Crispin Hull has demolished the notion that Australia’s seemingly chronic ‘skills shortage’ can be solved by ramping-up immigration. He argues that Australia has followed this approach for 20 years without success, and repeating the policy is the very “definition of insanity”:
So why then, for more than 20 years, have Australian Governments thought that the solution to “skills shortages” has been to ramp up immigration. It began in 1999 when the Howard Government more than doubled immigration from around 70,000 to 160,000 or 200,000 a year to meet “skills shortages”. And still, 23 years later, we l have “skills shortages”.
Has anyone stopped to consider that the higher immigration does not solve skills shortages, but in fact causes them.
Since 1998 we have brought in four million people and still we have “skills shortages”. Surely, if we continue doing the same thing, we will get the same result – more “skills shortages”.
But no doubt next month’s jobs summit will pour more of the same snake oil over the fire of population pressure.
Why can’t business be honest and tell us they just want more cheap labour to keep wages down in areas like retail and hospitality? Why can’t government be honest and tell us that to the extent we cannot find enough doctors, nurses and teachers, it is not because of a skills shortage but a pay and conditions shortage?
Both are slowly being caught out.
Last week, business inadvertently made a major admission. Australian Chamber of Commerce and Industry chief executive Andrew McKellar, in an address to the National Press Club, condemned any idea of raising the salary floor for temporary skilled visas from $53,000 a year. (And by the way, “temporary” invariably leads to “permanent”.)
But the $53,000 floor is only 25 per cent over the minimum wage. This is not bringing in skills. It is bringing in cheap labour.
Even a floor of $90,000 a year would be less than the average wage. Surely, truly highly skilled people would need more than the average wage to be attracted.
But we are not really attracting skills. We are attracting people who are semi-skilled at best, and whose skills can be taught to people already here fairly easily. But business does not want to do this because they would have to pay more.
The trouble is, once these semi-skilled people come in, they increase the demand for scarce highly skilled people to educate their children, engineer new infrastructure, and give them medical services.
McKellar said that lifting the floor to $90,000 would “kill the immigration program overnight”.
This is a damning admission. The average wage is $92,000. So, McKellar’s prediction suggests that the only people who would come to Australia under a skills program would be those earning less than the average wage. In short, dragging the average wage down, not lifting it up…
As for the Furphy that we need higher immigration because of an ageing population, remember that those people who came to Australia as immigration was ramped up in the late 1990s are now retired to approaching retirement age. That ramping has made the problem worse, not better.
The danger with next month’s jobs summit is that all the usual suspects will ply their usual self-interested snake-oil remedies which the Government will swallow to the detriment of the people who do not have a seat at the summit: those whose lives are made worse by high population – waiting for a medical appointment; sitting in congested traffic; cut out of housing; or with children in teacherless classes…
And bringing in more cheap labour will only make it worse.
Crispin Hull is one of the few honest journalists that Australia has left.
I comprehensively demolished the whole ‘immigration to solve skills shortages’ canard in last year’s briefing note for Sustainable Population Australia.
Like Crispin Hull explains, the skills shortage claim has persisted for decades despite Australia running one of the largest immigration programs in the world, most of which was purportedly ‘skilled’.
For example, a Senate Inquiry from 2002, put forward by the Howard Government on behalf of the business lobby, complained of ‘serious skill shortages and skill gaps’ in Australia and warned that unless we did something about it – i.e. import a lot of workers – Australia’s economy would not develop and would simply end up going backwards. Below are key extracts from this 2002 inquiry:
‘According to the Australian Chamber of Commerce and Industry (ACCI), the lack of suitably qualified staff has been a major concern for Australian industry over the past decade, and is one of the most significant barriers to investment…
‘The Australian Industry Group (AiG) … reports that several industry sectors, including manufacturing, are continuing to experience serious skill shortages which, unless effectively addressed, may have severe and lasting consequences for Australian enterprises…
‘The Business Council of Australia submission points to the risk of future broad-based skill shortages resulting from an ageing population’…
Despite decades of strong skilled migration, whereby literally millions of foreign workers were imported into Australia, industry and the federal government continue to make identical claims about chronic skills shortages.
How could this possibly be? How could Australia have such dramatic skills shortages after all these years? And why then is Australian wage growth tracking at close to its lowest level in history if skills shortages are so pervasive?
How can Australia simultaneously be suffering from a shortage of workers and poor wage growth?
Something doesn’t add up.
If Australian employers are given easier access to cheaper migrant workers following the Jobs & Skills Summit, then unemployment will rise, wage growth will remain low, and there will be little incentive for firms to automate, the capital per worker will decline, and ultimately the nation’s productivity will stagnate.
This is the predicament Australia found itself during the decade leading up to the pandemic, simultaneously suffering from both low wage growth and low productivity growth as immigration boomed. It is a recipe only for living standards to stride endlessly backwards.
Australia instead needs a skilled visa system that maximises the welfare of Australians by focusing on quality over quantity.
Such a visa system would lift workers’ incomes and purchasing power, in addition to boosting productivity by rewarding business investment in productivity gains.
The logical solution is to set a pay floor for all skilled temporary and permanent visa holders above the median full-time wage ($83,000 in 2021, according to the ABS), and index it to wage growth.
This simple reform alone would boost the economic benefits from skilled migration. Local workers would no longer be undercut. Complexity of the visa system would be reduced. And lifting the income threshold (quality bar) would reduce the overall level of immigration into Australia – 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.
Sadly, we all know that the federal government would never implement such a reform because it would drastically reduce the number of ‘skilled’ migrant workers arriving.
They will instead fold like a cheap deck of cards to the business lobby, whose sole goal is to reduce wage costs and boost their profits.
