CHAPTER 2
EFFECTIVENESS OF THE 457 VISA PROGRAM
Introduction
2.1
As noted in Chapter 1, the policy settings of the Temporary Work
(Skilled) - Standard Business Sponsorship (Subclass 457) visa program (457 visa
program) broadly seek to balance the goal of addressing temporary skilled
labour shortages with the need to protect the employment opportunities and
conditions of local (Australian or permanent resident) workers, and the working
conditions of 457 visa holders.[1]
2.2
This view of the program is confirmed by the submission of the Department
of Immigration and Citizenship (the department); the Department of Education,
Employment and Workplace Relations; the Department of Industry, Innovation,
Climate Change, Science, Research and Tertiary Education; and the Department of
Resources, Energy and Tourism (the departments' submission), which identified the
program's two 'fundamental tenets' as being:
- to enable a business to sponsor a skilled overseas worker if they
cannot find an appropriately skilled Australian citizen or permanent resident
to fill a skilled position; and
- to ensure that the working conditions of a sponsored visa holder
are no less favourable than those provided to an Australian worker and that
overseas workers are not exploited.[2]
2.3
The extent to which the program's design and administration effectively
achieves a balance between its fundamental tenets is therefore the question underpinning
the issues raised by the inquiry's term of reference. As the Migration Council
of Australia (MCA) has observed, the inherent tension in the program's policy
aims is reflected in the 'extensive media coverage and political attention' it
has received since its inception.[3]
The committee notes also that the program has undergone a number of significant
changes over that time.[4]
2.4
Accordingly, this chapter considers broadly the effectiveness of the 457
visa program, with particular reference to inquiry terms of reference (a) to
(g) and (i), which required the committee to examine the framework and
operation of the program, including:
(a) ...[its] effectiveness in filling areas of identified skill
shortages and the extent to which they may result in a decline in Australia's
national training effort, with particular reference to apprenticeship
commencements;
(b) ...[its] accessibility and the criteria against which
applications are assessed, including whether stringent labour market testing
can or should be applied to the application process;
(c) the process of listing occupations on the Consolidated
Sponsored Occupations List, and the monitoring of such processes and the
adequacy or otherwise of departmental oversight and enforcement of agreements
and undertakings entered into by sponsors;
(d) the process of granting such visas and the monitoring of
these processes, including the transparency and rigour of the processes;
(e) the adequacy of the tests that apply to the granting of
these visas and their impact on local employment opportunities;
(f) the economic benefits of such agreements and the economic
and social impact of such agreements;
(g) whether better long-term forecasting of workforce needs,
and the associated skills training required, would reduce the extent of the current
reliance on such visas; and
...
(i) the role of employment agencies involved in on-hiring
subclass 457 visa holders and the contractual obligations placed on subclass
457 visa holders...[5]
2.5
The inquiry's terms of reference also asked the committee to consider
the above with reference to Enterprise Migration Agreements (EMAs) and Regional
Migration Agreements (RMAs), and with reference to the proposed changes
announced by the Government in February 2013. These matters are considered in
chapters 4 and 5, respectively.
The economic benefits and economic and social impact of the 457 visa
program (term of reference (f))
2.6
The committee notes that there is general support for an effective system
of temporary skilled migration in Australia, and this was evident across the range
of interests represented by the groups and individuals that provided evidence
to the inquiry.[6]
2.7
Mr Andrew Bartlett, a Research Fellow at the Australian National
University Migration Law Program, observed that, of all migration visa
subclasses, 457 visa holders provide the most 'immediate and...significant'
fiscal benefits for Australia',[7]
and support for the 457 visa program is generally premised on recognition of
the direct economic benefits flowing from the ability to address genuine skill
shortages in the local labour market. The Australian Mines and Metals
Association (AMMA), for example, observed that the program:
...provides a 'circuit breaker' when appropriate labour cannot
be sourced locally, allowing important job creating projects and investments to
proceed that would be unviable or significantly delayed without access to such
labour...[8]
2.8
It was also noted that 457 visa workers make a direct contribution
through the payment of taxes and the spending of wages in the Australian
economy.[9]
2.9
Further, the 457 program was recognised as supporting skill shortages in
respect of critical industries or services, such as healthcare and hospitals.[10]
2.10
Many submissions noted that, in addition to the direct benefits of
addressing temporary skill shortages, the program provides an avenue of skills
exchange and development by allowing overseas workers to impart their skills,
knowledge and experience to local workers.[11]
In this way, 457 visa workers 'enhance Australia's skill base and assist in
developing Australia's economy to become more efficient on a global comparison'.[12]
2.11
In social terms, the 457 visa program represents an avenue of cultural
exchange and, in many cases, significant economic opportunity for individual
457 visa holders in terms of enhancing their social, family and career
prospects.[13]
2.12
It was also recognised in a number of submissions that the operation of
the 457 visa program should be seen in the context of a global employment
market.[14]
Effectiveness of the 457 visa program in addressing areas of identified
skill shortages (term of reference (a))
2.13
Notwithstanding the general level of support for the 457 visa program,
the evidence to the inquiry revealed significant concerns regarding the
effectiveness of the program in addressing areas of genuine skill shortages,
and whether the program is achieving its stated policy aim of ensuring that the
457 visa workers are used only where skilled labour cannot be sourced locally.
