Finally economists admit lower immigration is good for workers

After being ignored for nearly a decade, it is gratifying to see Australia’s economics fraternity belatedly endorse MB’s argument that lower levels of immigration are necessary to drive labour underutilisation down and wages up.

The shift began in March with the release of Ross Garnaut’s new book, Reset, which argues that the massive increase in Australia’s immigration intake in the early 2000s, which saw Australia’s population swell by 35% in 20 years, was one of the major factors contributing to Australia’s decade long wage stagnation. Garnaut also calls for Australia’s immigration intake to be halved post-COVID to safeguard workers and living standards:

“The overall effect was to integrate much of the Australian labour market into a global labour market for the first time”…

“Integration into a global labour market held down wages and inflation during the resources boom, [but] it contributed to persistent unemployment, rising underemployment and stagnant real wages”…

“It contributed to the historic shift in the distribution of income from wages to profits. Increased immigration contributed to total GDP growth, but detracted from the living standards of many Australian working families”…

“Breaches of labour laws on wages and other conditions became common”…

“Immigration now lowers the incomes and employment prospects of low-income Australians”.

Since then we have witnessed a conga-line of economists confess that mass immigration lifts unemployment and lowers wages, including ANZ’s Daniel Gradwell, Citi’s Craig Woolford and CBA’s Gareth Aird; although Aird has been consistent on the matter for years.

Even the RBA, which has long been a cheerleader of mass immigration, has tentatively acknowledged that the endless migrant flood has worked against its goal of full employment and wage growth.

The latest mainstream economist to fall into line with MB’s view is Saul Eslake, who explained to the Eureka Report’s Alan Kohler that the closure of Australia’s borders to migrants has significantly reduced the amount of ‘competition’ which Australians who’ve lost their jobs face in seeking new ones. This, in turn, helps to explain why the unemployment rate has fallen faster than expected and should soon lead to rising wages:

“The longer our borders remain closed to international migrants, the easier it is for the targets for unemployment to be achieved”.

“For example, on average over the three years to March 2020, the working aged population was growing by around 22,000 a month. And that in turn meant you needed jobs growth of around 13,000 a month or more in order merely to stop the unemployment rate from rising. But since the onset of the pandemic and in the last six months or so, the working age population has only risen by around 8,300 a month. And that means that you can prevent the unemployment rate from rising with much less employment growth than pre-pandemic. Or, to put it another way, you only need employment growth of about 0.13% per month in order to get the unemployment down to less than 5% by the end of this calendar year. Whereas if the working aged population has been growing at its pre-pandemic rate, you would have needed employment growth of more than double that in order to get the unemployment rate down to 5% or less with no change in the workforce participation rate”…

The SMH’s economics editor, Ross Gittins, noted similar yesterday:

“[Economic managers have] concluded that the only way to get wages growing again is to get unemployment down so far that employers are having trouble finding the workers they need and are forced to compete with other employers by bidding up the wages they’re prepared to pay…

[It is] quite foreign to what the econocrats have been telling us about wages for as long as I’ve been in journalism…

Amazing isn’t it. Gareth Aird aside, it is like Australia’s economists have suddenly discovered the laws of gravity!

Let’s hope economists now unite and speak out against the Morrison Government’s planned reboot of immigration to pre-COVID levels by:

  • Abolishing labour market testing requirements;
  • Lowering costs and speeding up approval times for importing foreign workers;
  • Expanding the skilled occupation list to include almost any role;
  • Providing all ‘skilled’ visa holders with a clear pathway for transition to permanent residency; and
  • Granting ‘skilled’ visa holders priority access to flights and hotel quarantine ahead of stranded Australians.

If the pre-COVID level of migration are restored, an extra ~200,000 workers would enter the Australian labour market every year. This would necessarily drive up unemployment and put downward pressure on wage growth.

Australians already suffered a decade of stagnating real wage growth on the back of mass immigration, alongside declining amenity. The Morrison Government’s proposed immigration reforms would be a fatal final blow for wages and living standards.

Unconventional Economist
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Comments

  1. The press club on ABC yesterday was pushing lack of women’s participation (all female speakers), two of the speakers really pushed rebooting immigration as well… I kept swearing every time they did so as the impact on Australian workers (male and female) was completely disregarded!

    • It was painful wasn’t it. First speaker was good but the second had no insight whatsoever.

  2. Danielle Wood is still a holdout. She said that immigration is slightly positive for wages.

  3. working class hamMEMBER

    Only people with menial jobs will be affected by an immigration reboot, therefore those leaners should suck it up and accept their fate. Or, just get a better job.
    The LNP really have a chance to pull this whole thing off, if only they could just let actual Australian workers have a little bit more and business interests a little less. The huge pile of public and private debt would be inflated away, deleveraging back into a sustainable growth position.

