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Immigration budget 2011: the cost of overseas labour

By Jo Coghlan - posted Tuesday, 31 May 2011


The current immigration debate and budget is being driven by labour needs without considering the short and long terms economic costs.

In October 2010 Chris Bowen was appointed Labor's Minister for Immigration and Citizenship. He noted that he was bringing an economist background to the portfolio. He said he understood the impact Australia's immigration program has on the 'three Ps' – population size, workplace participation rates and productivity levels. He re-affirmed this view again in November 2010 when he said: "A well-calibrated migration program contributes to all three Ps: productivity, participation and population". He also noted "…it is essential that Australia's skilled migration program, both temporary and permanent, is responsive to current economic conditions.

The Department of Immigration and Citizenship received $1,171.3 million in the 2011-12 budget. In comparison to the 2010-11 budget of $1,120.8 million, this is an increase of $50.5 million. Increasing the permanent migration intake from 168,700 to 185,000 places will cost an additional $160 million over four years. This includes 125,850 skilled places, which is an increase from 113,850 in 2010. Family migration will also increase to 58,600 places, up from 54,550 last year.

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Increases in the skilled migration program, 16 000 places in regional Australia, and speeding up of the controversial '457' visa have contributed to increased portfolio costs. Long-term costs include the administration of overseas workers on 457 visas who stay in a regional area and whose employers will guarantee work for a further two years who will be fast-tracked to permanent residency. Almost $4.8 billion will be spent marketing migration opportunities and visas to regional employers.

There are six main categories of permanent visa: skilled migration, family migration, business migration, employer-sponsored, refugee/humanitarian, and special eligibility (former Australian residents). Temporary visas, such as 457 visas in the past allow people to visit Australia for a limited time. Beyond these major categories of permanent and temporary visas there are approximately 140 visa subclasses with different eligibility criteria. While Australia has a history of immigration linked to labour needs, the migration system today is driven exclusively by a rigid visa system that often forgets the short and long terms costs of labour on the national economy. Driving much of the debate about the need for overseas labour are Australia's mining companies.

The chairman of BHP Billiton, for example, recently called for a boost to immigration to feed the booming mining industry: "Australia needs to attract more skilled labour from overseas…In the short-term, flexibility is required on labour practices, including immigration policies". Yet, two days after the budget announcements increasing skilled migration places in regional Australia the Bureau of Statistics revealed weak unemployment figures with more than 49,000 full-time jobs lost, offsetting a rise of almost 27,000 part-time positions. Mining stocks fell sharply after a big sell-off in commodities with companies blaming the strong Australian dollar and lower global steel prices. The Australian Council of Trade Unions (ACTU) rejects the use of temporary overseas labour by employers in industries where local labour cannot be attracted due to poor wages and conditions.

The report recently released by Population Minister Tony Burke, Sustainable Australia, Sustainable Communities, maintains Chris Bowen's view that targeted immigration is about the needs and skills of the Australian workforce. Moreover, population and labour needs have received $230 million of fiscal backing in the 2011-12 Budget. Some of the labour-population costs announced by Tony Burke include $100 million for a Suburban Jobs initiatives; $81.4 million in new investments in the National Urban Policy including $61.4 million for a smart managed motorways trial and $20 million for a Liveable Cities program; $29.2 million for a new Sustainable Regional Development initiative; $11.5 million for a new Promoting Regional Living; and $10.1 million for a new Measuring Sustainability program.

This population-labour related spending needs to be contextualised with the recent Treasury modeling projects that Australia would reach a population level of 36 million by the year 2050. Peter McDonald from ANU's Australian Demographic and Social Research Institute argues that without migration Australia's population would grow by just over a million in the next decade. But 900,000 of them will be over the age of 65. Hence, there will be very little scope for labour force growth but at a time when there will be a very strong labour force demand. Even if the federal government determined that Australia needed 250,000 new workers over the next two years, domestic supply of workers at best can only provide about 100,000 workers. Based on this it is inevitable that Australia will need to have high levels of migration at least over the next decade.

The need for labour is therefore the driving factor of Australia's migration program. This in itself is fine, as long as Australians are prepared to pay for the cost of overseas labour. In the case of the 2011-12 federal budget that is $1,171.3 million plus related costs. To not import labour has its own costs such as wage inflation and interest rate rises. Conversely, there are hidden costs of overseas labour migration.

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Environment author Mark O'Connor argues infrastructure costs are between $200,000 and $400,000 for every person that comes to Australia to work. While each overseas worker can contribute to the Australian economy the benefit is more likely to go to the company hiring them (and in this case it is the mining giants like BHP Billiton). For each person that comes to Australia to work it may save the employers training an apprentice or it may drive down wages.

According to O'Connor this may save the employer $10 000 in not having to train an apprentice, but the infrastructure costs borne by government is more than likely double that. Therefore, there is also an argument that there is an economic downside of importing overseas labour.

These arguments are known by government, however the Minister for Immigration maintains an immigration program driven by productivity, population, and participation regardless of the short or long-term costs.

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About the Author

Jo Coghlan is a lecturer in the School of Arts and Social Sciences at Southern Cross University.

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