Senate Inquiry: Raise temporary migrant wage floor

A new report from the Senate select committee on temporary migration has found that Australia’s temporary migration system is “broken” and allowing the easy exploitation of foreign workers.

According to Labor’s committee chair Raff Ciccone, the closed international border in response to COVID has “exposed the dependence our economy has on temporary migration”:

“There is one story that runs true through almost every one of them and that is the story of a broken system that is failing to deliver for those that need it to”.

“Temporary migration has a role to play in areas where we cannot skill up enough Australians quickly to meet demand. That is why we need to reset our migration program to meet the unprecedented economic challenges we are currently facing”

Ciccone also noted that prior to the pandemic, Australia had the second largest temporary workforce in the OECD, with the inquiry hearing “significant evidence” of worker exploitation.

The inquiry has made 40 recommendations including granting new powers to the Fair Work Ombudsman, increasing penalties for wage theft, banning dodgy operators from hiring temporary workers, speeding up processing times to improve the responsiveness and flexibility to meet labour demand, and improving pathways and time frames to permanent residency.

As usual, the inquiry does not recommend reducing temporary migrant flows to improve job prospects and wages for Australian workers, nor alleviate population pressures.

Moreover, the dissenting report from the ‘Big Australia’ Greens also wants permanent residency to be handed out like tic tacs to all and sundry:

In this report, the Committee has recommended (Recommendation 25):

… restoring the alignment that used to exist between the temporary skilled and permanent skilled programme to ensure that where appropriate, migrants have pathways to permanency and citizenship.

As with the report, this recommendation is supported, but the Australian Greens have concerns that, if implemented only for skilled migrants, it would further entrench classes of ‘haves’ and ‘have nots’ within Australia’s immigration program…

The Australian Greens support people who come to Australia under the humanitarian and family reunion visa programs being provided with a pathway to permanent residency and ultimately citizenship.

Recommendation

That migrants who come to Australia with family visas, and with refugee and humanitarian visas, be provided with pathways to permanency and citizenship, and that these pathways begin with permanent residency upon entry to Australia.

Chain migration here we come!

The best recommendation to come from the report relates to raising the minimum wage that temporary ‘skilled’ visa holders must be paid from the current appallingly low level of $53,900:

Recommendation 20

The committee acknowledges the role the current artificially low Temporary Skilled Migration Income Threshold plays in undermining the attractiveness of employing Australians over temporary visa workers and recommends that the Temporary Skilled Migration Income Threshold be increased to the rate it would have been if it were not frozen in 2013 and that future increases be indexed, as was previous practice…

According to DESE, the Temporary Skilled Migration Income Threshold (TSMIT), currently set at $53,900, is an important safeguard of the temporary skilled migration programme, designed to protect lower paid Australian jobs and ensure skilled migrants can support themselves while in Australia.

While stakeholders were supportive of the TSMIT to allow temporary visa holders to support themselves while in Australia, the committee heard that the threshold does not reflect current Australian wages. For example, the ACTU submitted that TSMIT, set at $53,900, has been ‘frozen’ since 1 July 2013. Unions NSW explained that as a result of the failure to increase the TSMIT, employers are able to employ temporary visa holders on a lower wage than Australian workers:

“This is a clear example of why temporary migration facilitates the stagnation of wages, with the salary expectations on employers lower for migrants than for local workers. The net result is that roles can be filled by migrants on a 2-4 year basis on a lower starting wage and can then be replaced by another who fits that category”.

The ACTU similarly argued that without indexing the TSMIT in accordance with the seasonally adjusted Wage Price Index, the ‘TSS visa can increasingly be used to employ temporary migrant workers in occupations that attract a far lower salary than that earned by the average Australian worker’.

The inquiry is 100% correct on this point. The Temporary Skilled Migration Income Threshold (TSMIT) has been set at the ridiculously low level of $53,900. This TSMIT was $5,900 (10%) below the median income of all Australians in August 2020 ($59,800), which includes unskilled workers (see table).

