Young Aussie workers pay the price of mass immigration

The Grattan Institute is one of the nation’s biggest supporters of ‘Big Australia’ immigration, repeatedly spruiking the benefits of a strong migration program while ignoring the costs.

With this background in mind, it was unfortunate yesterday to read the CEO of the Grattan Institute, Danielle Wood, lament that younger Australian workers are struggling for job opportunities, suffering from poor wage growth, and cannot afford housing:

“While weak wages growth has bitten all age groups, for younger people it has been particularly pronounced,” Grattan Institute chief executive Danielle Wood said.

“Workers aged 20-34 experienced close to zero growth in real wage rates from 2008 to 2018”…

Ms Wood said young people now spend less on discretionary items such as clothes, alcohol and recreation than the same age group three decades ago, but spent more on essentials such as housing, power, food, medical care and transport.

She said the overall effect of flatlining wages and rising underemployment was that under-35s in 2018 had, on average, lower incomes than those of the same age a decade earlier.

“The Australian Productivity Commission has found that people joining the workforce in the past decade have graduated into less attractive occupations on average, for a given level of education, than previous generations.

“And with young university graduates moving into lower-level roles, other young people without the same qualifications are pushed even further down the ladder – in jobs more likely to be characterised by part-time and casual work.

“This has been accompanied by a big rise in underemployment – workers not getting all the hours they want – particularly among younger age groups.”

Ms Wood said the housing price boom was in no small way responsible for the growing schism between the wealthy older generations and the rest…

“The fact remains that it is now only the richest ones, or the ones with the richest parents, that can afford to [own a home],” Ms Wood said.

I agree entirely. But what is to be done about it?

Recent research by Melbourne University economists Jeff Borland and Michael Coelli explicitly acknowledged that Australia’s high immigration intake, which rocketed after 2005, has driven the increased competition for jobs and undermined young jobseekers:

Our main contention is that worsening employment outcomes for the young in the decade following the GFC were caused primarily by increases in labour supply which have meant extra competition for jobs sought by the young, and resulted in them being ‘crowded out’ from employment…

For the young who are in full‐time education, the main source of increased labour market competition in the decade after the GFC was from within their own age group — from an increased number of young international students and holiday travellers seeking part‐time work.

Figure 5a shows the proportionate growth in labour force participants aged 15–24 years who are Australian‐born and immigrants. Between 2004 and 2019 the annual rates of growth in labour force participants in these groups were respectively 0.6 and 3.9 per cent. Over the same period, immigrants accounted for 52.6 per cent of growth in the labour force aged 15–24 years, despite being only 12.6 per cent of that labour force in 2004…

What is also critical is that the occupational composition of employment of recent young immigrants (aged 15–24 years who arrived in the last 2 years) is similar to full‐time students of the same age (Australian‐born and immigrants who had not arrived in the past 2 years). Young newly arrived immigrants are therefore most likely to be seeking jobs in the same small set of occupations into which it has been shown that young persons in full‐time education are largely segmented. This suggests that the increase in labour supply by young immigrants post‐GFC substantially increased competition for employment in those occupations…

For young persons who are not attending education full‐time, increased labour market competition has come from relatively strong and steady growth in aggregate labour supply…

In the years prior to the GFC the increase in labour supply was outpaced by employment growth. However, since the GFC that pattern has reversed. This has meant that the rate of labour underutilisation — the proportion of available hours of labour supply that are not being utilised in employment (reflected in unemployment or under‐employment) — has increased.

The increasing gap between labour supply and employment following the GFC has had a disproportionate negative impact on employment outcomes for the young…

In making forecasts of the labour market outlook for the young, it is also necessary to consider what may happen to labour supply. In the years prior to the onset of COVID‐19 there had been strong growth in aggregate labour supply; and relatively high rates of growth in the population aged 15–24 years had been projected for the 2020s. The impact of COVID‐19, of course, has been to substantially reduce that projected growth.

Australia’s net overseas migration (NOM) jumped from an average of 90,500 between 1991 and 2004 to an average of 219,000 between 2005 and 2019 – representing an annual average increase in immigration of 140%:

Australia's net overseas migration

Such strong growth not only suppressed the wages of younger Australians in particular, but also helped to inflate the cost of housing, especially across Sydney and Melbourne.