457 visa applications and the
general rate of unemployment
2.14
A particular focus of the evidence to the inquiry on this question was
the apparent significance of recent data showing a divergence between the
number of 457 visa applications and the general rate of unemployment, which,
historically, have been closely aligned.[15]
In a May 2013 Senate estimates hearing, an officer of the department commented
on the significance of the relationship between these two measures, noting:
...the effectiveness [of the 457 visa program] will be measured
by how responsive...[it] is to the business cycle. If you...are seeing growth rates
in 457 at the time of growing unemployment that is the first test for 457, and
the most important one...[16]
2.15
The significance of this statistical relationship as an indication of
the effectiveness of the 457 visa program appears to be well-accepted. The AMMA
submission, for example, noted:
The demand-driven nature of the program is...an in-built
mechanism that renders it responsive to prevailing economic and labour market
conditions.[17]
2.16
Similarly, the MCA has described the program as 'an automatic relief
valve', whereby '[s]urges in skilled labour requirements or dips in economic
activity see numbers of temporary skilled workers ebb and flow'.[18]
2.17
The divergence of the number of 457 applications and the general rate of
unemployment was demonstrated in the departments' submission, which provided
the following graphs showing the number of primary 457 visa applications as
against the number of job advertisements (using the ANZ Job Advertisement
Series) and the general rate of unemployment, respectively.[19]
2.18
The departments' submission noted that the above graphs demonstrate that
the program has 'continued to grow since July 2011 to mid-2012 despite a
softening of the Australian labour market'.[20]
2.19
However, the strength of this trend was disputed, with some groups
pointing to downward trends since June 2012 as 'reinforcing the responsiveness
of the program and [minimising] any concerns' about divergent trends.[21]
A February 2013 media release from the department was cited in support of this
view:
Temporary work visa applications have been heading downwards
since June 2012 and have now declined for the last three consecutive months...
Reinforcing this trend has been a drop in actual 457 visa
grants since August. This movement demonstrates the 457 visa program's
responsiveness to the changing needs of the Australian economy.[22]
Underlying causes
2.20
The inquiry heard different views as to the underlying causes of the
divergent trends in the number of 457 visa applications and the general rate of
unemployment (notwithstanding any recent improvement that may have occurred).
2.21
Some submitters and witnesses interpreted this divergence as indicating
that the program was failing to ensure that 457 visa workers were being
employed only as a measure of last resort in areas of genuine skills shortage.[23]
This was acknowledged as potentially being the case by the departments'
submission, which noted:
...it is possible under the current program settings for
employers to source skilled workers from offshore without sufficient commitment
to recruiting or training locally by using various loopholes in the current
legislative framework.[24]
2.22
Evidence arising from a May 2013 estimates hearing confirmed at least
some incidence of 457 visa holders being employed in the absence of a genuine
skill shortage. An officer of the department noted:
[The department has]...come across evidence that some employers
that are clearly discriminating against Australian workers...
...we have seen some companies that have a policy of not
employing Australian workers.[25]
2.23
A discussion paper on strengthening the integrity of the 457 visa
program, which was prepared for the Ministerial Advisory Council on Skilled
Migration (MACSM) and released under freedom of information laws on 2 May 2013,
also cited some occurrences of this type:
Recent cases include examples of certain sponsors who have
advised the Department that they do not seek to recruit locally as it does not
fit with their business model, or because it is too expensive to recruit
domestically.[26]
2.24
Other groups, however, submitted that the break down in the historic
alignment of the number of primary visa applications and the general rate of
unemployment was due to 'structural' factors within the broader immigration
program. The Law Council of Australia (LCA), for example, identified these
factors as being:
- since February 2010 student visa holders have been precluded from
applying for on-shore general skilled permanent residence visas. Student visa
holders are therefore applying for 457 visas where previously they would have
applied for a general skilled migration visa;
- since February 2010, for the same reason, student visa holders have
been transitioning first to Graduate Skilled 485 visas, allowing them to remain
in Australia for a further 18 months, and subsequently applying for 457 visas;
- since July 2012, the minimum period which student visa holders
must wait before being able to seek permanent residence has increased from one
year to two years, increasing the number of people remaining on 457 visas;[27]
and
- since mid-2012, delays in the processing times for visa
subclasses 186 and 187, increasing the number of people remaining on 457 visas.[28]
2.25
In a May 2013 estimates hearing, an officer of the department confirmed
that some increase in 457 visa applications since mid-2012 was attributable to
increased applications via the student visa stream.[29]
457 visa applications and other labour
market trends
2.26
The relationship of 457 visa numbers with certain other labour market
trends was also raised as relevant to the question of whether the program is
effectively ensuring that overseas workers are used only in areas of genuine
skill shortage.
2.27
The Construction, Forestry, Mining and Energy Union (CFMEU) submission
argued that a 'similar picture of 457 worker growth outstripping general
employment growth emerges at an industry and occupation level'; and noted, for
example, that in the 12 months to February 2013 a 1.1 per cent growth in the
Australian construction industry was exceeded by growth of 25 per cent in the
number of 457 workers in that industry.[30]
2.28
In contrast, with reference to the same industry, AMMA pointed to a 3
per cent reduction in the number of 457 visa applications in construction, in
the 2012-13 year to November, compared to the same period in the previous year.[31]
2.29
In a May 2013 estimates hearing, an officer of the department advised
that in mid-2012 concerns arose about the growth of the 457 visa program in relation
to particular industries and regions:
Midway through...[2012] the department identified that the 457
program was growing at quite a rapid rate...[We] identified much of the growth as
being in industries and geographical regions where there had been a softening
of the labour market. Some examples of that include accommodation and food
service and the retail industry.[32]
2.30
At the same hearing another officer noted that, beyond concerns arising
from divergent patterns of growth per se, concern could also arise where growth
occurred in industries and occupations traditionally exhibiting higher levels
of noncompliance:
There has been some growth in specific occupations, where we
have integrity concerns. Traditionally, the accommodation and food services
industry is the industry where we have a larger percentage of noncompliance.
Also, those occupations are where the salary levels are very low and very close
to the minimum salary level prescribed under the temporary skilled migration
income threshold limit...We also have some occupations that are not clearly
defined, like project manager/administrator, where it is really difficult to
identify the particular skills required in that occupation. These two
occupations, project administration and project manager or problem manager,
have [also] been growing quite significantly...[33]
The accessibility and criteria against which 457 visa applications are
assessed, including whether stringent labour market testing can or should be
applied to the application process (term of reference (b));
The process of listing occupations on the Consolidated Sponsored
Occupations List, and the monitoring of such processes and the adequacy or
otherwise of departmental oversight and enforcement of agreements and
undertakings entered into by sponsors (term of reference (c));
The process of granting such visas and the monitoring of these processes,
including the transparency and rigour of the processes (term of
reference (d)); and
The adequacy of the tests that apply to the granting of these visas and
their impact on local employment opportunities (term of reference (e))
2.31
Terms of reference (b), (c), (d) and (e) collectively relate to the
extent to which the 457 visa program's design and administration effectively
achieve a balance between its fundamental policy objectives.
