The points-test: The role of government and the market

I have a good friend who wages the occasional covert, informal propaganda battle against the points-tested visa. He’s quite convincing.

This much promoted innovation of Australian (and Canadian) immigration policy has been a bipartisan bedrock for the past four decades. Advocates across the world sing the praises of the points-test. Britain has taken it up (for the very small number of migrants allowed in) and there has been a push in the United States led by George Borjas to implement such a policy.

You don’t meet many people in immigration circles who are against this policy. So what’s the beef with the points-test?

Basically, somewhere in Canberra, bureaucrats gather in whitewashed cubicles and decide the rules allowing about 80,000 people per year to gain residency in Australia via the points-test. They are not sneaky about this. But given the media is disinterested in such policy sausage making, not many people would be aware of the in’s and out’s.

These dedicated public servants decide two things: what occupations should be allowed based on long-term projections of skill shortages and how we should rate migrants experience, qualifications and labour market potential. These two concepts are embedded in pages of legislation which would-be immigrants attempt to satisfy. These migrants are now ranked by order of their points, determining who gets residency quickest.

Students of politics might point out these decisions are actually made by the government of the day. These students would be technically right given the Minister signs the paper. They would also be radically underestimating the power of the bureaucrats involved in this process.

This system of visa contrasts rather starkly with another: employer sponsorship. Here, the main consideration is if the would-be immigrant has an employer to work for. There are other rules to be followed (also about occupations and experience) but these rules are secondary in nature relative to any points-tested visa. If there is an employer with an eligible position, then migrants can book their tickets if they are hired (or, more likely, they already work for said employer on a 457 visa).

For the purposes of this blogpost, lets call the points-test “government-led” and call employer sponsorship “market-led”. In the last Migration Program, permanent skilled visas were split about 60:40 in favour of the government-led categories.

(On a related sidenote, some points-tested visas require migrants to jump another government-led barrier: sponsorship by a state or territory government)

Over the past ten years, market-led visas have increased their proportionality of the Migration Program. But government-led visas maintain a strong majority share. Why is this?

This is hard to rationalise if you consider how the two major political parties would prioritise these visa categories in a policy vacuum.

I’d argue both major political parties would show a strong preference for market-led systems. This is based on oft-heard rhetoric about markets (the Liberal Party) and recent policy achievements (the ALP, i.e. the ETS). I’d accept this is a more complex proposition for the ALP given the strong position the union movement maintains for permanent residency free of employer shackles.

Perhaps this is simply another example of very slow, incremental change which brings benefits over time without the risk associated with shocking the system. This is a classic signal of policy driven by the public service. “Don’t stuff it up” is the overriding factor, not “Do the best job possible”.

Yet small-state, small-l liberals – found across party lines – should detest the points-test. The process and red-tape, the intervention by government in the market, the endless bureaucracy. Think about this: there is a public servant, likely somewhere in your state capital city, who is responsible for approving individual points-tested visas based on state government approval. Across Australia, 25,000 of these visas will be approved this year. Employers need not apply.

Can we mark the points-test down as a win for the progressive movement, where migrants can settle in Australia with complete freedom in the labour market working to buttress against long-term skill shortages? Perhaps this is one argument. I would argue however, it is a holdover from a period of earlier reform, moving from family-related visas to skilled-based visas.

I won’t be surprised if the trend towards employer-sponsorship continues. In the face of growing temporary visa grants, it is nearly inevitable. But I also wouldn’t be surprised if a future immigration minister radically rethinks what has become folklore in immigration policy circles: just how successful and necessary is the points-test for the 21st century?

(Endnote: For some labour market data on how these visas compare, here is a departmental publication from 2011)


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