AFR op-ed: China FTA disputes are about migration and labour, not trade

The AFR published an op-ed of mine on the China-Australia FTA. Republished here:

“China FTA disputes are about migration and labour, not trade”

Political debate on the China-Australia Free Trade Agreement is not centred on trade but on labour and migration. For Australia, this is the first instance in what will become a staple of how regional and bilateral economic negotiations occur in the 21st century.

In a world where most trade barriers have either disappeared or are disappearing, labour mobility and intellectual property rights will be the fault lines where countries can either cooperate or shirk away from each other.

Recognition of this is critical. The economic forces shaping the movement of people are not the same as those for goods and services. Comparative advantage drives cooperation on trade, where even the poorest country can be incorporated into a global market and derive economic benefits.

Migration and labour mobility is different. There is no comparative advantage for countries in labour. Migrants are independent actors with their own economic, security and cultural incentives. Throw this into the relationship between origin and destination countries and you have a much more complex environment than for goods and services or capital.

Despite this complexity, getting the policy mix right has the potential to unlock unrivalled economic gain. Michael Clemens from the Centre for Global Development has shown even minor reductions in barriers to migration from developing countries are equal to the removal of all remaining barriers to goods, services and capital combined. This is good for migrants, origin and destination countries.

The obvious challenge is how labour markets compare to regular markets. Incomes and working conditions are disparate across countries and regions. This creates great tension in rich countries. A new migrant in Australia might be willing to work for $10 an hour, perhaps more than double the income available in her home country for the same job. A new migrant might not be aware of what a union is. At the same time, migration brings real benefits to Australians.

As is playing out in Donald Trump’s push for the Presidency and the far-right in Europe, nationalism on immigration creates the conditions for autarky. Closing the borders, capping migration numbers and squeezing the rights of migrants already in societies. In OECD countries, this will stymie economies and contribute to demographic nightmares.

There are green shoots of this debate on the China-Australia Free Trade Agreement. While the ALP has a strong tradition on trade policy, this isn’t traditional trade policy. For a political party with a labour base, these are not the same as questions from the 1980s. They are more difficult. On the other hand, the Prime Minister’s reference to Billy Hughes and the ‘ghosts of White Australia’ was a clear overreach given the Agreement is about mobility, not race. The union campaign is not characterised by xenophobia but self-interest.

Unlike recent history, no-one in Canberra is against Asian migration. China is firmly entrenched in the top three countries of new migrants arriving in Australia. This will not change anytime soon.

The debate is about how employers use labour in an increasingly regional and global labour market. As much as we may wish it, this cannot be divorced from how countries conduct bilateral and regional economic relationships in 2015.

For Australia, this means a policy debate about the 457 visa program. Opponents of the China-Australia Free Trade Agreement focus on labour market testing, assessing skills and contractual labour agreements. These are not new questions. What is new is having the debate through a proxy like a free trade agreement.

This campaign against the agreement risks a nasty aftertaste. The agreement will not lead to hundreds of thousands of Chinese citizens descending on Sydney – a complete falsehood but one easily imagined if you knew little about the Migration Act. It is particularly important to note that labour market testing is wholly ineffective at getting Australians into employment. There is bipartisan agreement on “Australians first”. Instead of arguing about Facebook job ads, a more effective policy solution is to increase the price of foreign labour through a fee. This creates an incentive to hire Australians and removes administrative paper work.

This is why the government would be unwise to rule out marginal changes within enabling legislation in search of a parliamentary majority to pass the China-Australia Free Trade Agreement. A small number of changes to the 457 visa program – a commitment to index the salary threshold, a higher fee levied on employers to boost the competitiveness of Australians and a commitment to more compliance officials – would quickly see a parliamentary majority emerge.

Australia’s relationship with China is too important to leave to bipartisan political brinkmanship. A shift towards policy considerations would see the agreement passed, along with enabling legislation to better support domestic policy goals.

Labour market testing doesn’t work. Increase prices instead.

If you have been following the debate on the China-Australia Free Trade Agreement, you might have noticed the phrase labour market testing. This is bureaucracy-speak for advertising jobs.

