Keynote Address - John Curtin Institute of Public Policy
Sustaining the boom - the role of skilled migration in the WA economy
Western Australia, Thursday 17 June 2008
In 2006-07, interstate migration to WA only made up 9.4 per cent of its population growth. This in contrast to Queensland, where interstate migration made up 30 per cent of its population growth over that period.
Research by the WA Chamber of Commerce indicates that WA will need an extra 400 000 workers over the next decade. Based on current trends, it projects a shortfall of 150 000 workers.
While employers across Australia are crying out for skilled labour, the skills shortage is being most acutely felt in WA, where the shortage has flowed into less highly skilled occupations, from where people are being drawn to work on the mines.
Global Context
What needs to be better understood is that Western Australia’s skills crisis is more than just the product of the resources boom. It also comes in the context of an increasingly competitive global market for skills, as well as long-term demographic shifts that will impact on the supply of labour.
Over the last 20 years, we have started to witness the internationalisation of the labour market as part of the broader process of globalisation.
The current global demand for skills has only acted to accelerate this transformation.
Many of the overseas skilled workers that Australian employers are seeking to attract may not be looking to move here permanently, as migrants traditionally have.
They are mobile and responsive to career and financial opportunity.
However, what is true of overseas workers is also true of Australian workers: the Australian workforce is extremely mobile, with large numbers of our young, highly skilled people moving overseas to live and work.
What many people don’t realise is that Australia’s emigration levels are historically high and this is never properly considered when we tell our immigration story.
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. Many were our most highly skilled.
Australia’s migration story has undergone a dramatic transformation as a result of these trends and global conditions. It is far more complex than it once was.
A reassessment of Australia’s migration policies and programs is long overdue.
Domestic factors
At the last election, Labor campaigned on the need for an education revolution. We identified the skills shortage as a key capacity constraint on Australian economic development.
In addressing the chronic skills, 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 five 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.
Demographic pressures
Australia is facing a demographic shift that fundamentally changes the way we must consider our migration program.
In Australia 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 Western Australia, the ABS projects that the relative size of the WA workforce will shrink by 4.6 per cent between 2005 and 2025. Over this period, more people will retire than any period in our state’s history.
This reflects the national trend. In 2007 there were 600,000 more people aged 15–24 years than people aged 55–64 years in Australia, 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 Australia. So going forward we will be in deficit.
As a result of these demographic shifts, projections show the total labour force across Australia will begin to stagnate over the next five years and then decline in real terms.
This is a permanent shift in the age profile 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 and an ageing population.
If the workforce of Australia is to be maintained and grow, immigration must meet the deficit.
Old-fashioned migration system
Nationally, we need to rethink the way our skilled migration programs, both temporary and permanent, in order to cater for future demands.
It is essential that we have in place a flexible migration system that is responsive to global migration trends and the needs of the Australian economy.
Our current migration program is a 1960s model. It won’t deliver the skilled migrants our economy will need in the future without radical change.
The reality of migration
We can’t have a serious public policy debate unless we separate fact from fiction.
The Australian public is largely unaware that the former Howard Government, for all their rhetoric, was a big migration government.
Under the Howard Government, around 1.2 million people were brought in under the permanent migration scheme.
Migration rates were double those of the Keating Government.
The Rudd Government’s first Budget decision to increase permanent skilled migration by 31 000 was greeted by commentary about the enormity of the increase.
The discussion completely ignored the reality of Australia’s total migration program and its development over recent years.
There was some mention of the fact that in the last five years the temporary skilled migration program (457 visa) had gone from under 20 000 to more than 100 000 people.
From a permanent to temporary proportion of 5 to 1 to 1 to 1.
But that was interpreted as some sort of Budget decision by Government, without recognition that the program was uncapped and driven by employer nomination.
There was no recognition that over the past five years, we have granted almost two million temporary entry visas (excluding tourists), which allow people to live and work in the country for one to four years.
That in March this year there were 545 000 working holiday makers, 457 visa holders and international students in the country. That is over half a million people in the country with temporary work rights.
The 31 000 increase in the permanent skilled migration program this year does not look quite as dramatic as some would think.
The growth in working holiday makers and international student numbers is in part being driven by the same demand for skills and labour that’s driving the growth in 457s.
