Asking the wrong question: Changing the 457 visa program

A quick comment on the ongoing 457 visa policy changes playing out at the moment. As the government has not provided sufficient detail for a rigourous analysis of the changes, I’ll stick to a more conceptual issue.

(See this piece on the Conversation for a quick reaction to the changes and this piece for the Lowy Interpreter blog for a more detailed discussion)

Many people have said something akin to “Why were Goat Farmers, Judges and Retail buyers (or insert any occupation) on the occupation list in the first place? We have Australians who can do that job.”

This is the wrong question to ask.

At the heart of any sponsored migration program is an employer. Not a migrant. More people will come if demand for workers is high. Conversely, fewer will arrive when demand is softer (such as the period from 2013 to 2017).

The purpose of the 457 visa program is to allow employers to hire from a larger number of people. But the rationale is they will only do so outside Australia when they cannot find someone in Australia. This is why employers are required to pay the same salary to people on a 457 visa, so they cannot undercut Australian workers.

The process of searching for someone overseas is the natural deterrent. It is presumed to be more costly to employers to look all around the world – and then bring that person here via a 457 visa – than hire an Australian. And in most cases, this is true. However with the number of people being hired on 457 visas who are already in Australia, this means the recruitment costs are lower on average than they have been in the past and it is likely increasing numbers of employers now have a much lower cost imperative to look at Australian workers first.

Instead of asking why certain occupations are on a list, we should be asking what will make employers look more closely at the Australian labour market? This means the central policy mechanism should be about employers being pushed to hire Australians via incentives.

What are some examples of these incentives? Fees. Instead of allowing bureaucrats in Canberra to pick and choose what occupations employers can and cannot hire, employers should be able to hire most occupations but be made to pay for it. This will ensure they look to potential Australian workers first.

I have been saying this since about 2012 when I first left the (then) Department of Immigration and Citizenship.  In a report in 2013, I called for a $1,000 fee. Today, it appears this fee should be much higher, say anywhere between $4000 to $10,000 depending on the occupation and salary of the occupation.

This means we can leave all the occupation lists alone, instead of trying to imagine and pick what different employers needs are across a labour market of 12 million people and many different geographic areas and industry compositions, and if an employer genuinely needs a Goat Farmer (or any other occupation), they are able to hire people on 457 visas after they have paid a penalty.

 

Regulating migration in the labour market is really hard. The best solutions are often the most straightforward. Instead, the Turnbull government has opted for a hodge podge of ideas and regulatory tweaks which wouldn’t look out of place in a Politburo meeting to discuss the next five year plan. When was the last time you saw a “conservative” government lean so heavily on a regulatory framework to address this type of issue? Not a single initiative is likely to lead to more Australians working. And I’ve yet to hear a full throated defence from anyone in industry (with the honorable exceptions of KPMG’s Michael Wall and AICD’s Stephen Walters).

The 457 visa changes are about politics and appealing to dissatisfied voters. Picking on foreigners only works for so long until people realise foreigners aren’t really the problem.

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