Speech to the Don Dunstan 2014 Migration Update

I gave a presentation yesterday at the Don Dunstan Foundation’s 2014 Migration Update. Thanks for the Foundation for making time for my speech in their busy schedule.

While I veered away from my prepared notes a bit, here is the speech as prepared:

Speech – Don Dunstan Foundation 2014 Migration Update

Hello. My name is Henry Sherrell. I work at the Migration Council Australia.

We’re an independent, non-profit organisation who advocate, promote and research Australian immigration and settlement.

I’m also going to preemptively apologise for the jargon that has slipped into this speech and any assumed knowledge. I’m very happy to answer questions at the end.

Our report ‘More than Temporary: Australia’s 457 visa program’, was released last year and based on survey data undertaken by the Social Research Centre and commissioned by the (then) Department of Immigration and Citizenship.

Background

The 457 visa is Australia’s most important skilled visa program given the bipartisan support for a skilled migration framework, one increasingly tilted towards labour demand.

It is also a temporary visa.

There are currently about 190,000 visa holders living and working in Australia, including over 105,000 primary visa holders.

In 2011-12 and 2012-13, the number of 457 visas granted was equal to the total of all permanent skilled visas.

The program has changed since its inception in 1996.

Slide02As you can see, small numbers of migrants once filled niche, highly skilled occupations in the late 1990s.

Today, a larger number of migrants are employed in a more general mix of medium and highly skilled occupations.

This expansion can be seen from primary 457 visa holders representing about 0.2 per cent of the labour market in the late 1990s to slightly over one per cent today.

If we only consider the skilled labour market, 457 visas represent about two per cent of the total.

Survey results

The details of the survey are included in detail in our report. There were a total of about 3800 migrants and 1600 employers who responded across a period of six weeks in mid-2012.

At the time, the unemployment rate was lower than it was today, important contextual information when we consider a demand-driven labour program.

The survey indicated high levels of satisfaction from migrants.

Slide03One of the important demographic breakdowns for policy-makers is English language background.

Promisingly, there was little difference in satisfaction for these indicators between English and non-English speakers.

Slide04

For employers, 83 per cent said it was difficult to recruit in the local labour market. This is the overriding rationale for the program.

We should expect a result like this but it is positive to confirm policy goals.

Perhaps surprisingly, both migrants and employers reported high levels of training and development.

76 per cent of migrants said they help train or develop other workers.

Employers echoed this with 68 per cent responding 457 visa holders trained Australian workers. For multinational firms competing internationally, this rose to 78 per cent.

As I mentioned earlier, we should not undersell the nature of these results. Employers are primarily using the program as intended. And a strong majority of migrants are satisfied with their employment in the labour market.

Of course, surveys aren’t perfect measurements but when considered from the perspective of both migrants and employers, these responses are an excellent indication that the program – on a macro level – is both highly functional in meeting its policy goals and satisfying the vast majority of migrants.

Given the potential vulnerability in sponsored visas, this is a strong positive finding.

However, this does not mean the program is perfect.

There are emerging issues that should give policy-makers pause when considering the 457 visa program.

As I mentioned previously, 11 per cent of migrants were dissatisfied with their wages and the same number have an income equal or less than $50,000.

Of this latter group, over 70 per cent were non-English speaking compared to 50 per cent for the program as a whole. This is concerning and points to distinct cohorts within the 457 visa program.

With a salary threshold of $49,300 at the time, over one in ten workers were within $700 of the salary floor, what is considered the lowest acceptable wage in the program.

Perhaps it sounds obvious, but income is clearly an important factor when considering future intention.

Slide05This graph shows different rates of intention to stay in Australia based on migrants’ partner’s employment. Generally, the more income earned, the higher the intention to stay and the more satisfied migrants are.

Given this importance of income for 457 visa holders, the fact 19 per cent of migrants said they did not receive a pay rise after 12 months in Australia is also concerning.

Slide06(Note: It was pointed out that these figures may be comparative to the Australian labour market given the impact of the GFC. I am going to investigate the survey data to understand this better.)

An additional 3 per cent reporting a pay cut. This is illegal without being re-nominated and approved by the department.

In certain industries, stagnant pay is more prevalent. In hospitality, 32 per cent went without a pay rise after 12 months in Australia.

Hospitality is also the industry with the most recent growth. Flat pay and high employer demand is an awkward combination worthy of closer consideration by the bureaucracy and government.

In addition to these wage concerns, seven per cent of migrants said working conditions were not equal to Australians and five per cent did not think their employer was meeting their obligations under the program.

I do not believe this survey data indicates widespread rorting or illegality of the program. Even individual cases that look bad on face value can be well within the regulations of the Migration Act.

But I see it as evidence to exemplify concerns about how some employers are engaging with migrants in the labour market.

