The Grattan Institute has released a new report on Australia’s temporary skilled migration system whose key recommendation is an uncapped wage floor for temporary skilled migrants of $70,000, which is $13,000 below the median full-time wage of Australians of $83,000 (which includes unskilled workers):
Today, more than half of sponsored workers earn less than the typical full-time Australian worker, up from 38 per cent in 2005. The freezing of the minimum salary threshold at $53,900 a year since mid-2013 means employers are sponsoring a growing number of low-wage workers with few skills.
Exploitation of sponsored workers abounds, which further undermines public confidence in the program. Australia has been left with the worst of both worlds…
Temporary sponsorship should be reserved for higher-wage jobs in any occupation. Targeting higher-wage migrants will better address most genuine skills shortages that emerge. Restricting sponsorship of low-skilled migrants would reduce the risks of exploitation, so the program would become more politically palatable.
High-skilled migrants also bring more knowledge and ideas, and they pay more in taxes than they receive in public services and benefits. Targeting high-skilled migrants on temporary sponsorship would also improve Australia’s permanent skilled migrant intake, because it would increase the pool of high-quality applicants.
This report calls for a new visa, the Temporary Skilled Worker (TSW) visa, to replace the existing Temporary Skill Shortage (TSS) visa. Employers would use the Temporary Skilled Worker visa to sponsor workers in any occupation, provided the job pays more than $70,000 a year and the worker is paid at least as much as an Australian doing the same job. Labour agreements, which permit sponsorship for lower-wage jobs, would also be abolished. We calculate that under our plan, the number of full-time jobs eligible for temporary sponsorship would rise from about 44 per cent today to up to 66 per cent.
The new TSW visa should be made portable, so temporary skilled migrants could more easily switch sponsoring employers should they find a better job once in Australia. This would enable migrants to walk away from employers who mistreat them.
Note recommendation 1 above explicitly states that temporary migration should target “high wage jobs”. Yet Grattan’s proposed $70,000 skilled wage floor is by definition not “high wage”, since it is well below the median full-time earnings of Australian workers.
Grattan justifies its low wage floor as follows:
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We recommend a $70,000 wage threshold, which is slightly below the full-time earnings of the median Australian worker of $83,000 a year. The threshold is set below median full-time earnings since temporary skilled visa holders are often younger, and therefore in the early stages of their career, earning lower incomes. The median full-time wage for Australian workers aged 25-34 is $71,750.
Surely skilled visa holders should be paid well above the population median, regardless of age. Otherwise they can’t be considered genuinely skilled? Moreover, even taking Grattan’s flaky “younger argument” into account, why has it set the migrant wage floor below the “median full-time wage for Australian workers aged 25-34 [of] $71,750”, which again is pulled down by unskilled workers? Surely skilled migrants should be paid much higher? Otherwise they are not highly skilled.
Grattan complains that “more than half of sponsored workers earn less than the typical full-time Australian worker, up from 38 per cent in 2005”. So why not set a salary threshold that ensures that 100% of skilled migrant workers earn more than the typical Australian worker? This would deliver a genuinely skilled system.
To add further insult to injury, Grattan proposes that the $70,000 ‘skilled’ wage floor would apply to migrants of any age in any occupation:
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This would see older migrants with years of experience being used to undercut local workers. It also goes against Grattan’s claim (quoted above) that $70k is appropriate because “temporary skilled visa holders are typically younger, and therefore in the early stages of their career”.
Why has Grattan chosen a wage threshold for temporary ‘skilled’ migration that is $10,000 less than it proposed for ‘skilled’ permanent migration, which is already below the population median wage of $83,000?
By setting the temporary skilled wage floor at such a low level, and expanding access to it to every occupation, Grattan has set the scene for temporary skilled workers to be used by employers en masse to undercut locals and abrogate their need to provide training.
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.
