More proof Australia’s ‘skilled’ visa system is a giant fraud

For years we have been told that Australia’s visa system is world-leading because it provides the economy with vital skills and plugs so-called critical labour shortages.

This view is generally based on a superficial examination of Australia’s permanent migration program, whereby the ‘skilled’ stream accounted for around two-thirds of the total intake pre-COVID:

Australia's permanent migrant intake

The skilled stream accounted for around two-thirds of Australia’s permanent migrant intake.

The reality paints an entirely different picture.

First, around half of the ‘skilled’ stream actually comprises unskilled family members (spouses and children) of the primary skilled applicant. Accordingly, only around 30% of Australia’s total migration program are primary skilled visa holders, according to the Productivity Commission:

..within the skill stream, about half of the visas granted were for ‘secondary applicants’ — partners (who may or may not be skilled) and dependent children… Therefore, while the skill stream has increased relative to the family stream, family immigrants from the skill and family stream still make up about 70 per cent of the Migration Programme (figure 2.8)…

Primary applicants tend to have a better fiscal outcome than secondary applicants — the current system does not consider the age or skills of secondary applicants as part of the criteria for granting permanent skill visas…

Second, most ‘skilled’ migrants have gone into areas that are already oversupplied with workers, such as accounting, engineering or IT. Therefore, the visa system failed to alleviate actual skills shortages despite 15 years of endless mass immigration.

Third, the actual pay rates of ‘skilled’ migrants is surprisingly low, suggesting most are working in lower-skilled and lower-paid jobs.

Evidence for this claim is contained in the Department of Home Affairs’ various Continuous Survey of Australia’s Migrants (CSAM) surveys, which compare the median full-time salaries of migrants 18 months after being granted a permanent visa against the general population. Summaries of past CSAM surveys are presented below.

CSAM 2018 (latest):

CSAM 2018

CSAM 2017:

CSAM 2017

CSAM 2016:

CSAM 2016

CSAM 2015:

CSAM 2015

As you can see, primary skilled permanent visa holders are typically paid around the same at the general population, whereas their migrating spouses (~50% of the skilled stream) are paid significantly worse than the general population. Permanent migrants overall also earn significantly less than the general population.

These results are noteworthy given the population median income includes unskilled workers, which obviously pulls the population median figure down. In fact, if skilled visa holders were compared only against skilled Australians, then the pay gap would be very large.

Related to the above, the fourth and final problem is that many ‘skilled’ migrants cannot find work in their nominated field, leaving them either unemployed or underemployed. On this point, the submission from Engineers Australia (EA) to the federal government’s skilled migration review is particularly telling, since it admits that most engineers imported via the skilled visa program are not working in engineering and are chronically underemployed or unemployed [my emphasis]:

At the 2016 census, 58.5% of engineers in the Australian labour force were born overseas… However, continuing large scale intakes of qualified engineers will not further develop Australia’s engineering capability unless action is taken to modify the migration program to ensure a better fit for the policy objectives, and more support is provided to migrants and employers to ensure better employment outcomes.

At present, regarding engineers, due to the inefficient utilisation of migrant engineers, the skilled migration program is only primarily a success if the overarching objective is simply to stimulate population growth by introducing people with high level qualifications…

Of those who arrived from 2007 onwards to the time of the 2016 census, the top country of supply was India which supplied 23,217 and the top 10 nations supplied two-thirds of all migrant engineers (so, the supply source is very concentrated).

Migrant engineers are much more likely than Australian-born engineers to work in non-core industries, which indicates that they are also much more likely to work in non-engineering roles. This trend is true of migrants regardless of arrival date and is most pronounced for recent arrivals…

The difference in employment outcome for migrants as compared to Australian-born engineers is significantly worse, both in terms of utilisation in engineering roles and raw unemployment…

Irrespective of when they arrived, overseas-born engineers experience higher unemployment rates than Australian-born engineers do, with recent arrivals experiencing higher rates than in the unskilled labour force segment.

At the time of the 2016 census, the unemployment rate for engineers generally was 6.0%. However, the situation for migrants is put into stark relief if overseas-born and Australian-born engineers are examined in isolation. For Australian-born engineers the unemployment rate was 3.7%. For migrants it is 7.6%…

Of the top 10 migrant groups by country of origin, which deliver 67.1% of all migrant engineers, all have higher rates of unemployment than Australian-born engineers…

Unemployed engineers

Swathes of unemployed migrant engineers.

Migrant engineers are much more likely than Australian-born engineers to work in non-core industries, which indicates that they are also much more likely to work in non-engineering roles. This trend is true of migrants regardless of arrival date and is most pronounced for recent arrivals.

