We Don’t Know: The backpacker tax edition

I imagine everyone is sick of the backpacker tax. This will certainly be the last time I think about it in awhile. But instead of focusing on the tax itself, I want to show a couple of examples of what we don’t know when migration policy decisions get made here in Australia and the consequences of this.

We don’t know where backpackers live. There are about 135,000 backpackers in Australia at the moment and we simply don’t know where most of them are (the exception are people who apply for a second visa and need to show their postcode). This isn’t necessarily a bad thing in itself but gets overlooked when making decisions about tax. Income tax can be influenced by the geography of the labour market and not being able to understand this broader context constrains the capacity to inform policy.

More importantly, we don’t know where, how much or for what price backpackers work. This is very important for income tax policy. What we do know is a very high level picture about average incomes ($13,300 per person) and we know limited aspects of industry coverage, again only related to the second visa application (as this is restricted to construction, agricultural and mining). There was a survey back in 2008 showing some industry and occupational information however the labour market has changed since then, as have migration trends. Basically, we don’t know much at all. This means any questions about tax incidence or the potential effects on labour participation are going to draw a blank. Would a higher tax rate actually make Australian workers more competitive as backpackers withdraw their supply? I didn’t see this argument mounted during the debate but I can imagine a set of circumstances in urban Melbourne and Sydney where this is the case. The farmers might suffer but a 19 year old kid who isn’t studying or working may find it marginally easier to enter the hospitality or retail industry.

We don’t know why backpackers come to Australia. It’s probably a mixture of a bunch of things: holiday, lifestyle, work, future residency options. The list goes on and many individuals will have different reasons. This can have a big effect on policy decisions. For example, the Productivity Commission found about 20 per cent of backpackers who arrived between 1991 and 2014 ended up with a permanent visa. These people will be motivated very differently from genuine tourists, with a number of labour market effects (and tax implications) to follow. I think it is plausible to think people seeking residency are more likely to work cash in hand and accept sub-standard working conditions than those just having a holiday. The much bantered discussion about ‘competitiveness’ and New Zealand’s tax rate doesn’t much matter if Australian minimum wages are substantially higher than alternatives and people are choosing Australia for the beaches instead of the tax rate. I imagine this last point is pretty important in the behavioural decision making process for many potential backpackers thinking about coming to Australia.

Getting into the weeds, we don’t know how many backpackers claim their superannuation when the leave Australia. This is despite an integral part of the final backpacker tax compromise incorporating changes to the superannuation rules and fees for backpackers. How can we make sound fiscal projections if no-one knows what the answer is to these questions? The ATO provided evidence to the Parliamentary inquiry into the legislation and could only say about 100,000 temporary migrants withdrew their super each year. These could be students, 457 visa holders, backpackers or even New Zealanders. As about 220,000 backpacker visas have been granted in each year recently, who knows how much revenue the Government will end up due to changing the superannuation withdrawal fee from 95 per cent to 65 per cent? #WeDontKnow

We don’t know how many backpackers want to come to Australia (but we know more do). If we are worried about the labour market in regional Australia, there are other options to encourage more people into the backpacker program. The following countries are ‘maxed out’ against their cap for the number of backpacker visas available: China, Chile, Argentina, Spain, Thailand, Poland, Portugal, Slovakia, Slovenia, Turkey and Malaysia. These last two have a combined population of over 100 million people and are only able to send 100 people each year to Australia under their respective agreements. Instead of fretting about tax rates which may or may not have large implications, opening up some of these tiny country caps would almost certainly attract more backpackers to Australia. A proportion of these would then head out to regional Australia. And after all, attracting more backpackers to Australia seems to be a primary goal of the Government judging by Scott Morrison’s post-vote Twitter activity:

morebackpackersforoz

Showcasing Coalition social media posts seems like an appropriate place to end. Hopefully we have all seen the last of the backpacker tax for sometime and if the most this stale debate has achieved is create a world-class example of poor policy process, then maybe some future government in the future can look back and not make the same mistakes.

