457 visa “rorts”: The case against visa ceilings

Sarah Whyte, the Fairfax immigration correspondent, has a story on a recent change to the 457 visa program. Unfortunately, it lacks context and infers things which I believe to be untrue.

The premise is the Abbott government recently removed a regulation which stated employers have a visa ceiling. Say BHP wants to hire people on 457 visas, they had to say how many and this was the ceiling. The government has removed this because they see it as “red tape”. Unions are unhappy – primarily the CFMEU and the AWU – because this potentially allows an unlimited number of 457 visas.

The story leads with, “The Abbott government has quietly reopened a visa loophole that will allow employers to hire an unlimited number of foreign workers under a temporary working visa, in a move that unions say will bring back widespread rorting of the system”.

Issues:

  • This is not a “loophole” or “rort”. Under both Liberal and ALP reforms in the past, issuing a visa ceiling was seen as unnecessary. This is because it is very hard to predict the exact number of employers a company will require over a three year period. Further, it is extremely difficult to enforce without drawing arbitrary lines. Finally, companies will simply avoid just restrictions by applying for vastly inflated ceilings. A loophole is a regulatory mistake abused by people in search of profit. The lack of a visa ceiling was never unintended. It was extremely deliberate. The use of the term “loophole” is therefore regrettable.
  • More importantly, the ceiling has virtually no effect on the operation of the 457 visa program. The number of employees on 457 visas depends on a range of factors; the strength of the labour market, the relative strength of different industries, labour markets in other countries, visa regulations of other programs in Australia and the costs associated with using the program. The introduction of the ceiling was a poor piece of public policy and those who infer the cap will stop exploitation or specific cases of an over reliance on 457 visas are dreaming.
  • To illustrate this point. Whyte writes, “Before the cap was introduced in 2013, the number of 457 visas was quickly rising. In the financial year 2009/10 there were 67,980 visas granted. By 2012/13 there were 126,350 visas granted, statistics from the Department of Immigration show”. 2009-10 was of course the low point for 457 visa grants due to the effects of the Global Financial Crisis. Framing the trend of visas without reference to GFC does not assist readers in understanding why this trend has occurred.
  • This shows how the notion of an “unlimited” number of 457 visas is bunk. 457 visas are expensive, given recent price rises. Under law, migrants must be paid the same as Australian workers doing the same work. It is up to the government and bureaucracy to enforce this law in cases of exploitation, not simply rely on employers doing the right thing. Exploitation does occur because, as with other policy areas, a small minority of employers are nasty. Further, the administrative burden of visas is substantial. Anyone scaring people with the notion of unlimited foreign workers descending on Australia when no such thing will happen, does a disservice to having an informed understanding of immigration policy.
  • The ALP undertook massive reform to the 457 visa program in 2009 and no cap or ceiling was introduced. Only in the heat of ALP leadership tension combined with a sunken primary vote was this measure introduced. Instead, the 2009 reforms addressed core issues, such as establishing market rates for 457 visa holders relative to their peers.

It is true a very limited number of companies have abused the 457 visa program in the past via hiring massive amounts of migrants without any Australian workforce. However there are a range of other regulations designed to mitigate this.

The 457 visa program is designed to respond to the labour market where skilled labour ebbs and flows. The program is likely used by every single major ASX200 company as well as 30,000 other employers. Of course there will be rorts, but like other public policy issues, it is up to the government and the bureaucracy to stop this without overtly negative regulations hurting the vast majority of companies which do the right thing. Railing against individual examples of dishonesty does not improve the policy environment.

Instead, unions and reporters could helpfully highlight some of the actual problems in the 457 visa program. These include stagnant wage rates for certain industries and occupations over periods of 3-4 years and the massive rise in the use of the visa for the accommodation and food service industry. In addition, the effects of labour mobility in recessions should be explored, as I wrote about yesterday, given the increase in unemployment has likely seen a decrease in labour mobility for 457 visa holders. Working towards policy reform to tackle these issues instead of crying wolf at every occasion would help improve the program over the long-term.

Finally, the review panel into the 457 visa announced recently which AWU Assistant National Secretary Scott McDine said ”has been stacked to deliver a predetermined outcome that will hurt Australian workers”. It is true there is no union representative on the panel. This seems slightly petty from the government. However the representatives chosen have a long history and understanding of the 457 visa program. Apart from Jenny Lambert, who works for the Australian Chamber of Commerce and Industry, they do not represent industry. Further Ms. Lambert was a member of the ALP government’s Migration Advisory Committee, as was Peter McDonald, Professor from Australian National University. Not exactly hacks determined to allow open borders for big business.

I want to make it clear. It is excellent that Fairfax has an immigration correspondent. This provides an opportunity to build on knowledge over time in what is an extremely complex policy space. But the 457 visa program is heavy on rhetoric in the media and very often removed from what the program data actually tells us. Pro- and anti-457 visa advocates fail to reach any middle ground, air their differences in the media and we are worse off for it.

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