You’ll never believe this one neat trick to fix the 457 visa program

Crappy headline aside, I wrote this op-ed during the week but couldn’t get it placed. I was prompted when David Crowe asked Bill Shorten what he thought about raising the price of 457 visas during his National Press Club address on Tuesday.

Since this is my blog, I’ll add some context: I’m a big supporter of the 457 visa program. But it’s crucial to maintain public legitimacy in the program. At the moment, this isn’t occurring as a small number of employers are exploiting design flaws for their own profit. As I wrote for the Lowy Institute earlier this week, now is not the time to turn away from immigration. But that doesn’t mean we can ignore issues and seek to improve the status quo.

tl;dr Employers respond to prices not paperwork

“Increasing public scepticism towards the political establishment will shape Australian politics in 2017. How immigration intersects with Australian jobs will be one of the most prominent public debates informing this discussion as One Nation continues to gain legitimacy, providing an outlet for anti-migrant sentiment.

Despite being in decline, this means talking about 457 visas. Since the end of the mining boom, the debate over 457 visas has been piecemeal. We’re stuck in the worst of environments: unnecessary regulation burdening good employers while failing to prevent exploitation, and by extension, undermining wages and conditions.

These visas attract lots of rhetoric and politics however underpinning the visa program is a bipartisan consensus. Both major parties agree the program is an important part of Australia’s immigration framework and both also agree Australians should have preference in the labour market. This consensus is the best tool to address the latent anti-migrant sentiment found on the political fringes.

The simplest and most effective policy change is to raise the price employers must pay to hire a temporary skilled migrant. Instead of a new set of regulations which malicious employers avoid with ease, higher fees are a stronger deterrent and impossible to avoid.

I used to believe about 2-4 per cent of people working on a 457 visa were subject to exploitation and poor wages. A proportion like this can be addressed through enforcement. However over the last couple of years, in a labour market unable to create large numbers of new full-time jobs, the power of temporary migrants diminishes compared to their employer and they become willing to accept lower standards. Existing wages and conditions are undercut when this happens, particularly in industries reliant on award wages such as hospitality and retail.

At the moment, it costs $330 for an employer to hire someone on a 457 visa. This is equal to 0.4 per cent of the average full time wage in the labour market. But when you consider employers can nominate a worker for up to four years, the effective cost is often less than 0.1 per cent of an average salary.

This price is nowhere near high enough to deter employers who are willing to break regulatory standards to profit themselves. Deterring these employers up front instead of trying to police them after the fact is likely the only method to create a more robust temporary skilled visa program. A significant increase in the thousands of dollars per nomination is necessary. While an employer with a genuine vacancy will pay a higher price to employ a skilled worker, a malicious employer looking to save money on a wage bill will think twice.

In addition, employers should pay more to be certified as a sponsor. At the moment the price is only $420. From past research and evidence, we know small and medium businesses are more likely to exploit and underpay temporary skilled workers than large companies. Substantially raising this fee to ensure employers are using the program on a needs-basis, not as a process to undermine the labour market, will improve workplace standards.

Industry will ask why they should shoulder this burden when the vast majority do the right thing, in both the spirit and the letter of the law. Unfortunately the business establishment has been missing in action in debates about temporary migration. They have failed to clean up industries rife with exploitation – of Australians and migrants alike – and show no willingness to come up with alternative solutions to soothe public sentiment. As a trade-off, and recognising the vast majority of employers do the right thing, any price rise should be accompanied by the removal of ineffective regulatory settings such as labour market testing and the existing training requirements. These settings have never pushed an Australian into the labour market and represent the worst of a technocratic, administrative approach to tackling the issue of migrant exploitation in the labour market.”

Blog posts published elsewhere

I have two blogs published elsewhere today.

For the Lowy Institute’s Interpreter blog, I write about the opportunities for Australia presented by likely changes to immigration norms:

To date, Prime Minister Turnbull and Immigration Minister Peter Dutton have shown no willingness to explore the opportunities provided by a changing international environment for immigration. The Brexit vote and the Trump Administration’s approach to immigration will upend established processes and trends while formalising new norms. There is no reason these trends and norms should be dictated to us.

From the big picture down into the weeds, in this post for the Development Policy Centre (where I work), Richard Curtain and I outline how recruitment processes in origin countries can shape migration outcomes in the seasonal worker program:

Fiji was not a participating RSE or SWP country until 2015. However in the first full financial year of participation, Fiji had 160 participating workers in the SWP and 104 workers in the RSE. Already in the first half of 2016-17, 168 workers have gone to New Zealand. This stands in stark contrast to participation from Papua New Guinea. Despite participating in the RSE since 2010-11 and the SWP since inception in 2012-13, the number of workers participating is small and refuses to grow. In Australia, only 42 workers participated in 2015-16, while in New Zealand a total of 69 participated, down from the year before.