Move over security: economic and cultural immigration may prove difficult for the Turnbull Government

Rightly or wrongly, since 2001 immigration policy has haunted Labor. But things could be changing quickly.

Despite the best efforts of establishing a militarised Border Force, the emerging immigration debates in Australia are not about security. They are economic and cultural, and contain an entirely different set of propositions and implications. If Peter Dutton has grasped how important this is for his portfolio, his actions and words fail to show it. On economic immigration matters, the Coalition will be permanently chasing Labor. Even worse, on cultural immigration, the Coalition is stuck in the middle of two competing strands, where a foot in both camps approach will fail to please anyone. Malcolm Turnbull is in a genuine pickle.

Peter Dutton cannot out ‘Australia First’ Bill Shorten on the intersection of migration and jobs. He doesn’t have the support in caucus. More Coalition members than Labor members believe immigration is substantial economic positive for Australia. He doesn’t have the natural Liberal constituency of big business as they despise jingoism being bad for business. The Nationals know economic immigration is the last big hope for many towns in regional Australia even if they have never fully embraced it publicly. And in general, people don’t believe the Coalition are better for their job future than Labor, even if they are seen as better for managing the economy overall. After all, the Labor party is named after workers.

All of this will constrain policy options and rhetoric for the Coalition. The Government simply will not be able to get ahead of Shorten, who will always be willing to go a step further. For example, if the Government reduced the permanent migration program in the next Budget, Shorten would move to cut it a bit further. He knows Chris Bowen and Jim Chalmers can clean up the mess later if they win government in the future. On economic immigration – 457 visas, international students, backpackers – Dutton is chasing Shorten, who will not let up easily.

This has serious implications for the Coalition Government. Instead of leaking the names of employers who use visa programs under the Labor Government to the Daily Telegraph as happened this morning, Turnbull and Co should talk about anything else. Don’t feed the beast as keeping the spotlight on temporary migration is good for Shorten, almost regardless of the content. Internal Labor research must light up on the issue of foreign workers. This is the same reason Tony Abbott said no to the Malaysia Solution, drawing it out and maintaining the focus on asylum right up until the 2013 election. Peter Dutton should not say the words ‘457 visa’ for two years and he certainly shouldn’t start proposing alternative policies in response to Labor. Malcolm Turnbull should talk about literally anything else: the budget deficit, infrastructure, regional perks and security policy. Allow events help push the conversation away from this stuff.

Unfortunately for Turnbull, the problem is even worse for cultural immigration. The chilling effect of One Nation on the LNP in Queensland and the Coalition federally is yet to fully play out. Yet already there are ominous signs for the Government. Multiculturalism is heavily supported by the public and despite what you read from Essential, most people don’t want an outright ban on muslim migrants. The geographic concentration of Hanson support in traditional Coalition strongholds means she can freelance on these questions without proper opposition. Again, regardless of his efforts, Dutton cannot out pace Hanson to the right because of institutional Liberal policies and a broader cross-section of electoral appeal. You could see David Coleman, the Member for Banks, appear very uncomfortable when Dutton was speaking in Parliament about second and third generation Lebanese Australians. Reconciling a single approach to questions of cultural immigration with regional Australia and suburban marginal seats is very difficult.

The Coalition are literally caught in the middle where everyone from the far-left to the centre-right support multiculturalism and a non-discriminatory migration policy while the fringes get excited about the prospects of returning to White Australia. I don’t know what the solution is but again, I would guess it starts by not feeding the beast. Entering into a debate on the merits or otherwise of muslim migration or trying to highlight bad settlement outcomes (see this parliamentary inquiry) will only egg on the far-right. Whatever public rhetoric is used or policy suggestions mused about will not be enough to sate appetites. On the weekend, a small possibility was flagged: the introduction of new citizenship requirements with stricter English requirements. I don’t see how this does anything to aid the Coalition as opposition from Labor will mean Senate difficulties, which in turn gives One Nation a higher platform, allowing them to own the issue and move forward. That’d what being in the middle is all about and to deliberately enter into self-defeating public debates cycle must be avoided at all costs.

