The bizarre debate on 457 visas


Why is the Prime Minister pursuing a policy of restricting the 457 skilled worker visa scheme?

As I note here, the scheme is likely to be a net job creator. One of Australia’s leading demographers, Peter McDonald has noted the lack of rigour in the numbers the Prime Minister is using. The IT industry has noted that if it wasn’t for overseas skilled workers there would be no IT industry in Australia – despite these same workers being a focus of the PM’s attacks. The claims that we should train young Aussies to fill the roles is silly (hmmm – five years training – just hold the job guys) and hypocritical (hmmm – now which federal government funds the universities who train IT graduates, engineering graduates, etc).

So why is the PM vigorously pursuing a policy change that will destroy wealth for Australia? Presumably because it is an election year and the government believes that this sort of campaign will win votes. Presumably it is aimed at the ‘blue collar’ voters who labour is ‘bringing back’ to the fold.

And, well, they are the experts in politics, not me. But I hope this type of beggar-thy-country politics does not work. I hope the electorate will see through it. Because if they do not, with seven months of election campaign left, God help us! What other wealth-destroying policies will be pursued before September?

9 Responses to "The bizarre debate on 457 visas"
  1. Just because a particular government program makes us in aggregate wealthier, or “creates more jobs”, doesn’t necessarily mean that it’s in everyone’s interest.

    Even if it is a net job creator and a net generator of wealth, it is entirely possible that 457 visas suppress wages in certain parts of the labour market.

    Distribution of costs and benefits matters; it should matter to policymakers, and it certainly matters to voters.

    • But Robert – who loses? If the job would not actually be filled then who is the loser by filling the job and having more expenditure throughout the economy? Perhaps you could argue that ‘housing prices’ will rise due to extra demand by 457 visa holders, but they are small in number and dispersed so any loss would be small to trivial. That is why I find the debate bizarre – there are winners and it is hard to find a loser.

      • Stephen, I would have thought the losers were obvious..

        If the pool of labour able to perform a particular in-demand skill is restricted to a small pool of domestic workers, the price for those with those skills goes up. You see it in IT all the time, when people with the hot skill of the day are paid megabucks.

        If you open up to the global labour pool, particularly at the moment when our economy is doing better than most of the developed world and the Australian dollar is high as a kite, the premium for those skills goes down.

        Ergo, if you have in-demand skills and the global going rate for those skills is lower than yours, you lose, because your pay will get pushed down to something closer to the global going rate.

        You might argue that the 457 visa scheme is supposed to ensure that this doesn’t happen. Do you really think the bureaucrats in DIAC understand the subtleties of the highly specialized technical jobs market?

        I’m not suggesting for a moment that that is a slam-dunk case against 457 visas, by the way. But I’m pretty sure that there are Australians who would benefit individually if certain 457 visas were not issued – just as there are companies and employees who benefited from tariffs back in the day.

        So I come back to my original point – even if there is an aggregrate economic benefit, you have to consider who wins and who loses. If it turns out that the losers are low down the totem pole and numerous, and the winners few and higher up, governments should think long and hard about whether to proceed, or what complementary policies they should adopt.

        As for Student, might I suggest that whatever its abstract philosophical merits, his/her view has historically been extremely unpopular with the Australian electorate since Federation, and doesn’t appear likely to change any time soon.

    • On the big picture issue of importing labor to Australia, so what if it ‘suppresses’ wages? Australians earn too much. Australian rates for unskilled labor are ridiculous by international standards. If a Malaysian is willing to work for $35/Hr then why must we pay an Australia of equivalent skill $70/Hr? All this moral crusading about “dey took our jobs” fails to consider why, in the first place, Australians have a fundamental right to inflated wages and able foreigners, who are willing to work for less and by consequence desire the job more, are beyond reach to industries who want to employ them. But this is a separate issue.

      As a matter of immigration policy, the 457 Visa legislation is already protectionist by design. As part of the rules attached to the visa, a company must 1) pay a market rate (i.e. the same rate paid to an Australian worker or more) and 2) can only hire a foreigner if they can’t find an Australian to do the job. It also applies to *skilled labor* according to a list of occupations the government decides are a) skilled and b) in demand.

      The median wage for 457 holders is about 90k and 70% of those granted the visa are highly skilled professionals or managers. So, Robert, what’s the alternative? Faced with a skills shortage for say, surgeons or scientists or IT professionals or whatever, should we give preference to unqualified Australians in the name of the “national interest” ? Then who would I sue for negligence? The Commonwealth or the individual?

      Let’s not for a minute pretend this isn’t about Australian xenophobia, something that has always been a significant social problem here.

