Liberal MP: Reboot immigration to fix “unprecedented” skills shortages

The Australian’s Patrick Commins has penned a ludicrous article claiming that Australia needs to quickly reboot its mass immigration program to ease “unprecedented” skills shortages and fuel the nation’s economic rebound.

The article is centred around claims from Liberal MP Julian Leeser that Australia is “facing a shortage of skilled labour almost unprecedented in our history, and we can solve this through skilled migration”. It also quotes a bunch of employers in the hospitality industry who claim they are unable to find trained staff or restaurant managers:

The chief executive of industry group Restaurant and Catering, Wes Lambert, said a lack of experienced chefs and restaurant managers was acting as an impediment to hospitality businesses reopening or expanding, and therefore hiring.

This was exacerbated by the exodus of about half a million temporary visa holders at the start of the pandemic…

The number of people starting food industry vocational training has plunged by 40 per cent between 2016 and 2020, according to the National Centre for Vocational Education Research.

The notion that Australia is experiencing “unprecedented” skills shortages is easily debunked by looking at wage growth, which has plummeted to around record low levels:

Australian wage growth has collapsed amid a vast oversupply of labour.

In any other market, a shortage raises prices:

  • A shortage of bananas following Tropical Cyclone Yasi sent banana price rocketing.
  • A shortage of waterfront homes makes these properties incredibly expensive.
  • An oil supply shock sends petrol prices soaring.

So how can there simultaneously be a shortage of workers and record low wage growth, not to mention very high labour underutilsation? The whole argument is bullshit.

The huge increase in Australia’s immigration intake from the early 2000s, which saw Australia’s population swell by 35% in 20 years, was one of the key contributors to Australia’s wage stagnation last decade (see next chart).

Australia’s real per capita household disposable income stagnated over the past decade as immigration boomed.

In turn, low wage growth is now considered by many economists, including RBA governor Phil Lowe, as being one of the key barriers to the Australian economy’s post pandemic recovery.

Ramping up immigration when there is so much spare capacity across the labour market will only dampen wage growth even further by swelling labour supply and eroding workers’ bargaining power. It would completely undermine the RBA’s push for higher wages.

The solution to purported labour shortages is simple: let the ‘market’ work and allow wages to adjust upwards. This would have two positive impacts. First, it would encourage workers into the profession experiencing shortages, thus eliminating the problem. Second, it would encourage employers to stream-line their operations and/or automate to reduce labour costs (boosting productivity in the process).

If the Morrison Government had any integrity whatsoever, it would require all ‘skilled’ migrants (both temporary and permanent) to be paid at least at the 75th percentile of earnings:

Median Australian weekly earnings were 57,200 in 2019, according to the ABS. The 75th percentile of earnings was $85,852.

Lifting the salary floor for skilled migrants would ensure Australia’s visa system is used sparingly by employers to hire highly skilled migrants with specialised skills, not as a tool to undercut local workers and eliminate the need for provide training.

Sadly, visa integrity is not the purpose here. The Coalition wants a never-ending influx of “cheap” foreign labour to lower wage costs and boost profits for its business-owning mates.

Unconventional Economist
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Comments

  1. Moses has spokenMEMBER

    So Murdoch, a billionaire American has spoken through his media.
    Banks, universities, and big donors have spoken.
    Arguments for – bigger profits for mass industries.
    Arguments against? – None of them matter – Underemployment, low wage growth, increased GDP (lower GDP per person). Don’t affect the liberal base.
    No point in arguing with beliefs and lobby interests with real facts or statistics. Keep trying though.

  2. Cummins and Leeser: crazy claims!

    Raise wages, and the right workers will appear – stop trying to pay garbage wages. It’s the farm worker argument all over again.

    Further, the hospitality sector just got gutted – there will be plenty of workers around, even now!