Should employers have to advertise jobs before they hire foreign workers? This question has become the be all and end all in the political debate over skilled migrants.

Often overlooked, a bipartisan consensus exists that Australians should have first dibs on jobs in Australia. This should be the end of the story on whether to advertise jobs first. Yet as with much public policy, there is something amiss here. There is no evidence to suggest forcing employers to advertise jobs has any effect at at all on Australian employment.

A thought experiment can help here. Imagine all employers are either good employers or bad employers.

Good employers will comply with all the rules of hiring skilled migrants. More importantly, they will undertake due diligence before they decide to hire a skilled migrant. They will seek out employment from the local labour market if available. This does not occur because they are altruistic but because it is a good business decision. If a business complies with the law, hiring Australians is cheaper than hiring migrants. For these good employers, labour market testing is a hurdle to pass through when there is no locally available option. This points to the superfluous forcing employers to prove they have advertised jobs.

Bad employers are different. Bad employers will not comply with the rules of hiring skilled migrants. They will underpay them and force extra hours on them. They will seek out employment on the cheapest terms possible, sometimes within the law but also outside the law. They will use skilled migrants as an alternative source of labour to Australians to lower their wage bill. For these employers, mandatory job advertising is useless as they have no intention in using Australians in the first place. They can put up 10 Facebook ads and 20 Seek ads and ignore them. In fact, they are happy to do so as it provides the veneer of respectability, allowing them to go about exploiting skilled migrants.

This is the worst part of labour market testing: an utterly false sense of achievement at meeting the broader goal of getting Australians into the workforce.

Some people say you can get labour market testing to work if you enforce it more effectively. This is belies the fact public servants are not very good at figuring out what is going on inside businesses. Thankfully, there is an easier alternative.

Employers respond to prices above all else. By making skilled migrants more expensive, the government would create a better incentive to hire Australians. Instead of creating mountains of paper and internal checks, higher fees would force employers to consider a broader set of options in hiring practices.

This was the original justification to pay equal wages for skilled migrants. If wages are the same between Australians and skilled migrants, all else being equal, the added costs of participation (administration, recruitment etc) in the 457 visa program would see utility maximising firms choose local workers first. However this has broken down in recent years as more skilled migrants are already in Australia, eliminating previously high recruitment costs. Higher fees will ensure Australian’s are ‘cheaper’ without touching wage structures. Coupled with compliance activities, this is a more effective method to improve the treatment of skilled migrants while protecting existing wages and conditions.

The vast majority of businesses do not shirk their responsibilities with regard to migration. They might feel unjustly burdened by a fee increase. However the 457 visa program is too important to be left to its own devices and overtaken by crooks and shonks. There need to be regulated methods at weeding out those who seek profit at the expense of migrants and Australians. A fee increase is a price worth paying for long-term acceptance of the importance of skilled migration and insurance against knee-jerk policy reactions.

I’ve never quite understood why those opposed to the 457 visa program don’t seek to increase the cost structure and instead advocate for a mess of legislative changes. The revenue raised from higher fees would; deter bad employers from using the program, increase the funding available to compliance operations and provide support for things like English language for spouses of skilled migrants. Each of these outcomes are positive for migration policy.



What difference is the Chinese-Australia Free Trade Agreement going to make to migration?

I’ve been pretty unimpressed with the coverage of the Chinese-Australia Free Trade Agreement. A central question has been missing from an avalanche of think-pieces, FactChecks and hot-takes.

What difference will the agreement make if it is passed compared to the status quo we are living in now?

This is my best attempt to answer this question.

  • The removal of labour market testing for Chinese citizens

There are three types of occupations in the 457 visa program: Skill Level 1, Skill Level 2 and Skill Level 3. The first two categories do not attract labour market testing. An employer can hire an overseas worker without advertising the job, regardless of the country of origin. Only Skill Level 3 occupations require labour market testing. Using visa grant data from the Department, there were 6207 Skill Level 3 visas granted from July 2014 to March 2015, from a total of 38,134 visas in the program. Using current trends, this means 84 per cent of the 457 visa program is not subject to advertising jobs (source: visa grants pivot table).

