Address to the Committee for Economic Development of Australia about the Federal Government’s plan for meeting the growing demand for skilled labour
(Delivered by Parliamentary Secretary to the Minister for Infrastructure, Gary Gray, on behalf of the Minister for Immigration and Citizenship, Chris Evans)
Perth, Friday 27 June 2008
Thank you for your kind introduction. And thank you for the opportunity to speak at this forum today.
It is unfortunate that the Minister for Immigration and Citizenship, Senator Chris Evans, is not here because Cabinet is meeting in Canberra today.
But I jumped at the chance to deliver the Minister’s speech because of the importance of its message, which is so relevant to Australia’s future economic wellbeing.
Perth is the last place in the country where people need to be lectured about the skills shortage. Research by the Western Australian Chamber of Commerce indicates that WA will need an extra 400 000 workers over the next decade.
But what needs to be more widely understood is that Australia’s current skills crisis comes in the context of an increasingly competitive global market for skilled workers, as well as long-term demographic shifts that will impact on the supply of labour.
Global context
Over the last twenty years, we have started to witness the internationalisation of the labour market as part of a broader transformation of the global economic environment.
The current global demand for skills has only acted to accelerate that transformation.
The factors that are driving the demand for skills in Australia are also impacting on those economies that compete with us for skills.
The resources boom that is fuelling demand for skills in Australia is occurring in other countries.
The demographic shifts in Australia’s population that will impact on the supply of labour are also occurring in other countries. In addition we are also starting to see some of the big ‘source’ of labour countries in our region become our competitors in demanding skills. The economic development of India and China will increasingly see those countries attracting back its skilled citizens and even skilled Australian workers.
We now live in a global economy with individuals behaving more and more like global citizens, moving where the work is in an increasingly borderless world.
Many of the overseas skilled workers that Australian employers are seeking to attract may not be looking to migrate to Australia permanently, as they traditionally have. They might come here for a few years, but will then move on to another career opportunity in a different country.
However, there is a two-way flow: our own citizens are increasingly willing to participate in this global labour market as well. Last year, over 70 000 people left Australia permanently and this figure is likely to increase. A further 100 000 people left for at least 12 months to work overseas.
Education and training
In addressing Australia’s skills shortage, the first priority of the Rudd Government is equipping our own workforce, our own people, to meet the skill requirements of industry.
As part of the Budget, the Treasurer announced that the Rudd Government is making a $19.3 billion investment in education and training to ensure we continue to provide employment and training opportunities for Australians.
The Budget outlines the Government’s commitment to invest $1.9 billion over 5 years to fund up to 630 000 new training places.
These new places will skill Australians for the jobs of tomorrow and close existing skills gaps.
However, while investing in the education and training of Australians is crucial, it will only go part of the way to meeting Australia’s skilled labour shortages now.
There is also an added twist: demographically, we are facing a labour shortage as large numbers of baby boomers begin dropping out of the workforce in greater numbers than we have young Australians to train. But I’ll come back to this point later.
Need to restructure migration system to meet new economic demands
All of these factors point to the need for a rethink of the way our skilled migration programs, both temporary and permanent, will cater for future demands.
Global migration patterns are changing and in order for Australia to remain competitive – to continue to attract workers from across the globe to meet our labour needs – it is essential that we have in place a flexible migration system that is responsive to global migration trends and the needs of Australian industry.
The current migration system is anchored in the 1950s. It was originally set up by the Chifley Labor Government to bring in a large number of permanent migrants on an annual basis to meet the nation building tasks of the post-war period. Among other things, it was not originally designed with a large temporary migration program in mind.
Even the debate itself over the size of the annual migration intake is old fashioned because it just focuses on the major lever that the government controls – the permanent program – and ignores the rapidly expanding uncapped temporary program, which largely falls outside the ambit of government influence.
The suggestion that Australia can’t cope with the additional 31 000 places that have been added to next year’s permanent program ignores the fact that under the Howard Government, around 1.2 million people were brought in under the permanent migration scheme. And over the past five years, we have granted almost two million temporary entry visas (excluding tourists), which allow people to stay in the country for 1 to 4 years.
In March 2005, there were 340 000 Working Holiday Makers, 457 visa holders and international students in the country. By March this year, the number of these visa holders had increased to 545 000. The growth in Working Holiday Makers and international student numbers is largely being driven by the same demand for skills and labour that’s driving the growth in 457s.
In the last three years, the number of uncapped temporary visa holders have increased by 205 000! So compared to the growth in the temporary program, an extra 31 000 people in the permanent program is relatively modest.
