Submission to the inquiry into Australia’s skilled migration program

Below is a submission to the inquiry into Australia’s skilled migration program, written by Sustainable Population Australia with my assistance. The submission is a direct rebuke of the Morrison Government’s planned rebooting of Australia’s pre-COVID mass immigration program via giving Australian businesses easier access to migrant workers to overcome purported skills shortages.

Introduction

Sustainable Population Australia (SPA) welcomes this opportunity to make a submission to the Joint Standing Committee’s inquiry into Australia’s skilled migration program.

The comments in this submission have relevance to all the terms of reference (ToR), and have particular relevance to ToR 3 and 4.

A summary of the major points of this submission is contained in the next section, ‘Response to the Draft Report,’ page 4 below.

SPA is a non-partisan, not-for-profit advocacy group that seeks to establish an ecologically sustainable human population within Australia and globally. It works on many fronts to encourage informed public debate about how Australia and the world can achieve an
ecologically, socially and economically sustainable population. SPA rejects any positions or policy measures based on racism or involuntary population control.

SPA’s opposition to population growth resonates strongly with the views of the Australian community. Opinion polls over many years show a majority of Australians believe Australia’s population is growing too rapidly and that it should not grow much beyond its present size of nearly 26 million. They do not agree with the idea of a ‘Big Australia’. They believe we are big enough already.

These views are also reflected repeatedly in readers’ online comments on articles in a range of newspapers and online magazines: The Australian, the Sydney Morning Herald, Guardian Australia and The Conversation (Australia) are among these.

One of the most profound changes affecting the Australian economy and society this century has been the massive lift in Australia’s net overseas migration (NOM) and the resulting population growth under the multi-partisan Big Australia policy.

Net overseas migration surged from the early-2000s. Prior to the Covid-19 pandemic it was running at around triple the historical average in number terms. Pre-Covid-19, Australia’s population was growing by a number approaching, and sometimes exceeding, 400,000
people annually, the equivalent of adding a Canberra-size population each year. NOM was contributing more than 60 per cent of Australia’s yearly population growth, with births to migrants further contributing to natural increase.

Australia’s population has expanded at a rate that is 2.5 times the Organisation for Economic Cooperation and Development (OECD) average since 2003, easily the fastest of advanced English-speaking nations.

Australia’s population in 2021 is 25.8 million people. This is an extraordinary 34% increase from the population in 2000 of 19.2 million. To give an indication of just how large Australia’s population shift has been, in the year 2000 the Australian Bureau of Statistics
(ABS) projected that Australia would not reach 25.4 million people until 2051! The main reason that reality deviated so far from this projection is that the Federal Government chose to accelerate growth through promotion of childbearing and vastly higher immigration
quotas.

This rapid population growth has had a series of cascading negative impacts such as infrastructure congestion, stagnant growth in incomes for working people, reduced housing affordability, deteriorating standard of living and environmental degradation.

With the Covid-19 pandemic and the closure of Australia’s international borders, Australia’s population growth has abruptly slowed. SPA believes this slowdown ought to be enthusiastically welcomed. Australia should no longer seek to grow the economy through the high levels of immigration seen in recent decades. This is an old and fundamentally failed economic model. Such an approach continues to ‘widen’ the economy by (unsuccessfully) trying to catch up with the moving target of infrastructure demands from a growing population, but does nothing to deepen it by improving the per capita well-being of all Australians, or the health of our natural environment.

There is evidence that the well-being of Australians has been declining since the 1970s when the population was 15 million. And the government’s own State of the Environment reports confirm that population growth is contributing to continuing environmental deterioration.

It has been reported, citing a KPMG report, that our economy could lose $117bn annually by 2031, due to slower population growth. SPA believes that such claims are erroneous and misleading, if not mischievous special pleading. Such claims only highlight the benefits side
of the ledger, to boost the position of the sectional interests which they promote. They do not offer a complete economic assessment where the whole range of costs and benefits (including those that are not quantifiable) are identified, weighed and assessed, and how those costs and benefits are distributed. The latter is the approach that was sensibly taken by the Productivity Commission in its landmark report Migrant Intake into Australia (2016). We note that the government has still not provided a serious and considered response to
that report.