In 2014-15 to March 2015, there were 2569 primary 457 visas granted to Chinese citizens. Of these, 269 were classified as “Skill Level 3”, those subject to labour market testing. The Agreement will remove this requirement. These 269 visas are equal to 0.7 per cent of the 457 visa program from July 2014 to March 2015. It may be the case that removing the requirement to labour market testing will induce more migration. However I find this unlikely as wages and economic growth have traditionally been a much greater influence on 457 visa trends. Further, there was no labour market testing from 2001 to 2013.

My best guess is that based on current trends, at most an additional one per cent of the 457 visa program will be exempt from labour market testing if the Agreement passes.

The Agreement also means Australia cannot cap the number of standard 457 visas granted to Chinese citizens. This is exactly as today, given the entire 457 visa program is uncapped and has been since its inception in 1996. This is a common clause found in past FTAs. The highest number of 457 visas granted to Chinese citizens in any financial year was 2012-13 at 3727, equal to 5.4 per cent of visas that year.

  • The removal of mandatory skills assessment for Chinese citizens.

Mandatory skills assessment is where a government-approved Registered Training Organisation supervises an exam to certify a visa applicant has the skills relevant for the nominated occupation.

This only applies to citizens from the following countries: Brazil, China (including Hong Kong and Macau), Fiji, India, Papua New Guinea, Philippines, South Africa, Thailand, Vietnam, Zimbabwe.

Further, the visa applicant must be nominated in one of the following 28 occupations: Automotive Electrician [321111]*, Fitter-Welder [323213], Baker [351111], Joiner [331213]*, Cabinetmaker [394111]*, Metal Fabricator [322311]*, Carpenter [331212]*, Metal Machinist (First Class) [323214]*, Carpenter and Joiner [331211], Metal Fitters and Machinists (not elsewhere classified) [323299], Chef [351311], Motor Mechanic (General) [321211]*, Cook [351411], Panelbeater [324111], Diesel Motor Mechanic [321212]*, Pastrycook [351112], Driller [712211], Pressure Welder [322312], Electrical Linesworker [342211], Sheetmetal Trades Worker [322211], Electrician (General) [341111]*, Technical Cable Jointer [342212], Electrician (Special Class) [341112]*, Toolmaker [323412], Fitter (General) [323211], Vehicle Painter [324311], Fitter and Turner [323212], Welder (First Class) [322313].

(Source: Trades Recognition Australia)

The Chinese-Australia Free Trade Agreement will remove the mandatory skills assessment for 10 of these occupations (those starred above). The total number of Chinese visa holders nominated in these 10 occupations from July 2014 to March 2015? Fifteen. 15.

For all countries subject to mandatory skills assessment, not just Chinese citizens, a total of 353 visas have been granted  in these 10 occupations. Therefore on current trends, the Agreement will remove mandatory skills assessments for 4.2 per cent of those who are currently subject to them for these 10 occupations.

However, and importantly, a total of 1184 visas have been granted in these 10 occupations for the program as a whole. This means over 70 per cent of 457 visas granted in these 10 occupations are not subject to mandatory skills assessments. If one were to retroactively apply the Agreement for 2014-15, a total of 15 Chinese citizens would have joined them.

I should note also that while the mandatory skills assessment has been removed from the visa process, all visa holders must comply with standard licensing and registration requirements. The visa process also requires they present their qualifications and experience. Visa processing officers may request a mandatory skills assessment if they believe they do not believe the bona fides of a visa application.

  • The introduction of Investor Facilitation Agreements (IFA)

Unlike the two changes above, this change cannot be tested against current trends. An IFA is a framework to facilitate individual contracts between employers and governments that governs labour mobility outside of the standard 457 visa program.

These contracts already exist. The Minister for Immigration has broad powers under the Migration Act to approve these contracts. They are available to any employer in the country regardless of industry or investment origin. Historically, the time taken to conclude a contract negotiation is between 6 and 12 months.

The two main purposes of the contracts are to slightly lower the English language requirement for visa holders and to allow the sponsorship of Skill Level 4 occupations, lower skilled occupations not allowed under the standard 457 visa program. These contracts typically cover regional and rural areas where attracting labour is more difficult.

