With skilled migration set to dominate day two of next week’s Jobs and Skills Summit, and talk of some kind of grand bargain over migration and wages, higher migration has taken on a near-untouchable status as one of the crucial policy fixes for worker shortages and skill deficits.
Fortunately, some have remained objective about the pluses and minuses of migration as, in the eyes of business, the panacea for our economic problems.
A new paper from Brendan Coates and Tyler Reysenbach makes for compulsory reading ahead of the summit, especially for starry-eyed Big Australia fans. Coates and Reysenbach systematically explain why more skilled migration may not deliver the results advocates believe it will.
For a start, increasing permanent skilled migration won’t have a major effect for some time, because “three quarters of permanent skilled visas are allocated to people already here on a temporary visa”. It would just mean fewer temporary workers leave — undoubtedly a good thing at this point, but unlikely to deliver a major increase in skilled migrants.
Moreover, increasing migration will add to demand for labour as well as labour supply. They reference data that shows migrants — even those who’ve been in Australia for a substantial period of time — spend significantly more than they earn, compared to long-term migrants or people born here (there’s a separate issue about the impact of migrants on specific industries, but that’s not germane to the overall national demand for labour).
And more skilled migration won’t fix worker shortages in areas like hospitality, agriculture and tourism, which heavily depend on low-skilled temporary migrants like foreign students and working holidaymakers.
Higher migration will also, inevitably, put more pressure on housing. “We estimate that increasing the annual migrant intake by 40,000 a year would, over a decade, lift rents by up to a further 5%. Lower-income renters would be hit hardest.” The only solution to that problem is for governments to get serious about housing supply.
What higher migration will do — and the reason why the government may be attracted to it — is increase tax revenue.
Skilled migrants generate a fiscal dividend because they pay more in taxes than they receive in public services and benefits over their lifetimes. Grattan Institute modelling suggests that increasing the size of the permanent intake from 160,000 to 200,000, and allocating those extra visas to skilled workers, could offer a $38 billion boost to federal and state governments combined over the next decade.
The Grattan team has previously called for improvements to skilled migration, such as dumping dud categories like the Business Investment and Innovation Program, and ditching priority worker categories for skilled visa entry in favour of a wage-based category — an employer could apply for the entry of any worker who would earn over $85,000 a year.
The reflexive demand by employer groups for more temporary migration to fix labour shortages has been a prominent feature of the last 12 months, even as wages growth has failed to shift, reflecting that employers are still refusing to increase wages to attract workers. As the Grattan paper shows, the demand for more migration fails even according to the short-term and self-interested goals of business themselves — and that’s before wider problems such as the increasing global demand for labour is factored in.
Employers may need to reflect on why workers around the world would want to move to Australia when they face wage stagnation and an epidemic of wage theft across the economy. It’s doubtful that kind of self-reflection will occur before next week, however.
