Grattan Institute half right on skilled visas

The Grattan Institute’s Henry Sherrell penned an article in The AFR calling for Australia’s permanent skilled migration system to be reformed so that it focuses more on younger, higher paid entrants:

Public debate about migration policy in Australia tends to swirl around just one thing: picking a number… But how many migrants is just one part of our migration policy. Who gets to come is just as important as how many…

To whom we grant permanent visas matters enormously. Granting a permanent visa to a 25-year-old will have different consequences for the Australian community than granting permanent residence to a 60-year-old. For skilled visas, age and skills matter…

Australia should… target migrants who can fill high-wage jobs rather than specific occupations…

Rather than drawing up lists of occupations that would benefit from skilled migrants, the government should assess which migrants bring valuable skills simply by looking at the wages their jobs attract.

If Australia introduced a wage threshold of $80,000 – the equivalent of median annual full-time earnings – we could stop relying on those clunky and out-of-date occupation lists and instead focus on what matters: the wages employers are willing to pay to workers.

This would create a simple system that would benefit Australia by attracting skilled workers – and it would reduce uncertainty for employers and would-be permanent migrants.

Rethinking permanent skilled migration along these lines would enable Australia to give priority to younger and higher-skilled workers for whatever number of permanent skilled visas we choose to issue.

Migration policy cannot be reduced to a single number. We should stop pretending it can be.

I agree with the thrust of Sherrell’s arguments, although I believe it doesn’t go far enough.

Setting the permanent skilled salary threshold at $80,000 – the median annual full-time wage – is too low. These are supposed to be highly skilled workers. Therefore, they should be paid well above the population median, which is pulled down by unskilled workers.

My preference is to set the wage floor at the 75th percentile of median earnings, which was around $94,120 in August 2021, according to the ABS:

Australian median income

Setting the salary threshold at this level would ensure that Australian businesses only hire foreign workers to fill highly skilled professions, while also eliminating the need for labour market testing or maintaining bogus skilled occupation lists.

This salary threshold should also be extended to temporary skilled shortage (TSS) visas (formerly 457 visas). The Temporary Skilled Migration Income Threshold (TSMIT) is currently set at the ridiculously low level of $53,900, which is $8,500 (14%) below the median income of all Australians in August 2021 ($62,400), which includes unskilled workers (see above table).

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 TSMIT must, therefore, also be increased in line with permanent skilled migrants.

More broadly, the Grattan Institute has been a vocal defender of mass immigration, which contradicts its positions across a range of policy areas:

  • 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’s population growing by 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;
  • Grattan continually laments Australia’s lack of housing supply and poor planning, but contradictorily supports the mass immigration driving the supply ‘shortfall’; and
  • Grattan laments the lack of social housing, but supports the mass immigration driven population growth causing the shortfall.

To be consistent with its other policy goals, Grattan should argue to lower Australia’s immigration intake in tandem with boosting its quality.

Unconventional Economist

Comments

  1. cognitive dissonance? never quite understood the funding and hence the imperatives of this organisation. for instance are they sponsored by corporate Australia, and if so, is it really just another business council. don’t know so can’t comment.
    what is important to answer is why do we need migrants anyway. if we are first world country why do we need growth in people. I have never understood the imperative to add people to country where it has the second highest land prices in world and only thing we do is build houses, import people for education before turning them into citizens, dig up resources (and not pay the Australian people the economic rent for using our commodities), tourism. the good thing is I think we are going to crash and burn for long time (and I am talking like Italy and Greece etc where 2000 years ago they were top of the pile and now they are bankrupt). I am happy Australia going down drain. we deserve it

  2. The Temporary Skilled Migration Income Threshold (TSMIT)
    hmmm interesting, Is it the skills that are temporary? The migration that’s temporary? The Income that’s temporary, the threshold itself that’s temporary or the program that’s temporary?
    left themselves with lots of Political wiggle room there.

  3. In 2020-21, the great majority of the 160,000 “permanent” “migration” “outcomes” were already camped in Australia on other visas, but fewer than a quarter were principal applicants in the Skill Stream. In other words, politely fiddling with the wage thresholds won’t make that much difference to the overall quantity or quality of the migration deluge.

    Meanwhile, Grattan knows perfectly well that migration policy CAN be reduced to a single number – net migration. It’s being rebooted to a massive 235,000 and nothing else matters for Treasury GDP and the Morrison-Albanese Government.

  4. I suppose the issue of the threshold wage would be less important if there was a system in place that grants work visa to specific industries.
    Namely, industries that attract genuine foreign investment and generate exports could be given annual quotas of temporary work visas, and presumably they would have the capacity to pay higher wages (albeit not at every level, e.g. farm fruit pickers). Those that depend purely on local support (services like health care, aged care, some segments of hospitality…) shouldn’t have access to temporary work visas, full stop.
    A single rule (wage threshold) seems inappropriate across the whole range of industries.

    • The problem is that the bureaucrats in Canberra are not nimble enough to keep the list of targeted industries up to date. Hairdresser, pastry chef and hotel manager remained on the list for many years even though they were not scarce at all, while computer programmer stayed off the list for many years in the 1990’s when foreign computer programmers could have been a big boost to the Australian economy if they were allowed to come here. Setting a minimum wage allows the jobs to shift rapidly to the skills that are actually needed, without having to wait for the stodgy old pencil heads in Canberra to catch up.