Finally, I curate a regular newsletter with links to research and blog posts on Pacific labour mobility and other bits and pieces about Australian immigration for my day job. The first edition for 2017 will be sent tomorrow. If you would like to subscribe to this, let me know on Twitter or shoot me an email: henry.sherrell@anu.edu.au

Analysing Australian migration: Getting beyond common sense

I want to give Carrington Clarke, an ABC business journalist, the benefit of the doubt. His piece on Thursday titled “Immigration masking Australian economic decline” hints at an important point often missed but the litany of negative inferences and weak claims which follow, unsupported by any evidence at all, is hard to accept. Clarke highlights how adding more people to the economy is not necessarily good for everyone as individuals. Throughout, the author infers migration to Australia is one reason why individuals are going backwards in economic terms. The way he does this is by using ‘common sense’ arguments about migration, e.g. how more people will push down wages because that’s what Economics 101 dictates.

In the simplest terms possible, if you add an extra person to the economy, it is going to grow in the aggregate. But it may not grow in per capita terms, or for each individual. This is because each extra person may have a positive, negative or nil effect on the average. Say the average wage in an economy is $50,000 but the new worker earns $40,000. She is adding output to the total but reducing the average, ‘dragging down wages’.

Clarke concludes, “High migration makes it nearly impossible for Australia to fall into recession” as migration means the aggregate economy will keep growing.

This is debatable but no-one can deny migration has improved aggregate GDP growth over the past two decades. The net migration trend – the number of people immigrating to Australia minus the number of people who have emigrated – has been high when compared to the 1970s and 1980s. As others have pointed out, net migration to Australia from the Global Financial Crisis onwards may have been the most important factor keeping Australia out of recession alongside the mining boom. From Bob Gregory, an ANU economist and former RBA board member:

“Our extra ordinary economic success since the GFC owes a great deal to the increased level of national income produced by the unforeseen population expansions generated by our new immigration program.”

“It is possible that the economic magnitude of the immigrant policy change over the last decade has been as large as the mining boom impact.”

(Source: A good Chris Bowen speech from September 2016)

This is essentially Clarke’s point but while he is focusing on the potential negative effect on the individual, others focus on the positive national effects. He takes this point to an extreme by saying it is ‘nearly impossible’ for Australia to experience a recession. Given the recent aggregate GDP figures, and the declining rate of net migration, I don’t buy this claim as migration trends can change relatively quickly and it is entirely possible Australia could fall into recession.

And this is my main concern. By failing to explain why migration has changed, Clarke isn’t able to place these migration trends in context and explore the question. If you can’t do this at the ABC, where can it occur in mainstream journalism? You shouldn’t be able to discuss immigration and economic changes since the 1980s without noting the transformational policy changes that have occurred. Migration changed from a process controlled strictly by governments to a mixed system where economic demand itself influences the rate of migration as well as government decisions.

Regardless of an interesting main point, this is no excuse for poor supporting analysis without any substantial evidence.

Claim One: “The truth is, migration to Australia is still proceeding at a record clip.”

nomjune2015

(Source: ABS, Net Migration)

Net migration figures show quite clearly immigration trends since the high of 2009 are slowing. This is akin to the rate of GDP growth slowing but the economy as a whole still growing. When the latest GDP figures come out, there is almost universal focus on the rate of growth as opposed to the size of the economy. This is sensible as in many cases the total size is less relevant than the rate of change. In migration, the equivalent is total number of migrants in Australia, or the stock figures of various visa categories.

Clarke uses the stock of temporary migrants in Australia as evidence. While the table he highlights notes 12 month changes, he fails to mention permanent migrants (accounting for about 40 of net migration) as well as any emigration at all (where citizens and others leave Australia). Net migration, not the total number of temporary migrants, is the primary tool used by policy makers to assess migration trends. The latest estimates of net migration from the ABS in December 2016:

“The preliminary estimate of net overseas migration (NOM) for the year ended 30 June 2016 (182,200 people) was 3.0%, or 5,300 people higher than the net overseas migration recorded for the year ended 30 June 2015 (176,900 people).”

Is 180,000 a record clip? That’s about 0.75 per cent of the population on an annual basis. The latest Intergenerational Report helpfully puts this into a historical context:

nomhistorical

A net migration rate of 0.75 per cent is lower than the last decade average of 1.1 per cent as well as the post-war net migration rate of 1.0. It falls somewhere between the heights of post-war Australia and the lows of the 1970s to 1990s.

All of this means the “truth” is migration to Australia is not proceeding at a “record clip”. In fact, it is falling in trend terms and perhaps people should be talking about this more as it likely reflects a soft labour market and economy. This is particularly true if you exclude international students (which are growing strongly) and focus on visa categories which are influenced by relatively global strength and domestic labour demand, like 457 visas, working holiday makers and New Zealand citizens.

Claim Two: “New workers mean greater competition for jobs, which suppresses wages.”

Unfortunately Clarke doesn’t provide any evidence for this claim, except to note how wage growth has been falling in recent times. It’s true migration could be affecting wage growth but all the evidence we have suggests this is not the case.