Yet Grattan explicitly supports rebooting mass immigration post-COVID, as projected by the Intergenerational Report:

Immigration projection

Back to a ‘Big Australia’.

We know the result in advance. Australia’s youth will face reduced job opportunities and wages, while also being forced to live in smaller, more expensive housing.

The immigration issue highlights the contradictions of the Grattan institute across a number of disciplines:

  • Grattan laments the poor wages and employment opportunities provided to Australia’s youth, but contradictorily supports flooding the labour market with migrants to compete for jobs;
  • Grattan laments Australia’s poor progress at meeting its ‘net zero’ emisions reduction goals, but contradictorily supports Australia growing its population by a projected 13.1 million (~50%) over the next 40 years, which will necessarily drive up emissions and wreck the natural environment;
  • Grattan continually bemoans Australia’s infrastructure waste, but ignores the extreme immigration driving the demand for expensive new infrastructure; and
  • Grattan continually laments Australia’s lack of housing supply and poor planning, but contradictorily supports the mass immigration driving the problems.

In short, the Grattan Institute suffers from a chronic case of cognitive dissonance and needs to start examining issues as a whole, rather than in silos.

Unconventional Economist
Latest posts by Unconventional Economist (see all)

Comments

  1. Ably supported by CEO of the “Growth Areas Alliance” (The Mandarin, this week) who wants a “Minister for Growth Areas”.

    Because, how can you meet the infrastructure needs of the outer urban areas, unless you take the critical first step of flooding them with mass migration again? If Albanese takes over, he too will be a big “congestion buster”.

  2. Totes BeWokeMEMBER

    When you’ve got The Grattan Institute, treasury, consultants like KPMG, MSM, Our ABC, LNP, Labor and Greens all saying mass immigration is awesome. It must be awesome.

    After years of woke teaching, even our kids being led to the slaughter think it’s awesome, literally meaning we’ve got a couple of decades to save them from themselves.

    The elites cabal of LNP and Labor must be dismantled to solve this problem.

    Anyone STILL thinking, all we need do is vote LNP out, and that Labor are a solution for Australia’s future is frankly an idiot.

  3. Muttafukaburrasaurus.MEMBER

    Perhaps tighten up citizenship drastically, and then wait for the lightbulb moment ?
    Otherwise Australia will become a nation of family reunion shirkers, leeching off medicare and pensions until they collapse.
    We are globally in the process of equalization, and the trajectory is down for the Australian standard of living.

  4. Ghost of Stewie Griffin

    When you run your nation as an economic zone instead of a society, it is inevitable that it will end up consuming itself.

  5. Are you suggesting that Engineering graduates obtain cutting edge knowledge from their university course?

    p.s. Reply to post by DodgyAs that weirdly disappeared.

    • Yeah long post that I edited just to correct a couple of mistakes and insert a paragraph suddenly and it’s considered Spam. like wtf
      anyway post is lost is, tried to repost but that doesn’t work and I don’t have the time to retype.
      as for my suggestion
      1) if you have seriously good technical skills than get the F out of here, no one in Australia respects truly differentiated technical skills.
      If you decide to stay in Australia, than get a job at the universities or somewhere like CSIRO DSTO etc
      I’ll be keeping an eye on this Goggle research thingy which was announced the other day, but I’m not all that hopeful

    • Original post maybe it will work ….

