation.

      Those saints are taking 90% of the IT jobs in USA too and smashing salaries across USA.

      • False. My salary is back to 2005 levels because AUD = 2/3 USD. If the dollars were closer to parity, I’d still be ahead by $30K.

        • Jumping jack flash

          I hear you.
          My salary is back to 2006 levels. Not for the exact same type of job though. My current job is far more difficult and technical than what I was doing back in 2006.

  4. Meanwhile Curtin uni in WA has refused student union permission to build a Lennon wall to put messages of hope and unity and democracy in support of Hong Kong freedom fighters. The reason seems to be because the uni is worried mainland the China spies students will feel intimidated.

  5. Jumping jack flash

    I’m pretty sure everyone knows by now that the migrants are lowering wages. That’s their entire purpose, after all.
    The real question to ask is why do wages need to be lowered.

    The answer to that question is simply debt – lower labour costs enable employers to maximise their own incomes, which then can maximise their debt. And everyone needs debt, as much debt as they can eat.
    Company profits are up and have been up for quite a while, yet the only wages that are rising are the top end’s. This is nothing new, it has been going on for as long as we have been pumping migrant workers into the country, but just recently we reached a tipping point where the rise in employers’ wages wasn’t enough to hide the decline in workers’ wages.

    Crying about the cheap labour is crying about the symptom of the problem.
    It falls on deaf ears because the migrant workers are here to do a job, and they’re doing it really, really well.

    What we really need to be doing is crying about the problem, the requirement for enormous debt to obtain the basic things we need.