There is a pretty clear consensus among labour economists that migration – regardless of the workers who are joining an economy – doesn’t have large employment or wage effects, on average. What matters is composition: “the skills of migrants, the skills of existing workers, and the characteristics of the host economy” (source: Martin Ruhs, Migration Observatory, United Kingdom). In Australia, this is the rationale behind a skilled migration program. If we take Clarke’s point literally, more doctors and IT specialists will reduce the wages of doctors and IT specialists, making it cheaper for people to see a doctor and for companies to get IT assistance. Then, these new doctors and IT specialists will spend their incomes on goods and services, rising the demand for things like hairdressers, accountants and construction workers. When you throw all this in together, any number of scenarios are possible, including positive, negative and no effects.

The real take away is to consider demand and supply effects, with regard to the labour market fundamentals which already exist and the characteristics of new migrants. While I acknowledge there isn’t much space in an 800 word analysis piece, it’s not hard to note some of these trends and effects in passing.

So what does the evidence say? Here are a couple of statements which show why Clarke’s claim about suppressing wages should be taken with a large piece of salt:

Productivity Commission (2016):

“International studies find that the overall impact on the local labour force is small (either positive or negative).”

“Research commissioned for this inquiry suggests that over the decade since 2001 (generally a period of robust economic growth), on balance and in aggregate, recent immigration had negligible effects on the labour market outcomes of the local labour force.”

Migration Observatory (2016):

“Empirical research on the labour market effects of immigration in the UK suggests that immigration has relatively small effects on average wages but more significant effects along the wage distribution, i.e. on low, medium and high paid workers.”

Claim Three: “More people also mean more demand for scarce goods and services. When there’s already a tight supply of a particular good, it can mean huge price rises.” (talking about housing)

It’s undoubtedly true that demand for scarce goods and services leads to higher prices. But as has been acknowledged by almost every serious policy guru in the country, the reasons for housing scarcity are numerous, including demand-side policies like negative gearing and capital gains tax, as well as supply pressures such as zoning and urban planning. Lumping Australia’s housing market onto new migrants is a particularly low blow when this was a major election issue.

Yes, more people will increase demand for housing and other services. But as the graphs above show, migration has not come out of nowhere and is a known quantity. Planning for this, instead of passively ignoring it, is a much better approach than scapegoating migrants. Understanding migration flows as response to underlying economic conditions, instead of an exogenous force or shock imposed by governments, helps understand why blaming migrants is not the way forward on housing policy.

Claim Four: Migration ‘Good for business, governments’ but “But it isn’t necessarily good for ordinary workers.”

As with the effects on wages and employment, this question is compositional. It depends where you live, what you do and what your skills are. However this is the very reason underpinning Australia’s skilled migration program. It is deliberately set in the “national interest” or for ‘ordinary workers’. Skilled workers increase supply at the top of the labour market, most assisting those at the bottom of the labour market. Skilled migration is a mitigating force on inequality in Australia, albeit likely a small one (but opening up more low-skilled opportunities to Australia would better assist global inequality instead of national inequality). For example, while 457 visa holders make up less than one per cent of the labour market, their salaries are about 20 per cent higher than the average full time wage. English-speaking migrants do better on average than the average labour market participant while non-English speaking migrants do slightly worse. In addition, the economic demand created by new migrants is propping up entire industries – construction and higher education come to mind – and while this is not a reason to run a migration program, it must be considered when assessing the effect on ‘ordinary workers’. Clarke also fails to note how migration may drastically improve the lives of new migrants themselves. Should we consider this? Again, it depends on the policy goal of governments.

The real people who feel the biggest brunt of new migrants are likely the migrants who are already here. Numerous studies show this and it’s because these groups are often the most similar in any economy, therefore having higher rates of substitution on employment and wages.

Normally, any analysis of non-asylum migration to Australia is a positive as it is drastically underexposed in mainstream media outlets. Kudos to Clarke for taking the time to write about an interesting aspect of migration to Australia, the differences between aggregate and marginal benefits/costs of migration. However it would have been good to see a broader discussion about why migration is the way it is, a broader set of possible effects and some of the well-established evidence about these questions. Particularly for analysis on the ABC, which should be held to a higher standard, the four claims above deserve more scrutiny than they received.

Why now? Revamping Australian citizenship

Why is Peter Dutton (and Pauline Hanson) talking about a tougher citizenship test?

Before getting to this question, let me state my position on citizenship: the existing requirements for citizenship – four-year residency, a permanent visa, and the existing citizenship test is already performed in English – are more than sufficient. I believe birthright citizenship, or jus soli for the lawyers out there, is a human right, as the United States, Canada and most of Latin America hold. The 21st century will bring home some of the very difficult political questions about who belongs where as migration continues to increase. The current ad-hoc citizenship processes across the world will struggle to cope. The losers will be migrants, as the countries they live and work in seek to assert vague notions of sovereignty for political gain.

