Some visa policy questions on Cooks, students and working holiday makers

Earlier this week, I took issue with the methodology in some recent research titled Immigration and Unemployment 2014 by Dr. Birrell and Dr. Healy of Monash University.

While the numbers produced from their report drew most of the headlines, I’d like to discuss some policy concerns they raise in their paper which I largely agree.

I want to preface this discussion. I think more migration, in the abstract, is a very positive thing and working towards this goal is important. However visa programs should be used the way they are intended to ensure public and political support. This is sometimes overlooked but something I consider critical for the long-term success of immigration policies. It’s up to immigration advocates to call for visa systems that can be abided by and build immigration. Allowing visas to be abused is pernicious in a democratic society.

Cooks

As the authors – Bob Birrell and Ernest Healy – highlight, the single largest occupation in 2012-13 for migrants seeking skilled visas was cooks. This includes 8,449 permanent residency visas and 3,040 temporary 457 visas. However there is no apparent overwhelming employment demand for cooks in other indicators, such as ABS labour market surveys or Department of Employment forecasts.

I’m less concerned about the permanent visas. This is a hangover from past policy mistakes around student visas. The migration system is slowly but surely working through this. As a result, the period of 2008-2014 may not produce the best labour market results from highly-skilled migrants. Despite this, I believe the issues have been largely addressed and future migration outcomes will be vastly improved (see below).

However there are issues with 457 visas and cooks. The central reason is pay. Under the 457 visa program, the minimum salary threshold is $53,900. As Birrell and Healy point out, the market salary rate for a cook is less than this, typically between $40,000 and $50,000 when you account for penalties and hours worked.

An important principle of the 457 visa program is equal pay for equal work. You can argue about whether this principle should exist (I believe it should) but one should recognise it is embedded in legislation and has bipartisan support. Either employers are paying migrant cooks above the market wage – something I find difficult to believe for such a number of people – or underpayment is occurring once visas have been approved to firms. Unfortunately I believe this is likely the case, at least for a substantial number of the cooks being sponsored.

Under program rules, technically employers should not be able to hire migrants on 457 visas if the market salary is below the threshold salary. This means an occupation like Cooks with a market salary of below $50,000 should have few 457 visa holders and should definitely not be the number one occupation under the program. Cooks is the most obvious outlier to this issue and demands a closer response from government. It’s not just cooks either. I have written previously on a range of occupations in the hospitality industry where there appear to be some serious disjuncture of visas and labour markets.

All of this raises important questions. This is not to say remove or cap the 457 visa program immediately. The program is vital to our immigration framework and fills an important niche for the labour market. But a more thorough approach to granting visas is apparent, particularly in relation to wages, conditions and enforcement. Coordination enforcement by using visa data should be (relatively) simple. Given all of this is well known in the bureaucracy, hopefully there is some attempt to address this in the Abbott government’s response to the recently concluded 457 visa integrity review.

Students

The interaction between student visas and residency visas may not seem apparent on face value. Student visas are to obtain an Australian education, not to live here. However immigration isn’t that simple. Many international students seek permanent residency, some even value this above obtaining an education qualification.

For sometime Dr Birrell has successfully prosecuted the case about how student visa settings in the 2000s enabled permanent residency in a manner which had massive unintended consequences. Poor quality education providers thrived, gorging students for money as they attempted to become permanent residents. This is now accepted as a failure of immigration policy making, perhaps the most prominent in the past generation (outside of asylum policy).

As a result, there are former international students living legally in Australia who have applied for permanent visas and meet all the criteria yet remain without a visa after years of waiting. The number of these former students was once much higher (numbering above 100,000) but has since dwindled to less than 15,000. Birrell calls this process ‘warehousing’. In essence, by accepting these former students with low quality educational qualifications, the skill level of these new permanent residency is questionable.

However, it is important to note. These former international students were simply playing by rules governments established. Refusing their visas would have been a substantial policy shift and, from my point of view, highly unfair. It is also an issue which has nearly worked its way through the system. The method of obtaining residency via a student visa pathway has changed substantially in the past four years and is now well structured.

Working Holiday Makers

The evidence obtained in Immigration and Unemployment in 2014 is perhaps strongest on Working Holiday Makers.

In Table 6 (p.21) it is shown nearly 600 Working Holiday Makers living in Australia were sponsored by employers as ‘Program or Project Administrators’ in the 12 months to August 2012. This is over 35 per cent of program or project administrators sponsored onshore in Australia. This is emblematic of the complexities of visas.

It’s unlikely these young migrants are working in the occupation of program or project administrator as intended. More likely, they were working for an employer (allowed for up to six months on a WHM) and both the employer and migrant sought a method to work full-time, transferring to a 457 visa. If these migrants have the skills and qualifications required to perform the job, this is a positive use of the program. However the scope, size and trend increase of backpackers moving into the skilled workforce calls into question what is happening at the macro-level as this has not occurred before.