2.32
The following issues are discussed below:
- impact on local employment opportunities;
- labour market testing;
-
cost of employing 457 visa workers;
- the Consolidated Sponsored Occupations List;
- transparency and rigour of the 457 visa application process and
adequacy of relevant tests;
- impact of the 457 visa program on the national training effort
and apprenticeships; and
- impact of better long-term forecasting and skills training.
Impact on local employment
opportunities
2.33
The committee notes that, where a genuine skill shortage does not exist
in relation to a position, the employment of a 457 visa holder represents a
fundamental breach of the program's central aims, and as a matter of course
must impact negatively on the opportunity for local workers to fill that
position.
2.34
Evidence in support of this proposition was received from a number of
submitters and witnesses. The Australian Nursing Foundation (ANF), for example,
pointed to high levels of employment of overseas nurses on 457 visas at a time
when 'an increasing number of new graduate nurses unable to find work as nurses'.
The ANF expressed concern that:
...the inability of our home grown nurses to obtain employment
is not only a serious waste of public monies but will also lead a decline in
those taking up undergraduate nursing courses and a consequent decrease in the
levels of nursing care.[34]
2.35
Similarly, the Communications Plumbing Electrical Union
(CEPU) submitted that its members commonly experienced difficulty in obtaining
employment in the mining and resource industry, despite possessing the
appropriate skills and willingness to work.[35]
2.36
Conversely, the committee notes that, where a genuine skill shortage
exists in relation to a position, the inability of an employer to readily
access a 457 visa worker to fill that position frustrates the key economic
objectives of the program and could impact negatively on both business activity
and the availability of critical services.
2.37
The submissions of the Chamber of Commerce Northern Territory and the Chamber
of Commerce and Industry Western Australia provided valuable insights into the
particular impacts of an inability to readily access employees through the (standard
business sponsorship) 457 visa program, subject as these regions are to the
pressures of geographical remoteness and large-scale resource projects on the
pool of local labour.[36]
Labour market testing
2.38
'Labour market testing' (LMT) may be understood as 'a legal obligation
on employers to demonstrate, before being able to access an overseas worker
through the 457 [visa] program, that they have tried to recruit Australian
resident workers for the job vacancy on the open market through designated
means and have not been able to find a suitably qualified Australian resident
worker'.[37]
2.39
The committee notes that, in simple terms, in the absence of a
requirement for LMT to establish that there exists a genuine skill shortage in
relation to a specific position,[38]
this must otherwise be achieved via the combined effect of the program's policy
settings.
2.40
A number of submitters and witnesses argued strongly for the introduction
of LMT to the application processes for the 457 visa program. In general, those
in favour of this regarded the current policy settings of the program as being
ineffective at ensuring that it is used only in respect of genuine skill
shortages and, concomitantly, offering adequate protection to the rights of
local and 457 workers.[39]
2.41
Equally, the inquiry registered strong opposition to any imposition of
LMT. Generally, the view of those against LMT was that the program's current
policy settings are effective to ensure that it is used only in respect of
genuine skill shortages and, accordingly, offers adequate protection to the
rights of local and 457 visa workers.
2.42
In a number of cases, opponents of LMT pointed to previous experience of
a LMT requirement in the context of the 457 visa program. The Migration
Institute of Australia submission (MIA), for example, observed:
Whilst [LMT]...may appear prima facie to be a thorough way of
testing the market it [previously] proved to be cumbersome and ineffective as...many
advertisements were left unanswered or suitable applicants were simply not
found.
In many cases, employers received applications from people
who required sponsorship to remain in Australia, which again defeated the
purpose of carrying out labour market testing to attract local Australians.[40]
2.43
Similarly, the LCA submitted:
...when labour market testing was [previously] compulsory as
part of the company sponsored temporary visa program...[i]t was our experience
that those requirements were poorly managed, largely ineffective and honoured
more in form than substance.[41]
2.44
Dr Joanna Howe, appearing in a private capacity, pointed to particular
design features of the previous LMT requirement as being problematic:
...our experience in Australia has been that it did not work
too well between 1996 and 2001. There were reasons for that. In the system
there was this artificial distinction between key activities and non-key
activities, so it was quite a difficult...system to work.[42]
2.45
Beyond the question of previous experiences, it was also argued that, in
many cases, LMT is unnecessary because an employer is seeking highly specialist
skills,[43]
or is otherwise aware that the skills being sought are not available in the
local labour market—for example, there may be industry or government
information clearly demonstrating that a skill shortage exists in a particular
occupation or region.[44]
In such cases, a requirement for LMT was said to impose delay and cost that
could ultimately frustrate the fundamental economic objectives of the program.[45]
Cost of employing 457 visa workers
2.46
A number of submitters and witnesses drew attention to the cumulative
financial impact of sponsorship requirements as the main design feature of the 457
visa program to ensure that employers preference local workers over 457 visa
holders. The true relative cost differential between the employment of local as
against 457 visa holders is therefore of fundamental importance to the question
of whether employers may seek to use the program exclusively in respect of
genuine skill shortages.
2.47
On this point, the departments' submission pointed to a number of 'strong
economic incentives' for employers to employ Australian workers before seeking
workers through the 457 visa program. It identified the costs related to the
sponsorship of a 457 visa holder as:
- sponsorship and nomination fees;
- recruitment costs;
- providing equal terms and conditions including paying market salary
rate;
- meeting training expenditure benchmarks and maintaining a
financial commitment to training levels; and
- being liable for the cost of the 457 visa worker's return to
their country of origin.[46]
2.48
The submission observed:
These costs...make foreign workers more costly to employ than Australian
workers, provided that there are Australian workers available and that employers
abide by the intent of the legislation.[47]
2.49
A number of submitters and witnesses attested to the effectiveness of
these requirements in imposing higher costs on the employment of 457 workers
relative to local workers. Mr Stephen Bolton, a Senior Adviser for the Australian
Chamber of Commerce and Industry (ACCI), for example, submitted:
...it is almost universally the case that workers on 457
visas are significantly more expensive than local workers when you factor in
not only the recruitment costs that an employer may incur by going overseas but
also healthcare provision in many cases, subsidised accommodation and ongoing
training, as well as their wages and entitlements. It can be a very expensive
prospect for an employer.[48]
2.50
Some submitters and witnesses questioned the extent to which employers
face relatively higher costs to employ 457 visa holders. The CFMEU, for
example, argued that 'the costs to employers of accessing temporary foreign
workers on 457 visas are either declining, as a consequence of the falling
costs of offshore recruitment; relatively modest or avoidable;[49]
or in fact largely avoided because the 457 visa is sought in respect of an onshore
applicant.[50]
2.51
On this last point, at a Senate estimates hearing in May 2013 an officer
of the department confirmed a trend of 'strong growth' in onshore 457 visa
applications, and confirmed that such applications would generally involve
lower costs:
This is the area where we have identified some integrity
concerns, given that the legislative framework around the current system was
developed on the basis of...[the] price signal that actually provides economic
incentive for employers to look domestically, if the labour is available,
before looking overseas...
