You’ll never believe this one neat trick to fix the 457 visa program

Crappy headline aside, I wrote this op-ed during the week but couldn’t get it placed. I was prompted when David Crowe asked Bill Shorten what he thought about raising the price of 457 visas during his National Press Club address on Tuesday.

Since this is my blog, I’ll add some context: I’m a big supporter of the 457 visa program. But it’s crucial to maintain public legitimacy in the program. At the moment, this isn’t occurring as a small number of employers are exploiting design flaws for their own profit. As I wrote for the Lowy Institute earlier this week, now is not the time to turn away from immigration. But that doesn’t mean we can ignore issues and seek to improve the status quo.

tl;dr Employers respond to prices not paperwork

“Increasing public scepticism towards the political establishment will shape Australian politics in 2017. How immigration intersects with Australian jobs will be one of the most prominent public debates informing this discussion as One Nation continues to gain legitimacy, providing an outlet for anti-migrant sentiment.

Despite being in decline, this means talking about 457 visas. Since the end of the mining boom, the debate over 457 visas has been piecemeal. We’re stuck in the worst of environments: unnecessary regulation burdening good employers while failing to prevent exploitation, and by extension, undermining wages and conditions.

These visas attract lots of rhetoric and politics however underpinning the visa program is a bipartisan consensus. Both major parties agree the program is an important part of Australia’s immigration framework and both also agree Australians should have preference in the labour market. This consensus is the best tool to address the latent anti-migrant sentiment found on the political fringes.

The simplest and most effective policy change is to raise the price employers must pay to hire a temporary skilled migrant. Instead of a new set of regulations which malicious employers avoid with ease, higher fees are a stronger deterrent and impossible to avoid.

I used to believe about 2-4 per cent of people working on a 457 visa were subject to exploitation and poor wages. A proportion like this can be addressed through enforcement. However over the last couple of years, in a labour market unable to create large numbers of new full-time jobs, the power of temporary migrants diminishes compared to their employer and they become willing to accept lower standards. Existing wages and conditions are undercut when this happens, particularly in industries reliant on award wages such as hospitality and retail.

At the moment, it costs $330 for an employer to hire someone on a 457 visa. This is equal to 0.4 per cent of the average full time wage in the labour market. But when you consider employers can nominate a worker for up to four years, the effective cost is often less than 0.1 per cent of an average salary.

This price is nowhere near high enough to deter employers who are willing to break regulatory standards to profit themselves. Deterring these employers up front instead of trying to police them after the fact is likely the only method to create a more robust temporary skilled visa program. A significant increase in the thousands of dollars per nomination is necessary. While an employer with a genuine vacancy will pay a higher price to employ a skilled worker, a malicious employer looking to save money on a wage bill will think twice.

In addition, employers should pay more to be certified as a sponsor. At the moment the price is only $420. From past research and evidence, we know small and medium businesses are more likely to exploit and underpay temporary skilled workers than large companies. Substantially raising this fee to ensure employers are using the program on a needs-basis, not as a process to undermine the labour market, will improve workplace standards.

Industry will ask why they should shoulder this burden when the vast majority do the right thing, in both the spirit and the letter of the law. Unfortunately the business establishment has been missing in action in debates about temporary migration. They have failed to clean up industries rife with exploitation – of Australians and migrants alike – and show no willingness to come up with alternative solutions to soothe public sentiment. As a trade-off, and recognising the vast majority of employers do the right thing, any price rise should be accompanied by the removal of ineffective regulatory settings such as labour market testing and the existing training requirements. These settings have never pushed an Australian into the labour market and represent the worst of a technocratic, administrative approach to tackling the issue of migrant exploitation in the labour market.”

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