The number of WHM visas has been increasing over the past three years from 185,480 in 2010-11 to 249,231 in 2012-13. Unlike other immigration programs, the WHM is not driven by the demand of the labour market but by the push factor from overseas. How many young people want to visit Australia? Work in Australia? In the case of some European and Asian countries – many do.

Unlike Dr. Birrell, I believe capping the program would be a mistake. This program is built on reciprocity and a more restrictive program may impact on the ability of Australians to undertake similar opportunities overseas. Too often this benefit is completely overlooked in migration analysis.

However there are methods to improve the integrity of the program. The transition from a WHM visa to a sponsored visa should be a point of interest and subject to higher verification. DIPB should work with labour market enforcement officials elsewhere to better analyse and monitor where working holiday makers do work and what their salaries and conditions are, particularly if they transition to a more substantial visa. If we don’t even know the basics about the program (and we don’t), undertaking analysis to better tailor outcomes to government policy intentions is very difficult.

There appears to be cause to consider removing the second year of eligibility. This additional time period was only introduced as a favour to the National’s by the Howard government as a source of labour supply for regional agriculture. Little evidence has been provided (or research undertaken) to understand this policy issue. However since that decision was made, the Seasonal Worker Program has been introduced. In my opinion, this is a more appropriate method to address labour concerns given the development benefits for Pacific countries and the additional integrity embedded in the program.

Addressing an ageing population

Immigration is important for countries with fertility rates below replacement levels to maintain and grow population. This is undisputed. However the degree of importance certainly is.

I believe a positive net flow of migrants will help – at the margins – reduce the dependency ratio of taxpayers to younger (<15) and older people (>65). However migrants will not “solve” an ageing population. This was highlighted by the ABS yesterday, with their “Does Size Matter” article detailing population projections. Even spectacular inflows of migrants unlike Australia has ever seen before will only have a degree of impact on an ageing population. This is something Dr. Birrell notes but conflates with his argument about employment.

There are other reasons apart from an ageing population why I think a larger population is beneficial but we’ll leave it at that for now.

Birrell and Healy’s research included some dodgy numbers. But like all matters migration, this is a complex area where they note some important concerns we should better pay attention to.

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4 thoughts on “Some visa policy questions on Cooks, students and working holiday makers

  1. I’m not sure I’d be so quick to jump from “an average cook gets $45k” to “nobody would pay a cook $54k”.

    This is a relatively small premium, which could easily be accounted for by:
    1) geographical scarcity. If I’m looking for a cook on a mining site, or even in Perth (or at least, Perth a couple of years ago), a $10k divergence from the national average seems entirely plausible.

    2) non-homogenous skills. If I’m looking for a cook to run a standard pub bistro, that person is unlikely to command a premium. But I’m looking for a skilled sushi or Indian or Mexican or Spanish cook, then again, it’s quite likely there won’t be anyone with the relevant skills looking for work nearby, and so I’ll need to pay over the odds.

  2. Thanks for your comment John, it’s much appreciated and makes a good point.

    I agree on principle. However from looking deeply at the 457 visa stats (both the internal departmental and external version), I’ve come to the conclusion this isn’t happening. A large majority of these Cooks are based in Melbourne and Sydney. The trend increase has kicked off quickly in the past two years after “normal” activity for the period before then. Personally, I haven’t seen good evidence of where the demand is coming from but I could still be persuaded otherwise.

    The salary levels are also smack on the threshold level. Because employers are meant to pay ‘market rates’, it would be quite a coincidence that the ‘market rate’ is also equal to the threshold rate. In reality, we see a wage floor in effect where one shouldn’t be. This is an issue with any government regulation determining wages and rewards but an issue which should be considered more in policy analysis.

    It is likely employers are not breaking the law by doing this, unless they then proceed to not pay the worker the amount on the visa nomination form.

    Of course, there will be scarcity as you suggest and I’d venture a large minority of the cooks being hired are perfectly legitimate uses of the 457 visa program. I’ve made a large generalisation when perhaps a smaller one with more qualifiers was required. We also need to be aware that the largest integrity issues in the 2000s for the 457 visa program were associated with the hospitality industry.

    Cheers Henry

  3. I think the obsession with visas is driving the country insane. A visa is supposed to be merely an entry stamp, the numbers of conditions we place on them for most are deranged to say the least.

    • Marilyn, you say a lot of things which are over the top and often extremely rude. However the sentiment behind this comment is more true than many things I’ve read on immigration policy in Australia and something I would do well to remember more often.

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