Unfortunately, I cannot find the number of labour agreements currently in operation. This goes to the long-standing conservatism inherent in the Department of Immigration around transparency. However at Senate Estimates in February 2014, the Department of Immigration and Border Protection noted 51 had been signed in the previous 6 months.

I believe the IFA under the Chinese-Australia Free Trade Agreement is an attempt to streamline negotiations for these contracts, to reduce the length of time for approval. How many new migrants should be expected through this process?

The Roy Hill project is a good historical example. The Roy Hill Enterprise Migration Agreement covered 1715 positions for a $9.5bn project with a total workforce of 8000. However the threshold to enter into an IFA is much lower. A project must be valued at $150m, not $2bn.

Using the same ratio as Roy Hill, a construction project with 150 workers worth $150m may see about 30 positions covered by an IFA. Applications for these contracts will require detailed estimates of workforce and local training. The majority of these workforces will come from people already in Australia. Negotiations will clearly stipulate the number and type of occupations. The contracts will attract serious attention in Senate Estimates, creating pressure to ensure any agreement is limited in its scope.

I estimate between 10-15 of these agreements will be signed in the 12 months after the Chinese-Australia Free Trade Agreement is finalised. The government will want to show the process works but will not want this to be subject to an ongoing campaign. If 50 agreements signed between September 2013 and February 2014 remains the trend, then 10-15 Chinese IFAs would be a 10-15 per cent of the total number of agreements signed.

If an average of 30 migrants per contract is in the ballpark, this will see 300-450 workers who would otherwise have not entered Australia. This would be equal to about 0.8 per cent of the expected total number of 457 visa grants for that period.

There are substantial unknowns here. These unknowns are what is driving the campaign against the Chinese-Australia Free Trade Agreement. For example, if demand for these contracts exceeds what is expected, this signals the threshold investment level is likely too low. If the number of workers per contract is significantly higher than existing contracts, this signals something is amiss.

More FactChecking: The ABC on ChAFTA

This ABC FactCheck article on the Chinese-Australia Free Trade Agreement received a lot of attention this week.

Fact check: Does the China Free Trade Agreement threaten Australian jobs?

The claim: Unions say the China-Australia Free Trade Agreement “allows Chinese companies to bring in their own workforce for projects over $150 million and removes the requirement that jobs be offered to local workers first.

The verdict: The agreement allows the Immigration Department to decide that jobs should be offered to local workers before it issues visas to overseas workers, but it does not require this to happen. The ACTU’s claim checks out.

The claim addresses two distinct issues in the Chinese-Australia Free Trade Agreement. The verdict conflates these issues so much so any reader will walk away with an opinion far from “fact”.

Chapter 10 of the Chinese-Australia Free Trade Agreement has removed the requirement for jobs to be offered to local workers under the standard rules of the 457 visa program. If the agreement were retrofitted to the 457 visa program, it would affect about one per cent of all visa holders in Australia at the moment. One per cent.

For some reason the government does not want to tell anyone this. Labour market testing – the process of advertising jobs – only applies to ~30 per cent of the standard 457 visa program. Everyone knows labour market testing is ineffective at pulling Australians into the labour market. This is the reason why seven in ten 457 visas are not subject to mandatory labour market testing.

The most effective way to promote Australians in the labour market is to create a greater price incentive. A 457 visa should cost the sponsoring business more money. This will make them consider alternatives, such as unemployed Australian workers. Any money raised can help support settlement services like English language and/or monitoring and compliance for the program.

The side agreement for projects over $150m is wholly distinct from the standard rules of the 457 visa program.

The Memorandum of Understanding concerns individual contracts signed between a company and the government. There is no legislation that outlines labour market testing must occur in these contracts. Any claim this assumes this already occurs is false. The ACTU claim cannot “check out” because it is based on a false assumption that a requirement has been removed. The only requirement that has been removed is mentioned above, in relation to the standard rules of the 457 visa program.

Further, the side agreement does not cover unskilled occupations, meaning these jobs must be filled by Australian workers.