They are all, to a varying degree, being drawn to Australia with the prospect of work.
Many of our international students rely on their capacity to work 20 hours per week to in order to live and pay their fees and that is part of the reason they choose to study in Australia.
There are now 500 000 people per year entering the country temporarily with work rights. They fundamentally underpin our economy and without them, many businesses and industries would close.
The question of whether or not temporary and unskilled foreign labour is needed to sustain our economy has been answered.
Our economy is already reliant on that labour source.
The question is really how much more labour do we need and how should that demand be met.
457s
There has been much focus on the temporary skilled migration program (457s) in recent times – nearly all of it negative.
There are some serious incidents of abuse and exploitation of particularly non-English speaking trades’ level workers and there is an impression that it is a cheap labour scheme. It is not.
That there has been exploitation of vulnerable workers in industries with traditionally poor IR practices is a fact. That must be stamped out.
What these examples hide is the real story of 457 visas in the Australian economy.
The majority of 457 visa holders are professionals.
The largest user of 457s is the health sector.
The largest country of origin is the UK.
The average nominated salary is $73 000 per annum.
Think an Irish nurse in NSW Public Health, or an Indian doctor in Queensland.
And what is a better migration result than a skilled worker entering Australia to a guaranteed job in an area of shortage!
What’s even better, about 25 per cent of our permanent migrants are now 457 workers converting to permanency. Having experienced the lifestyle and remained in employment, they are opting to become permanent residents.
They have tried it. They have liked it and they have made a success of it so they have stayed.
But again, the numbers are skewered towards professionals and people from the UK.
Temporary skilled program ‘demand driven’
That the 457 visa is directly driven by the needs of the economy can be seen in the state breakdowns in the occupations sponsored.
You can clearly see the difference in the skills demanded by employers in WA versus Victoria, NSW or South Australia.
The top occupations coming into WA on 457 visas include fitters, welders, motor mechanics and geologists.
This is a stark contrast to Victoria, where the top occupations are computing professionals, registered nurses, software designers and GPs; or Tasmania, where the top occupations are trainee doctors, GPs and medical engineering technicians.
That demonstrates the success of the program to deliver the skills needed in the different economies that are now operating across the country.
Increasingly, immigration’s role is as a job matching agency for the nation.
We’re doing pretty well but we can do it better.
We need to get the right skills to the areas of need.
We don’t just want people to pour into Sydney and hope the labour market distributes them over time.
We need to develop the levers that allow the immigration program to match the needs of the economy.
WA is a good example of why a national skilled migration program may not meet the needs of particular regional economies.
There are a number of regional economies in Australia with different growth rates, unemployment rates and skills needs.
Our national immigration program is not doing as well as it might in responding to the very different demands of those various local economies.
A more localized and targeted immigration program can deliver better outcomes.
The WA migration picture is very different to the eastern states economies.
In 2006-07, interstate migration to WA only made up 9.4 per cent of its population growth. This in contrast to Queensland, where interstate migration made up 29.8 per cent of its population growth over that period.
At December 2007, WA only had 7.8% of international students, compared to almost 70% of international students that study in NSW and Victoria.
Similarly, in 2006-07 only 10% of working holiday makers stayed in WA, compared to the 85% that stayed in NSW, Victoria and Queensland combined.
These temporary migrants are not only valuable sources of labour while they’re here, but they also provide Australia with the opportunity to improve its links with their source countries after they have returned home. WA needs to work harder to increase its share of these migrant groups.
WA is clearly worse off in terms of the availability of temporary unskilled workforce and interstate migration.
Attempts to change this reality have proved only marginally successful.
While it is true that the mining boom is sucking in labour from semi-skilled and unskilled workers, these other actors are also at play.
Linking our migration programs to the needs of the economy
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 good levels of English language and particular skills.
But there has been some valid criticism levelled at the program.
When we find that 20 per cent of our skilled migrants are accountants it is difficult to argue that it is responsive as it might be 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 but reflects the skills of those applying and the crude filter that we apply called the MODL (Migration Occupations in Demand List) which lists cooks and hairdressers.
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 permanent 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 I am focused on shifting the balance in our permanent 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 to significantly to increase the proportion of employer sponsored permanent visas.
