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Relaxing 457 visa laws will spoil the economic pie

Contrary to the Abbott government’s claims, flagged changes to the foreign worker 457 visa program won’t be good for the Australian economy.

The Abbott government yesterday announced sweeping changes to the 457 “temporary” work visa program to make it much easier for Australian businesses to import so-called skilled foreign workers. These changes include relaxing English language requirements for foreign workers, and increasing the sponsorship approval period for start-up companies. However, the government insists it will maintain the requirement to pay foreign workers the same wage as an Australian equivalent. Prime Minister Tony Abbott believes these changes will promote business growth.

It’s worth reiterating that, at this point in time, loosening 457 visa requirements is a poor decision. Overall, unemployment is tracking at around 12-year highs, with youth unemployment tracking at over 13% (although the actual situation facing Australia’s youth is much worse given plummeting participation and the sharp contraction of full-time jobs )

Moreover, the most recent skills shortages reporfrom the Department of Employment, released in late-July, revealed that the number of occupations suffering skills shortages is at an “historic low” with employers able “to recruit skilled workers without marked difficulty” and “generally large fields of applicants vying for skilled jobs and employers filling a high proportion of their vacancies”.

And with the mining investment boom set to unwind over the next few years, along with the closure of the local car industry from 2017 (if not earlier), labour surpluses are only likely to increase from today’s already high levels.

Given such an environment, why on earth should the visa system make it even easier to import labour from offshore rather than training local workers, potentially adding to the pool of under/unemployed and depriving our youth of employment opportunities? Where’s the sense in that?

The government’s own “independent report” into 457 visas revealed there are currently almost 200,000 457 visa holders working in Australia — almost double the number residing here in 2007.

Further, the majority of these visa holders have not gone to work in resource project areas — as one would expect given constant claims of labour shortages — but have instead migrated to New South Wales and Victoria (presumably Sydney and Melbourne).

Moreover, the majority of 457 visas have been granted to professions that many would not consider to be particularly “skilled”, in short supply, or critical to the economy, such as cooks/chefs, cafe/restaurant staff, and call centres/customer service.

Based on the available information, and the fact that there is already a large pool of under/unemployed Australians, it would seem that the 457 visa system is not genuinely designed to alleviate skills shortages at all, but rather is aimed at reducing the need for businesses to train local workers, while at the same time maintaining the throttle on population growth.

What Australia needs are policies aimed at a real exchange-rate adjustment to improve competitiveness but that should be a managed process that protects the vulnerable and encourages workforce participation by locals, boosting productivity. Importing labour to keep wages down and to disguise the adjustment by reducing all Australians’ cut of the economic pie is the wrong policy at precisely the wrong time as mining investment and the local car industry collapse.

Courtesy of  DAVID LLEWELLYN-SMITH of Crikey

Administrator’s note:

This is an excellent explanation of the illogical attitude towards the recent proposed relaxation of aspects of the 457 visa program noted above. I don’t often agree with the unions position on such matters, but I believe the local labour market will suffer as there have been employees in the past who are prepared to flout the regulations so their attitude will only worsen. There must be an active compliance push to control the program. There must be sufficient negative incentive to modify the behaviour of local employers to look for local workers first.