How much Australians earn

The median income in Australia was $59,800 in 2020.

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

The obvious policy solution

The simplest solution to give integrity to Australia’s skilled visa system is to apply a pay floor equivalent to the 75th percentile of weekly earnings ($90,480 p.a. in 2020 – see above table) to both temporary and permanent skilled visa holders.

Doing so would ensure that Australian businesses can only hire foreign workers to fill highly skilled professions, while also eliminating the need for labour market testing or maintaining bogus Skilled Occupation Lists.

These simple reforms would maximise the economic benefits from skilled migration. Skilled local workers would no longer be undercut. Complexity of the visa system would be reduced. And lifting of the quality bar would reduce the overall level of immigration – both directly via having fewer skilled visa holders arrive and indirectly by making it harder for other temporary migrants (e.g. foreign students) to transition to a permanent skilled visa.

Labor should adopt these reforms as policy for the upcoming federal election.

Unconventional Economist
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Comments

      • Probably by focusing on the majority of environmental damage being done that’s got nothing to do with Australia’s population.

      • It boggles my mind that you acknowledge the most incompetent and corrupt Government in living memory, but consider the lack of an explicitly anti-immigration stance to be a bigger problem.

        (Especially when their proposal is a return to the historical immigration model: “Until the 1990s, Australia’s immigration program was a settlement-based system, with permanent visas granted to new migrants on arrival.” […] “Up until 1996, family reunion visas made up around two-thirds of Australia’s permanent migration program.”)

  1. TailorTrashMEMBER

    Back when ah were a lad Australia exported ship loads of fresh and canned sunshine filled fruit to the grey post war cities of Britain. This was from a country of about 10 million and before the mass third world immigration of today .
    How did that Australia do it ?

    • Lord DudleyMEMBER

      Cheap and plentiful housing. Imported goods were quite expensive, but were generally not required for living. The local goods and services needed for a decent living standard (food, shelter, education, clothing) were cheap.

      Now that land has been deliberately made extremely expensive, it has driven up the cost base of everything, and an increasing number of industries cannot afford to pay the wages required to live on local (extremely expensive) land.

      The solution is to bring people in from elsewhere for those industries. Expensive land will be the death of Australia as a developed nation. The nation is on the same trajectory as Argentina in the early 20th century.

    • Jumping jack flash

      Making things is too difficult and very damaging to the environment. Best to let China do it so we can achieve our climate targets easier. (We’ll worry about China later.)

      We can replace that part of the economy with debt and debt growth. It works just as well and is much cleaner.

  2. Employers hiring “skilled” workers are alledgely doing so because there are not the skills in Australia. The employers should be charged a 15% tax on those employees which is directed towards a training fund to train local workers.

    If the employer is not prepared to train staff – tax them so locals can be trained regardless.

  3. Jumping jack flash

    What’s the point of that?

    Businesses should start trusting the economy and start paying their employees more anyway. The money will come back as increased purchases of goods and services.

    The real problem is that business owners, like everyone, need to maximise their debt eligibility by grabbing as much of the revenue as they possibly can as their own wages instead of paying it to their employees, and then toddle down to the bank with a handful of money and convert it to a massive wad of debt. This allows them to live a lifestyle commensurate with that of a “business owner”.

    This raises the additional issue of how are business owners going to be forced to pay their imported workers more if that money is already allocated to debt and debt service? Its not like we can lower interest rates much more.

    The problem starts and ends with debt and the absolute requirement, and insatiable need for debt that has been surreptitiously placed onto the economy and the economic cycle by the banks who are responsible for creating and selling their debt.

    In a properly functioning and traditional economy centred around the transformation of raw materials into useful finished goods to be sold for profit, debt isn’t required whatsoever. Debt should only ever be used to increase productive capacity. Anything else causes huge problems, which we find ourselves right in the middle of at this exact point in time.