At best, this FactCheck is ignorant of critical context. At worst, disingenuous.

You get what you deserve: Big business and immigration policy

One day in my year 12 Economics class, Mr Darling walked in with a small stack of A4 pages. There was a quote plastered in bold type covering the entire page, “You get what you deserve”, a backpage headline pulled straight from the Herald Sun. Shane Crawford, a high profile Australian Rules Football player for Hawthorn, had just been suspended and he apparently muttered the words to the media on his way out of the Tribunal.

Mr Darling was a decent teacher but motivation was not in his wheelhouse. As he handed each of us a printout, he said we would get the score we deserved at the end of the year. For some unknown reason, I stuck that A4 page on the inside cover of my exercise book and this moment from my otherwise unremarkable year 12 is etched in my memory. Economics turned out to be my best subject but as they say, correlation doesn’t equal causation.

From time to time, I think about “you get what you deserve”. Mr Darling’s words did not resonate with me. As I grow older, I see how manifestly untrue “you get what you deserve” is. Many people in life don’t get what they deserve. Most deserve better. But very occasionally, this saying neatly sums up a complex situation.

I’ve worked in and around migration policy for the best part of eight years and I’m increasingly becoming convinced the big business community in Australia doesn’t have the will or the ability to prosecute a public argument on migration. Almost meekly, they sit by the sidelines and watch as others shape discourse and policy.

They get what they deserve.

Perhaps this is unjust as there are individuals from the big end of town who do their best, both for themselves and their companies as well as the public interest. Yet as a community, big business are failing on migration policy at the very time they need to be leading from the front. Some might disagree but an engaged, outward looking business community is one of the foundations for a successful migration policy framework in the 21st century.

These thoughts were prompted by events last week. The CFMEU ran an extremely effective ad during Masterchef on Sunday night skewering the Chinese-Australia Free Trade Agreement. This was a loud public bang in an until then slow burning campaign that has caught the attention of the broader union movement, the Opposition and crossbenchers, and increasingly, the general public. When ChAFTA was signed, I thought there would be a bit of bluster on the migration provisions. This would blow over and everything would get signed.

I don’t believe this anymore. A clear ‘anti-migration’ perception of the agreement has formed outside of Canberra. The CFMEU and ETU have been on top of their game, creating a campaign that has cut through technical jargon and politics. The ALP has been forced to listen and advocate, a difficult position with Free Trade Agreements as they are nearly impossible to change or retrofit once agreed.

I believe the union campaign is without substance. There are several minor matters in ChAFTA that should be further explained. But I do not think the union campaign is xenophobic or motivated by race. A more likely explanation is one found at the centre of many issue-based campaigns, a combination of self-interest and apprehension of government intentions. Anyone calling the campaign racist has not done the hard yards and sought to explain the agreement to a now-skeptical public. Free trade has been grudgingly accepted by the public for decades and advocates need to continue to demonstrate why these agreements are welfare enhancing.

To recap for those who have wisely avoided reading the technical documents, there are three policy changes central to the union campaign:

  • The removal of advertising jobs to Australians before applying for a 457 visa for Chinese citizens:
    • ChAFTA will remove job advertising for about one percent of the 457 visa program. In general, advertising jobs is not an effective method to get Australians, especially those already unemployment, into the labour market. Employers respond to prices more than regulation. This points to increasing the fees of the 457 visa as a more effective method to provide Australians preferential access in the labour market. In my opinion, this is a small, positive change.
  • The removal of ‘in-person’ skill assessments for Chinese citizens:
    • Under ChAFTA, Chinese citizens are subject to the same provisions as Canadian, British, German and over 90 per cent of all other visa applicants. The removal of in-person skills assessment does not change the fact any Chinese 457 visa holder will still require the relevant occupational licensing and a paper-based skills assessment before they get their visa. Anyone in the world can get a dodgy qualification, you don’t need to be Chinese.
  • The introduction of “Investor Facilitation Agreements”:
    • These agreements are based on current legislation and ministerial powers. Immigration Minister Peter Dutton could sign an IFA tomorrow. They have been rolled up into the ChAFTA as a tactic to push negotiations over the line. In reality, they are completely separate. But the government cannot use this to negotiate with the Chinese government on one hand and then expect the public to ignore it completely. There should definitely be more transparency around the process. A commitment to publicly releasing all agreed IFAs would go a long way to demonstrate how negative effects on Australian workers are illusory.