The slowdown in population growth due to the pandemic is a chance to change course from the high population growth, Big Australia path of the past two decades. It is an opportunity to reset Australia’s population goals in pursuit of a sustainable future for people and the
environment.

It should be noted that it is the rate of population growth that has dropped; Australia’s population is projected to continue to grow in absolute terms, and would continue to do so through to about mid-century, even if we had zero net immigration during that whole time. This fact is confirmed in the government’s own recent Population Statement.

Reduced population growth will bring many benefits, including less pressure on housing prices, less congestion in the big cities, less pressure on state and federal budgets struggling to keep up with infrastructure demands caused by high population growth, slower increase
in our CO2 emissions, less loss of agricultural land from urban sprawl, and the easing of the relentless destructive impacts on our natural environment and threatened species.

There are powerful sectional interests associated with property development, retail, migration and latterly in higher education, supported by bureaucrats in the Treasury, who advocate for high immigration and high population growth. According to Professor Judith Sloan, “the lobbying behind immigration is so strong that both [political] parties have concluded the views of ordinary folk can be ignored. These forces include the bureaucracy — check out the Treasury’s reports — big business, property developers, the universities and various interest groups, some ethnically based.”

The flow of benefits (but not the costs) of high immigration is skewed towards the few sectional interests noted above. As Professor Sloan further remarks, “What Treasury won’t admit is that the distribution of those gains [of immigration] are snaffled mainly by the immigrants themselves, and the businesses that can secure larger domestic markets — think property developers, in particular — and save on paying for training. It’s a great deal for them. Whether it’s a great deal for everyone else is an open question.”

A consistent theme in the advocacy from these sectional interests, or ‘growth lobby’, warns about the dangers of an ageing population and claims that high levels of immigration can ameliorate this. This theme is repeated in the submission from the Migration Institute of
Australia to this inquiry.

SPA wishes to place on record that the ageing population argument is a furphy, designed to cause fear among the Australian people and garner support for high levels of immigration. A gradually ageing population is not a cause for panic. In Australia today, there are more
people of ‘working age’ who are not working than there are people over 65. A recent in depth, expert study commissioned by Sustainable Population Australia shows that a reduction in the proportion of people of ‘working age’ is likely to reduce unemployment and underemployment, because the labour market will adjust to the forces of supply and demand and more people will be attracted into the workforce. These are surely beneficial outcomes.

This study also shows that the considerable cost of extra infrastructure to support population growth outweighs the small extent to which that same population growth could lessen pension, health-care and aged-care burdens. And that is not even including the often ignored cost of continuing environmental deterioration caused by population growth.

Response to the Draft Deport

Australia’s skilled migration program (both permanent and temporary) has been a major part of Australia’s high migrant intake over the past two decades. In light of the introduction above, it should be clear that SPA does not believe it desirable to return to the pre-pandemic ‘normal’ of high immigration and high population growth. We believe that, if asked, this would also be the view of the overwhelming majority of the Australian people.

Sustainable Population Australia therefore strenuously rejects the majority recommendations contained in the draft report of the inquiry into skilled migration.

In a nutshell, these draft recommendations propose to:

  1. Water down or abolish labour market testing requirements.
  2. Lower business costs and speed up approval times for importing foreign workers.
  3. Significantly expand the skilled occupation list by including almost any role.
  4. Give all ‘skilled’ visas a clearer pathway to permanent residency.
  5. Give ‘skilled’ foreign workers priority access to flights and hotel quarantine ahead of stranded Australians.

The effect of implementing these recommendations would be to flood the Australian labour market with even more workers from overseas, at a time of great economic uncertainty and labour force disruption, when Australians displaced from Covid-affected sectors are seeking to repurpose their skills.