Peter Dutton did not wake up on January 2 and decide, on a whim, to start agitating for harsher citizenship measures. This was a calculated decision, just another marker in a longer process which started in earnest when Malcolm Turnbull kicked him out of the National Security Committee of Cabinet, and before that, when Scott Morrison as Immigration Minister created the Department of Immigration and Border Protection. Here is a marker for 2017: the prevalence of security and citizenship as national topics of conversation is inversely related to Malcolm Turnbull’s political ability.

Immigration hawks view the world in discrete units, such as the number and type of visas granted and border crossings. They don’t have much use for social cohesion and diversity, concepts somewhat ill-suited as evidence for measurement and decision-making. The world is black and white, devoid of grey and extremely risk averse. In the aftermath of 9/11, Dick Cheney illustrated what became known as the One Percent Doctrine: “If there’s a 1% chance that Pakistani scientists are helping al-Qaeda build or develop a nuclear weapon, we have to treat it as a certainty in terms of our response. It’s not about our analysis … It’s about our response”.

‘It’s about our response’. When considering Peter Dutton’s words and actions in 2017, I would encourage you to keep these words in mind. The approach outlined by Cheney above is an approximation of the worldview linking immigration and security, where zero tolerance drives policy fundamentals and crowds out most other considerations.

One unit considered by policy makers but often overlooked in public commentary is time. Time is precious and extending it is a neat way of increasing power without appearing to make wholesale change. Anyone on a visa, permanent of temporary, falls under the Migration Act and the various powers contained without it. Drawing out the time visa holders spend as migrants instead of citizens, enhances the power of the Immigration Minister, provides governments with more flexibility and, importantly, increases the number of people overseen by the Department of Immigration and Border Protection. More widgets, higher growth, bigger numbers: this is the language of power in Canberra if you want a place at the big kids table.

To my mind, these are the reasons behind the push for greater citizenship hurdles for migrants to overcome. This is why Peter Dutton is talking about citizenship. He wants a longer time period allowing more opportunity for security agencies to assess people and creates more possibilities for other issues and agencies to be brought into the mix (i.e. welfare and the Department of Social Services). This may include additional English testing and some form of a migrant demonstrating “Australian values”. When looking for a needle in a haystack – a terrorist on a student visa for example – more time increases your odds. But the flip side is everyone else is also affected. Students who are not terrorists, i.e. all of them in any statistical sense, would be treated to the same rules being used to find the ever elusive needle.

There are a host of other potential problems with using time to place more barriers in front of citizenship. For example, the ABS tells us humanitarian migrants earn more income the longer they stay in Australia:

Income earned by Humanitarian migrants after a period of residency

incomeover11years

It is not difficult to imagine how gaining citizenship assists people move into higher skilled jobs and earn more income. Citizenship is used by many public service agencies as an entry requirement and large multinational companies often preference citizens as they are not subject to visa restrictions. What if increasing the length of time it took to become a citizen – from say four years to six – also reduced occupational mobility in the labour market? What if this held back people who would otherwise have a smoother settlement journey? While marginal, these are large probabilities beneath the surface and never examined as a counter to the security narrative.

You can trace Peter Dutton’s comments early in 2017 to movements last year as well as looking ahead. Leaked documents show the Cabinet considered revised immigration regulations in March 2016 (which I wrote about with Peter Mares and Anna Boucher here). This came only four months after Parliament passed an overhaul of citizenship rules, including new powers of revocation for dual-citizens. From what I understand, these new powers have not been used or tested in the court system, with a number of legal experts at the time considering them unconstitutional. Looking ahead, the Joint Standing Committee on Migration is conducting an inquiry into Migration Settlement Outcomes. This is code for examining welfare, English proficiency and citizenship rights of new migrants (see the Terms of Reference here). You can expect this inquiry to be used as “evidence” for a new round of sweeping changes to migration and citizenship law. Incidentally this is occurring at exactly the same time as every single government service provider for humanitarian support programs find themselves in the middle of a procurement process. If you were a cynic, it wouldn’t be a good look in stifling a dissenting view from those supporting humanitarian migrants on the ground. I would urge people to engage with the Parliamentary inquiry as there is a paucity of evidence to generate more barriers for people who want to become Australians.

This is the result of citizenship as a security policy tool. Gone are ideals about give and take, about rights and responsibilities. Today citizenship is viewed as solely as a privilege, something the state can choose to bestow upon you. Thankfully most people do not subscribe to this view, signalling a political opportunity to oppose or at least modify the pending legislation. Yet every discussion about citizenship through a security frame and in such a haphazard manner, stokes the coals of Hanson. Every media cycle promotes her views and gives her a platform. These national conversations might suit Peter Dutton’s short-term interests yet they undoubtedly hurt Malcolm Turnbull and any considered strategy to confine the far-right in Australia to the fringes.

Post-2016: Trump, Brexit and Hanson do not belong together

A new trope has emerged in the Australian media. ‘Something something, out of touch, post-something post-something, Trump, Brexit, Hanson’.

