Australian immigration stamp

In the wake of Donald Trump’s election victory, the Labor Party has outlined a new proposal for the 457 visa program, best summed up as an “Australians First” approach. Based largely on his 2016 election commitment, Opposition Leader Bill Shorten’s proposal has won support from LNP MP George Christensen and One Nation. The only problem is the changes won’t work and might even fuel future dissatisfaction as people are led to believe underlying problems have been addressed.

The outlined changes are regulatory in nature and focus on advertising job opportunities. The Guardian highlights these new rules:

  • A mandatory requirement for all jobs to be advertised as part of labour market testing obligations;
  • A requirement that jobs be advertised for a minimum of four weeks;
  • A requirement for labour market testing to have been conducted no more than four months before the nomination of a 457 visa worker;
  • A ban on job advertisements that target only overseas workers or specified visa class workers to the exclusion of Australian citizens and permanent residents; and
  • A crackdown on job ads that set unrealistic and unwarranted skills and experience requirements for vacant positions, with the effect of excluding otherwise suitable Australian applicants.

“Labour market testing” is the process of forcing employers to advertise their vacant positions before hiring a migrant. This requirement also exists in the Seasonal Worker Program but does not apply to international students and working holiday makers. There were 94,890 sponsored 457 visa holders in Australia at June 30, 2016, down 9.4% from the year before. This compares to about 400,000 international students and 130,000 working holiday makers.

In Queensland and Western Australia, states experiencing a softer labour market in the wake of the mining boom, the 457 visa program has reduced much more quickly than nationally. New visas granted in 2015-16 were down 15.8% in Queensland and 27.6% in Western Australia. This indicates activity in the 457 visa program is primarily driven by labour demand, with governance and regulatory measures secondary factors.

Starting in 1996, shortly after the first Howard government’s election, the 457 visa program has an “on again, off again” history with labour market testing. During the first five years of the program, some positions required advertising while others did not. In 2001, advertising was mostly abolished, except for the handful of low-skilled positions available (see here for a history of the 457 visa program). However in 2013, the Labor government with Brendan O’Connor as immigration minister and Bill Shorten as employment minister reintroduced labour market testing for most trades-level occupations. Today between a quarter and a third of jobs under the 457 visa program require employers to formally advertise.

The central problem of labour market testing is enforcement. Most employers are disposed to act within the rules. They will generally advertise jobs regardless of being mandated to do so as it is in their best interest to do so. For larger employers, especially, the risk of being barred from using the 457 visa program outweighs the motivation to act outside regulations and ignore Australians.

[Protectionism turns its ugly gaze on 457 visas]

However, employers that specifically hire migrants to underpay them, deliberately avoiding Australian workers, will not be worried by the process of advertising positions. These employers have no intention of hiring Australians but will act within the rules to access the 457 visa program. This is the dilemma of labour market testing. It penalises those who are doing the right thing while failing to promote Australian employers or prevent exploitation. Even with an army of public servants to enforce a “crackdown on unrealistic and unwarranted skills”, this process-based approach will be ineffective and productivity sapping for most employers. Any employer with malicious intent can get around these types of regulations with a good migration agent.

If the policy goal is to promote Australian employment and reduce migrant exploitation, there is a more obvious method to achieve this. A price-based framework, where employers are forced to pay a larger fee to hire a 457 visa holder will better identify a genuine skills shortage. With base salaries averaging $88,500 and a visa being valid for up to four years, employers are only required to pay $330 to use the 457 visa program. This is too low and allows unscrupulous employers to satisfy paper-based forms while ignoring the objective of ‘Australian First’.

A fee equal to 1% per year of the nominated salary would better motivate employers to consider Australians before migrant workers. For example, a cook hired on the minimum salary threshold of $53,900 for two years would cost an employer $1078 instead of $330. This would double if hired for four years. Prices motivate businesses much more than administrative paperwork, particularly those employers who seek to exploit migrants and avoid Australian workers. If you have to pay an additional $700, you are marginally more disposed to looking for an Australian. The higher the price, the more disposed you will be.

Of course, this would apply to all employers, including the vast majority who do the right thing. There are more than 30,000 employers who use the 457 visa program. However, if the political class agree — and they do — that Australian workers should be given first priority at employment before migrants then a price-based approach will be much more effective than a paper-based regulatory approach.

Finally, the 457 visa program has never been subject to rigorous enforcement. A lack of Immigration Department inspectors, combined with limited resources of the Fair Work Ombudsman, means most employers never even face a compliance activity. It’s no wonder there are employers willing to risk breaking the rules when they do not need to worry about the consequences. A new price for hiring 457 visa workers would raise anywhere between $300 million  to $600 million over the four-year budget estimate period. This revenue could be used for a number of things, including additional inspectors and compliance officers.

Throwing more regulations at employers will not work. This alternative approach is more likely to succeed and will demonstrate governments have the capacity to effectively manage immigration programs instead of vague promises about Aussie jobs.