For example, 69.6% of Australian-born engineers work in core industries, but just 56.5% of all migrants do, and this reduces even further to 48.9% for those who arrived since 2012. Looked at differently, in the core industries, 52.3% of the engineers were overseas-born, compared to 65.8% in non-core industries…

For example:

  • In the retail industry, the biggest employer of engineers is the supermarket and grocery stores sector. In 2016, over 1,100 migrant engineers who arrived in Australia after 2011 worked in this subindustry, but only 4.9% were employed in engineering occupations.
  • Similarly, over 2,600 migrant engineers who arrived in Australia after 2011 worked in the cafes, restaurants and takeaway food industry – a sub-industry of the accommodation and food services industry. Of those, only 1.1% worked in engineering occupations.
  • And for administrative and support services, the largest sub-industry is building cleaning, pest control and garden services, which employed over 1,200 migrant engineers who arrived after 2011. Only 1.7% of these engineers worked in engineering occupations.

The next time somebody spruiks Australia’s ‘skilled’ visa system, show them this damning report, which proves the ‘skilled’ visa system is actually undercutting local workers and adding to Australia’s unemployment queue.

The solution to this problem is not EA’s proposal to help these migrants into jobs (which means taking jobs from Australian applicants), but for them not to come to Australia in the first place. Obviously, this does not mean abandoning those who are here already – they should be helped, as for any Australian disadvantaged job seeker – but to ensure that this situation does not continue into the future.

The genuine solution requires Australia’s skilled visa system to be overhauled to ensure that it only brings in migrants to fill genuine skills shortages.

The simplest and best way to reform the system is to require all work visas (other than the well-regulated Pacific Islands Seasonal Work Program) to be employer-sponsored (thus ensuring they come to Australia with a job in hand) and paid at least at the 75th percentile of earnings (preferably higher). This would equate to a minimum salary of $90,500 currently, which would rise over time with earnings:

How much Australians earn

The 75th percentile would set a migrant pay floor of $90,500, which would rise in line with earnings.

Setting a pay floor at this level would ensure that work visas are used sparingly by Australian businesses to employ only highly skilled migrants with specialised skills, not abused by businesses as a tool for undercutting local workers, reducing wage costs, and eliminating the need for training.

Unconventional Economist
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Comments

  1. I’d be keen to see a long term chart of Australian GDP per capita – level and growth – against the skilled migrant flow. No surprises it’ll show a negative correlation. More semi-skilled migrants, slower growth in GDP/Capita.

    Of course, not everyone’s a loser here, and that’s why this system is put in place. It benefits existing landowners, property developers, banks and corporates… and of course government through greater tax revenues (which don’t keep pace with infrastructure needs).

    • DreadnotMEMBER

      The primary purpose of the skilled migration program is to discipline Australian labor, including unskilled Australian labor. Its a design feature. Of course, the smart skilled labor migrants who are not satisfied with being stuck in unskilled jobs will set up their own businesses and thrive.

    • SchillersMEMBER

      With advanced economies, generally the lower the rate of population growth the higher the rate of growth in real per capita GDP.
      Conversely, the faster the rate of population growth the slower the rate of growth in GDP per person.
      Australia versus the Nordic countries is a good contrast. Japan is another.

  2. In NZ’s case, the Government loves immigration. Tax revenues rise, and that supports spending in wellington, while the migrants cram into Auckland. Our tax, your problem… I’m guessing Canberra is no different.

  3. As well paid servants of the ruling and political classes, mainstream economists are particularly fond of this transparently false “skilled migration” lie. They throw it at you all the time on The Conversation.

    It is a superficial form of shorthand that saves economists from the painful business of having to think for themselves. And allows them to get back to their important work of feeding the rich, driving inequality, and destroying the environment.

    • It is pretty much the only real paying work for economists. Like most other professions. What does that say about our society?

  4. my toranaMEMBER

    and highly skilled doctors and dentists? they’re not really coming in, are they? no doubt all the specialists’ colleges are in there quietly working with Dept of Health to make sure the o/s qualifications are always rated as questionable.

    • RobotSenseiMEMBER

      They’ll bring them in at low- and mid-level (i.e. yet to start specially training), or GP’s. But your statement is getting much warmer if we start looking a proceduralists, and there certainly is a conflict-of-interest where those specialist colleges are needed to accredit foreign-trained doctors whilst also representing those who have a large stake in the private sector. You can probably draw your own conclusion as to where on the “patient safety vs profit safety” continuum you sit.

  5. Professor DemographyMEMBER

    What does MB make of all the modeling studies and other studies often cited as evidence that migration does not effect wages and employment of encumbents? Would be a good post if you could do that.

    • There is also modelling and studies that shows that immigration reduces wages of incumbent workers, which I mentioned last week. Most notable among these is the Productivity Commission’s, which found that increasing skilled migration (let alone unskilled migration) worsens incomes of incumbent workers.