...if you have a large number of temporary visa holders under
the other visa categories onshore, with the pathway to 457s, that price signal
may not work as effectively as for offshore applicants.[51]
The Consolidated Sponsored
Occupations List
2.52
The Consolidated Sponsored Occupations List (CSOL) is an important
feature of the 457 visa program, specifying as it does the occupations that can
be sponsored for the program, in addition to a number of other employer and
state and territory nominated visa subclasses.[52]
Form and content of CSOL
2.53
The evidence of a number of submitters and witnesses addressed the
question of whether the current form and content of the CSOL effectively
supports the operation and objectives of the 457 program.
2.54
Regarding the content of the CSOL, the departments' submission advised
that, with reference to the visa subclasses that it supports, the CSOL seeks to
achieve an appropriate balance between allowing employers 'access to workers
which they need to sponsor to retain their skills [sic], and ensuring that
appropriately skilled migrants would be [sic] accessing the skilled migration
program'.[53]
Occupations are included on the CSOL:
...based on the skill level of occupations as defined in the
Australian and New Zealand Standard Classification of Occupations (ANZSCO)...[with]
[m]ost occupations specified in ANZSCO with a skill level of 1, 2 or 3 [currently
included]...unless a particular occupation has significant integrity concerns or Australian
citizenship is a pre-requisite for appointment.[54]
2.55
A number of submitters and witnesses expressed the view that the CSOL
effectively targets occupations subject to identified skill shortage, thereby
negating the need for LMT. The Australian Industry Group submission, for example,
stated:
The...CSOL ensures that 457 visas apply to occupations where
there are identified skill shortages.[55]
2.56
Similarly, Mr Scott Barklamb, Executive Director, Industry, AMMA,
stated:
...we already have, in our view, significant labour market
testing by virtue of the government's scheduled occupations that can use these
visas, based on research and the government's extensive labour market
knowledge.[56]
2.57
However, Mr Alan Chanesman, a policy adviser with the Australian
National University, characterised the CSOL as a 'static list of occupations'
as opposed to one that lists occupations on the basis of identified skill
shortages.[57]
Other submitters and witnesses expanded on this point, noting that the CSOL, in
servicing a number of visa types by reference to the skill level of occupations
rather than identified skill shortages, is by definition composite and very
broad in nature.[58]
A joint submission from Dr Joanna Howe, Associate Professor Alexander Reilly
and Professor Andrew Stewart observed:
...[the 457 program currently relies] upon a broadly-based
occupational list to identify the occupations for which employers can sponsor
temporary migrant workers. Crucially, this list is not compiled with reference
to skill shortages in the domestic economy. The CSOL currently has 742
occupations on it from A[NZ]SCO skill levels 1–4. So long as an occupation is
on this list, an employer can make a 457 nomination and the occupation is
deemed to be in shortage. Present on this list is a number of occupations where
there is clearly no domestic labour shortfall.[59]
2.58
A number of examples were provided in evidence to the inquiry of occupations
currently included on the CSOL, but clearly either not presently the subject of
a skill shortage (such as 'print journalist', despite the high level of
redundancies in that profession on recent years) or not requiring a particularly
high level of skill (such as 'flight attendant' and 'cook', which are
Certificate III occupations requiring only two years of on-the-job training).[60]
2.59
On the basis of the composite and broad nature of CSOL, Dr Howe
observed:
...[the CSOL]...is not finely attuned to shortages. So long as an
occupation is on this list then an employer can nominate an overseas worker...
...[This is] a fairly broad, crude mechanism for identifying
skill shortages and...is fairly ineffective for that key first threshold test of
identifying Australia's skill needs. As such, because of this design flaw...the
457 visa has become more of a general labour supply visa...[61]
2.60
Notwithstanding evidence regarding the overly broad nature of the CSOL,
the committee heard evidence that the range of occupations listed on the CSOL poorly
services a number of regions, industries or areas of particular or emerging
skill shortages.
2.61
The Chamber of Commerce and Industry Queensland, for example, indicated
that the CSOL's current focus on skill levels does not 'reflect the skills
needs of Queensland's small to medium businesses, particularly those in
regional and remote areas'.[62]
Similarly, the MIA noted:
Many would argue that the...[CSOL] is not broad enough and does
not include those occupations that assist employers to address their skill
shortages. For example, restaurateurs are often seeking ways in which they can
sponsor experienced sommeliers or maitre d'hotel for their fronts of houses.
Similarly, with the abundance of seafood restaurants...there is also a need for
the skills of experienced fishmongers to be employed. This is also apparent in
the mining and rural sectors in which employers are not able to sponsor people
in specific occupations.
...
The CSOL is not representative of critical business needs and
skill shortages in the regional and remote areas of Australia. There should be
an expanded list for rural and remote areas of Australia, for example in the horticultural
and nursery sectors where specialist workers are required for the cultivation
of the nation's food.[63]
2.62
Mr Bolton also questioned whether the use of a skill-based occupations
list for the 457 visa program (as opposed to an occupations-in-demand list) was
well suited to Australia where geographical regions could experience disparate skill
shortages, and noting that regional differences were already subject to tailored
approaches, including regionally based and state occupations-in-demand lists.[64]
Mr Bolton was also critical of the responsiveness of the CSOL in servicing
emerging and growth industries.[65]
Process of listing occupations on
the CSOL
2.63
The committee received very little detailed evidence or insight regarding
the process for listing occupations on the CSOL.