  3. I just find a population growth of 35% in 20 years mind blowing. You can’t tellme that doesn’t induce some kind of trauma in the existing population when the majority of that growth comes from bringing in outsiders and you have to assimilate such large groups with varied cultural values and practices. I honestly think we’ve done very well to retain as much cohesiveness and social niceness as we have, despite all our complaining about deteriorating standards. I’m reasonably certain many other societies wouldn’t have managed so well

      • SnappedUpSavvyMEMBER

        It’s ended on Sydney’s roads, I’ve seen no patience lately for people crossing 3 lanes of traffic with their hazards on doing 30kph in a 100 zone nearly causing all kinds of close accidents

      • Its just been a Covid hiatus that is thankfully going to last at least 6 months than it would have due to fed gov vaccine roll out incompetence. To me Its obvious as soon as they can they’ll open up the flood gates and pump in way more people than before to make up for lost time, though foreign students might play a smaller role than many would expect in that calculus. Plus given we basically escaped getting Covid we’ll be even more popular as a destination for many people around the world (look at the Hollywood stars they’ve been here for months saying they want to stay for example). I know people os who are now dusting off old let’s migrate to Australia plans. I’m curious to know why you think the migration tapswill be on a lower flow setting once the borders reopen?

        • happy valleyMEMBER

          I don’t think the warm bodies flow will be lower, but rather considerable higher for the reasons you have stated. However, I think patience with the inequality which will only get worse, will run out and who knows what might come next with the likes of ScoMo telling us in parliament today that we don’t have the police/military firing on demonstrators … yet.

          • Ok that makes sense! Yes it is a very interesting question. I feel that Gen X has been pretty passive over the years wrt demonstrating etc, and I don’t really see that changing. It’ll be interesting to see what the younger generations do esp if currency devaluation and loss of purchasing power continues to deteriorate. I have a feeling that they’ll either change paradigms through new tech uptake or a significant enough chunk of them will opt out as much as possible of the whole system. When I speak to younger colleagues a lot of them do understand many (but not all) of the reasons why their lives are harder than they should be, however some of them think we just need more left of centre governments and that’ll fix it. I feel that they’re sort of on the path to enlightenment, but not quite there. Anyway it is certainly going to be an interesting decade or two ahead of us.

    • I just bought a house at auction, and ended up bidding against an Asian couple. The guy spoke no English and before the auction he was walking around the house with his phone held up, apparently streaming the layout to someone and talking in a foreign language.

      During the auction he was taking orders over the phone that he passed on to the woman who made the bids. They bid us up $60K past the other bidders before they dropped out.

      So, those invaders cost me $60K that I shouldn’t have had to pay, which I definitely found traumatic.

      I saw similar things happen at 3 other auctions I attended.

      Most…not all but most… immigration to this country is causing us harm. And diversity is not our strength.

      • happy valleyMEMBER

        This is not going to end well – and the potential for violence cannot be discounted?

      • Oh I feel your pain. It especially resonates because I was going to buy a place in far east Gippsland for 230k but got something far better on so many metrics in western Vic for just under 170K so the figure of 60K resonates with me. That 60K less has literally saved my financial bacon given all the challenges I face wrt my health etc and low income status. Its giving me so much more breathing space. I’m sorry that happened to you but try to focus on the fact that you got the house (it reminds me of something an Aussie real estate agent of Greek/Italian heritage said to me in 2017 when he found out I used to live in China and was disgusted by foreigners buying houses here: one day some 2nd green Aussie managed to buy a house at auction and the rea wanted to throw a party because an Aussie and not a foreigner had managed to buy something, Anyway I’m sure the borders being closed is a major reason why so many Aussie fhb are getting in now, this is their first real opportunity to participate in the market for years).

