Yesterday, a group of labour academics released a book, entitled The Wages Crisis in Australia, which bemoans Australia’s anaemic wages growth and offers policy prescriptions.
Locked away in chapters 13 and 14 are incendiary analyses on the great Australian migrant wage rort, which is unambiguously lowering employment standards and undercutting local workers.
Below are key excepts from Chapter 13 entitled Temporary migrant workers (TMWs), underpayment and predatory business models, written by Iain Campbell:
This chapter argues that the expansion of temporary labour migration is a significant development in Australia and that it has implications for wage stagnation…
Three main facts about their presence in Australia are relevant to the discussion of wage stagnation. First, there are large numbers of TMWs in Australia, currently around 1.2 million persons. Second, those numbers have increased strongly over the past 15 years. Third, when employed, many TMWs are subject to exploitation, including wage payments that fall below — sometimes well below — the minimum levels specified in employment regulation…
One link to slow wages growth, as highlighted by orthodox economics, stems from the simple fact of increased numbers, which add to labour supply and thereby help to moderate wages growth. This chapter argues, however, that the more salient point concerns the way many TMWs are mistreated within the workplace in industry sectors such as food services, horticulture, construction, personal services and cleaning. TMW underpayments, which appear both widespread in these sectors and systemic, offer insights into labour market dynamics that are also relevant to the general problem of slow wages growth…
Official stock data indicate that the visa programmes for international students, temporary skilled workers and working holiday makers have tripled in numbers since the late 1990s… In all, the total number of TMWs in Australia is around 1.2 million persons. If we include New Zealand citizens and permanent residents, who can enter Australia under a special subclass 444 visa, without time limits on their stay and with unrestricted work rights (though without access to most social security payments), then the total is close to 2 million persons… TMWs now make up around 6% of the total Australian workforce…
Decisions by the federal Coalition government under John Howard to introduce easier pathways to permanent residency for temporary visa holders, especially international students and temporary skilled workers, gave a major impetus to TMW visa programmes.
Most international students and temporary skilled workers, together with many working holiday makers, see themselves as involved in a project of ‘staggered’ or ‘multi-step’ migration, whereby they hope to leap from their present status into a more long-term visa status, ideally permanent residency. One result, as temporary migration expands while the permanent stream remains effectively capped, is a lengthening queue of onshore applicants for permanent residency…
Though standard accounts describe Australian immigration as oriented to skilled labour, this characterisation stands at odds with the abundant evidence on expanding temporary migration and the character of TMW jobs. It is true that many TMWs, like their counterparts in the permanent stream, are highly qualified and in this sense skilled. However, the fact that their work is primarily in lower-skilled jobs suggests that it is more accurate, as several scholars point out, to speak of a shift in Australia towards a de facto low-skilled migration programme…
A focus on raw numbers of TMWs may miss the main link to slow wages growth. It is the third point concerning underpayments and predatory business models that seems richest in implications. This point suggests, first and most obviously, added drag on wages growth in sectors where such underpayments and predatory business models have become embedded. If they become more widely practised, underpayments pull down average hourly wages. If a substantial number of firms in a specific labour market intensify strategies of labour cost minimisation by pushing wage rates below the legal floor, it can unleash a dynamic of competition around wage rates that foreshadows wage decline rather than wage growth for employees…
Increases in labour supply allow employers in sectors already oriented to flexible and low-wage employment, such as horticulture and food services, to sustain and extend strategies of labour cost minimisation… The arguments and evidence cited above suggest a spread of predatory business models within low-wage industries.37 They suggest an unfolding process of degradation in these labour markets…
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And below are extracts from Chapter 14, entitled Is there a wages crisis facing skilled temporary migrants?, by Joanna Howe:
Scarcely a day goes by without another headline of wage theft involving temporary migrant workers…
In this chapter we explore a largely untold story in relation to temporary migrant workers… it exposes a very real wages crisis facing workers on the Temporary Skill Shortage (TSS) visa (formerly the 457 visa) in Australia. This crisis has been precipitated by the federal government’s decision to freeze the salary floor for temporary skilled migrant workers since 2013… the government has chosen to put downward pressure on real wages for temporary skilled migrants, thereby surreptitiously allowing the TSS visa to be used in lower-paid jobs…
In Australia, these workers are employed via the TSS visa and they must be paid no less than a salary floor. This salary floor is called the Temporary Skilled Migration Income Threshold (TSMIT). TSMIT was introduced in 2009 in response to widespread concerns during the Howard Government years of migrant worker exploitation. This protection was considered important because an independent review found that many 457 visa workers were not receiving wages equivalent to those received by Australian workers…
In effect, TSMIT is intended to act as a proxy for the skill level of a particular occupation. It prevents unscrupulous employers misclassifying an occupation at a higher skill level in order to employ a TSS visa holder at a lower level…
TSMIT’s protective ability is only as strong as the level at which it is set. In its original iteration back in 2009, it was set at A$45 220. This level was determined by reference to average weekly earnings for Australians, with the intention that TSMIT would be pegged to this because the Australian government considered it ‘important that TSMIT keep pace with wage growth across the Australian labour market’. This indexation occurred like clockwork for five years. But since 1 July 2013, TSMIT has been frozen at a level of A$53 900. ..