2.64
The departments' submission briefly noted that the CSOL is approved by
the Minister for Immigration and Citizenship (the minister) following
consultation between the department, the Department of Education, Employment
and Workplace Relations and the Australian Workforce and Productivity Agency
(AWPA).[66]
2.65
The submission from Berry Appleman and Leiden (BAL Australia) noted also
that the Ministerial Advisory Council on Skilled Migration (MACSM) is able to
recommend changes on any aspect of Australia's skilled migration program, and
may also therefore provide input to the department regarding the content of the
CSOL.[67]
The Minerals Council of Australia attested to its own experience of
participation in the MACSM, noting that, through that forum, it had
successfully negotiated the addition of 'skill-shortage occupations' to the CSOL
in recent years.[68]
2.66
In broad terms, a relatively consistent message from submissions on the current
listing process for the CSOL was that there is a lack of transparency as to the
methodology by which occupations are added and removed. The joint submission
from Dr Joanna Howe, Professor Alexander Reilly and Professor Andrew Stewart,
for example, noted:
...[there is] limited transparency and accountability in the
compilation of the list. It is unclear when annual reviews of this list take
place. It is unclear as to how and why occupations are added to this list. Very
little justification, if any, is given for the occupations that are on this
list.[69]
2.67
Similarly, the ACCI submission noted:
Changes made to the CSOL...are often not immediately or widely
communicated. This leads to considerable confusion and frustration on the part
of employers and can further exacerbate time lags in cases where access to
skills in order to progress work is time critical.[70]
2.68
The submission of the Transport Workers' Union of Australia (TWU)
pointed to concerns, voiced previously by the Joint Standing Committee on
Migration and the Visa Subclass 457 Integrity Review (the Deegan review),
regarding a lack of clarity about the extent to which the CSOL is customised in
terms of 'listing not only skilled occupations but also migration occupations
in demand' (that is, occupations subject to skill shortages).[71]
2.69
More generally, the LCA contrasted the relatively opaque administrative
processes supporting the compilation of the CSOL with the more consultative and
public approach taken to determining the content of the Skilled Occupation List
(SOL),[72]
which lists occupations for the purposes of nominating occupations in relation
to general skilled migration visas:
The SOL is compiled by AWPA...[I]t contains those occupations
that are widely recognised to be in short supply and include such occupations
as health professionals, engineers, lawyers and certain trades. AWPA analyses a
range of evidence when updating the SOL. Evidence is also gathered from
industry and key stakeholders: comprehensive submissions from industry
stakeholders are available from...[AWPA's] website. As well, a variety of
indicators and information is considered to make determinations about relevant
occupations to include in the SOL.[73]
Suggestions for improving the
effectiveness of the CSOL
2.70
With reference to the issues outlined above regarding the effectiveness
of the CSOL in the context of the 457 visa program, a number of submitters and
witnesses offered suggestions as to how it and related processes might be
reformed to better support the operation and objectives of the program. The
general theme of these was that the narrowing and targeting of the list to
occupations demonstrably the subject of a skills shortage would both improve
the ability of employees to readily access workers to fill positions for which
a local worker could not be found,[74]
and remove the potential or pressure for the program to be used to fill low-
and semi-skilled positions against the fundamental tenets of its policy aims.[75]
2.71
Submitters and witnesses advocating for a narrower and more targeted
CSOL generally acknowledged that such an approach would involve an element of
LMT or labour market analysis to establish whether an occupation was the
subject of a genuine skills shortage. It was also suggested that any such
approach would need to be consultative and timely in order to add and remove
occupations in response to labour market conditions and trends.[76]
2.72
The committee notes also suggestions that a more narrow and targeted
CSOL may require complementary consideration of whether and how to accommodate
the demand for low- and semi-skilled workers through the Australian immigration
system.[77]
2.73
AWPA was generally identified as the appropriate agency to undertake
primary responsibility for maintaining the (modified) CSOL and overseeing
and/or undertaking the required labour market testing or analysis.[78]
Dr Howe, for example, observed:
...[AWPA could be used] to compile a list [for the purposes of
the 457 visa program]. They currently compile the skilled occupation list [SOL],
which has 192 occupations on it. So they are already doing labour market
analysis. We think that organisation could potentially be used to rigorously
compile a 457 visa list that would more accurately identify skill shortages.[79]
Transparency and rigour of 457 visa
application process and adequacy of relevant tests
2.74
Evidence to the inquiry in relation to the transparency and rigour of
the 457 visa application process suggested that, while some stakeholders
are generally satisfied with the process,[80]
others feel that there are inconsistencies in the assessment of applications at
various stages of the process.
Refusal of applications at
application stage
2.75
A number of submitters and witnesses outlined concerns regarding what
was said to be a large number of refusals occurring at the (visa) application
stage (that is, after approvals have been granted at the sponsorship and
nomination stages) on the basis of concerns that the nominated position with
the employer was not in fact genuine.
2.76
On this issue, the MIA submitted:
...after a sponsorship and nomination have been approved by
[the department]...case officers are refusing some visa applications because they
have decided that it is not a genuine position. Assessment by a [department]...officer
of the nominated position is outside their mandate when assessing a visa
application. The requirements that a position meets a "genuine need"
is not current policy but has been mooted by the Government to be changed, however,
until such time that new legislation and policy has been announced,
then...[department] officers should implement current Immigration policy and not
take it upon themselves to interpret what they believe will be the new policy.[81]
2.77
The LCA, similarly, was concerned that this apparent practice was
leaving the outcome of applications unduly dependent on the discretion and
policy interpretation of individual decision makers, leading applications of
similar merit to be determined inconsistently and thereby introducing
uncertainty into the process. The LCA noted that, under current arrangements,
the department may have little evidence before it at the nomination stage to
consider the question of whether a nominated position is genuine, but contended
that in such circumstances further investigation should be undertaken so that
refusal, if warranted, can take place at that earlier stage of the application
process.[82]
2.78
In relation to improved transparency around decision making more
generally, the LCA called for:
...the implementation of stricter guidelines and
collation of precedents for case officer's adherence and increased case officer
training for a greater transparency in DIAC's decision making process.[83]
Intra-company transfers
2.79
The committee heard evidence that the application of the criteria
attached to the 457 visa program is unwieldy in respect of intra-company
transfers. In response to a question on notice, Fragomen noted that the current
sponsorship criteria reflected the program's focus on the filling of short term
skill shortages, and were not well suited to accommodating or regulating
temporary intra-company transfers.