The most confronting example I’ve seen to date was back in November when the headline editors at the Guardian asked “First Brexit, now Trump: can Australia be spared a similar voter backlash?” Spared? And while Lenore Taylor provided one of the more readable takes in this new genre, she was unable to shake the self-doubt from such a stultifying headline. The Trump-Brexit-Hanson narrative within Australian political journalism, occupying a grey area somewhere amongst opinion, analysis and news, has exploded over the past eight weeks. There are already 24,500 results for “Trump Brexit Hanson” in Google News. Combining these three words as the foundation stone for content has become a crutch spanning the political spectrum and outgrowing any one type of social network. Take your pick:

Warren Mundine (Daily Telegraph)

Trump, Brexit and One Nation’s resurgence deliver two key lessons.

First, politicians who speak directly to voters about what voters care about can prevail, regardless of the media and commentariat.

Second, if centrists are unwilling or afraid to embrace commonsense views, voters will turn to extremists and populists, however offensive.

David Lipson (ABC)

The election of Donald Trump and Britain’s exit from the European Union are the hallmarks of a tectonic shift in Western politics, fuelled by rural and regional revolt. As a consequence, the long-forgotten people in the regions of Australia are now at the forefront of every politician’s mind.

Jennifer Hewitt (AFR)

For all the surprise in Australia about the election of Donald Trump, for example, he says the complete disdain and disgruntlement among swinging voters towards establishment politicians here is not that different to the US or to the sentiment that drove Brexit in the UK.

James Massola (SMH)

In the election of Donald Trump, the triumph of the Brexit campaign and, in Australia, the election of four Pauline Hanson One Nation senators, three Nick Xenophon senators and a phalanx of disparate crossbenchers, voters have sent a clear message: “the system is not working for us, and we are dissatisfied with our elected representatives”.

 

My festive hot take is here in Australia, we shouldn’t lump Hanson in with Brexit and Trump.

Anyone who is concerned about Pauline Hanson should be aware of where her support comes from and what this may say about the political and social landscape of Australia. The people who voted for Hanson are not chumps or dullards and deserve their say as much as everyone else. Combine this with the journalistic imperative to find a way to explain complicated stories confined by tight word limits and the rationale for why journalists lump together Trump, Brexit and Hanson becomes clear. Everyone knows Trump, most people know Brexit and Hanson is a divisive figure with a long history in Australian politics. We also need to know about how Hanson is shaping the debate and what this may mean for the future.

But before the end of 2016 and as a primer for your Christmas day dinner conversation, I urge anyone thinking Trump, Brexit and Hanson are even somewhat equivalent to reconsider. When your uncle repeats some version of the accepted wisdom derived from the above quotes, you can counter with the following. Grouping them together is dangerous, misplaced and bestows an additional sense of undeserved legitimacy on Hanson. It’s also wrong. Removing this crutch from Australian political analysis in 2017 would be a welcome addition to the media landscape. Early 2017 will mark a test as the legitimacy for Hanson will grow with the inevitable One Nation gains at the Western Australian state election coinciding around the same time with Article 50 for Brexit and Trump becoming President. Luckily for you, there is ample evidence demonstrating why Hanson is a disparate political movement compared to Trump and Brexit.

The first exhibit is straightforward: examine overall support. Over 95 per cent of Australians did not vote for Hanson while about half of all American and British voters selected Trump and Brexit respectively (of course noting Clinton’s victory in the popular vote). Much more should be made of this and even if the Hanson vote increases to one in ten or one in five nationally, which would represent stark political failure by the major parties, there would remain a deep gulf in terms of comparative voting outcomes. Why does Hanson get the benefit of the doubt from less than five per cent of the national vote and a few profile stories of One Nation voters? Compared to Trump and Brexit, she failed miserably.

Trump was able to attract ~40 per cent of the GOP primary vote on a platform containing not much more than anti-migrant rhetoric. This transformed into a broader coalition at the general election. He captured one of two party institutions in the United States with little resistance. Brexit attracted a majority – more than one in every two votes – in a high-turnout U.K. election. In contrast, Hanson attracted 1.8 per cent of the primary vote in the House of Representatives and 4.3 per cent of the primary vote in the Senate. She peaked at 9.2 per cent of the Senate vote in Queensland. The comparative figures are stark yet always overlooked when explaining the link between the three political movements. Trump co-opted a mainstream political institution in the GOP and Brexit was a take it or leave it option. One Nation is neither of these. Instead it is a renegade party akin to UKIP in the United Kingdom but without the opportunity of an up or down referendum of generational importance. As will occur in the future, One Nation was forced to compete in a crowded field of candidates across the country and the overall level of support Hanson attracted can help explain an important yet relatively small story about the political landscape in Australia.

