Alan-Tudge
Acting Immigration Minister Alan Tudge

The flood of migrant workers that has helped sustain the long economic boom has all but dried up following the COVID-19-induced closure of Australia’s borders.

Migrant numbers are expected to drop by 30% this financial year, and by 85% in 2020-21 (compared with 2018-19).

With the economy officially in reverse and the ranks of the unemployed and underemployed swelling, there are some who say the migration slump is no bad thing.

In a recent opinion piece, Labor’s immigration spokeswoman Kristina Keneally argued that although migration had played a key role in Australia’s economic prosperity, in recent years a “cheap supply” of foreign workers had been taking jobs from Australians and undercutting wages.

“Our post-COVID-19 economic recovery must ensure that Australia shifts away from its increasing reliance on a cheap supply of overseas, temporary labour that undercuts wages for Australian workers and takes jobs Australians could do,” Senator Keneally wrote.

The article provoked a strong response, including accusations of racist dog-whistling.

Tudge hits back

In an ABC RN interview the following day, Federal Population Minister Alan Tudge dismissed Senator Keneally’s argument, claiming the government had been “very, very careful” to prioritise Australians and Australian jobs through the visa system.

In making his case, Mr Tudge zeroed in a specific type of visa — the Temporary Skill Shortage (TSS) visa.

He said Australian workers are being protected by labour market testing rules, which force employers to advertise for local workers first before hiring foreigners.

Putting to one side the merits or otherwise of the labour market testing system, Tudge’s claim needs context.

For a start, there are some significant exemptions from the labour market testing rules.

Labour market testing is not required when it would conflict with Australia’s international trade obligations.

That means it does not apply to workers from China, Japan, Mexico, Thailand, Vietnam, Canada, Chile, South Korea, New Zealand or Singapore.

The system has also been criticised as a blunt instrument.

Business groups have argued it doesn’t contribute much towards ensuring the recruitment of Australians first, but it significantly adds to the red tape burden.

On the other hand, unions say the rules are easily flouted, for example by businesses offering unreasonably poor wages and conditions in local advertising to access cheaper workers through temporary skilled migrants.

But more importantly, the labour market testing rules referred to by Tudge apply only to the TSS visa for temporary skilled migrants.

This visa in turn represents a relatively small and shrinking proportion of the total number of visas issued in any given year that include work rights.

The broader point, not really addressed by Tudge, is that the makeup of Australia’s visa system has shifted in recent years, away from permanent skilled and permanent family visas towards other forms of visas that include work rights.

Students shifting the makeup

Temporary skilled visas — the visa class highlighted by Tudge — account for a small and shrinking share, equivalent to 2.8% of the total number of visas with work rights (that is, excluding from the total tourist and business visas and various other miscellaneous visas) in 2018-19, compared to 4.8% in 2012-13.

Permanent skilled visas have also become less important. In 2018-19 they made up about 3.7% of the total visas issued with work rights. That was down from 4.9% in 2012-13.

Permanent family visas have also become relatively less important, accounting for 1.6% of the same total in 2018-19, compared to 2.1% in 2012-13.

On the other hand, the share of student visas has increased significantly, from 9.8% of the total to 13.7%.

While Australia’s visa system has become less permanent and less focussed on skilled migration in recent years, it does not automatically follow that migrants have been taking jobs from Australians and undercutting wages.

Unders and overs

The evidence here is somewhat mixed.

Australian National University economics professor Robert Breunig, who has modelled the impact of skilled migration on employment and wages, says although migration adds to the labour supply, placing downward pressure on wages, it also tends to add to productivity, which has the opposite effect, lifting wages.

Professor Breunig found these two countervailing effects in most cases cancelled each other out.

“We found a big fat zero,” Professor Breunig told Fact Check.

Other studies have reached similar conclusions.

As useful as this analysis is, it does not entirely address the broader question raised by Senator Keneally: have lower-skilled migrants, perhaps on student or working holiday visas, been taking jobs and undercutting wages.

By its nature, this is a difficult question to answer precisely.

As the Grattan Institute’s John Daley put it in a recent paper “Australia is now running a predominantly low-skill migration system”.

“People from this system form a material proportion of the younger workforce,” Dr Daley wrote.

But assessing the impact of this is tricky. Many of these low-skilled migrants might be willing to work for less than minimum wages, and some businesses might even be geared towards paying such wages.

But according to Daley, both employers and foreign workers are unlikely to admit to this, making any data “inherently ropey”.

Where does all of this leave us?

The labour market testing regime referred to by Tudge applies to only a small share of visas issued with work rights. Even then, workers from many countries are exempt to accommodate free trade agreements.

There are also some big criticisms, both from unions and business groups, who argue (for different reasons) that the system is not working as it should.

The bigger question is whether growing numbers of workers on other types of visas with work rights such as student visas could be undercutting Australian jobs.

There is some anecdotal evidence to suggest this could be the case, although it is tricky to answer empirically.

What is clear is that Tudge is not telling the full story by focussing on labour market testing rules to argue that Australian workers are being prioritised.