Taken as a whole, these survey responses point me toward a level of concern for lower paid migrants, particularly migrants who tend to occupy lower skilled occupations in particular industries and who come from a non-English speaking background.

This creates a situation where employers are not breaking the law but where those critical of the 457 visa program perceive unacceptable levels of exploitation.

I believe this is an important but overlooked aspect of the public debate, one where values drive discourse much more than any empirical survey data. We see that today in the aftermath of Minister Morrison’s Press Club speech yesterday.

These survey responses highlight areas for concern in the 457 visa program within a broader environment where nearly nine in ten migrants are satisfied with their employer and a vast majority of employers treat 457 visa holders exactly like Australian workers and abide by the law.

This survey work is perhaps most helpful in identifying areas of focus for government and policy-makers at the department.

I will discuss three such areas now, noting the Minister did not raise these topics yesterday and appear to be off the radar of the government.

Policy Responses to the Survey

Price signals, program fees and settlement support

The 457 visa program is demand-driven, meaning employers generate how many migrants end up working on 457 visas. The Migration Council strongly supports this use of the visa.

However the cost structures and price signals embedded in the program are not working as effectively as they could.

It currently costs $1035 for a migrant to gain a 457 visa. This fee also applies to secondary visa holders 18 and over. Dependent children are charged $260. For a hypothetical family of four, this is a total of $2,590.

An employer will pay $330 per nomination.

There is a bipartisan consensus that 457 visa holders will not replace Australian workers.

The market salary rate requirement – equal pay for migrants and Australians – is designed to enforce this goal.

Policy-makers have always been assumed recruitment costs and other bureaucratic compliance creates an incentive to look locally before hiring a migrant on a 457 visa. This is the concept of a price signal.

However the price signal is less compelling now than it was in the past.

Slide07

About 50 per cent of 457 visa grants are now made onshore. These visa holders likely already work for their employer, on a student, working holiday or existing 457 visa. It is cheaper and easier to simply keep employing the visa holder than finding a replacement.

Other evidence in the survey shows nearly 70 per cent of visa holders who intend to stay in Australia.

This intention will, in general, override short-term costs such as visa fees and in some cases, accepting lower salaries than what is stated by employers.

Slide08

These factors ensure the price signal is not what it once was.

To improve this, instead of charging migrants thousands of dollars of fees, employers should be charged substantially higher nomination fees.

This higher fee would act as a renewed price signal and help weed out potential substitution of Australian workers.

The Migration Council advocate that these fees fund limited, as-required, settlement services to 457 visa holders and their dependents.

If 70 per cent of visa holders intend to stay in Australia, the case for as-required AMEP eligibility for the spouses of 457 visa holders is overwhelming given one in two come from a non-English speaking background.

In addition, voluntary workforce orientation sessions would better inform migrants instead of another paragraph in their visa acceptance letter about labour market rights.

This would also provide a critical ongoing point of contact for migrants who fear talking to their employers or the department.

The Temporary Skilled Migration Income Threshold

The Temporary Skilled Migration Income Threshold is a wage floor, below which migrants cannot be hired as 457 visa holders.

This salary threshold – the TSMIT – has for the past five years been indexed.

Established in 2009 at $45,220, it rose to $53,900 by 2013.

However this past July, the TSMIT was not indexed. This may have been because there was an external enquiry underway.

Regardless, this was a poor policy decision.

The salary threshold acts as a wage floor for migrant households unable to access social security or family benefits. This ensures an income level above subsistence living.

Government assistance at these income levels is significant.

Slide09

(Note: With thanks to David Plunkett for the government assistance numbers)

An Australian couple with one income of $53,900, two children aged 8 and 6 and rent of $400 per week are eligible for the following assistance.

The same one-income household on a 457 visa is not eligible for this support.

They must also maintain private health insurance and if they happen to live in NSW, the ACT or WA, pay public school fees.

On an income of $53,900, this works out to a difference in disposable income of anywhere between $15,000 and $30,000.

This is not an argument 457 visa holders should be eligible for family assistance. Our welfare system is not designed for this.

Instead, I use this example to highlight how 457 visa holders at the bottom of the wage range – a full ten per cent – are in a vulnerable position.

Slide10

This is also the major argument against allowing award wages to dictate salaries for 457 visa holders.

Repeated failure to raise the TSMIT will eat away at the purchasing power of 457 visa holders and their families.

This sets a poor precedent and increases the risk temporary migrants will face exploitative labour market environments.

By maintaining indexation, the real wage of even the lowest paid 457 visa workers will keep pace with cost of living increases.

Improving the Market Salary Framework (Note: this section was not delivered due to time constraints and having been discussed earlier in the day)

The Market Salary Rates framework is the foundation of the 457 visa program. This ensures migrants are not discriminated in the labour market and acts to maintain existing wages and conditions.