2.80
Fragomen submitted that transfers of this type were a common practice
among multinational companies, which 'routinely assign key staff and executives
to their operations around the world in the normal course of conducting their
business'.[84]
2.81
In light of the particular purpose and benefits of intra-company
transfers, Fragomen called for the creation of a distinct 'intra-company transfer'
category within the 457 visa program, with a tailored application process and
eligibility criteria to better match the particular characteristics and risks attached
to such requests. The adoption of the specific criteria and processes could
support a truncated application process, in which the nomination stage could be
removed. Specific and appropriate visa conditions could ensure that an
intra-company transfer category would be incorporated easily within the
existing regulatory framework, which was already premised on distinct 'streams'
within the subclass 457 visa category.[85]
Extent to which the 457 visa program may result in a decline in Australia's
national training effort, with particular reference to apprenticeship
commencements (term of reference (a)); and
Whether better long-term forecasting of workforce needs, and the associated
skills training required, would reduce the extent of the current reliance on
457 visas (term of reference (g))
2.82
Term of reference (a) and (g) required the committee to look at the
inter-related issues of the impact of the 457 visa program on Australia's
national training effort, including apprenticeships; and the extent to which
better long-term forecasting of workforce needs, and associated skills
training, would reduce the extent of the current reliance on the 457 visa
program to address skill shortages.
Impact of the 457 visa program on national
training effort and apprenticeships
2.83
A number of submitters and witnesses expressed concern that the 457 visa
program impacts negatively on Australia's national training effort and
apprenticeships because it reduces the need for employers to directly invest in
workforce training. The CEPU, for example, submitted:
The 457 visa scheme provides an attractive alternative to
investing in training by employers faced with the skills shortage. Rather than
investing in training or taking on apprentices, employers can simply poach
trained employees from overseas.[86]
2.84
However, other submitters and witnesses noted that approval as a sponsor
under the program requires employers to meet one of two training benchmarks,
being:
-
expenditure of one per cent of payroll expenditure on the
provision of structured training to employees; or
- a contribution equivalent to two per cent of payroll expenditure
to an industry training fund.[87]
2.85
A business must also demonstrate a commitment to meeting one of the
specified training benchmarks for each fiscal year for the term of their approval
as a sponsor.[88]
2.86
The program's training benchmark requirements for sponsors were said to
ensure that the 457 visa program has a positive impact on training, by
requiring businesses either to invest directly in staff development,[89]
or to provide a financial contribution to the national training effort more
generally, and so providing 'the flexibility to direct training effort where it
provides maximum economic benefit'.[90]
Further, it was noted that the program's focus on filling immediate demand for
skilled labour did not directly compete with the skill level demands and
training timelines for apprenticeships.[91]
2.87
The absence of a demonstrable link between the program and apprenticeships
was addressed by an officer of the Department of Industry, Innovation, Climate
Change, Science, Research and Tertiary Education, who advised the committee:
...there is no evidence that there has been any impact on
apprenticeship commencements...[T]rade apprenticeship commencements have remained
relatively steady over the last 10 years, with a slight increase...There is no
evidence of a relationship between 457s and commencements. Where there have
been downturns in non-trade commencements, that has generally been related to
changes to apprenticeship incentives.[92]
2.88
More generally, the committee heard that the level of the Commonwealth's
funding commitment did not appear to be linked to the operation of the 457 visa
program:
...in the area of training, funding for training has increased
rather than decreased over the last five or six years. This would tend to
indicate that the use of 457s is not about reducing the federal government
commitment to training.[93]
2.89
Notwithstanding differences of view regarding the impacts of the 457
visa program on the national training effort and apprenticeships, the evidence
of submitters and witnesses revealed a relatively consistent view that deficiencies
in the national training effort reflect a 'broader failure...to ensure that young
people have employability skills as well as the vocational skills to meet the
areas of large demand in the economy'[94]
through increased resourcing,[95]
and more effective and responsive demand-side strategies for matching the needs
of industry with the activities of the education and training sectors.[96]
Impact of better long-term
forecasting and skills training
2.90
In general terms, while submitters and witnesses broadly accepted the
proposition that improved long-term forecasting can allow training settings to
be adjusted to reflect upcoming skills needs',[97]
this view was tempered by a number of significant caveats.
2.91
First, there was some question as to the significance of the link
between the national training effort and the level of use of the 457 visa program,
given the program's focus on addressing temporary skills shortages. Mr Robert
Walsh, Managing Partner, Australia and New Zealand, Fragomen, for example,
stated:
I do not think in any way that...[a more effective national
skills training program] would deal with the vast majority of people who come
to Australia on a 457 visa because...the vast majority of those people are
professional and managerial level staff or skilled tradespeople.[98]
2.92
Second, it was noted that, due to a range of personal, cultural and
geographical factors, skill shortages in Australia arise due to not only a lack
of relevant skills but also a lack of mobility in the Australian workforce.[99]
2.93
Third, there was recognition that long-term forecasting is unable to
wholly address skill shortages. ACCI, for example, noted that it was 'generally
accepted that current mechanisms used in workforce projections and planning
have limited validity and cannot predict major shifts and changes in the
economy'.[100]
2.94
The qualified view of the ability of long-term forecasting or modelling
to address skill shortages was encapsulated by the evidence of AWPA, whose
submission noted that such forecasting makes a valuable contribution to matching
available skills to demand, but will not reduce the need for skilled migration
entirely:
AWPA views the long-term modelling of workforce needs and the
associated skills training required to meet them as an essential component in
achieving an adaptable workforce where skills are used effectively to meet the
increasingly complex needs of industry, and individuals are able to fulfil
their potential...The scenario modelling produced by AWPA is a leading
contributor to the long-term modelling of workforce needs and indicates that
the tertiary qualifications held by the workforce need to grow by between 3 and
3.9 per cent per annum over the years to 2025 to meet Australia's skill needs.