The Australian labour market was already weak after almost two decades of elevated immigration levels. Coupled with an enormous increase in housing costs, lower-income Australians have seen declining standards of living. The experience of these two decades shows that cries of ‘skills shortage’ from industry and business are in reality a stalking horse for seeking cheap labour and diminished working conditions.

The incomes of Australian workers have been suppressed by high immigration for too long, and this should not be allowed to continue.

There is an overwhelming case for not loosening labour market testing, increasing the number and scope of skills categories, or in any way making it easier for skilled migration and accompanying pathways to permanent residency.

This submission will present evidence to back up these claims, supported by statements from some of the most eminent economists in the land, including Commonwealth Bank economist Gareth Aird, Professor Ross Garnaut and Professor Judith Sloan.

Post-Covid, there needs to be a major reduction in Australia’s level of net migration, to less than half of the pre-Covid level. This will require considerable tightening of the skilled migration pathway to prevent the frequent gaming of the system, as has occurred to date.

An example of the latter is provided below in the section on labour requirements in the hospitality industry (explained below).

SPA believes that if labour market testing is inefficient, as has been claimed, it should be strengthened, not scrapped.

Or, consideration could be given to putting in place a robust alternative ‘income-threshold’ policy approach which will prevent the frequent gaming of the skilled migration pathway.

As an alternative to labour market testing, SPA recommends that the government require all ‘skilled’ migrants to be paid at least at the 75th percentile of full-time earnings. Further detail is provided below.

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 providing training.

In conclusion, the sensible policy is to keep immigration low, provide workers with proper training, and let local wages rise. Doing so would lift workers’ incomes and purchasing power, in addition to boosting productivity by rewarding business investment in productivity gains.

The myth of skills shortages

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

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?

Over the past 20 years, due largely to high immigration levels, the size of the labour force expanded by 46 per cent, from 9.4 million in January 2000 to 13.7 million in January 2020. This enormous growth has been one of the key contributors to Australia’s wage stagnation last decade (see next chart).

Australian real household disposable income

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.

According to the Head of Australian Economics at the Commonwealth Bank, Gareth Aird:

From a wages perspective, immigration augments the supply of labour beyond what would have naturally occurred. That intensifies the competition for existing jobs while of course also adding to the demand for labour. The bigger the supply side shock, the more that the competition for existing jobs intensifies. This puts downward pressure on wages initially, but its effect should only be temporary. However, if the supply side shock continues the temporary impact may not prove to be so short lived.

“Skilled” migration was worth around 70% of the total migration programme outcome pre-COVID. From the perspective of an employee, working in an industry that has a skills shortage means that the labour market in that profession should be tight. In industries with skills shortages, bargaining power between the employee and employer should move more favourably in the direction of the employee and higher wages should be forthcoming.

But in Australia’s case pre-COVID there was no evidence of widespread skills shortages based on the broad-based weakness in wages growth. The relatively high intake of skilled workers looked to be a pre-emptive strike on the expectation that there would be skills shortages in the future. (emphasis added)

A similar conclusion is reached by Professor Ross Garnaut in his latest book. Garnaut states that the ramping up of immigration over the past two decades, and particularly the large growth of temporary migration, has had the effect of integrating “much of the Australian labour market into a global labour market for the first time.”

Professor Garnaut continues: “Integration into a global labour market held down wages during the resources boom, [but] it contributed to persistent unemployment, rising underemployment and stagnant real wages during the expansion of total economic activity [between 2013 and 2020].

Professor Garnaut further states: “Increased immigration contributed to total GDP growth, but detracted from the living standards of many Australian working families.”

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

These conclusions are endorsed by Professor Judith Sloan who states, in a comment on Professor Garnaut’s book:

“We have imported cheap labour and this has harmed local workers who compete with imported workers.”