There is now a gap of more than A$26 000 between the salary floor for temporary skilled migrant workers and annual average salaries for Australian workers. This means that the TSS visa can increasingly be used to employ temporary migrant workers in occupations that attract a far lower salary than that earned by the average Australian worker. This begs the question — is the erosion of TSMIT allowing the TSS visa to morph into a general labour supply visa rather than a visa restricted to filling labour market gaps in skilled, high-wage occupations?..
But why would employers go to all the effort of hiring a temporary migrant worker on a TSS visa over an Australian worker?
Renowned Australian demographer Graeme Hugo observed that employers ‘will always have a “demand” for foreign workers if it results in a lowering of their costs’.17 The simplistic notion that employers will only go to the trouble and expense of making a TSS visa application when they want to meet a skill shortage skims over a range of motives an employer may have for using the TSS visa. These could be a reluctance to invest in training for existing or prospective staff, or a desire to move towards a deunionised workforce. Additionally, for some employers, there could be a belief that, despite the requirement that TSS visa workers be employed on equivalent terms to locals, it is easier to avoid paying market salary rates and conditions for temporary migrant workers who have been recognised as being in a vulnerable labour market position. A recent example of this is the massive underpayments of chefs and cooks employed by Australia’s largest high-end restaurant business, Rockpool Dining Group, which found that visa holders were being paid at levels just above TSMIT but well below the award when taking into account the amount of overtime being done…
Put simply, temporary demand for migrant workers often creates a permanent need for them in the labour market. Research shows that in industries where employers have turned to temporary migrants en masse, it erodes wages and conditions in these industries over time, making them less attractive to locals…
A national survey of temporary migrant workers found that 24% of 457 visa holders who responded to the survey were paid less than A$18 an hour. Not only are these workers not being paid in according with TSMIT, but they are also receiving less than the minimum wage. A number of cases also expose creative attempts by employers to subvert TSMIT. Given the challenges many temporary migrants face in accessing legal remedies, these cases are likely only scratching the surface in terms of employer non-compliance with TSMIT…
Combined, then, with the problems with enforcement and compliance, it is not hard to conclude that the failure to index TSMIT is contributing to a wages crisis for skilled temporary migrant workers… So the failure to index the salary floor for skilled migrant workers is likely to affect wages growth for these workers, as well as to have broader implications for all workers in the Australian labour market.
While the book has done an excellent job of dissecting the systemic rorting of temporary migrant workers, which is undermining broader wages growth, it unfortunately has not also addressed the rorting of Australia’s permanent ‘skilled’ migrant program.
Moreover, overall skilled migration – both permanent and temporary – continues to run at extreme levels despite actual skills shortages running near recessionary levels, according to the same Department of Jobs and Small Business data:
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Remember, it is the permanent migrant intake that is primarily behind Australia’s population increase and therefore the choking of infrastructure and rising housing costs, in addition to dragging down wages. Many migrants also come to Australia initially on temporary visas with the hope of transitioning to one of the many permanent non-humanitarian visas handed out each year (numbering roughly 160,000 in 2017-18).
Therefore, if Australia was to remove the carrot of permanent residency by slashing the intake, it would also automatically reduce the flow of temporary migrants, since the two areas are intrinsically linked. In turn, workers’ bargaining power would be increased.
More broadly, ordinary workers’ cost of living would be reduced through lowering immigration, for example via cheaper housing (both prices and rents) and infrastructure, not to mention sinking the Australian dollar, thereby making trade exposed industries more competitive.
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Ultimately, Australia’s so-called skilled immigration system is one giant rort that’s all about lowering labour costs for employers by crushing wages and abrogating their responsibility for training, while also feeding the growth lobby more consumers.
It needs root-and-branch reform, starting with dramatically lowering the overall permanent migrant intake, as well as setting a wage floor for ‘skilled’ migrants at the 80th to 90th percentile of earnings, thus ensuring the scheme is used sparingly by employers on only the highest skilled migrants, not as a general labour market tool for accessing cheap foreign labour.
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.
