Where to start? Employers, migrants and the 457 visa

The public debate about immigration policy isn’t going anywhere. This means it’s time to better untangle some different aspects of the conversation. What is the appropriate starting point? What can governments actually change? What should the boundaries of the discussion be?

Three observations to begin:

1) There is concern about immigration today however it is not new or more significant than it has been in the recent past. Please don’t throw Trump, Brexit and Hanson into the same basket when we are talking about proportions of electors equal to 46 per cent, 52 per cent and 4.3 per cent.

2) This does not mean anti-migrant sentiment cannot grow quickly in the future for any number of social, economic or security-related reasons or political events.

3) Raising the political stakes of immigration and failing to address underlying concerns may exacerbate negative sentiment, with potentially large unknown consequences.

Putting Peter Dutton’s comments about second generation Australian citizens to one side for the moment, the 457 visa and temporary migration debate is the marginal policy discussion more likely to shift political attitudes in the period leading up to next election. The racist vote is often stable, proportionally small and won’t swing the seats critical to making up the next government (the Senate is a different story). The Coalition holds 11 seats against Labor by less than 2 per cent and these seats are a mixture of outer suburban and regional electorates, exclusively located in QLD, NSW and Victoria. In the end, issues appealing to these people will drive the public debate as well as political responsiveness to events.

From my observations about immigration policy, race and cultural discussions resonate strongly in more rural and inner-city geographies whereas employment concerns are more prevalent in suburban and regional areas. These distinctions are not black and white by any means. Instead think of them as points along a continuum. When you combine this with the likely marginal seats for 2019, appealing to the intersection of migration and employment, not migration and race/culture, is a better bet (noting asylum policy is a different kettle of fish entirely). This is good news for Labor and something the Coalition backbench should take note of. But this alone will not determine the success or otherwise of shifting voters via immigration policy. The saliency of issue is the critical factor. Despite the best efforts of the tabloids and Peter Dutton, asylum policy was not salient at the 2016 election. Incidentally, this is why you should read Essential polling with a heavy dose of salt. People are asked binary questions but they don’t have any ability to prioritise their answers.

There is strong evidence to support the why immigration policy should be considered in conjunction with employment at the national level, as concern about immigration being ‘too high’ largely tracks the unemployment rate:

scanlon2016Source: Scanlon Foundation, Mapping Social Cohesion 2016.

If you can accept people’s attitudes to immigration are shaped by economic indicators more so than racial indicators (but not excluding these), the next step is working out where the policy incidence falls for government decisions about immigration: on the migrant or other actors?

Say a recently unemployed person believes a migrant has taken their job. As demonstrated above, more people probably think this as unemployment rises. It’s easy and natural to see why people think this way. An individual migrant can be identified as the part of the equation which has changed: I had a job, now I don’t but this migrant does. What gives? If you remove the migrant, the equation changes and Australian employment rises. Yet considerable effort must be expanded to show this causal process starts with by identifying the wrong actor. Employers and labour market norms – not individual migrants – are an order of magnitude more important for employment trends and hiring decisions.

There are two sides to a 457 visa. A employer demands a worker (labour demand) and has to nominate a migrant (labour supply). A migrant cannot gain a 457 visa without a sponsoring employer. Within the broader labour market, the employer nominally sets the terms of the relationship: what occupation will the person work as and what will the wage be. This is why politicians and bureaucrats refer to Australia’s immigration policy as ‘demand-driven’. The economic ups and downs will push and pull the number of migrants as employers in the labour market demand more or less workers. Tighter labour markets will see more migrants while in times where capacity is slack, fewer migrants will be hired. As an example, the previous Labor Government oversaw the largest population of 457 visa holders but this wasn’t a deliberate strategy they came up with. It was passive Employers hired more workers as the economy recovered after the GFC and as more construction and mining workers were employed in the mining boom. Today, the number of 457 visa workers are about 30 per cent lower than their peak, reflecting lower labour demand. There are just as many people around the world who want to be sponsored by Australian employers – perhaps even more so than five years ago – however the catalyst for them being hired in Australia is not as common, meaning it doesn’t happen as regularly.

