Productivity Commission's migration reform ideas a curate's egg

While recommendations have been made by the Productivity Commission on skilled migration reform, there are still improvements that could be made, writes Dr Abul Rizvi.

WHILE THE Productivity Commission (PC) makes no recommendations on immigration levels and the implications of these for population and workforce ageing, it does recommend a ‘better targeted skilled migration system’.

Immigration and population ageing

In terms of demographics, the PC notes:

‘Increasing life expectancy combined with falling fertility rates in advanced economies has meant that their populations have been ageing at a pace that is still a few decades away from its peak. This has increased the demand for several non-market services including health care and aged care.’

The PC appears to ignore that immigration levels will be a key factor in determining the rate at which populations of advanced economies will age. Lower levels of immigration result in faster ageing while higher levels of immigration slow the rate of ageing. It is because of the assumed level of immigration that Australia’s rate of population ageing is projected to be slower than in most other advanced economies.

The assumption that in a few decades, population ageing in advanced economies will “peak” and presumably then decline is highly questionable. The UN’s latest population projections show population ageing across most advanced economies continuing for the rest of this century even though the UN assumes fertility rates in most advanced economies will steadily rise — a highly questionable assumption.

If fertility rates remain around current levels in advanced economies, including China and Russia, ageing will continue at a much faster rate than the UN projects. An increasing number of advanced economies will also have shrinking populations — severe ageing and shrinking populations are co-travellers.

That does not mean Australia needs to increase current immigration levels; large fluctuations in immigration levels would be poor policy. But we do need to better understand the impact of immigration over the long term on our rate of population ageing and, as a result, also on productivity. A fact the PC largely ignores.

Skilled migration

While the PC does not express a view on immigration levels, it considers ‘significant reforms to skilled migration could yield large productivity benefits’. The PC makes eight recommendations relevant to immigration policy.

Recommendation 7.1: Abolishing investor visas

The PC says:

‘The Australian Government should abolish the Business Innovation and Investment visa program. Temporary migration should be facilitated for people with genuine plans to start a business in Australia, while pathways to permanent residency should involve the revised Skilled Independent visa, based on a points test that better accounts for income levels and age.’

The current BIIP includes both investor streams as well as streams for migrants who start or run a business in Australia that employs a minimum number of local workers for a minimum time. While the case for abolishing investor visas – essentially a buy-a-visa retirement scheme for older, rich migrants – is strong, merging visas for people who start or run businesses in Australia with the Skilled Independent visa would make it unnecessarily complex and difficult to design and administer.

Better to maintain a separate visa for people who start or run businesses in Australia with a minimum turnover and employing a minimum number of locals.  

Recommendation 7.2: Implementing wage thresholds for employer-sponsored visas

The PC says:

‘The Australian Government should remove current list-based restrictions for employer-sponsored temporary and permanent skilled visas and set an income threshold well above the Temporary Skilled Migration Income Threshold rate. The income threshold that applies to temporary migration should be lower than for permanent. The income threshold for employer-sponsored permanent visas should increase with age, though at some older age, people would no longer be eligible for this visa category.’

There is merit in abolishing the use of occupation-based restrictions for employer-sponsored migration where these are used to target skill shortages. The PC is right to focus this on a higher minimum income threshold (without reliance on “in-kind” payments and no labour market testing) although the case for a higher threshold for permanent employer-sponsored visas than temporary employer-sponsored visas is poor.

This would only increase the number of people in Australia in long-term immigration limbo. The objective of policy should be to minimise this group.

However, there is a lot more to an effective and robust employer-sponsored visa system than just a high income threshold and an age threshold.

There is also a need to:

• ensure visa applicants meet any relevant Australian occupational standards or licensing requirements, including relevant English language levels;
• check only reputable employers are using the system;
• close monitoring to ensure employers are meeting their obligations, including paying the minimum salary without collusion or coercion; and
• strong penalties for employers who breach their obligations and employees who collude with employers to undermine the system.

Recommendation 7.3: Improving Skilled Independent visas

‘For the Skilled Independent visa (subclass 189), the Australian Government should remove current list-based restrictions, but the points system should be able to award points for any factors shown to be associated with fiscal and employment benefits. Additional points should be awarded for ongoing employment in Australia according to income level, with different income benchmarks for different age groups. Moreover, the design of the points system should be updated regularly based on empirical research.’

The PC appears to have only taken a superficial examination of Skilled Independent visas. Presumably, the current Parkinson Review will examine this in more detail.

Recommendation 7.4: Meeting the needs of human services without stifling wage increases

The Australian Government should introduce a pilot of a special permanent visa subclass for occupations in human services sectors largely funded by government (such as aged and disability care), but only if these are facing likely enduring and significant labour shortages that are weakly responsive to wage increases. The visa subclass should be subject to the current Temporary Skilled Migration Income Threshold (TSMIT) and include a condition that the applicant remains employed in the relevant sector for four years.

 

The pilot should be evaluated for its impacts and need after several years. It should also be abandoned if the Australian Government develops sustainable alternative funding options for aged care that are sufficient to meet the wage increases required to limit labour shortages.

There is a need to reform how the visa system deals with shortages of aged care, disability and childcare workers but this should be done on a comprehensive basis rather than the limited examination of this issue that the PC appears to have undertaken.

Recommendation 7.5: Improving temporary migration and pathways to permanent residency

The Australian Government should amend settings for temporary skilled migration to increase their duration to six years, subject to continuous employment (for a set percentage of a given year) with a sponsoring employer (with the ability to move to a new sponsoring employer under the same visa). While temporary skilled migration visas should not come with an expectation of permanent migration, pathways to permanent migration should be available under revised employer-sponsored and independent skilled visas.

 

For international students, obtaining a qualification from an Australian tertiary education provider should be associated with some expectation of being able to test their skills in the Australian labour market, but not an expectation that their qualification alone will qualify them for permanent residency. The Australian Government should increase the duration of stay for Temporary Graduate visas (subclass 485) for graduates with Bachelor and higher level degrees, such that an extension to five years is guaranteed subject to proof of ongoing employment above a set wage threshold.

 

These changes should be subject to the revised Employer Nominated and Skilled Independent visas, both of which would place greater emphasis on age and income (recommendations 7.2 and 7.3).

This appears to be another instance of the PC having done little in-depth examination of this issue. Indeed, there is a desperate need for a root and branch review of the student visa ecosystem, including in terms of how it deals with the traditional trades. Extending the duration of temporary skilled visas is a pointless exercise as these can already be extended onshore in most cases.

Recommendation 7.6: Improving job mobility for employer-sponsored visas

‘The Australian Government should amend settings for employer-sponsored temporary and permanent visas to better allow workers to switch to competing employer sponsors including by permitting a short period of unemployment while looking for a new sponsor.’

A short period allowing employer-sponsored temporary visa holders to look for alternative employment already exists. There is a case for examining how a longer period could be implemented given the visa holder would not have fallback to a social safety net.

Recommendation 7.7: Expanding the default recognition of international licences

‘Australian governments and regulators should pursue further international mutual recognition of occupational licences by improving (and potentially formalising) links between Australian licensing bodies and those in similar countries.’

This seems sensible but would be a long-term issue.

Recommendation 7.8: Aligning migration and occupational license requirement

‘Australian governments and regulators should coordinate to align skilled migration requirements with occupational license recognition requirements, including by removing duplication of assessment where possible.’

These are already largely aligned. It is not clear which areas the PC has concerns with.

Dr Abul Rizvi is an Independent Australia columnist and a former Deputy Secretary of the Department of Immigration. You can follow Abul on Twitter @RizviAbul.

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