      To be honest I’d have absolutely no problem with increased wages if these increases were like the tide and “lifted all boats”. But here’s the thing increased wages (especially increases in the minimum wage) do not behave like the tide, instead of all boats being lifted the increases at the bottom result in comparative wage compression in the middle. If you look at the pay for highly skilled Engineering graduates in Australia you’ll discover that it’s really not much better than the pay for an equivalent Tradie, in many cases it’s the Tradie that wins out, especially if you take into account the many years of forgone wages necessary to attain an advanced engineering degree.
      What motivation is there to excel if this excellence goes unrewarded?
      Many young Aussie Engineering graduates struggle with this reality and even question their own sanity until one day their eyes are opened to a world of opportunity, outside our borders. It’s such a well worn path. for Aussie Stem graduates, that it’s cliche. When you tell your friends that you’re leaving for a job in the US or Germany or these days even China, they all yawn and wonder why it took you so long to see the light.
      I might be just plain daft, but most days I ask myself, why can’t Australia retain its skilled Stem Graduates?
      Why can’t we build strong and profitable engineering companies?
      Why can’t our Stem graduates profit from their expertise while remaining in Australia?
      The conclusion that I keep coming to is that it all comes down to differential advantage, that’s where Australia fails to deliver. Australia fails our Stem graduates because we can’t pay them what they’re worth. More precisely we’re unwilling to pay them what they’re worth.
      In Australia we have the stupidity that Masters level (and even Phd) Electrical Engineering graduates are encouraged to get their Electrician’s certificate. When Engineers go down this road there’s no turning back, they are paid more to work as an electrician than they’ll earn as an Engineer (in Australia) but here’s the thing, these engineers are not learning, they’re not perfecting their professional knowledge and within 5 years their knowledge is no longer cutting edge and their better off remaining in the Tradie world.
      I can’t escape the feeling that differential wage compression (middle vs bottom) is somehow the root cause of this problem.
      Skilled middle income wage compression a problem that could be easily addressed with informed “Industrial Policy” but in today’s Australia those words are without doubt, the two dirtiest words in our language.
      I’m not sure where to from here, but it is laughable to see “Skilled Migration” touted when it’s our most skilled Aussies that are forced by the system to leave Australia. So who are these Skilled Migrants that replace them?…oh they’re not really all that skilled, you say.
      Who could have known it ….

      • Just to be clear the root problem is our belief in “laissez-faire” economics coupled with some sort of Adam Smith style “Invisible hand”
        Neither concept can work properly in a rich country like Australia, least way not until we become a poor country.
        Other countries like Switzerland, Norway and Germany understand this conundrum and they understand that the solution requires active informed intervention ( Government support of industry. aka “Industrial Policy”…opps their I go swearing again

        • ( Government support of industry. aka “Industrial Policy”…opps their I go swearing again

          Sorry you seem to be stuttering. Did you say “socialism” ? 🙂

          • Yeah I’ve always been a bit of a closet commie (sorry socialist)
            just not a national socialist but then again they were also big advocates of “Industrial Policy”
            So what do you call someone that’s half way between a Commie and a Fascist?

        • Can’t compete with the industry policies of other countries. We have to match them and then some.

        • kierans777MEMBER

          I’m currently in the “mixed market economy” camp, which ties in well with ideas like “doughnut economics”. Which of you’re of the Fox News type is socialism.

          Everytime I hear the RWNJ complain about “socialism” in this country I wonder if Marx and others will rise up in disgust. Even the Greens are center-left.

      • The cause of this is actually eluded to by this article. It is easy to migrate knowledge workers, much harder to migrate specialized “physical” workers. Doesn’t matter how inefficient, you need that local electrican to wire that house here. You can’t import a house built elsewhere, and importing labor to do it here has a variety of blockers/import tariff like protections that make that hard. Has nothing to do with the knowledge or intelligence required; its simple supply and demand. Tradie wages, by virtue of the apprenticeship system, licensing and other “economic protections” both natural and man-made have protected their “real” salaries over many decades. They are not exposed to migration pressures unlike other industries.

        i.e. Tradies used to be middle class when middle class got you a house and a comfortable lifestyle. Their position hasn’t changed IMO – they are still living the good life of the pre 2000’s era before migration ramped up. Its just that migration has depressed “real wages” for long enough in other industries without those economic protections that the lifestyle of old seems “well paid” now in comparison.

        There are a few professions in Australia that limit entrants via long training programs that require huge investment to finish, and it is no coincidence that they are the ones that remain well paid.

  6. One thinks MB is misinterpreting the research abstract and title? The research presented is tenuous because it relies upon making conclusions or ‘guesstimates’ from headline data; does not comply with statistics 101, let alone academic integrity.

    However, while the article is not available i.e. payment needed, MB misses that the title has a question mark Is It ‘‘Dog Days’ for the Young in the Australian Labour Market?’, suggesting not much certainty, and may also ignore the same time period was peak baby boomer in the work force or working age, which has now passed….. but let’s blame undefined ‘immigrants’ anyway?