Dr Bob Birrell from the Australian Population Research Institute has released a new report, entitled “Australia’s Skilled Migration Program: Scarce Skills Not Required”, which comprehensively debunks the argument that Australia’s immigration system is providing the economy with skills that it desperately needs, and instead finds that most skilled migrants go to areas already in oversupply, with most also employed at levels well below their claimed skills set.
Below are key extracts from this report.
As vexations flowing from record high net overseas migration mount, supporters of the permanent entry program have had to dig deeper to defend it.
These supporters include the Treasury and the Reserve Bank as well as business and property interests. They say that any major cut to the migration program would put in jeopardy Australia’s 26 years of unbroken nominal economic growth. The Treasury emphasises that Commonwealth taxation revenue would also diminish, putting further pressure on the budget deficit… Even better from the Treasury’s perspective, most of the public costs of accommodating the extra people do not accrue to the Commonwealth, but to state and local governments…
Whatever the truth of these assertions, they do not cut much ice with the majority of voters who now think that immigration levels should be reduced. The Coalition government has had resort to other justifications. The chief one is that Australia’s permanent entry skill program is delivering scarce skills vital to Australia’s economic health. According to the PM, Malcolm Turnbull, it is ‘state of the art’ in this respect.
The focus of this paper is on whether these claims have any substance. They do not. This conclusion is based on recent unpublished data on the occupations of those visaed in the skill program. The key findings are:
The great majority of those visaed in the skill program are professionals, an increasing share of whom hold occupations that are oversupplied. On the other hand, it is delivering a negligible number of construction trade workers. This is despite housing industry claims that continued skilled migration is crucial to supplying the workers needed to provide the housing and infrastructure to accommodate Australia’s booming population.
You might think that a skill program directed at recruiting scarce skills would prioritise the relevant occupations. That is not the case. In 2010 a Skills Occupation List (SOL) was introduced that made selection conditional on the applicant’s occupation being in national shortage. Since that time this condition has been wound back, to be finally abolished in 2016.
The SOL has been replaced by a Medium to Long-Term Strategic Skill List (MLTSSL). This makes selection conditional on whether an occupation might be needed in two to ten years’ time. The MLTSSL includes numerous professions that the government’s own Department of Employment has judged to be oversupplied, including accounting and engineering.
As a consequence, most recently arrived skilled migrants cannot find professional jobs. This statement is based on new findings from the 2016 Census on the employment situation of skilled migrants who arrived in Australian over the years 2011-2016 (Table 2).
A huge number (256,504) of overseas born persons aged 25-34 who held degree or above level qualifications at the time of the Census arrived in Australia over these years.
The vast majority, 84 per cent, came from Non-English-Speaking-Countries (NESC). Just (16 per cent) came from MainEnglish-Speaking-Countries (MESC).
Only 24 per cent of the NESC group were employed as professionals as of 2016, compared with 50 per cent of the MESCs and 58 per cent of the same aged Australian-born graduates…
Why is this the case? First of all, there is a huge number of graduates seeking professional employment. That might be OK if the demand was there. But, because of the tough labour market conditions described above, there are currently more applicants than available positions in many professions.
Why are recently arrived migrants from NESC locations doing so poorly?
Employers can take their pick. They are choosing their employees from the MESC and the Australianborn cohorts. They have an enormous advantage because of their English language proficiency and in the case of the Australian-born, their cultural awareness and networking connections.
The outcomes for those with management and commerce qualifications illustrate this point starkly. As noted, accountants have been in oversupply for several years, yet thousands of accountants are being visaed in Skill Stream every year…
Australia is awash with graduates – as a consequence of past migration and growth in domestic university completions. By 2017, 38.5 per cent of Australian residents aged 25-29 held degree level qualifications and 40.3 per cent of those aged 30-34. This is high by international standards.
The recent surge in undergraduate commencements, particularly in the STEM disciplines, means that this trend will continue. Table 3 tells this story.
Current migration policy is not about present skill needs, but hypothetically about those skills Australian employers might need in the medium to long-term, were it possible to forecast such needs with accuracy. All the Skill Stream Categories, including the Employer Sponsorship Category after May 2018 will be structured around the MLTSSL. This, as demonstrated, takes no account of current skill needs…
There are already too many graduates in Australia and their number is growing fast from both domestic and migrant sources…
As a result it is unlikely that there is any need to augment the current stock of professionals, at least for the medium term. This is true even in the STEM disciplines where there has been so much concern about the level of domestic training. As the table indicates, these disciplines have made solid gains in commencements since 2011.
Even if shortages do emerge, migrant recruitment could be rapidly ramped up. Australia is in high demand as a destination from Asian countries where there has been a huge surge in university training. Furthermore, large numbers could be drawn from the ranks of overseas students being trained in Australia to Australian specifications. Their numbers, too, have expanded sharply over the last few years.
Then there is the 457 program. Though tightened with the 457 Reset, Australian employers still have access to the most generous temporary entry program in the developed world. They can sponsor as many migrants with professional and trade skills as they like. True, they now have to first establish that they have tried to find residents to do the work. They must also pay a tiny training levy for the privilege. This is $1,800 a year for a large business…
Conclusion
Australia’s high migration policy is defended by the claim that it is delivering the scarce high level skills needed to help maintain economic growth. The reality is quite different. Migration policy has been reformulated precisely to avoid confining the skilled program to occupations that are in shortage.
Instead, the program is directed to delivering professionals who might be needed in the medium to long-term. To the extent that the current program does deliver any scarce skills this is an accidental rather than a planned outcome.
Critically, the three major Categories of the Skill Stream – the Employer Sponsored, Skilled Independent, and State & Territory & Regional Sponsored – are all to be tied to the MLTSSL, despite the fact that listing does not require any current skill shortage.
The Skill Stream could be abolished and employers would hardly notice.
The Skill Stream is really about numbers, the ‘Treasury numbers’ needed to sustain Australia’s rate of economic growth and the Commonwealth’s projected tax revenues.
The Coalition, Labor and Greens effectively have prioritised these ends above the concerns of Australians living in the metropolitan areas. They have been left to put up with the loss of urban amenity, high dwelling prices and the costs of providing the additional infrastructure needed to accommodate population growth in their cities.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
