New data and a story about my favourite 457 visa graph

It’s going to be all 457 visas on the blog this week. Last week, the department provided answers to over 600 questions from the February Senate Estimates. In addition, I have sought and gained access to new survey information from the department. Finally, submissions on the government’s external review were due last week. I’ll be able to share the submission I worked on later this week.

I want to start with something which has which has puzzled me for awhile.

Screen Shot 2014-05-03 at 9.58.34 pm

(Source: Senate Estimates response AE14/216)

This graph highlights the correlation¬†between job vacancies in the labour market and 457 visa applications. When I was at the department, it was used extensively in external presentations to defuse suggestions ‘migrants stole jobs’.

Up until mid-2011, if the labour market was strong, more employers would hire 457 visa holders as labour supply was more scarce. Alternatively, in the GFC, you see both job vacancies and 457 visa applications head south with soften labour demand.

But then, this wonderful story took a wrong turn somewhere. At one point, I was explicitly told to take the graph out of a presentation because the gap between vacancies and visas was too large. Never again were we to see the graph, despite using it for years to explain the visa program.

This was a horrible decision. Instead of trying to hide away data, I think its preferable to seek to explain it. The graph above comes via senate estimates questioning and is up to date for January 2014.

So what happened and why is there a massive gap after eight consecutive years of close correlation? Are migrants stealing Australian jobs?

The primary reason for the divergence is the increasing share of people getting 457 visas who are in Australia. This share has increased from less than 30 per cent to over 50 per cent since the GFC. And no, this doesn’t mean migrants are stealing Australian jobs.

Being in Australia implies a couple of things. Its likely, but not certain, you are already working in the labour market. As a non-citizen, you have no recourse to social support and this means work for most people. Further, its likely your employer is sponsoring you. This is the easiest path to a 457 visa as you have an established relationship with your employer.

To see the extent of this, 81,547 visa applications were lodged in 2012-13. Of these, 52 per cent were lodged onshore.

Who are these people? This graph shows the number of 457 visa grants by their previous substantial visa when in Australia:

Visa Type: Number: Share:
Working Holiday Maker 9442 28%
International Student 9525 28%
Post-Study Work 2264 7%
457 visa holder 7119 21%
Other 5091 15%
Total 33441 100%

(Technical note: These are visa grants. The figures in the graph above represent visa lodgements. They are generally the same, but there is a substantial difference in 2012-13 because of fee increases, where a many visas were lodged just prior to 30 June but not processed.)

Thankfully, the total share of 457 visa holders applying for another 457 visa is a minority. If this figure were higher, it would indicate many people ‘stuck’ on 457 visas without the option to become a permanent resident. 7119 equates to about 12 per cent of the whole program. I’d argue this is within reason however more analysis about who these people work for and their salaries would better inform this statement. Unfortunately, this data isn’t available.

This explains the divergence between job vacancies and visas as seen above. While these people show up in the visa statistics, they are likely not doing anything different in the actual labour market. They were working before their visa grant and they continue to work after their visa grant. The only thing which has changed is their administrative status, not their labour market status. Prior to the GFC, this was less prevalent, helping keep the correlation between job vacancies and 457 visas much stronger.

I also think we need to think about what this onshore transition means for the visa program as a whole. If 50 per cent of visas are being lodged onshore, what makes these people choose Australia in the first place? Typically, I think of the 457 visa program as an employment program which incorporates immigration. However Working Holiday Makers likely choose Australia only in part because of the economy and labour market, amongst other factors, like sunshine and beaches. Further, Working Holiday Makers may leave their home countries to escape as opposed choose Australia. This is the distinction of push/pull in global migration trends. If Irish and Italian working holiday makers come to Australia because their labour markets stink, then end up in the 457 visa program, how much of this relationship reflects Australian labour demand and how much reflects global labour supply? I have no idea but its worth thinking about.

Two other quick notes about the graph. There are two obvious spikes, one at June 2007 and one at June 2013. The first spike is when the rules for English language proficiency changed, becoming more difficult. This sparked a rush of visa lodgements before the changes were made. The bigger spike in June 2013 is from the large fee increases introduced for the visa last year. I imagine the fee increases were so large (+$2000 for families) that even people with over a year left on their visa will have reapplied to beat the rise. This means that 457 visa statistics from July 2013 to June 2014 should be viewed with a note of caution and should not be compared with other years or labour market outcomes as they are too skewed.

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