The union campaign has excelled at highlighting a specific, negative interpretation of these three policy issues. But to my mind, there is a commonsense rebuttal available for each concern.

I’m yet to see such rebuttal from the big business community. Now the best they could manage was tin-eared and late to the party. To date the biggest shot I’ve seen fired is a front page story in the Australian, led by Rio Tinto’s Andrew Harding saying the union campaign “feels xenophobic”. Twiggy Forrest and Kerry Stokes also lent support.

Perhaps broader business support is there behind the scenes. But the time for helpful phone calls ended the day the text of the agreement was published. For weeks now, the policy sales job has been missing in action. Andrew Robb has been left high and dry to do the heavy lifting but with the government already in the doldrums, it was hardly an easy task. The entrance of Harding and Co into the public debate can be best described as reactive. Having let the unions set the boundaries of the debate, there isn’t much ability to pivot back to the presumably positive changes in ChAFTA, such as the removal of quotas and tariff barriers.

There is no reason the business community couldn’t have rolled out a focused campaign to support a bilateral Free Trade Agreement with our single largest trading partner. A handful of industry leaders could have come together and flogged the media high and dry about the benefits of the agreement. An advertising buy, business lunches, a press club speech or two, some market research. Anything. Showcase examples of how the Australian-Chinese business relationships have made Australia richer over the past two decades. Those cheap TVs didn’t make themselves.

Instead, the collective passivity demonstrates the tendency of big business to jump in when it suits, not when there is a fight to be had or gains to be made. This is a dirty little bipartisan secret in Canberra that many in government are unwilling to speak up about. In this example, the cost could be a more fractured relationship with Australia’s most important economic partner.

Big business cannot be relied on to advocate for policy, even one squarely in their interests. When I talk to people about the 457 visa program, they picture a poor bastard on shitty pay getting exploited by their employer. This happens because those who gain the most from the program – Australia’s largest companies – sit back and let the narrative be dictated by others. There are about 35,000 employers using the 457 visa program and if I were a betting man, I’d wager every single member of the Business Council has at least one 457 visa holder on their books, with an average somewhere between 20 to 100 depending on the industry. No-one imagines the computer programmer, the market researcher, the financial analyst, the management consultant, the surgeon, the university researcher or the CEO, let alone state government sponsored nurses and teachers.

Highly paid, highly skilled, filling vacancies, teaching Australian’s and importing innovation with an average salary of over $88,000, well above full time average weekly earnings. This is what the picture of the 457 visa program should be. Yet when the current inquiry being led by the Senate Committee on Education and Employment looks around for evidence of this, they see nothing. For months they have heard stories of worker exploitation and not once have they heard from an ASX200 company about the benefits of temporary and circular migration for business, local economies or Australia as a whole. Perhaps these inquiries are viewed as worthless in Sydney and Melbourne. This is regrettable as they are markers in a debate to capture the public imagination and inform the bias of parliamentarians.

Worse, big business remain silent when news breaks about more short-term self-interest. The hospitality industry has been granted in-principle approval for a lower salary threshold for the 457 visa. The agreement will create the option to negotiate a salary threshold of $48,510. This is 10 per cent lower than the standard program threshold of $53,900. This is despite wage growth in the Accommodation and Food Services sector being below the labour market average from September 2009 (when the 457 visa program was reformed) to March 2015.

I can’t think of a single policy decision that is laced with more risk to the 457 visa program than this. This is the type of decision that gets crushed by history. This will hurt big business as the pendulum will inevitably swing back faster in the opposite direction, probably soaking the program in administration. Why any business or industry leader would let a program as important as this – filling skilled vacancies – be held ransom by a small minority of dodgy operators I do not know.

Unfortunately this goes beyond ChAFTA and salaries for the hospitality sector.