This leads into a second factor behind these political forces, the motivation for support of Trump and Brexit compared to Hanson. Concern about immigration was a primary consideration in the success of Trump and Brexit. Trump’s GOP primary success was catalysed by disparaging remarks about Mexican and Muslim migrants. This was not a factor to explain his early success, it was the factor. GOP stalwarts from Jeb Bush, to Marco Rubio and even Rick Perry in the 2012 cycle, were undone by their support of various migration initiatives to address the 10m+ undocumented migrants in the United States. Trump was ruthless on this and while the reasons for his victory in the Presidential election are more varied than concern about migration – partisanship, a lack of GOP dissent, Hillary Clinton – migration cut the track for future success. Brexit was similar except with an inverse timeline. As the proponents of Brexit hammered away over months on a mishmash of messaging, eventually they figured out nothing had the potency of anti-migrant rhetoric. In the fortnight leading up to the June vote, Nigel Farage and other pro-Brexit campaigners focused almost exclusively on immigration, feeding the beast. Google Trends shows a doubling of search interest in ‘immigration’ in the week of the Brexit vote. This anecdotal evidence is supported by more thorough empirical research linking migration to Trump and Brexit, from people like Matthew Goodwin and Eric Kaufmann. I’m particularly convinced by the link towards more negative attitudes on migration and fast-changing levels of migration, feeding into support for overtly anti-migrant rhetoric. This deep dive at Vox on race and immigration in the context of Brexit and Trump has much more.

Now turn to the Australian context behind these factors of support in the United Kingdom and the United States. A full 28 per cent of Australians were born overseas (a slightly lower proportion of electorates are born overseas). The increase has occurred in conjunction with the 25+ years of economic growth. Clearly there has been large disparities in the growth of the migrant population if you start breaking down Australia into small chunks but overall, the picture is constant growth off an already high proportion of migrants in the population. The United Kingdom and the United States, at 14 per cent and 13 per cent respectively, have about half the proportion of migrants yet they have increased their share at a much faster comparative rate than Australia over the last 15 years as they came off a lower base of migrants. And while you can construct an equation where Hanson’s supporters look at least somewhat comparable to Trump and Brexit supporters, there are proportionally fewer of them in any relative sense. Urban? Education? Inequality? Migrant? In every single Australian comparison of similar cohorts, the political advantage lies more with the ‘establishment’ than the ‘outsider’ compared to the United Kingdom and United States.

A high migrant population does not provide an automatic barrier to political success of anti-migrant parties. But it does make it substantially more difficult, especially for forming government as marginal seats in capital cities counter balance the appeal in outer-suburban and regional electorates. A party of government must consider this at all times as opposed to a party of protest in an Australian electoral system which isn’t winner takes all. Hanson’s re-election attempt in 1998 is the best example of this. Even with the most primary votes, she lost on preferences as the Coalition pushed Labor over the line. It’s also worth considering why specific anti-migrant parties have failed in (modern) Australia. Recent evidence includes the disastrous performance of Reclaim Australia and the Australia First Party at the 2013 election despite significant media attention. Even non-racist anti-migration parties like Sustainable Population Australia have failed to carve out any presence on the national level. Their litter of Senate candidates over multiple election cycles hasn’t generated attention or more than a handful of votes. I’m not arguing we have moved past the ability of anti-migrant parties to establish themselves or the capacity of politicians to implement anti-migrant policies. Instead the size of the challenge should be noted and every profile of a Hanson voter should place their attitude in a broader context. The Scanlon Foundation Social Cohesion survey this year found historically high support for the current level of immigration, even though a large majority of voters have no idea what the actual rate is. These perceptions mean at a national level, Hanson has a much more difficult environment to grow her support into something resembling a permanent electoral fixture, equivalent to Trump and Brexit.

As Lenore Taylor wrote in her article referenced at the top of this blogpost, Australia is different in a number of other ways as well. Inequality is more muted. Electoral participation is mandatory. Growth did not flatline after the GFC and unemployment never spiked. Hanson is probably here to stay for quite sometime but this does not mean she is equivalent to generational electoral events elsewhere or a new trend where migrants are unwelcome in Australia. I’m extremely wary of One Nation’s future electoral success at the State level as well as her ability to shape the political agenda and other political actors. Her platform in the Senate must not be ignored or normalised. But before we frame political stories in 2017 through the lens of Trump, Brexit and Hanson, reconsider the basics here in Australia and stop lumping them all together.

How to feed research into Australian migration policy: Self-selection and labour market performance

I attended a great presentation yesterday by Christian Dustmann, who heads up the migration-themed CREAM research organisation, based at University College London. I’ll post a link to the video when available. There were lots of interesting bits and pieces but two things stuck out in an Australian policy context.

The first point was his emphasis on how migrants self-select and the flow on effects on these processes. There is lots of research on migrant selection but I find it tends to fall into the background when thinking about migration policy responses. The act of migration itself is a choice. Even in forced migration situations there are often options about where and when to travel. Dustmann focused on the selection at play in labour markets. Migrants are not stupid he said, and will select into markets where outcomes are more promising.

