The Commission of Audit: “Outsource visa processing”

The Commission of Audit recommended many things, much of which I disagree with (I whole heartedly support recommendation 61)

There wasn’t much to say about Immigration however. I suppose it is difficult to give immigration powers to the States.

Recommendation 46 is about reducing onshore detention costs and recommendation 51 advocates the consolidation of border protection services, both of which are pretty standard calls for more efficiency.

The only really juicy bit is recommendation 43, outsourcing visa processing:

The Department of Immigration and Border Protection grants around 4.7 million visas every year. Many visa processing tasks are high volume and low complexity and would be well suited to outsourcing. The Commission recommends that a business case and scoping study for outsourcing the Department of Immigration and Border Protection’s visa processing functions be prepared.

There is some truth in this statement. About 4.7 million visas are granted every year. Many visas are high volume and low complexity also. But that’s about it.

The main positive would be cost saving. Undoubtedly, processing visas via government worker is more expensive than via contracted temporary staff. APS3, APS4 and APS5 level public servants do most of the processing, with team leaders and management above this. These staff levels are paid between $55 and $75k, with super onto of that. In addition, standard employment costs must be factored in, such as rents, equipment and other overheads. To pick a number off the top of my head, I imagine a large private company could process all visas for less than 80 per cent of what it costs the government.

However, there are also drawbacks to privatisation.

The Commission is right the bulk of the 4.7 million visas are simple. Short stay tourist and business visas which don’t require too much work to process. In fact, increasingly these visas require no human work at all due to automation. The share of automated visas is rising each year, with more countries becoming eligible to visa waivers and electronic, on the spot processing. Therefore, using a big number to highlight how much potential efficiency is ripe for the picking is kind of misleading. As a public entity, visa processing is taking advantage of technology. Further, these visas don’t cost the government that much at all given the lack of detailed human interface.

Granted, there are some large exceptions. Chinese tourists are not ETA eligible, meaning there is significantly more government resource allocation to processing Chinese visas than British or American. However, in the near future, this will likely be relaxed, reducing over time the amount of resourcing it actually takes to process visas. An increasing amount of automation reduces the strength of the privatisation argument as cost saving will reduce over time. The costs of 2014 will be high compared to the relative costs in 2024.

A more significant criticism is how to address the relationship between government policy and visa processing. Visa regulations shift all the time and while the majority of visas are pretty simply, some are not. Witness the 15 year debate on 457 visas. Talk to any international student about the points-test. These visas are complicated. So complicated in fact that most people don’t even fill out their own visa papers, instead offloading this to specialised migration agents.

Managing this interaction is one of the most costly parts of visa processing within the Department. Communicating change, bedding down new processes and incorporating IT flux. Simply outsourcing the visa processing side will do nothing to lessen the impact of policy change. In fact, this will likely limit the ability of government to change policy, as change will increase the fee charged by private providers, likely mitigating the initial cost saving. For anyone who believes this is simply ‘worst case scenario’, “Systems for People” is important reading (here and here).

When I was working in a policy area, the amount of time spent weekly thinking and working through processing bits and pieces was not insignificant. Further, I learnt vital information from those parts of the department which made me a significantly better policy officer. Breaking this relationship would have serious long-term consequences for immigration policy.

Finally, the drivers of the primary benefit – cost saving – are also the source of likely mistakes. The search for efficiency will lead to short cuts and mistakes. These mistakes will affect people’s lives by questioning the legality of migrants who live and work in Australia. Pressure from contractors will see the emergence of ‘fee for service’, where higher fees result in faster service. As an egalitarian, this makes me uncomfortable when I see it at airport gates and priority boarding. In relation to people coming into Australia, this is not simply a moral concern but one which will shape the decision making of those coming to Australia. This will disadvantage those with less while making life that little bit easier for those with more.

I saw this type of thinking first hand inside the Department of Immigration. In 2012, a review of visa fees was considered by an outside consulting firm. They proposed a litany of fee increases without once questioning the potential impact of these costs in terms of the price people are willing to pay. The price elasticity of immigration may not be that interesting to most people, but when you live in a globalised world, it is important.

At first glance, visa processing does seem suitable to privatisation or outsourcing. Yet beneath the surface, it is a world of extreme simplicity and complexity. Technology will handle the simply stuff for cheap in the future. But outsourcing would radically harm the agency of government on the complex.

On a recent episode of EconTalk, Steven Teles said, in relation to a rowing metaphor about privatisation; “if government is going to do something, steer and row; and if it is not willing to steer and row, it ought to leave it to the private sector”.

As I can’t imagine the private sector in charge of visa policy, I don’t believe recommendation 43 of the Commission of Audit is appropriate.

(Note: I didn’t address the ethical concerns of temporary contract workers vs government jobs as that argument isn’t about immigration. Needless to say, I would prefer a world where temporary contracts weren’t forced onto people. However, I don’t think we are returning to that world anytime soon and instead the focus should be on mitigating against the worst excessive of labour market deregulation)

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