I 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.
I am particularly focused on WA. Here, employers are making excellent use of the 457 scheme. Recent data shows that WA is now the second biggest user of 457s in the country, with a total of 11 800 primary grants last year.
This is a 41 per cent rise on last financial year – the largest increase in Australia.
The willingness among WA employers to sponsor overseas workers is clearly there – but I want to see more employers sponsoring these workers as permanent skilled migrants, taking advantage of the 133 500 program, rather than just bringing them in through the 457 scheme.
We have to make the permanent migration program deliver for current needs.
I am 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.
If WA is to lift its share of the permanent migration program to sustain the growth in the economy, we need to do better in this area.
Since coming to office, the Rudd Government has put a lot of effort into addressing our skills shortages through longer term planning.
In immigration, we have increased last year’s permanent program by 6000; this year’s by 31 000.
We have worked hard to make the 457 program more user friendly by speeding up processing times, clearing the backlog and working more closely with business.
It has become clear that WA needs a range of migration options that are tailored to the specific needs of its resources-driven economy.
That is why I am very keen to develop a WA migration plan, in close consultation with the state government, that seeks to identify the medium term skill needs of this state’s economy and the role both temporary and permanent skilled migration can play in meeting those needs.
Under such a plan the state government will be given greater scope to sponsor the skills they consider to be needed. Currently the state government is constrained in the occupations they can sponsor; I believe they should be given greater capacity to make decisions on what skills are most needed in their economy to fill critical skills shortages.
State Migration Plans would recognise the reality that Australia is a combination of regional economies. The skills needed in the North West are very different to those needed in Victoria or Tasmania.
The Commonwealth Government cannot currently deliver a single national skilled migration program that will meet those regional variations. There is a role for state and territory governments to identify and target the skills needed within their jurisdictions.
Just as importantly, there should be an increasing role for employers in determining the skill mix that is delivered by our migration programs.
In that context any WA Migration Plan would include measures aimed at that the resources sector. It has billions of dollars of investment planned over the next four to five years, but no certainty on the labour needed to deliver those projects.
I see a benefit in working with the major companies and state government and setting out a framework that would give the resource sector greater certainty on its workforce, while ensuring that local jobs and conditions were protected.
As part of this approach I have already signalled an intention to develop a ‘one stop shop’ for large resource projects. This would provide a single Commonwealth point of contact when companies are planning significant projects. Instead of running between a number of agencies the company would deal with one agency which would coordinate the Commonwealth’s position in relation to its workforce needs.
By utilising labour agreements we can balance local training and employment with skilled migration programs to provide certainty to major resource and infrastructure projects.
This approach is already adopted by state governments through their resource project specific Acts.
Conclusion
So I think there is a lot we can do to improve our capacity to deliver the skilled workforce WA needs into the future. The immigration portfolio is critical to that task.
The migration issue that as a nation we are currently beginning to confront is that we not only have a skills shortage, but we also have a labour shortage in some parts of the country, particularly here in WA.
My 16-year-old son had four job offers.
NFF, HIA and aged care are all seeking workers at the semi-skilled and unskilled level.
Many attempt to use the 457 scheme to meet those needs because we don’t have an unskilled or semi-skilled migration option.
Australia also faces a growing demand for access to our labour markets.
The Pacific Islands, East Timor and our northern neighbours all are seeking opportunities for their people.
These labour issues are front and centre of all international trade forums.
As you know, the Government is currently considering a Pacific Island Temporary worker scheme. Nothing has been decided yet and if we do move down that path, it would be a trial.
More broadly, we need an informal debate about the need for temporary unskilled workers to meet the growing demands in our economy.
The issues of our demographics are not going to go away,
As Australians take up the skilled work opportunities available, shortages of labour in the service and regionally based industries will become more and more acute.
The growth sectors of the economy, like WA, are at the forefront of the problem.
The demand exists now and it is only going to grow.
Getting the policy settings right and gaining public acceptance for a growing migration program to meet the demand is and will be challenging.
Thank you.
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URL: http://www.minister.immi.gov.au
/media/speeches/2008/ce080717.htm
Last update: 13 August 2008 at 17:14 AEST