Finally, everyone knows Malcolm Turnbull doesn’t believe either the case for ‘Australia First’ nor promoting cultural assimilation. Trying to fight these big public debates without your Prime Minister onside is exceedingly difficult and will only highlight division and confusion. Tackling these issues head on will attract more attention and provide more incentives for Labor (economic migration) and One Nation (cultural migration) to keep hammering away in different areas of the electorate. This is the difficulty with more populist approaches to migration policy. None of this is necessarily good for migration policy. In fact, much of this may have serious negative effects. But at this stage, that’s largely by the by as the media and political observers are fixated on the machinations instead of the policy outcomes.

My battle with the Australian Border Force Act: A small, but worrying, example

Update: Since this post was published, the Department have reviewed my initial request and have provided the data. I appreciate the Departmental staff who reached out and initiated this off their own bat as I did not request any type of review activity. 

There are hundreds of interesting questions to ask when someone moves from one country to another. For as long as I can remember, Australia has been one of the best places to explore migration. There are two reasons for this: We welcome immigrants and the government and bureaucracy collect and make accessible robust migration data.

They are not household names but people like Graeme Hugo, the late Paul Miller, Deborah Cobb-Clarke and Peter McDonald have shaped global debates on migration. A new generation of scholars are now examining big, important questions about the intersection migration and work as well as any number of other themes, many of which will help us as a society in the future. Yet this tradition depends on access to Australian migration data from a number of sources, including the ABS, the Department of Immigration and various surveys funded by the government.

Until I received the following email from DIBP, I hadn’t realised just how uncertain this type of knowledge will be in the future:

“The data that was provided to Department of Agriculture was done so for a specific purpose in line with the Australian Border Force Act 2015 (ABF Act).  Unfortunately your request does not comply with the ABF Act and we are therefore unable to provide the requested data.”

I didn’t receive this email because I asked for something controversial. The reason this email stopped me in my tracks was I asked for something which was already largely public.

About a month ago I stumbled across the below map in a Senate submission to the Working Holiday Reform legislation.  The Department of Agricultural and ABARES had produced the map to help show where backpackers worked to gain their second visa. This was an important part of a big public debate about the merits or otherwise of the backpacker tax (as I write this legislation has just been voted on in the Senate, amended and defeat for the government).

I’d never seen this information before and I’m interested in exploring it further as there are decent labour market implications stemming from backpackers and the results may shed light on employment and migration trends. As you can see below, the Department helpfully documented the top 10 postcodes where backpackers worked to become eligible for their 2nd visa:

screen-shot-2016-11-24-at-2-48-38-pm

I get teased a little bit about the number of emails I send asking for stuff. But I’ve found you normally don’t get something unless you ask for it. So using the Department of Agriculture’s handy feedback form on their website, I asked for the data showing how many 2nd working holiday visas have been granted for each postcode.

The top 10 postcodes are already public but as the map shows, there is lots of other information about what you might term a ‘long tail’ of postcodes. One reason I wanted this information was to match up major industries in these postcodes and understand what type of work these people were doing. It would also be good to go back a couple of years and compare trends over time, whether employment activity shifts over time. All sorts of things were possible.

One thing I’ve learnt in the past is don’t ask for too much, too soon. In addition, there is always a potential privacy consideration when examining immigration data. For these reasons, I limited my request to the list of postcodes and number of second visa grants in each. That’s it.

This ensured I excluded information about individuals like age and country of birth which may compromise privacy. I also assumed if the number of backpackers in a postcode was less than five, it would be shown as “<5” as this is standard practice for other types of immigration data.