In Australia, this has policy implications. For example governments of both stripes and others on the crossbench continue to promote migration as a partial solution to regional labour shortages and even propping up the viability of existing communities. But it is hard to push migrants out into regional areas as there are relatively fewer employment opportunities. Migrants in Australia tend to be more urban than even existing Australian residents, selecting into locations which have potentially greater incomes. Recent policy examples such as the backpacker tax and the SHEV protection visas shed some light on this. Backpackers wouldn’t be out in regional areas if it weren’t for government policy. The incomes are not great and the work is hard. They select in looking for more residency. Instead of using prices and wages, the government can use the promise of more time in Australia. This obviously doesn’t work with Australian workers as they already have unlimited residency. The same forces are at play with the SHEV visas. The government knows asylum seekers are searching for more permanent residency outcomes so load up regional incentives into a more promising visa pathway.

Yet there are clear limits to these policy incentives. It is much more difficult to create this same incentive for a highly skilled worker who has numerous options across the world as they will select in elsewhere. Relying on this incentive is also quite short-term as after permanent residency is granted and labour mobility frees up, you would expect a drift away from these labour markets in line with choices others would make. Using migration to tie people exclusively to a single region is also not a good idea over a long period. Dustmann’s point was this process is more complex than people and policy-makers probably imagine. Instead of just focusing on the effect on wages and ‘Australian jobs’, existing native residents might leave labour markets or choose not to participate when migrants enter. This is not a simple static environment but one where change and response to that change is the default. Unfortunately this more complex argument is not very compelling to people who believe migrants steal domestic jobs from Australian workers. The response from both the Coalition Government and Labor must improve to counter a broader acceptance that migrants steal jobs, as the media certain isn’t going to help. And as the backpacker tax argument shows, often some of the more disadvantaged socio-economic communities have come to rely heavily on migration despite increasingly voting for political rhetoric which says there is no place for them in modern Australia.

In a roundabout way, this leads to the second take away.

Australia runs a skilled migration program and the general consensus is we do it well. The visas themselves are mostly achieved by using proxies for determining skills, things like a qualification or demonstrated work experience. But using proxies does not guarantee migrants will work in jobs associated with those qualifications or earlier work experience. This isn’t necessarily a bad outcome but we know migrants face added barriers in the labour market not faced by native workers, things like language proficiency and understanding norms. This leads to ‘downgrading’ in terms of their jobs which is difficult to capture in research and data because we never have a full picture of how people fare.

Dustmann presented some of his recent research using earned income and compared this to native income in a distributional sense. The graph below shows the proportion of recent migrants at different points in the earned income distribution, compared to natives.

dustmannwagespredictionSource: Dustmann et al, The effect of immigration along the distribution of wages

The flat line represents natives while the two other lines represent the actual and predicted outcomes of migrants place in the wage distribution of the United Kingdom.

The dotted line (actual) shows recent migrants are 1.5 times more likely than natives to be working at the very bottom of the wage distribution, which then falls away, flattens out and then rises at the very top end of the distribution. This pattern is quite different to the other line, which is the predicted distribution of recent migrants using their education as a proxy. Effectively, for recent migrants arriving in the UK, this graph captures the actual downgrading which occurs, at least for income purposes.

This is fascinating for Australian policy makers. Running a skilled program and relying on education and previous experience requires bureaucrats to make a whole bunch of decisions, such as what occupations to put on eligibility lists for example. You might have heard Peter Dutton recently say goat farmers are now not allowed to be hired on 457 visas. This is a policy choice. What this data shows is downgrading has massive implications for policy makers because out in the labour market, employers and migrants sort themselves out differently to what you would predict if you just considered qualifications. Thinking about this type of finding and replicating it for Australia should help us better understand migrants in the Australian labour market. If anyone reading this is interested in looking into possible replication of this research in Australia in 2017, please get in touch (henry.sherrell@anu.edu.au). I am following up whether the data is available and what might be required. The paper and methodology are linked above in the source. It doesn’t look easy but I think it is worth considering given the potential implications.

A big concern I have is how research about migration is getting fed into policy initiatives. I think we tend to do this fairly poorly and while migration policy cannot address everything which happens in the labour market after a migrant arrives and starts working, constantly trying to work out how to improve the situation is important. I don’t see much evidence this is occurring in any structured and meaningful way, despite the large amount of hot air which being spewed forth in the wake of Trump and the 2016 Australian election. Without it, simple reactions – like Dick Smith’s recent claims – to complex environments will start driving political decisions, leading to disastrous unintended consequences.

A space for big business in the migration debate: some suggestions

The Business Council of Australia has a new President, the former CEO of Origin Energy, Mr. Grant King.

His first comments about a month ago were what you might expect from an incoming BCA President: “My focus will be on continuing to drive a more innovative and competitive economy, improving incentives for businesses to invest, and making the economy more flexible so it can respond to global forces of change.” A couple of weeks later, King said he wanted to get some bipartisan support for policies the BCA advocates, make the complex simple and prioritise the right issues.

I’ve written in the past how big business is missing in action on migration policy. For as long as I can remember there have only been two stances from the BCA on migration: silence or reaction to others setting the agenda. In recent years they have been cleaned up by the CFMEU on the ChAFTA deal and failed to constrain the nativism which is seeping into the Coalition. There are a few reasons why big business might shy away from engagement on migration. After all, I can imagine how advocating for more migrants coming to Australia could easily come across as simple rent seeking. Stepping into the fray might generate additional volatility and provoke backlash from angry populists.