Another recent study, reinforcing Professor Garnaut’s conclusions, states that the growth of temporary migration (including skilled visas) has led to reduced pay and conditions for migrant workers:

Australia’s immigration system increasingly resembles a guest-worker system, where temporary migrants’ rights are restricted, their capacity to bargain for decent working conditions with their employers is curtailed and their agency to pursue opportunities available to citizens and permanent residents is diminished. The ability of temporary migrants in Australia to seek redress if they are underpaid or otherwise mistreated is limited by visa rules that place considerable power in the hands of employers.

There are obvious implications here also for the pay and conditions of Australian workers who are in effect in competition with temporary visa workers.

Professor Sloan also highlights the growing disenchantment of the Australian public with the high levels of immigration in recent decades:

If public opinion surveys are anything to go by – and they are in this case because of the sheer consistency of the public’s increasing antipathy towards large migrant intakes – the almost complete pause in immigration [during Covid-19] will have been welcomed by most people. This is particularly the case for Melburnians and Sydneysiders who have borne the brunt of the explosion in international students.

Professor Garnaut concludes that going forward, Australia should set its immigration level to about half of the pre-Covid levels of the past two decades (what he calls the ‘Dog Days’). His statements are summarised in an online article from the ABC:

Professor Garnaut says much lower immigration will hold back total output growth in coming years, but it “might improve the living standards of most Australians.”

He says the sudden halt to immigration provides an opportunity to reassess our immigration policy, “to think through the scale and composition of immigration that will contribute most to broadly shared goals.”

“There is likely to be electoral resistance to resumption of anything like the immigration levels of the [pre-Covid] Dog Days,” he assumes.

“Settling early on an immigration program that is moderate in size and strongly focused on valuable education and skills will help us to avoid contentious and divisive political debate at a time when our society and polity are under great stress.”

He says once we begin rebuilding the economy on the other side of COVID, it would make economic sense to set the new level of net migration to the same level it was during Australia’s productivity boom, at around 0.5 per cent of the population per year.

“This would be about half the level of the Dog Days,” he says.

SPA concurs with Professor Garnaut’s call for a major reduction in the level of the immigration program post-Covid – preferably to even less than half of pre-Covid levels, so that Australia’s population might eventually stabilise rather than continue growing.

Labour requirements in the hospitality industry

Paragraph 2.8 of the Inquiry’s Draft Report includes the far-fetched claim that bringing in 5,000 skilled foreign chefs and front-of-house managers would create 100,000 Australian jobs. A claim of skill shortages in this sector was also made in the submission by the Australian Chamber of Commerce and Industry.

The notion of bringing migrant workers into Australia to work in hospitality to alleviate so-called ‘skills shortages’ is ridiculous. The actual evidence shows that the industry is rife with surplus labour.

First, the Australian Bureau of Statistics’ (ABS) quarterly employment data shows that the Accommodation & Food Services industry (i.e. hospitality & tourism) has lost 86,200 workers in the year to February 2021:

Hospitality industry employment

Second, the number of job postings across Hospitality & Tourism was 40% below pre-COVID levels, despite the 33% increase in job postings across the broader Australian labour market:

Hospitality job postings

Third, annual wage growth across the Accommodation & Food Services industry crashed to only 0.3% in the year to December 2020, which was by far the lowest recorded wage growth across Australia:

Hospitality wage growth

Finally, the median earnings across the Accommodation & Food Services industry was by far the lowest in Australia in August 2020 (as well as August 2015) at only $650 per week, according to the ABS.

Median Australian earnings by industry

In addition, 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. This raises the possibility that cheaper imported labour has led to reduced training of new local employees.

On the basis of the all the evidence above, how can anybody take the claims that the hospitality industry is facing skills shortages seriously? If that were true, the industry would not have experienced mass unemployment, the lowest wage growth in Australia, as well as paying the lowest wages in Australia.