      • Ritualised Forms

        for those who can with relative ease going offshore is an increasingly viable alternative (or undeniable actually – it has been eminently viable for years, but now pure logic doesnt really permit not considering it – especially if you have kids and think to yourself that the fuel being poured on house prices now is fuel being poured on any scope for whole generations of Australians to ever be that competitive)

        A close friend has just had a 700K + offer accepted for this place in Frankston
        https://www.realestate.com.au/property-house-vic-frankston-135437466

        My Mrs and I are chewing over whether to sell up Geetroit and buy this place about 7klm from downtown Kaliningrad (which has good schools Universities, yada yada, all the shops etc) – for about 290K AUD
        https://kaliningrad.cian.ru/sale/suburban/249785857/

        I think my country has completely lost its marbles

        • SoMPLSBoyMEMBER

          Beaut place and reasonably priced!
          Another factor to consider is just how more messed up Straya will be in 15 years considering what’s ocurred in the last 15 wrt house prices.
          There is nothing on the horizon that will benefit the subsequent generations. All the resources which have been traditionally shared and protected for the family downlines have been spent in the most profligate and miserly way possible. It’s our new demeanor; the ‘spirit’ of yesteryear is now gone- faded to black.

          Best to sky out now and get a jump on ‘those’ people who’ve benefitted immensely already but who’ll soon learn what misfortune means and who’ll also look to depart. The inevitable maelstrom will occur and the karma sticks will pound us back to reality.
          Perhaps one day we’ll mature past where we’re headed now but I’m not certain. When some things break, they can never be repaired.

        • Kaliningrad – you can supplement your income by lucrative weekend digs for WW2 relics, flog them off on fleabay.

  4. – Your story is RUBBISH. Because the 2 charts don’t support your narrative.
    – Immigration (more or less) doubled starting in the year 2000. But wage growth continued to remqain high until say the year 2008/2010. (See chart 1).
    – Real Household disposable income continued to go higher after the year 2000 (when immigration doubled). Only after say the year 2008/2009 disposable Household income started to flatten.
    – You should welcome more immigration. It will help to bring down property prices.

    • you’re a funny fella.
      continuing mass immigration pushes wages down and houses up.
      and that’s why the housing bubble is unsustainable.

      • – Nope.
        – Agree. Immigrantion means downward pressure on wages.
        – But when all wages are going down (say 10, 20 or 30%) – as a result of e.g. immigration – then people / households / families are also less able to pay the same amount of rent (for a rental property) or Principal & Interest (for a mortgage). That will put downward pressure on rents & property prices.
        – What people contimue to overlook is the impact of (mortage) debt. More mortgage debt means higher property prices. When a bank is willing to lend me say $ 400,000 for a house then I can make a bid of $ 400,000 for a house. When the same bank is willing to lend me $ 800,000 then I am able to make a bid of $ 800,000 for the same house. Then the price of that house/property will go up from $ 400,000 to $ 800,000.
        – So, it’s NOT the immigrants themselves that are pushing prices higher, it’s the amount of money people are willing (and ABLE) to pay for a house/rent that determines the price of a house.

        • “What people contimue to overlook is the impact of (mortage) debt. More mortgage debt means higher property prices”.

          No shit Sherlock. This site notes this repeatedly. But more people via immigration means more intense bidding/competition for housing, which means more debt (bigger mortgages) and higher prices.

          Why do you think Sydney and Melbourne – both the key landing spots for migrants – decoupled from the other capitals a decade ago? The interest rates, borrowing policies, tax rules, etc were the same everywhere. The answer is obvious.

    • SchillersMEMBER

      UE’s article does not claim immigration doubled in 2000. Where does it say that? Immigration didn’t start to go ballistic until 2006, the last year of the Howard government. Both Labour and the LNP have continued it at nose bleed levels ever since. Hence the flattening of household disposable income and wage growth over the last 13 years.

    • Another statistics 101 issue which the ABS is also guilty of i.e. ignorance and/or avoidance of the change and expansion in the definition of the (UNPD defined) NOM in 2006 which spiked population by capturing more temporary churn over.

      Further, as suggested by comments, in five years time the baby boomer ‘bubble’ will be well into, or transition to, retirement, downsizing and liquifying assets for retirement; with another concurrent demographic change being the proporitonal decline of the permanent working age population vis-a-vis retirees.

      The latter is not just about skills in various sectors, and new sectors, but how to support more pensions and services for retirees with a proportionately smaller tax base?