That’s not to downplay concerns about the pressure an increasing population will place on housing and infrastructure. It’s just that the picture is much more complex than the current debate is portraying it to be.
Demographic trends
To complicate matters further, the importance of the permanent program as a major economic lever of government will grow as demographic pressures begin to impact on Australia’s labour force.
Quite simply, over the period 2010 to 2020 more people will retire than will join the workforce. 2010 marks a ‘tipping’ point, in that we will start to see the retirement of the baby boomers at a rate that exceeds the numbers of young people entering the job market.
In 2007 there were 600 000 more people aged 15 – 24 years than people aged 55 – 64 years in the population, meaning we had many more people able to enter the workforce than might leave the workforce.
By 2017 this situation will have reversed and there will be 84 000 more people aged 55 – 64 years than people aged 15 – 24 years in the population, meaning we will have more people likely to leave the workforce than can enter it. Going forward we will always be in ‘deficit’ under this equation.
As a result of these demographic shifts the total labour force in Australia will begin to stagnate over the next five years and then decline in real terms.
This is due to a permanent shift in the age of our population, not a temporary blip that will rectify itself. Over the coming decades we will have a shrinking native-born labour force to supply a growing economy.
This scenario assumes that net overseas migration is maintained at zero, which would be the case if no one left the country and no one arrived from overseas.
The reality is that, as I pointed our earlier, Australia’s population is not static. The number of Australians moving overseas, both temporarily and permanently, is growing.
If we held net overseas migration at 180 000 (in line with program announced for next year) it will ensure the labour force continues to grow, albeit at a lower rate than before.
The reality is that Australia’s population growth is shaping up to be a serious capacity constraint on our economic growth. We need a debate about these long-term demographic shifts and the implications for our future prosperity.
A large permanent migration program is essential to tackling the impending deficit of skilled workers over the coming decades.
It is also no longer sufficient for the Australian Government to set its migration program on an annual basis. We need more medium- and longer-term planning in our migration program to ensure stable, sustainable workforce that addresses our long-term population needs.
Permanent program
We can only achieve this by placing a renewed emphasis on our permanent program because, by definition, temporary visa programs will not deliver net positive overseas migration.
While the temporary visa programs can play an important role in addressing critical skill shortages, they cannot solve our long-term labour force needs.
The temporary program has blown out in recent years largely because the permanent skilled migration program is a capped scheme that has not been allowed to grow sufficiently in the past to respond to the skills shortages now faced by employers.
The increase of 31 000 people in the 2008-09 permanent program should act as a partial balance against the dramatic growth we’ve been witnessing in the temporary stream. But the Immigration Minister’s other focus in the permanent program is ensuring that migrants that come in are properly matched to the skills needs of Australia’s economy.
For the first time this year the Budget explicitly recognized the positive financial impact our migration program has on the economy.
The Budget Paper shows the migration program delivering a positive impact, as a result of the majority of migrants quickly moving into employment.
However, the Government recognizes the need to ensure that the migration program delivers the skills the economy needs and people into the areas of critical need.
Australia’s permanent skilled migration program provides a stable, effective and targeted source of skilled workers. For the most part, the points test has proven to be a successful way to target applicants that possess the particular skills and attributes that Australia needs.
Research consistently shows very positive labour market outcomes for recent migrants. Recent ABS data shows that as of November 2007, 68 per cent of recent migrants were employed, compared to just 66 per cent of those born in Australia. Further, the labour force participation rate for recent migrants is 72 per cent, compared with just 69 per cent for those born in Australia.
This research supports the findings of a longitudinal study published by the Immigration Department in August 2007. This study found that after 18 months, unemployment fell from 9 per cent to 3 per cent for migrants in the skill stream, and 20 per cent to just 6 per cent in the family stream.
However, there has been some criticism leveled at the program recently that the Government concedes has some basis in fact. While Australia’s skilled migration program is generally successful, we believe the current permanent program could be more responsive to the skills needs of particular industries and regions.
At the moment, the majority of skilled migrants still come in through the ‘supply driven’ independent skill stream. This program does not necessarily deliver the balanced range of skills our economy needs.
A set of reforms was introduced in September 2007 that should go some way to addressing these problems, although the impact of these changes will not be seen for another 12 to 18 months.
There is a role in Australia’s migration program for the independent stream, but it is the least targeted measure for delivering the skills we need in a balanced way and linking those people directly to jobs.
That is why the Immigration Minister is focused on shifting the balance in our migration program by building up other streams; in particular, the employer-sponsored stream. This is a ‘demand driven’ skilled program that matches skilled migrants with a job.