      Strangely, this modelling is always ignored by the spruikers.

      • Arthur Schopenhauer

        I recently had the experience of competing against a company whose staff paid them to work. Literally, the staff were paying the company to meet their requisite skilled work visa points, and driving Uber to make ends meet.

        No real company, paying real wages could compete. To build an economy like this is utter Bullsh!t! The apotheosis of neoliberal idiocy.

        • Professor DemographyMEMBER

          Yes. Impossible. I’ve heard of these things and a lot of exploitation and mostly from other immigrants competing in business against other immigrants. It creates a race to the bottom. One guy I spoke to said he just lost his contracts because he just couldn’t do the stuff to his employees that other contractors did. Sad shit.

        • Jumping jack flash

          There was a case recently i was told about where one of the larger meat processors was taking the overtime and shift allowances from their staff to allow them to work certain shifts, i guess it was night shift.

          I dont know too many details but apparently when fair work went in to see what was going on none of the foreign workers would say anything against their employer due to cultural norms. The only one who said they would say something went back to Taiwan so there’s no jurisdiction to be able to find them and ask them questions.

        • Dob them in. A link is on the ABF’s website. Though no guarantee the useless bastards will do anything.

      • Professor DemographyMEMBER

        My read was the PC modeling (the Bruenig modeling for example) showed effects in both directions depending on the method. The other links in the article are not modeling studies though. My sense is that the modeling studies are unable to separate cause and effect and reflect all sorts of things such as high immigration sometimes being triggered/caused by economic booms.

        • Victoria University’s modelling is pretty clear. As was the Bank of England’s and the PC’s modelling.

          Here’s the money quote from the PC regarding wages:

          “Broadly, incumbent workers lose from the policy, while incumbent capital owners gain. At a 5 per cent discount rate, the net present value of per capita incumbent wage income losses over the period 2005 – 2025 is $1,775…

          Owners of capital in the sectors experiencing the largest output gains will, in general, experience the largest gains in capital income. Also, the distribution of capital income is quite concentrated: the capital owned by the wealthiest 10 per cent of the Australian population represents approximately 45 per cent of all household net wealth…”

          • Professor DemographyMEMBER

            Cheers Leith. I’ll spend some more time reading the BOE and VU papers too.

        • Can you help me understand the Bruenig and subsequent CEDA modelling.

          As I understand they split the labour market into groups based on experience, then plot the wage growth of that group against the group’s proportion migrants. Finally creating a linear regression through all the different labour market groups.

          If that understanding is correct doesn’t it just show migrants are attracted to high paying labour markets? Surely I’m missing something here.

  6. Jumping jack flash

    Skilled migrants are a boon for everyone though. They spposedly create jobs because Australians can’t seem to figure that one out themselves. Who doesn’t want to work at a Liberty or Pieface?

    They also help businesses cut down on training expenses and enable “trickle-up” economics through the mechanism of wage theft.

    Whats not to love?

  7. 1 to 2% of foreign engineers working as engineers, while the rest work as gardeners, supermarket hands and burger flippers. Skilled immigration? These people are taking the piss.

    • “These people” being the pollies, I hope you mean, as they are the ones causing the issue, immigrants are as much victims of this scam as Aussies.

      • blacktwin997MEMBER

        To be fair many of these immigrants are complicit in the scam, and realise what they are doing is not entirely on the up-and-up. Which concern of course pales by comparison with the lure of sweet sweet PR, subsequent chain migration and satellite scam start-ups. Said scam start-ups again exclusively employing fellow ethnics on skilled visas, the cycle completes. I can understand an in-group preference but when this is based entirely upon exploitability then things are NQR.

        • Yeah, it’s not a case of a bunch of poor naive immigrants bing ruthlessly exploited at all.

          The politicians, Engineers Australia, the immigrants, the educational institutions…they’re all taking the p1ss.

    • Yes, but they are (upper) middle class with high qualifications, who are going to supplant the working class from those low-skill jobs.

      • Yes, this will ultimately lead to social fracture as the lower skilled workers who are displaced will get the sh##s. The pollies love to talk about the housing ladder but fail to understand the wage ladder. In a normal economy where there is limited workers at the bottom end they are naturally given a hand up as higher up earners increase their wage as employers have to compete. But when there is a big pool of people willing to work for lower wages the ladder is pulled down, the rungs compressed, especially including with “high” skills supply as it works on the higher rungs as well. Long term result for Australia will be lower spending/consumption levels and social stress.

  8. Any skilled professions on the skilled list that has an unemployment rate for immigrants above their national unemployment rate should immediately be removed from the skills list.

    • blacktwin997MEMBER

      Spot on, though i won’t hold my breath to see this implemented. Also hopefully economists are on the ‘skills’ list too and start feeling some well-deserved heat.