The survey indicated the median salary for migrants was between $75,000 and $80,000. This is lower than the data published by the department based on nomination forms.

As discussed, the survey also showed 19 per cent of migrants had not received a pay increase after 12 months in Australia.

This differed greatly across industries and occupation, indicating some employers may be more likely to stall pay increases for 457 visa holders.

Discrepancies between survey data and administrative data, combined with the lack of pay increases for a substantial minority of migrants, should signal concern regarding how effective the current market salary framework is and at a minimum generate questions to be answered.

Slide11One method to improve the ability of migrants to receive up to date market salaries would be to shorten the employer nomination period from four years to two, ensuring current market wages are more regularly checked.

This would be opposed by employers based on cost and bureaucratic objections but may be one of the simplest methods to ensure market salaries are maintained over the length of a four year visa.

In addition, additional evidence could be used to satisfy the employer’s claims about what is a market wage.

There is a wide range of available data for departmental officers to draw on when assessing migrant salaries. The ABS in particular publishes detailed industry and occupational breakdowns of salaries.

Instead of relying solely on employers, a more considered approach to determining market salaries would improve program integrity and better protect existing workforce conditions.

A word on the public debate

Lastly, I think it is important to have a position on the perennial debate about the 457 visa program and “Australian jobs”. The public discourse in 2013 showed how this debate impacts policy.

Undoubtedly, there are opportunities to improve the 457 visa program.

Yet these opportunities were ignored last year for an overt political agenda based on Australian jobs.

Issues raised by this survey did not appear in the debate despite the government and the department possessing the very same data I have discussed here today.

The Immigration minister at the time, Brendan O’Connor, was unable to point to evidence of his claim of 10,000 rorts.

Had the survey data been analysed by either the Minister’s office or the department, perhaps some actual evidence may have been marshaled.

Instead, government rhetoric based on “Aussie jobs” led to the introduction of labour market testing, an administratively burdensome requirement for which there is no evidence of effectiveness.

To me, this indicates a policy failure driven by politics. We have now witnessed this in both 2010 and 2013.

Slide12We talk about jobs as if they are to be added up and divvied out. As any labour economist will tell you, things are a little bit more complex than this.

Visa frameworks and the legislation that underpin it need to be abided by to ensure long-term public support for Australia’s immigration program.

Rouge employers who exploit their workers, combined with populist politicians and the front page of the Daily Telegraph, is the greatest risk to the 457 visa program.

But at no point in 2013 did the government seek to improve the program based on evidence.

For the ALP in particular, improving the market salary requirements and increasing fees for employers should not be a difficult decision.

Instead, we are stuck with a policy change that does nothing to combat employers who do seek to undermine working conditions.

Until we move away from pitting migrants against “Aussie” workers, this debate will continue. The 2016 election is but two years away.

Conclusion

The 457 visa program is effective.

For what governments seek to achieve with the program, it is world-class.

No other skilled temporary visa program in a developed country can match its effectiveness – that is, matching skilled people into jobs that can’t be filled locally.

Yet there is always more to do.

Policy-makers and those interested must always be aware of the potential vulnerability of migrants without labour market mobility.

I am told the survey data will be released publicly soon.

I hope many people can use this survey research widely, helping to further improve the 457 visa program.

If you have any questions about the report, I am more than happy to discuss today or get in touch at a later date.

Slide13

 

(With thanks to Tom McMahon and three anonymous public servants for their excellent feedback)

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2 thoughts on “Speech to the Don Dunstan 2014 Migration Update

  1. Henry, a couple of questions. You say 83 per cent of employers said it was difficult to recruit in the local labour market, and you say this is a positive result. However, isn’t this a threshold condition for 457 visa recruitment, ie. this figure should be 100 percent?

    Second, the graph %Visa Holders No Pay Increase I am struggling with. What is the horizontal axis, and where is does it show 19% have not received a pay increase after 12 months?

    • Thanks for your comment Kevin.

      I think 83 per cent is a high figure in terms of difficulty finding local labour. 457 visas are also used by companies who transfer employees across regional and global workforces. For example, if a company like PwC or BHP has a new contract, it is likely at least part of the team who works on that project or contract is working elsewhere for the company. These jobs are not intended to be looked for locally but to enable to company to operate in a more international labour market. This was also one of the original intentions of the 457 visa when recommended in the original Roach report of 1995.

      Sorry for not including axis labels, that’s my mistake. The x-axis is months in Australia. The issue with it is the graph doesn’t show the number of people in each monthly category. This means each x-axis cohort isn’t weighted the same, causing it to skew. I got the 19% figure from the survey data directly, not this particular graph which accounts for the confusion.

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