With these basic operations in place and dictated by policy decisions, it is clear the focus of governments and immigration policy should prioritise employers and their role in the labour market. This applies to other immigration policies as well. Think about how international students are limited to 40 hours per fortnight work and how this is used by employed as a tool to exploit and threaten workers. The more I think about this, the more I believe governments are making rules and regulations on the wrong part of the equation – the migrants themselves – and this is leading to greater exploitation and undermining labour market standards. By avoiding employers and labour demand, we miss the big picture for what appears obvious but is anything but.

Despite this, Peter Dutton stuck to this approach recently took when he proposed new regulations which restrict the movement of 457 visa holders. Dutton focused on labour supply when he restricted how long a migrant could go without a job, reducing the time from 90 days to 60 days. He didn’t refer to employers or show he understood the dynamics at the heart of temporary migration programs. As others have pointed out, his changes only give more power to malicious employers and will increase exploitation on the margins of the labour market. While Dutton claims this helps Australian workers, the complete opposite is more likely. The less power a migrant has in their job, the more employers are able to undercut Australian workers and labour market norms.

This brings us to Bill Shorten’s proposals also announced last week.The proposals would increase job advertising by employers before hiring migrants. I wrote at the time I don’t believe these proposals will be effective at getting more Australians into employment. However at least Shorten has identified the priority is employers and not migrants themselves.

While Shorten’s language is too loose for my liking on the link between immigration policy and Australian workers, the intention of the policy is to change employer behaviour. He should stay away from broad statements which leave room to blame migrants and zero in on employers who do the wrong thing while showing concern for both Australian workers who are being dudded by employers and migrants who are exploited. Additional policy options to target employers include: the occupations they are allowed to hire, the price they pay to participate in the program, the monitoring they should undergo. Tinkering with rules for migrants, like the level of English language they should have or the qualification they hold, may have small effects but these pale in comparison to addressing the underlying motivations of employers who participate in the program.

Regardless of the various policy proposal, it is worth asking whether focusing exclusively on the regulations governing 457 visas will actually have any effect at all on the broader labour market. If all of a sudden the 457 visa disappeared, would employment actually increase? This is unlikely. The average 457 visa salary is above full-time average weekly earnings, meaning in general these workers are skilled. This shouldn’t be surprising as the occupations for 457 visa holders are restricted to focus on the upper half of the labour market. We know unemployment and underemployment is more likely for people without formal qualifications and who have experience in occupations that do not match up to most 457 visa holders. And at about 0.8 per cent of the labour market, a crackdown on 457 visas is not going to drive tens of thousands of additional employment outcomes. Even if there was systemic rorting across every occupation – which there isn’t – the numbers simply aren’t there. This said, there are likely a handful of occupations where employment would improve: Cooks, entry level hospitality management positions, and some mid-skilled construction occupations. Combined these occupations make up about 10 per cent of the program.

At the end of the day, if people are concerned about their job, migrants on 457 visas are not going to change their concern. Drawing attention to the program is a short-term sugar hit. There is danger that this approach may stoke further anger if a range of changes are made and people still feel aggrieved. Modelling commissioned by the Productivity Commission plausible shows all of the immigration to Australia between 2001-11 did very little to average wages and total employment at a national level and even when broken down into more discrete compositional groups, there is little to get excited about.

On the other hand, under the right conditions, employers are well placed to hire more Australians or increase their hours and wages. Policies which promote labour demand, promote skill development and ensure basic expectations are met, like getting paid on time and having invoices actioned promptly, are much more likely to assuage anger about employment. This is why I was pleased to see the concept of ‘Security of Payments’ pop up in relation to the ABCC bill. While Labor took this policy to the last election, very little was made of it. Instead, it looks like Xenophon and Hinch are getting out at the right time and promoting practical measures to target potential voters, people who might feel a bit aggrieved by migrants. Reducing the saliency of migration but promoting other economic and employment policies is a necessary outcome at the moment.

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