ABARES let me know they had passed the response to the Department of Immigration and Border Protection. After following up with DIBP twice, about a month after my initial request, I received the above email which prompted a series of internal questions roughly in this order:

  • You have to be f****** kidding me?
  • If the data was provided to the Department of Agricultural with the knowledge it would be at least partially public, why isn’t the same data available but in a different format? i.e. a spreadsheet not a map based
  • How does my request not comply with the ABF Act? What’s in the ABF Act which prevents highly aggregated data being shared to better inform our understanding of relevant public debates?

And finally: why couldn’t someone work out a way to comply with the ABF Act and still provide me with data?

From what I can work out, the relevant part of the ABF Act is Part 6 pertaining to secrecy and disclosure provisions. Section 44 outlines ‘Disclosure to certain bodies and persons’ and subsection (1) is about ‘protected information that is not personal information’ disclosed to “an entrusted person”. This is the same process causing serious consternation among health professionals working in detention centres.

I am not “an entrusted person”. According to subsection (3), the Secretary of the Department has authority to designate this. Perhaps I should email and ask? Again from what I can work out, it looks like the person who created the data made a record now classified as protected information. This information is then automatically restricted to people who are classified as entrusted, including other bureaucrats, such as those in the Department of Agriculture.

Yet this begs the question. If the Department of Agriculture can publish a partial piece of a protected record, why can’t the Department of Immigration and Border Protection?

All I know is this stinks. And while this concern does not rank anywhere close to those faced by doctors and nurses who work in detention centres, the slow corrosion of sharing information caused directly by this legislation will have massive costs to how we understand migration in Australia.

Think about the very reason we’re even having a debate about the backpacker tax. Not enough people knew about immigration policy, trends and behaviour. The wonks at Treasury didn’t do any modelling on the labour market implications and the politicians in ERC and Cabinet – including the National Party – had no idea about what this might do to their own constituents. Outside the government, when I did a quick ring around in the days after the 2015 budget, the peak industry groups for horticultural didn’t think the backpacker tax would be a big deal. If I was a farmer, I’d rip up my membership. People should have known from very early on this would have real effects in the labour market as I wrote 10 days after the Budget. The fact no-one stopped or modified the tax before it got out of control shows we are working off a low base in terms of awareness about immigration.

The Australian Border Force Act is only going to make that more difficult. Hiding basic, aggregated data behind this legislation will increase future episodes of poor policy making and limit the ability of Australia to set an example to world for immigration. Our Prime Minister is fond of musing on our successful multicultural society yet alongside this decades of learning that has shaped communities, policy decisions, funding allocations and everything else under the sun.

I have no idea how I’m meant to take part in this process if access to information is restricted to bureaucrats and ‘entrusted persons’, who at the moment don’t seem able to analyse worth a damn, judging from the quality of public debates we are having. I don’t expect a personalised service with open access to immigration data. But I expect the public service to serve the public interest, especially when the matter is straightforward, uncontroversial and has the potential to inform relevant public debate.

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?

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A contrast in styles: Malcolm Turnbull and Peter Dutton

Here is Peter Dutton, Australia’s Immigration Minister, talking about diversity. From the Guardian:

“If there is a particular problem that people can point to within a certain community, and we’re talking about a significant number of people in that community who are doing the wrong thing, then clearly mistakes have been made in the past,” he said.

“The reality is that Malcolm Fraser did make mistakes in bringing some people in in the 1970s and we’re seeing that today. We need to be honest in having that discussion.”

Let’s go back nearly 12 months to the day, when Malcolm Turnbull launched George Megalogenis’ book at Parliament House. Also from the Guardian:

That openness and multiculturalism based on mutual respect is what has defined most successful societies in the world.

When was Istanbul or Constantinople at its greatest? When it was it’s most diverse.When was Alexandria at its most successful? When it was its most diverse.

When was Smyrna at its greatest? When it was most open and diverse?