Migration is going to become one of the defining areas of public policy of the 21st century, a battle of increasing security concerns and hyper-nationalism against how liberal we want to call our societies. Business communities will need to be at the forefront of this fight, for their own self-interest above anything else. I have little confidence based on current trends this will occur. Building a narrative where migrants contribute to our national story instead of a story where every new arrival is viewed with suspicion is not going to happen by itself.

“FactChecking” the “FactCheckers”: The Chinese-Australia Free Trade Agreement

I hate Fact Checking. I think it is a ridiculous way to undertake journalism. It implies a level of objectivity that often is not there. So-called “Fact checkers” routinely ignore context and knowingly wade into complex debates where there is no independent truth.

So it is with the Conversation’s series on the Chinese Australian Free Trade Agreement. The latest in this series is authored by Stuart Rosewarme, “Factcheck: Could Foreign Workers Be Paid Less Under the China Australia FTA?“.

At the heart of the public debate on the labour migration provisions in ChAFTA is the “Investor Facilitation Agreement” (IFA) Memorandum of Understanding (MoU). The IFA is a contractual agreement between a company and the government that outlines potential concessions to the 457 visa program.

Stuart Rosewarme is checking whether this agreement will allow for foreign workers on 457 visas be paid less than Australians doing the same job. He concludes:

Michael O’Connor is correct in that there is no black-and-white statement in the MOU that stipulates that foreign workers working side by side with an Australian worker shall unconditionally receive the same conditions and pay.

Clause 2(e) of the MOU does say that Chinese firms operating in Australia must agree to “comply with all Australian laws and regulations, including applicable Australian workplace law, work safety law and relevant Australian licensing, regulation and certification standards.”

However, Clause 5 opens the door to removing those protections through negotiated “concessions”.

Mr O’Connor’s concerns have considerable merit.

The problem with Stuart Rosewarme’s piece is that he doesn’t appear to know much about how the 457 visa works, either in practice or the regulations which govern the program.

“Michael O’Connor is correct in that there is no black-and-white statement in the MOU that stipulates that foreign workers working side by side with an Australian worker shall unconditionally receive the same conditions and pay.”

Buried in Regulation 2.72 at Section 10C of the Migration Regulations is the law governing how 457 visa holders must be paid the same as Australian citizens:

(10)  If the person is a standard business sponsor**–the Minister is satisfied that:

(c)  the terms and conditions of employment of the person identified in the nomination will be no less favourable than the terms and conditions that: (i) are provided; or (ii) would be provided; to an Australian citizen or an Australian permanent resident for performing equivalent work  at the same location;

“No less favourable than the terms and conditions” is commonly referred to as ‘Market Salary Rates”. While a minority of employers can and do pay 457 visa holders less than their Australian counterparts, this is against the law. This requires improved enforcement, not more legislation or statements of intent.

Because this is the law, the IFA would have to explicitly provide a concession for 457 visa holders to be paid less than Australian workers. Possible concessions are outlined in the IFA MoU in Clause 4:

(a) the occupations covered by the IFA project agreement;

(b) English language proficiency requirements;

(c) qualifications and experience requirements; and,

(d) calculation of the terms and conditions of the Temporary Skilled Migration Income Threshold (TSMIT).

‘Market salary rates’ are not listed in the MOU as a possible concession. This means any employer who signs an IFA has to comply with Section 10C of Regulation 2.72: providing ‘no less favourable terms and conditions’ to any 457 visa holder who is performing the equivalent work at the same location as Australian citizens or Australian permanent residents.

Calls for a “black and white statement” on whether 457 visa holders will be paid the same as Australian’s deliberately confuses the audience. The law requires this and there is nothing in the IFA to allow foreign workers to be paid less than Australians. Mr. Rosewarme should have mentioned this clearly in his ‘factcheck’ and showed that, no, it is not possible for the IFA to allow companies to pay 457 visa holders below Australian rates of pay.

I have seen others argue that Clause 4(d), in relation to the Temporary Skilled Migration Income Threshold, allows companies to pay 457 visa holders less. This clause in the MoU relates to Migration Regulation 2.72, Section 10CC, creating a salary level which must be met to use the 457 visa program. The standard threshold is $53,900.