AWPA is of the view that although such an increase would not remove the need
for skilled migration, it would reduce the extent to which skilled migration is
required to meet Australia's skill needs.[101]
COMMITTEE COMMENT
2.95
Evidence to the inquiry has confirmed that the 457 visa program, as the
main instrument of Australia's system of temporary skilled migration, attracts
widespread support based on recognition of the significant economic and social
benefits that flow from the ability to address genuine skill shortages in the
local economy through the use of overseas workers.
2.96
Equally, however, it is accepted that the goal of ensuring that
employers are able to readily access skilled migrants must be balanced against
the need to ensure that the employment opportunities and conditions of local
workers are protected, and that 457 visa workers enjoy no less favourable
conditions and are not otherwise subject to abuse or exploitation. Each of
these important policy elements interacts with and affects the others, and the
effectiveness of the program is dependent on the balance that is achieved by its
overall design and administration. Given this, concerns must arise if the
program is able to be used to employ 457 workers in occupations not subject to
skill shortages, and if 457 workers are able to be employed on less favourable
terms than local workers. Where this occurs, the economic objective of the
program may be frustrated, the employment opportunities and conditions of local
workers may be undermined, and the rights and working conditions of 457 visa
holders may be compromised.
2.97
The committee heard that a core indicator of the effectiveness of the
457 visa program in addressing areas of genuine skill shortage is the
relationship between the number of 457 visa applications and the general rate
of unemployment, which, historically, have been closely aligned. Evidence on
this 'automatic' indicator showed that there has been some divergence in the
growth or demand for 457 visas relative to the rate of general unemployment.
Further, at a geographical, industry and occupation level, there is evidence of
a divergence in the growth or demand for 457 visas relative to the strength of
the labour market, of increasing use of 457 visa holders in less skilled and
broadly defined occupations, and an increasing number of onshore applicants. A
number of submitters and witnesses pointed to these trends as showing that the
457 visa program is not effectively achieving its core economic aim of
directing skilled overseas workers to areas of genuine skill shortages. Others,
however, pointed to policy and systemic factors in the immigration system, such
as changes impacting student visa holders, as the underlying cause of these
trends in the data.
2.98
In relation to this issue, the committee notes that, while it seems
clear that policy and systemic factors are likely to be contributing to the
number and rate of primary applications for 457 visas, the divergence in the
historical alignment of this measure and the general rate of unemployment gives
rise to legitimate questions as to whether the program's policy settings are
currently effective to ensure that overseas workers are in all cases being
employed in areas subject to genuine skill shortages. Given this, an assessment
of the effectiveness of the program, including consideration of proposals for
changes to its current policy settings, is appropriate at this time. The
committee notes that, over the course of its life under successive governments,
the 457 visa program has undergone a number of substantial reviews and
revisions in seeking to achieve or maintain an effective balance between its
policy settings and aims.
Cost of employing 457 visa workers
2.99
The committee heard that the main way in which the 457 visa program
ensures that it is used only in respect of areas subject to genuine skill
shortages is through the imposition of higher costs on employment of 457 visa holders,
including sponsorship and nomination fees, recruitment costs, training
expenditure benchmarks and travel costs. These costs are intended to create a
price signal such that employers will seek to engage a 457 visa holder only
where a local worker cannot be found to fill a position. Evidence was provided
to the inquiry from a number of sources attesting to the fact that this price
differential is substantial and therefore effective in achieving this aim.
However, other submitters and witnesses questioned the strength of this price
signal, claiming that such costs are in many cases not substantial, or in fact
avoidable, particularly in relation to onshore applicants.
The Consolidated Sponsored
Occupations List
2.100
Another main focus of the inquiry was the Consolidated Sponsored
Occupations List (CSOL), which specifies the occupations that can be sponsored
under the 457 visa program, and is therefore an important consideration in
assessing the extent to which the program addresses genuine skill shortages. The
committee heard that the CSOL is broadly based, incorporating the Skilled
Occupations List (SOL) in addition to most occupations defined in levels 1 to 3
of the Australian and New Zealand Standard Classification of Occupations (ANZSCO).
The CSOL is not, as such, a well-targeted list of occupations in demand (that
is, subject to skill shortages), and in fact services a number of other visa
subclasses. Evidence from submitters and witnesses suggested that the CSOL is
in some respects both too narrow, with employers unable to access in-demand
occupations not present on the list, and too broad, with the inclusion of
occupations both not in demand (for example, print journalists) and not
possessing the requisite skill requirements (for example, flight attendants) to
justify the use of a 457 visa holder to fill such positions. The committee
heard that these problems with the content of the CSOL arise not only because the
ANZSCO definitions are ill matched to Australia's skill needs (for example,
through overly broad occupation descriptions or ascribing too high a skill
level to an occupation), but also because there is a lack of rigour,
transparency and consultation around the processes for determining its content.
2.101
In light of these concerns about the CSOL, the committee heard calls for
the development of a specific skills in-demand list for the 457 visa program,
with many recommending that the Australian Workforce and Productivity Agency (AWPA)
be tasked with compiling and maintaining such a list. It was argued that the
development of a 457 program specific list based on labour market analysis and
consultation conducted by AWPA could operate as a de facto form of labour
market testing, and also more easily accommodate labour market changes and regional
and geographical differences in terms of in-demand occupations.
2.102
Such an approach, however, may require complementary consideration of
whether and how Australia's immigration system should facilitate the flow of low-
and semi-skilled labour into Australia. This is suggested by evidence to the
inquiry that, in the shift to an increasingly demand-driven program, the 457
visa program is under pressure to act as a pathway for bringing low- and semi-skilled
workers into the Australian labour market.
2.103
In the committee's view, the evidence to the inquiry has established
that the 457 visa program should be serviced by a specific list or lists of
in-demand skilled occupations for Australia and, where necessary, specific
state or regional labour markets. As occurs with the SOL, AWPA should be tasked
with and appropriately funded to compile and regularly review the content of
the 457 visa program list.
2.104
The committee also considers that a complementary review of whether and
how Australia's immigration system should facilitate the flow of low- and semi-skilled
labour into Australia is needed.