Diversity is our strength, our greatest asset as the publisher said is not the rocks under the ground but it’s the people that walk on top.

Multicultural Australia is a remarkable achievement and we should treasure it and hold it dear.

Everyday Peter Dutton remains the Immigration Minister undermines this sentiment and threatens Australia’s social cohesion.

I’ve been thinking a bunch about Trump and Brexit and what it all might mean for Australia. One thing we must remember is that Australia is fundamentally different, at least politically. The marginal seats which will swing the next election are not Michigan, Ohio and Wisconsin but include Banks (born overseas 46%), Chisholm (47%) and Petrie (29%). Combine this with compulsory voting and appealing to nativist, jingoistic sentiment can only win over so many votes. Where is Ewen Jones when you need him?

No-one should ignore the concerns of people who have been battered and bruised by the economy. We must try to better understand who motivates discontent. But shouting about Africans and Muslims is not the way forward. Scaring people about 457 visa holders without a proper plan to discuss the underlying issues is not appropriate either. Our Prime Minister knows this and he should be held responsible for Minister Dutton given this is a clear pattern of behaviour.

Articles published elsewhere: 457 visas, seasonal workers and temporary parent visas

I’ve got three pieces published elsewhere today.

I argue in Crikey Bill Shorten and Labor are taking the wrong approach to ‘Australia first’ with their proposed regulatory changes to the 457 visa program (full article below the fold as it is paywalled). Governments should be using price-based mechanisms combined with more enforcement activity if goal in Australian employment.

I now spend most of my work life at the Development Policy Centre, based at ANU. Here is a short update on how the Seasonal Worker Program grew nearly 50 per cent in 2015-16 and why this is a good outcome.

Finally, I write with Peter Mares and Anna Boucher in the Guardian how the proposed Temporary Parent visa threatens to create a permanent second-class of Australian residents. Despite the good intentions of bringing together migrant families, this is a dangerous precedent to establish and should be reconsidered.

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Is our immigration system groaning under an influx of new migrants? Some quick thoughts

I’m unsure what I think about a Trump victory but already it is shifting the norms around immigration here in Australia. I need more time to think about it but here is a quick example. Today in the Australian, Judith Sloan has an op-ed titled, ‘immigration system is groaning under influx of new migrants’.

Sloan writes regularly about immigration, she is knowledgable and worked on the Productivity Commission’s 2006 inquiry in migration. In this piece she makes a number of decent points but I think draws much too heavily from what is happening overseas as her main argument. She fails to show what has changed and instead leans on what she thinks (which shouldn’t be dismissed from someone who knows what they are talking about).  For example, she asks what is wrong with Australia’s immigration system and lists:

  • Too many occupations available for employers to sponsor 457 visa workers (the number is about 650, or equivalent to about 55% of the labour market);
  • Poor English proficiency standards;
  • Uncapped international students and working holiday migrants who transition to permanent residency too easily, including by using the family program (Table 7.02 shows 4.8 per cent of international students who move onto another visa select a Partner visa, a total of 6,329 – down 16.4% from 2014-15);
  • Persistently low employment rates of humanitarian migrants; and,
  • Low prices for parent migrants, who on a per capita basis are expensive for the government.

She concludes:

So before our politicians get too smug about our immigration program and contrast it with the divisiveness induced by immigration in the US, we need to face up to some hard cold facts.

Arguably, our program is no longer working in the national interest. Rather, it is working to favour particular groups and to buy votes in certain electorates.

My guess is that more people are beginning to appreciate this fact, particularly as they bear the costs of congestion, loss of amenity and safety, and declining housing affordability. Canberra insiders need to acknowledge this and start to remedy the deficiencies.

You should read her column in full. There are a number of important take aways. Yet my major concern with this analysis in when you compare it to a column she wrote less than 12 months ago, ‘Brexit Remainers could learn from Australia’s immigration policy’, where she concluded: