What price for Australian residency?

I was reading about Gary Becker yesterday following his death and came across his Hayek Lecture from 2011 on the “radical solution” to sell immigration placements. From what I understand, Becker was one of the first people to advocate this. The idea of selling or auctioning visas has become a niche topic for a handful of immigration researchers however has not yet found support amongst policy makers.

In his lecture, Becker throws out a hypothetical figure of $50,000 per visa for the United States. He states at one point a fee of $0 would attract about three million immigrants every year, up from one million at the moment. Becker does not advocate for the $50,000 figure but uses it as an illustrative example.

This got me thinking about Australia.

One way to ‘solve’ the issue of pricing would simply to allocate a certain number of positions (there are currently 190,000 permanent residency visas per year) and auction them off. One method would be for all visas to attract the price of the 190,000 bid but alternatively, each visa could be individually charged what people were willing to pay.

However I think the idea of an auction would be even more antithetical to most than simply selling visas at a price. Even though we love auctions for selling and buying homes, I believe this would seem morally wrong to most people.

So instead, what would the price be for an Australian visa?

There are a couple of things to think about in relation to a country like the United States. We provide substantially less permanent visa places, 190,000 against one million even though on a per capita basis Australia’s is a the larger intake. However per capita doesn’t mean much when potential supply is 7 billion people. A smaller number of visas will generally increase the price paid per visa.

The income gains to migrating to Australia are perhaps even greater than the United States. The Australia federal minimum wage at purchasing power is well above most of the minimum wages in U.S. states. In addition, access to education and welfare are improved. Housing is typically more expensive in Australia and the labour market is much smaller. Valuing the large diaspora’s which already exist in Australia and the weather is slightly more complicated however I believe both would be considerations for many people.

I think a price of $50,000 is radically underestimating the price of a permanent visa. I think Becker’s claim of 3 million people at a price of $0 immigrating to the U.S. is also massively under-estimating the scale. We already see examples where people pay vast sums to migrate. Some family visas to Australia for instance cost tens of thousands of dollars. There are unconfirmed media stories about asylum seekers paying between $10,000 and $40,000 to people smugglers to get to Australia. The resources, time and effort put into gaining a permanent visa are immense and would be valued as such in a price model. When you factor in the income gains from migrating from a middle income country to an OECD country at the age of 30 and assume a 35-40 year career, the price of a visa could be very high indeed.

If loan processes were established (akin to a HELP loan with a substantial deposit), I think a price between $100,000 and $120,000 would clear at least 150,000 visas per year in Australia, a total of $15 to $18 billion. This price would attract both those highly skilled and lower skilled. Having 150,000 sold visas and 50,000 humanitarian visas would result in about the same number of permanent residency visas as today.

I do not advocate this position, for multiple reasons. The main reason is I think we would see substantially less diversity in our migration program. Further, our migration framework would fall apart. Australia’s immigration policy (non-asylum) is currently amongst the best in the world, in terms of accruing benefit to the host country (the counter-factual is the U.S. immigration system which is the best in the world at incorporating poor people into a rich society). This would be a spectacular gamble, largely in pursuit of financial gain.

Yet I do not think we are far away from seeing some type of auction or sold visa introduced in small numbers in a number of OECD countries. The income gains for the first country to introduce this will not address all fiscal issues but the sums are not insubstantial. In Australia, an allocation just five per cent of the current permanent migration program at $100,000 would see $1bn raised. This would be an increasing source of revenue also, as the number of immigrants rises over time in relation to a population. If a simple, effective auction system could be developed, this would be an even better option (tip: get Google to design both the auction and the IT behind it).

In an age where countries struggle to raise income , everything will have a price, including residency.

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