However this salary level does not work as a ‘minimum salary’ and employers cannot pay 457 visa holders $53,900 regardless of their job. The threshold determines that positions with a salary below $53,900 are not eligible for the 457 visa program. Even if an IFA outlines a reduction in the salary threshold, companies will still be required to pay 457 visa holders “no less favourably” than Australian citizens or permanent residents.

Mr. Rosewarme bases most of his argument on this line in Clause 5:

“The project company may be asked to provide additional information by DIBP in respect of its requests for concessions in the above areas.”

Clause 5 of the MoU clearly references Clause 4 as the ‘above areas’. This limits any discussion or possibility of concessions to those identified in Clause 4. This means the only concessions possible under an IFA relate to; occupations, English language, qualifications and the salary threshold. Nothing about market salary rates or wages and conditions. Nothing about broader workplace laws.

I disagree entirely with Mr Rosewarme’s “verdict”. He has not provided “facts” to back up his assertions. He has simply cobbled together a mishmash of references and assumptions, many of which are not grounded in reality.

For the Conversation to run this piece, PLUS have another “reviewer” give it the stamp of approval, shows just how inept this style of journalism and policy engagement is.

**Update: It has been pointed out to me that Regulation 2.72 10C applies to “standard business sponsors” and not work agreements. This is correct. However since the ‘no less favourable’ status was introduced in Section 10C, I understand every single work agreement has contained this same status. Further, this does not change that a work agreement/IFA would have to explicitly outline a concession from the standard program, something which is not raised in the MoU under Clause 4.

Private humanitarian sponsorship

The government recently released a discussion paper, “Community Support Program“, outlining options for private sponsorship of humanitarian migrants. This has been trialed over the last two years and there was sufficient demand in the community to indicate a permanent program of over 500 people per year.

I was surprised at this given the cost, approximately $30,000 for a family of five. Yet over 650 visas were granted from July 2013 to March 2015. Interesting, Syria and Iraq were the top two countries of origin, showing the program responds to current humanitarian crises.

Migrants can only be sponsored by Approved Proposing Organisations who have to:

  • ensure the visa application charge (VAC), which is approximately $30,000 for a family of five ($19,124 for the primary application and $2,680 for each secondary applicant), is paid;
  • provide the cost of airfares and medical checks;
  • provide initial practical support to assist humanitarian entrants settle successfully; and
  • provide services which are broadly similar to those currently provided to humanitarian entrants under the Humanitarian Settlement Services programme.

This is no small undertaking in both upfront costs and ongoing support.

However I have two main points of contention with this proposal.

The main criticism is the limitations placed on sponsorship. Organisations basically need to already be providing government funded support to become eligible to privately sponsor migrants. This automatically shrinks the potential of the program. Instead of something radical, this becomes a quaint addition to the humanitarian program.

I understand why the government create eligibility barriers. They don’t want to be on the hook for when dodgy private sponsors do not provide support. This is the standard, risk-averse position any government would take. But it also shows why this idea will not thrive until there is more willingness to fail. Private sponsorship has the potential to unlock tens of thousands of new placements for humanitarian migrants but only if a new community can be galvanised to sponsor them. Restricting sponsorship to well established settlement service providers cuts this option off at the very start of the journey.


Lastly, if there are going to be heavy restrictions, the visa fee should be reduced. $30,000 for a family of five stinks of ‘cost recovery’ from the government. This will keep program numbers artificially low and privilege certain communities over others.

If the government really believed in a system that tilted towards private sponsorship, they would either greatly expand the number of sponsorship options with a high upfront bond to dissuade cheating or lower the visa fee to encourage more private sponsorship funneled through a small number of select providers.

Personally, I think there is merit in exploring these ideas. Yes, the government might use private sponsorship to shirk greater responsibility. But the humanitarian program has hardly shifted in decades and it took the unhinging of our asylum policy to up the number. I can at least imagine a humanitarian program of 40-50,000 in two decades time where a substantial minority is provided by private sponsorship. And that would be a good thing.


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