Recommendation 1
2.105
The committee recommends that, for the exclusive purposes of the 457
visa program, the Australian Workforce and Productivity Agency be given the
responsibility and commensurate funding to compile and prepare a skills
in-demand list which also takes into account regional labour market skill
shortages.
Recommendation 2
2.106
The committee recommends that the government institute a review of the
extent to which Australia's immigration system does and should facilitate the
flow of low- and- semi-skilled labour into Australia.
Transparency and rigour of 457 visa
application process and adequacy of relevant tests
2.107
While evidence to the committee revealed some level of dissatisfaction
with the transparency and rigour of the 457 visa application process, the
committee considers that the administration of the program is generally
satisfactory. Notable improvements to the administration of the program have
occurred through the department's industry outreach strategies, and there was
also particular support expressed for the consultative mechanism of the
Ministerial Advisory Council on Skilled Migration.
2.108
A particular matter raised was the apparent practice of the department
in refusing applications at the (visa) application stage of the 457 visa
process. This matter is addressed in Chapter 5.
2.109
A further matter raised was the absence of a dedicated 457 visa 'stream'
for intra-company transfers. The committee considers that the arguments in
favour of establishing a dedicated stream to ensure that the movement of such
skilled labour is properly accommodated by the program have merit.
Recommendation 3
2.110
The committee recommends that a dedicated pathway for intra-company
transfers be introduced to the 457 visa program.
Labour market testing
2.111
Based on the concerns outlined above in relation to the 457 visa
program, a number of submitters and witnesses called strongly for the
introduction of labour market testing (LMT) to the 457 visa program, which in
simple terms is a requirement on employers to advertise a position locally to
ensure that a genuine skill shortage exists in relation to a position.
2.112
However, others raised concerns about the effectiveness of LMT. Some
submitters and witnesses noted that this requirement had previously been an
element of the 457 visa application process, which had proven to be generally a
barrier to employers accessing skilled labour, and nevertheless ineffective at
restricting the use of the program to areas of genuine skill shortages. LMT was
criticised as imposing an often unnecessary additional cost and delay,
particularly in cases where a clear skill shortage exists or highly specialist
skills are being sought, and as susceptible to manipulation to achieve desired
outcomes.
2.113
In the committee's view, the evidence to the inquiry regarding LMT
suggests that the introduction of such a requirement to the 457 visa
application process could assist with ensuring that the program is better
targeted to occupations that are genuinely the subject of skill shortages.
However, it is also clear that there are valid concerns regarding the potential
for LMT to impose additional cost and delay and therefore to act as a barrier
to addressing genuine skill shortages through the program.
2.114
In this regard, the evidence to the committee has shown that the
combined interactions of individual policy settings in the 457 visa program may
impact on its underlying policy aims in complex or unintended ways. It is
therefore clear that a LMT requirement would need to be carefully designed and
calibrated against the other elements of the 457 visa program to ensure that it
would be effective in demonstrating labour market shortages, while not
undermining the responsiveness of the program in meeting employers' needs.
2.115
In this regard, the committee notes that the evidence to the inquiry
addressing the issue of LMT did not address the specific legislative proposal
for LMT contained in the Migration Amendment (Temporary Sponsored Visas) Bill
2013 (the bill), given that the bill was introduced to the House of Representatives
well after the receipt of evidence in submissions and at the hearing for the
inquiry. Further, the lack of any Regulation Impact Statement (RIS) assessment
or formal consultation on the detail of the LMT proposal contained in the bill
was a significant limitation on the committee's ability to assess the practical
implications of the proposal for the operation of the 457 visa program.
This matter is further discussed in Chapter 5 of this report.
Impact of the 457 visa program on
national training effort and apprenticeships
2.116
Evidence to the inquiry regarding the impact of the 457 visa program on
the national training effort, and particularly the number of apprenticeship
commencements, was divided. A number of submitters and witnesses expressed concern
that the program undermines the incentive for employers to support the training
of local workers and apprentices by providing ready access to skilled overseas
workers. Others, however, claimed that the higher cost of employing 457 visa
holders, and particularly the training expenditure requirements for sponsors,
are effective to remove any such incentive and, in fact, ensure that the
program contributes positively to the national training effort.
2.117
More generally, there was a relative consensus of view that, the impact
of the 457 visa program aside, to be effective in addressing skill shortages
the national training effort requires both a greater funding commitment and
level of integration between the supply- and demand-side sectors of the labour
market. While these matters fall outside the scope of this inquiry, the
committee endorses this view.
2.118
With this in mind, however, it is important to recognise that the
promoting of the national training effort is, in one sense, not a core but almost
an incidental aim of the 457 visa program. That is to say, the primary policy
purpose of the training benchmarks appears to be to contribute to the cost
differential in the hiring of overseas workers which ensures the preferencing
of local workers. While the training benchmarks may have a self-correcting
effect on skill shortages in the local labour market (particularly training
benchmark A), they may also be less targeted to actual skill shortages
(training benchmark B).
2.119
On this view, the committee considers that the impact of the 457 visa
program on the national training effort should, overall, be a positive one, but
with the important caveat that this is in circumstances where the overall
policy settings of the program are effective in ensuring that the 457 visa holders
are only sought, or able to be accessed, for the purposes of addressing genuine
skill shortages.
Impact of better long-term
forecasting and skills training
2.120
In relation to the issue of better long-term skills forecasting and
skills training, and the extent to which this may reduce the need to rely on
the 457 visa program, the evidence to the inquiry broadly supported the
proposition that improved forecasting could reduce Australia's reliance on
systems of temporary skilled migration. However, it is also generally accepted
that, as noted by AWPA, there will, regardless, remain a need for a system of
temporary skilled migration to address areas of need in the economy.
2.121
The committee notes that, if implemented, Recommendation 1 (above)
should ensure that analysis and forecasting of Australia's skill needs is
undertaken by the appropriate specialist and expert agency, properly tasked and
operating with adequate resources to support this important task.
2.122
In relation to the targeting of skills training via labour market
analysis and forecasting, the committee again draws attention to the evidence
to the inquiry regarding the need for greater funding and integration of
Australia's national training effort.
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