Prof. Bill Mitchell: Immigration reboot will reverse jobs gains

Over the past two months, we have witnessed the Morrison Government reduce visa requirements on foreign workers to alleviate so-called skills shortages via:

1. Extending post-study work rights for international students;
2. Uncapping the number of hours that international students can work; and
3. Waving visa fees for ~175,000 arrivals international students and backpackers to encourage them to come to Australia and work.

These reforms form part of the Morrison Government’s plan to import at least 200,000 migrant workers to arrive in Australia by July 2022:

“We are working on a figure of 200,000, it may well be more than that but we will be actively looking to bring as many people into Australia as soon as we possibly can“ – Karen Andrews, 22 November 2021.

In his analysis of yesterday’s December labour market data, Bill Mitchell – Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE) at the University of Newcastle – warned that the Morrison Government’s mass immigration play will inevitably unwind the recent labour market gains enjoyed by Australians, in turn crushing wage growth:

Employment growth slowed but was still strong and unemployment and underemployment fell significantly. We are seeing the impact of flat population growth coming up against growing demand for workers and that is the reason the unemployment rate has fallen so quickly. It is good for workers but that won’t last long because the government is already trying to lure foreign workers to fill so-called labour shortages. This will stop the wages growth that would benefit domestic workers from occurring…

Given the variation in the labour force estimates, it is sometimes useful to examine the Employment-to-Population ratio (%) because the underlying population estimates (denominator) are less cyclical and subject to variation than the labour force estimates. This is an alternative measure of the robustness of activity to the unemployment rate, which is sensitive to those labour force swings.

The following graph shows the Employment-to-Population ratio…

There are two forces working here – the denominator (population) is clearly providing favourable pressures due to the slower population growth as a result of the lack of immigration arising from the external border closures.

This is forcing employers to search harder for workers already in Australia rather than discriminate against the unemployed.

The numerator (employment) is clearly stronger as the restrictions ease…

The following graph shows Australia’s working age population (Over 15 year olds) from January 2015 to December 2021.

With the external border still largely closed, immigration has shrunk to virtually zero and the impact is very clear.

This flattening out has forced employers to work harder to get workers and is one of the reasons unemployment is falling quite quickly, given the circumstances.

The Federal government is now working against the workers by offering enticements for people to come on foreign visas to increase the labour supply under the guise of worker shortages…

My overall assessment is:

1. The cessation of most Covid restrictions has allowed the labour market to recover somewhat.

2. There are still 1.5 million Australian workers without work in one way or another (officially unemployed or underemployed) and several hundred thousand who have left the active labour force due to lack of employment opportunities.

3. We are seeing the impact of flat population growth coming up against growing demand for workers and that is the reason the unemployment rate has fallen so quickly. It is good for workers but that won’t last long because the government is already trying to lure foreign workers to fill so-called labour shortages…

None of Professor Mitchell’s findings should come as a surprise. The Australian Treasury’s own research showed that the overwhelming majority of Australia’s jobs growth went to migrants between the 2011 and 2016 Census’, thus keeping the unemployment rate elevated:

Recent migrants accounted for two-thirds (64.5 per cent) of the approximately 850,000 net jobs created in the past five years. For full-time employment, the impact is even more pronounced, with recent migrants accounting for 72.4 per cent of new jobs created.

Migrants took most jobs between 2011 and 2016.

If pre-COVID levels of migration are restored, an extra 180,000-plus workers would join the Australian labour market every year, putting upward pressure on unemployment and placing downward pressure on wages.

Australians experienced a decade-plus of crushed wages and living standards on the back of extreme immigration. This failed policy must not be allowed to return.

The Morrison Government’s recent immigration reforms are the equivalent of Work Choices 2.0 – designed specifically to neuter Australian workers and fatten select company profits. So why is Labor remaining silent on this issue?