Traditionally this stream has been a small part of the skilled program and while it has grown over the last 3 – 4 years it still makes up only 20 per cent of the overall program.
In the current skills crisis we should be aiming significantly increase the proportion of employer sponsored permanent visas.
We want to identify why employers are not making greater use of the employer-sponsored permanent migration stream, and look to introduce incentives for employers to sponsor the skilled workers they need.
The Minister is also focused on increasing engagement with State and Territory governments over their use of sponsored migration programs, which are designed to tackle regional shortages.
The regional and state sponsored programs are also ‘demand driven’ in terms of matching migrants to the skills needs of regional economies, but – again – they currently only make up just over 20 per cent of the overall program.
A uniform migration program won’t work – the skills needs of north west WA are very different to the skills needs of regional Tasmania. Through improved consultation, the Government hopes that our state and regional sponsored migration programs can be better tailored to meet the skills needs of regional economies.
Temporary program
In terms of the temporary program, the Government’s focus is on making sure we have the policy settings right to facilitate the entry of increasingly large numbers of temporary workers in a way that’s responsive to the needs of employers, while at the same time retaining the integrity of the program.
The centerpiece of the program is the 457 visa scheme. This is an uncapped, demand driven scheme that’s grown exponentially in recent years.
However, the current 457 visa scheme was set up with a particular set of economic conditions and labour demands in mind.
It was originally designed to bring in a small number of highly skilled workers – doctors, nurses, engineers. The largest sponsor of 457 workers is the NSW Health Commission.
However, since 2003, the scheme has not only exploded in size, but is now being used to address shortages in lower skilled areas.
This is particularly so in Western Australia. As people who have traditionally filled the lower skilled, lower paid jobs are moving onto the mines, there is a growing demand for workers to replace them, and the 457 visa is being used to facilitate that.
The reality is that in some regions, we are at a point where it is increasingly a question of a labour shortage, rather than just a skills shortage – and one that is so acute that employers will just take a warm body.
The other significant trend is that there has been a major change in source countries. Ever increasing numbers of workers are coming in from non-English speaking countries, particularly the Philippines, China and India. So this is raising a different set of issues in terms of their English language skills, and the occupational health and safety concerns that flow on from that. This rapid growth and changing role of the 457 visa framework has led to a diminution of the integrity of the program.
The scheme has come under fire in recent years because of well-publicised abuses. These are only occurring in a minority of cases, but it’s a serious problem that needs to be addressed.
The Australian people will only support a temporary migration program if they’re convinced of its integrity: that domestic wages and conditions are not being undercut and foreign workers are not being exploited, and also that Australians are being given training opportunities.
In April, the Minister appointed Barbara Deegan – a senior industrial relations commissioner – to review the industrial issues in the 457 program and provide options to improve the integrity of the scheme. Ms Deegan will present Chris Evans with her final report in October this year.
In the meantime, the Minister recently indexed the Minimum Salary Level by 3.8 per cent from 1 August, which had been frozen for over two years. This increase will apply to new temporary skilled migrants coming to work in Australia, as well as those already in the workforce.
The Government will also introduce legislation later this year to improve the monitoring and sanctions provisions available when abuses are found.
Ms Deegan’s work and other integrity-building measures will complement the work done by the External Reference Group, which was established in February to examine the program from an industry perspective, and to look at ways to streamline visa processing times and improve the flexibility of the program for employers.
The ERG presented their final report to the Minister last month, and the Immigration Department is currently working to implement 14 of the 16 recommendations they made.
This includes establishing in Perth a highly efficient, specialised team to process 457 applications. This centre should be up and running by next month.
Together, these two reports will form part of this Government’s medium and longer term strategy to improve the transparency, accountability and integrity of the temporary skilled migration program.
Concluding remarks
In conclusion, there are many challenges ahead in the immigration portfolio as we try to respond to, and anticipate, new demands on Australia’s migration programs.
It is becoming increasingly clear that Australia’s migration policies need to be at the forefront of Government strategies to tackle Australia’s skills and labour shortages.
It is important for you to take away the clear message that immigration is central to the economic debate on Australia’s future, and will remain so.
The changing global environment and growing demographic pressures demand that we rethink the way our skilled migration programs, both temporary and permanent, will cater for Australia’s future needs.
This is a debate that Australians can no longer avoid.
Thank you for your attention.
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URL: http://www.minister.immi.gov.au
/media/speeches/2008/ce080627.htm
Last update: 13 August 2008 at 17:14 AEST