      • Funnily enough I think “coding/software development” has been one of the most impacted fields from immigration. Companies have favored technologies that are safe because they can hire more people via immigration. i.e. even if a technology isn’t as effective/productive it “scales” as its easy to hire (a.k.a. import) for. Lower immigration would benefit people who “code” as wages at the lower rung would lift wages at the higher rung just like any other industry. It may also make companies less conservative and willing to try out new approaches and ideas to get more out of their existing staff. Even the good people who are in demand would get wage rises under this. The skill shortage in Australia is a myth IMO especially in fields like IT, Accounting and Engineering.

        • Display NameMEMBER

          Yes IT has been affected hugely by migration. But there still is a huge shortage in Engineers that will work for 40K a year.

          • Arthur Schopenhauer

            Yes. Data Scientist with PhD needed, minimum 10 years experience, excellent pay, $54,000 per annum. Apply now!

          • Display NameMEMBER

            I personally have not heard of signing bonuses for IT /Software engineering jobs in Aus. They are relatively common in the US. There is no shortage here.

        • kierans777MEMBER

          I once proposed an architecture for a “Mark 2” of a system with a lot of learnings from Mark 1. It was instantly canned because the developers couldn’t understand it (Reactive Programming was just too hard). 18 months later and with millions of $$$ down the drain the lead devs realised I was right.

          We do have a shortage IMO of developers who have the skill sets we actually need. However importing people who also don’t have those skill sets is why corporations are still running on Java 6 and pay Oracle millions of dollars a year.

          • But that’s the point. Management don’t know what they need and what would make them more productive. They don’t bother if the easy option (get more cheap people) is there and it is a “known” even if it isn’t ideal. Management in these situations don’t feel they need to listen or respect cheaply paid tech staff. Australia is a risk averse culture generally, at least in Engineering. That works in fields like health, car safety standards, etc where processes and being cautious can lead to good results potentially – it typically doesn’t work in moving fast industries like software.

            There’s always a shortage of “good” people. But a shortage of people in general gives “good” people more power to make decisions. This is a fact that professionals in other industries have worked out (e.g. builders, doctors, etc) that’s not often appreciated by good people with talent in fields like Engineering.

            Its easier to take the “lazy” route – just look at our government using more people to make the economic figures look good. Same thing.

          • This compounds in that they would rather go with a method that’s easy to get “on the market” (i.e. the old low tech option) as opposed to a newer method that requires training. In a shortage situation you have to train people anyway (immigration isn’t an option) so that’s less of an issue as training becomes part of the culture and skills can be learnt on the workplace. That “Reactive Programming” is something they can deal with then, because they have the culture and have developed skills to mitigate the risk of new tech via training and mentoring.

            We don’t have any of that in Aus. Ironically it could be we aren’t an innovative STEM nation because we import too many people with supposed STEM skills, often from what I’ve seen though of low quality. It stops training from occurring, and growth. We expect the skills to already be there – trouble is that it is a chicken and egg problem. I don’t exactly buy the argument that we always need to import skilled people always either; knowledge is there on the internet. We just need to bring those skills into our educational institutions and give the good “tech” people the labor power to be able to spend time to learn these skills. If employers really wanted to keep them they would offer training, uplift and R&D as a perk of employment with the side effect that it might result in something innovative occurring as well.

          • kierans777MEMBER

            @AK

            > we import too many people with supposed STEM skills, often from what I’ve seen though of low quality.

            Hear, hear!

    • Fishing72MEMBER

      If this comment isn’t satire then some serious and prejudiced “re-education “ is due in your direction. Amazing that some people honestly believe they’re an independent island within society who exist and achieve on their personal merit alone.

  4. sps179MEMBER

    Not part of any economists’ conga line, and equally contemptuous of Australian voters, is Australian Treasury. Their current setting for net migration 2023-24 is 201,000. Don’t be totally surprised if that goes up – not down – next Tuesday night.

  5. drb1979MEMBER

    Similar musings are starting here in the UK – employers no longer have access to cheap unlimited labour from the EU so they are having to raise wages and offering training to locals.

    Oh the humanity!

  6. Fishing72MEMBER

    Apparently ABS statistics show that over 57,000 immigrants came from India alone in 2020(!). If confirmed this is a fckn disgrace. The low point for Australian government?

  7. Niall de Santos

    The author of this article fails to understand that he’s making a logical, coherent argument that massive immigration depresses wages.

    The simple fact is that no-one in power cares about the truth, let alone depressed wages. They care about staying in power, and to do that they need money. To get money, they need to do what their “big Australia” lobbyists want.

  8. Kudos to the MB team on this one. Yet another example where you were very far ahead of the curve. Of course on Aussie residential property you remain … very far ahead of the curve and in Reus’s shadow … so no getting cocky!

  9. Well they’re all blokes and the wrong sort. We need to do away with that sort of thing and get some diverse female representation so we can reinterpret the data with a more vibrant lens that reflects the global embrace of our benevolent overlords.