      The figures I quote are from government sources. An overview can be found here:

  2. I believe the government makes a distinction between 457 visas (short-term skilled migration, with special treatment of workers under workplace relation laws) and the Skilled Migration Program (long-term skilled migration, with no special treatment). They are arguing (though not clearly) employers are using 457 visas to take advantage of some of the exemptions/special treatment when they should instead be sponsoring employees under the Skilled Migration Program to address our skills shortages.

    • Hmmm. Haven’t seen any arguments suggesting that this is what the government is after. Rather I have seen claims that we are taking away jobs from Australians and that we need to train ‘locals’ to fill the jobs. The first argument is wrong and the second (as I note in the post) is silly. I think your argument has a better basis – but it is not what I have seen the government arguing.

  3. Five main points Stephen.

    So if the scheme is a net job creator, then this must be really terrible for the country of origin of these workers? If these skills are so rare, than someone must be missing out. Would a benevolent global dictator actually force them to stay where they are, especially if they are from a country less wealthy than ours?

    I also certainly disagree with this
    ” The claims that we should train young Aussies to fill the roles is silly (hmmm – five years training – just hold the job guys) and hypocritical (hmmm – now which federal government funds the universities who train IT graduates, engineering graduates, etc).”

    The whole mental model of “university=training=skills and you can’t get a job without first independently cooking the recipe of skills” is flawed.

    I am pretty sure that if the rules said “no temporary skilled migrants” that businesses would train locals to do these jobs in advance of them being required, or find local substitutes, or wages would adjust to make it more attractive to learn the relevant skills. As it stands, allowing 1% of the workforce, which is actually a much high percentage of the relevant professions, to be picked up from abroad when required seems awfully likely to depress wages in that profession. And low wages aren’t going to encourage anyone to take on lengthly study.

    It sounds like you are suggesting that companies can not anticipate their own labour needs a few years out? I’d be interested in the data on exactly what skills these visa holders have that is so hard for locals to provide? Some of the list of qualifying occupations need very little/no formal training at all. Antique dealer? Goat farmer? Public relations manager? Sculptors, Singers, Authors, Journalists, Florists, Gardeners, Arborists, Nurserypersons, Screen Printers, Flight Attendants, Driving Instructors, Footballers, Golfers, Jockeys, Real Estate Agents… It’s basically a free for all.

    I also heartily agree with Robert Merkel that the distribution matters, not just the size of the pie. There are plenty of circumstances where the pie gets bigger as a whole, but because a small number get a larger share, the majority get a smaller share.

    So let’s think about the winners and losers in the with and without 457 case. Without 457 visas we have higher wages in certain professions, more incentives for locals to invest in these skills, and smaller population. With 457 we have depressed wages in certain sectors, and low incentives for locals to invest in these skills. We have some more economic activity, commensurate with higher population, but no certainty that it is. Winners are: companies employing these skills. Losers are: locals with these skills, and locals without skills who would have otherwise found it economical to invest in skills.

    It’s the old capital vs wages debate again.

    You cite a guy who says this
    “He says that is because the retirement of baby boomers means Australia starts each year 140,000 workers short.”

    Short of what exactly? Is he trying to make the ‘immigration as a solution to the dependence ratio argument”? Didn’t the productivity commission show that to be untrue, and that higher immigration typically makes the dependence ration worse?

    In your linked article you say
    “But we can conclude that any ‘unemployment’ effect from 457 visa applicants will, at most, be very small, and is quite likely to be negative. In other words, bringing skilled workers to Australia under the 457 visa programs may lead to a net creation of jobs in Australia.”

    Which seems like a roundabout way of saying “457 visas probably lead to lower wages”. Correct?

  4. Hi Stephen. You and many commentators are under a fundamental misapprehension about how the 457 visa works. There is no requirement the visa be granted only when there is no suitable applicant. Employers are perfectly free to hire overseas workers even if they know of perfectly qualified local candidates.

    Peter McDonald is not really presenting a useful argument. In software, for example, the pool of professionals would not be affected by retiring baby boomers. Also, the growth in job numbers in IT includes jobs that don’t require computer science graduates, so it’s not as simple as Chris Ulhman, for example, makes out.

  5. This is an argument that’s sometimes made. The unions make it. It maintains that skill shortages should be addressed by permanent immigration so that people become full citizens with all the rights of citizens.

    Temporary worker programs, on the other hand, leave workers vulnerable to exploitation as they lack the rights of citizens.

    You can also make an argument that they’re not fully committed to the country, being ready to leave for the highest bidder. And in fact many temporary skilled workers do exactly that.

    The claim that locals need to be trained is sometimes a red herring used by lobbyists to justify the hiring of overseas workers. In the US, some of the criticism of science education arose from this lobbying. Politicians are particularly vulnerable to this tactic because it provides easy explanations, but it’s often a dodgy claim.

    Most 457 visa holders are just bachelor degree holders. There’s nothing special about them. Not all, of course.

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