The Kouk: No immigration means wage growth

Stephen Koukoulas (“The Kouk”) is the latest in a growing list of economists to acknowledge that the closure of Australia’s international border to migrants will soon generate enough labour market tightness to drive decent wage growth:

It’s good news for the economy – Australia is entering a period of accelerating wages growth…

A hectic schedule of client meetings have had one over-arching line of discussion and feedback – wages.

Common themes include:

  • “I can’t find the workers I need to expand my business.”
  • “I am having to offer higher pay to attract talent.”
  • “I need to start thinking about incentives to retain my existing experienced staff before they are lured away by a competitor – I have to pay them more”.

This means one thing – private sector wages growth is about to take off…

In the pre-COVID environment, many firms would look overseas for workers and talent. In 2021, this is no longer a source of labour for them. International borders are closed.

Indeed, it is clear that one effect of the COVID pandemic and the associated border closures is to allow for stronger wages growth…

Amazing isn’t it? For nearly a decade MB argued that Australia’s mass immigration program had flooded the labour market, which resulted in elevated levels of unemployment and underemployment, and helped to drive wage growth to record lows:

Australian wage growth

The mass immigration program helped to push Australian wage growth to record lows.

For years we were derided or ignored by Australia’s economists for holding this commonsense view (backed by empirical evidence).

Now that COVID has arrived, Australia’s economists have suddenly had a mea culpa and now openly admit that lower immigration is good for Australian workers and will help to lift wage growth.

Yet the laws of economics haven’t suddenly changed due to COVID. It has always been the case that when employers are allowed to freely hire cheaper workers from abroad, they won’t have to compete for local workers by offering better wages and benefits. Employers will also undertake less training. The inevitable result will be higher labour underutilisation than would otherwise be the case, alongside lower wage growth.

Thus, if Australia’s policy makers genuinely want wages to grow solidly post-COVID, they must not reboot the mass immigration program. A decade-plus of crushed wages and living standards is all the empirical evidence one needs to know that the mass immigration policy is self-defeating.

Unconventional Economist
Latest posts by Unconventional Economist (see all)


    • Peter SMEMBER

      Anecdotally, overseas students stuck in University distance learning really dislike it, even at discounted prices.
      Most likely the reason is that it’s not fun studying all day in your bedroom in Beijing or Delhi and there is no opportunity to eventually apply for PR after completing the qualification.
      Interestingly one of the blokes caught up in the most recent quarantine virus leek was studying cooking! Plenty of jobs for cooks out on the mining camps in WA!

      • GramusMEMBER

        Wrong…. The rules have changed and time spent offshore now counts for an automatic 18 month graduate work visa.
        “Temporary Graduate (Subclass 485) visa eligibility
        We have changed the requirements for a Temporary Graduate (subclass 485) visa for those who have been impacted by COVID-19:

        online study undertaken outside Australia as a result of COVID-19 travel restrictions will count towards the Australian Study Requirement for existing and new student visa holders
        graduates affected by COVID-19 travel restrictions will be able to apply for and be granted a Temporary Graduate visa outside Australia (where they have met all the requirements).
        Online study outside Australia is counted from the time of Student visa grant.

        If you are applying from outside Australia you must hold or have held a Student visa in the past 12 months to apply.”

        This is the change that is keeping the online learning numbers up.

        • Peter SMEMBER

          That’s terrible news from the “Big Australia” lot in Guv’ment and their Uni cheer quad!

  1. Dahls ChickensMEMBER

    Even young Gotti has had an epiphany:
    “What has transformed the unemployment outlook? I will go through some of the obvious forces that are generating higher employment and then unveil a complete surprise — the fall in overseas students has emerged as a big factor in reducing unemployment.”

    Time for Harry to get on the blower and re-educate him…

    • TailorTrashMEMBER

      That $40 billion “export industry “ isn’t coming from the back streets of Mumbai…..what a surprise .

      • This world famous ‘export’ industry won’t be returning from the COVID saturated back streets of Mumbai or Islamabad anytime soon either.

        Reopening Australia’s borders to hundreds of thousands of Indian and Pakistani ‘students’ is now politically impossible.

      • Niall de Santos

        One upside of India’s Covis problems is that my daily spam calls have stopped.

  2. Lord DudleyMEMBER

    Will there be inflation? That would be neat! That’s the way you save nominal house prices. The trick in Oz is mortgage rates need to be lower than inflation for a period to bail out all those mega mortgages. This seems to work more transparently in the US where most mortgages are 30 year fixed, and taking out an ARM (adjustable rate mortgage) is considered to be up there in the list of bad life decisions along with adopting a daily crack habit, or having your political opinions tattooed on your face.

    I refinanced my mega mortgage in the US about a year ago at about 3.1% APR for 30 years, so I figure by the time I’m making my last monthly mortgage repayment (in 2050), it’ll be the same cost as the new McElon’s Soylent-Green Happy Meal.

  3. GarethMEMBER

    ‘Now that COVID has arrived, Australia’s economists have suddenly had a mea culpa and now openly admit that lower immigration is good for Australian workers and will help to lift wage growth.’

    Majority of Australia’s economists are paid to publish an opinion of their employer/industry body, by this fact many are functionally useless as voices of reason. They simply sold out many many years ago for a stable income, long lunches and ego strokes that go with the role. Inside the safety of their corporate tent you could almost be certain their opinions would be different to the ones espoused to the great unwashed.

    MB hasn’t sold out as it doesn’t represent one of the parasitic industries which most mainstream economists come from. This is a good thing.