I don’t find this line of argument at all convincing. Consider the standard BCA positions on taxation and industrial relations and the almost non-stop advocacy of positions which would directly benefit BCA members and shareholders. And unlike taxation and industrial relations, migration policy actually needs as many coherent advocates as possible at the moment and businesses have a role to play. The field is pretty bleak as anti-migrant coalitions bubble away on the margins. Dick Smith’s history of “environmental” advocacy has coalesced with Pauline Hanson’s outright discrimination. Labor is content to poke the bear on skilled migration while the Coalition couldn’t dig themselves out of their own backpacker tax hole without help from the Greens. What a mess. Who is prepared to stick up for Australia’s greatest nation-building tradition?

The most obvious place for the BCA is addressing the continued failure to demonstrate the role skilled migrants play in the labour market. Skills transfer, training and development, and ideas generation from migrants are examples of actual innovation. Every single BCA member has numerous 457 visa holders employed who bring their experience and expertise to the Australian labour market and broader economy. These people aren’t being exploited in kitchens or on construction sites. They aren’t stealing jobs. Where are the stories by BCA members showing the real world effects of being able to tap into a global labour market? We’re told labour mobility is an integral part of international competitiveness so it’s time to show how this happens. Product managers revolutionising the retail supply chain? IT architects transforming how businesses manage their databases? Senior executives who bring with them new methods of business strategy? What about how migrants themselves play a critical enabling role in opening up potential export opportunities?

Instead of a 20-something start up founders popping up in the AFR every other week to say how we need to reform our visa system, I want to see CEOs from BCA members with Grant King’s backing talking about the importance of skilled migration to job creation. Reacting to the news cycle when another case of migrant exploitation has been uncovered is the complete opposite of effective advocacy. Which brings me to my main point.

Migration is so important to big business in Australia it’s time to stump up some political capital and purchase public confidence: The BCA need to get behind a clean up of the 457 visa program. Their members play by the rules so won’t have to worry about the implications. Instead, small and medium businesses who exploit vulnerable workers need to be shown it is unacceptable as this behaviour undermines the entire program. Get behind a price hike and a proper compliance operation to weed out those who wilfully exploit migrants.

Why would any business group would get behind a policy change which would result in a (small) cost increase? Clearly the status quo is not good enough and the end outcome if nothing changes is massive policy backlash to the visa program which a Turnbull Government will be unable to oppose. Exploitation also has broader implications for the labour market, creating incentives to undermine norms in search of profit. The more systemic this becomes, the more difficult it is for employers who comply with regulations to compete on an even playing field.

No need to stop there Mr. King. At a big picture level, the BCA should think about how to demonstrate what the differences in labour market activity mean for Australian workers and the importance of migration policy in addressing economic ups and downs. We only have one immigration policy but the labour market in the Sydney CBD is very different to Bundaberg. How can we better adapt migration policy across these different environments? BCA members see how the economy unfolds in real time through their sales and activity data. Instead of creating incentives to hoard this information, figuring out member-led initiatives to better inform a ‘demand-driven’ migration policy could create great dividends. Giving policy-makers more confidence about potential changes and improvements will lead to better outcomes.

If that sounds too difficult, how about fighting for migration policy to remain tethered to economic policy instead of being completely subsumed into security policy? Talking about migration through a security lens undermines policy capacity in the bureaucracy to improve labour markets. A good example to raise would be the massive blowout in processing times for 457 visas driven by greater security obligations. The time to process a visa under the Turnbull Government has almost doubled and it now takes 6-8 weeks instead of the 3-4 weeks average under the Labor Government. Where is the outrage? This harms businesses ability to respond quickly to their workforce needs. As security priorities continue to grow in a Department of Immigration and Border Protection uninterested in economic policy, BCA members will feel the brunt of poor processes and the lack of transparency. I haven’t once heard Peter Dutton as Immigration Minister give a big speech about the role of migration in economic policy. If he isn’t up to the task, start agitating for change.

Finally a simple suggestion. Get behind the Productivity Commission’s recommendation for a population policy as a vehicle for a more informed discussion. The ad-hoc nature of migration policy and the lack of depth hurts business over the long-term. More stability, more evidence and more engagement will lead to improvements.

None of these suggestions would directly benefit BCA members and one of them would add a small increase in costs for BCA members. But they would each prioritise the right issues, foster some policy debate where partisanship is tempered and attempt to better explain the complexity of migration. You only need to look at the backpacker tax debate to see the potential for future migration policy failure. And with the global environment tilting further towards populism and anti-migrant sentiment, the BCA have to put in the hard yards in 2017 to try and set some boundaries before the politics of the next election appears in 2018. Instead of responding to the next story Mr. King, get on the front foot and put the case forward about the importance of migration to Australia.

Post-script: Looks like more of the same is on the agenda at the moment.