The truth is the hospitality industry operates on a model of widespread wage theft and exploitation of migrant workers. Giving it easier access to foreign workers would merely exacerbate the exploitation, push wages even lower, and rob local workers of employment opportunities.

In conclusion, there is an overwhelming case for not loosening labour market testing, increasing the number and scope of skills categories, or in any way making it easier for skilled migration and accompanying pathways to permanent residency.

If our ‘skilled’ migration intake was already too great during the pre-Covid decades, leading to stagnant incomes, congested infrastructure, environmental deterioration and overall declining living standards, then how could it possibly be sensible to now loosen the immigration settings still further during these highly uncertain times of the pandemic?

Why should Australian workers suffer due to the desire of Australian businesses to minimise their wages bill by hiring overseas workers?

Proposed reform: an income threshold approach

The following discussion applies to employer-sponsored skilled migrant visas. All skilled migrant visas should be employer-sponsored and temporary in the first instance. Now is not the time to add job-seekers who are not demonstrably needed by an employer.

SPA believes that if labour market testing is inefficient, as has been claimed, it should be strengthened, not scrapped.

Or, consideration could be given to putting in place a robust alternative ‘income-threshold’ policy approach which will prevent the frequent gaming of the skilled migration pathway.

This income-threshold solution to purported labour and skills 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 businesses truly believe there is a skill shortage, let them offer fair remuneration to attract more candidates into the market. This approach needs to be accompanied by a large boost in apprenticeships, training and TAFE education, and in education more generally (including universities).

To ensure skilled migrants are not undercutting Australian job-seekers, SPA recommends that the government require all ‘skilled’ migrants to be paid at least at the 75th percentile of earnings:

Median Australian earnings

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 providing training.

To implement this recommendation, the Temporary Skilled Migration Income Threshold (TSMIT) should be lifted from its ridiculously low level of $53,900. This TSMIT was $3,300 (6%) below the median income of all Australians27 in August 2019 ($57,200), which includes unskilled workers (see table). It is likely even further below now.

Having such a low TSMIT explicitly incentivises Australian businesses to hire foreign workers instead of local workers, as well as abrogates the need to provide training.

Currently, ‘skilled’ permanent visa holders are also paid less than the general population, according to the Department of Home Affairs’ Continuous Survey of Migrants:

Skilled migrant pay

As shown above, full-time skilled visa holders were paid $73,000 in 2018, $3,000 less than the general population (combining skilled and unskilled workers).

Therefore, both the temporary and permanent skilled visa programs are unambiguously undercutting Australian workers, in turn contributing to the economy’s low wage growth and contributing to Australia’s chronic labour underutilsation.

As a first priority, SPA recommends the government should seek to apply a pay floor equivalent to the 75th percentile of weekly earnings ($85,852 p.a. in 2019 – see above) to skilled visa holders.

In this way, Australian workers may gradually begin to get a long overdue rise in incomes.

In conclusion, the sensible policy is to keep immigration low, provide workers with proper training, and let local wages rise. Doing so would lift workers’ incomes and purchasing power, in addition to boosting productivity by rewarding business investment in productivity gains.

Unconventional Economist

Comments

    • MountainGuinMEMBER

      Given the draft recommendations of the committee I’m doubtful about the impact this well argued and evidenced piece will have.
      But when the cash ban was looking likely a year ago, alot of folk like Martin North and John Adans pushed the facts hard, got record levels of committee submissions and in the end the ban was parked.
      I’ll be flicking my thoughts to my Member and perhaps SA can pass thier submissions onto those like Sloane who have a prominent public voice.

  1. drsmithyMEMBER

    Really should be the 90th percentile, and probably should be proposed at that level anyway to “compromise” down to 75th, but crawl before you can walk, etc.

  2. edward smithMEMBER

    Sustainable Population Australia (who wrote that submission) is one of the last remaining environmental organisations publicly stating population is a cause of habitat loss, climate change and every other environmental problem there is. Please join them or donate etc

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