Temporary skilled migration

Gareth Larsen, Social Policy

Key issue
The temporary skilled migration program, or subclass 457, is responsive to economic changes and employment needs. However, the program has been subject to some instances of exploitation, which resulted in reforms and greater oversight. This article focuses on recent integrity concerns. It also considers the program in the context of permanent migration, population and settlement.

Impact of skilled migration on jobs for Australian workers

The uncapped Temporary Work (Skilled) visa (subclass 457) program has been built on the premise that it does not undermine job opportunities for Australians.

The program, driven by employer demand, allows employers to access the services of overseas workers where a genuine skill shortage exists, or where suitably qualified Australian workers are not available. This is on the condition that the employers commit to the training of Australians to reduce their dependence on overseas labour in the longer term.

Subclass 457 has been highly responsive to the vagaries of the economy and to the needs of employers. When unemployment increases, employers advertise less, and from 2003 until 2011, subclass 457 visa lodgements responded precisely to job vacancies (grants data shows a very similar trend, but lodgements provide a more timely connection with job vacancy data). However, as the information in Figure 1 shows, in 2011, as job vacancies declined, there was a sharp rise in the number of subclass 457 visa lodgements.

Figure 1: 457 applications and employment trends, five years to May 2013Figure 1: 457 applications and employment trends, five years to May 2013

Source: Parliamentary Library analysis using ABS Labour Force data, DIAC statistics and the ANZ job advertisement series

The gap between lodgements and job vacancies/unemployment signified strong demand from overseas workers who were experiencing comparatively poor economic conditions. It has been suggested that this trend was also indicative of employers seeking the services of overseas workers in place of Australian workers.

In 2012, the then Department of Immigration and Citizenship (DIAC) identified that the subclass 457 program was growing at a record rate, especially in industries and geographical regions that did not appear to be experiencing skills shortages. A Migration Council Australia survey subsequently revealed that while around 15 % of employers had no difficulty finding suitable local labour, they were still sponsoring employees from overseas under the program. Recent media coverage points to underpayments in IT, hospitality, construction and manufacturing industries.

In July 2013, policy changes and legislative amendments sought to improve the integrity of the program without having an adverse impact on its responsiveness to genuine employer needs. Steps were taken to prioritise the employment and training of local workers, to legislate sponsor obligations, to empower Fair Work Australia to investigate breaches and to strengthen the Department’s ability to prosecute wrongdoing. It is too early to determine the exact consequences of these steps.

Whilst subclass 457 primary visa holders are approved to meet specific skill needs, spouses and dependents may work across industries in skilled or unskilled occupations during their stay in Australia. So the work rights of secondary visa holders is an additional labour force issue when considering subclass 457 visas.

Temporary to permanent migration

The subclass 457 visa has also become a popular pathway to permanent migration. In 2011–12, subclass 457 visa holders accounted for 81 % of the Employer Nominated Scheme, and 46 % of the Regional Skilled Migration Scheme.

Around 40 % of applications for permanent visas are from migrants already in Australia, of these, over half will have held a subclass 457 visa. In 2012 DIAC announced more streamlined, simplified and fast-tracking options for transitioning from the subclass 457 program to permanent migration.

Before becoming permanent residents, subclass 457 visa holders are often counted towards Australia’s population gain; people who have stayed in Australia 12 months out of a 16 month period are included in the Australian Bureau of Statistics’ calculation of net overseas migration (NOM). NOM accounts for 60 % of Australia’s population growth and over recent years, the largest contribution to NOM has been from people on temporary visas.

Since 2012, NOM has been above the levels assumed in Treasury’s 2010 Intergenerational Report (IGR), which suggested it would fall to, and remain at, 180,000 from 2012 onwards. However, for the year ending 31 December 2012, the NOM figure was 235,900. If these levels were to continue, Australia’s population would be considerably more than the IGR’s projection of 35.9 million by 2050.

Settlement and services

Where temporary residents settle is an important consideration for policy decisions and future planning across all levels of government. Particularly strong growth in demand in Western Australia (WA) for example means that it now ranks second to New South Wales (NSW) for subclass 457 visa holders (almost 33,000 as at 30 June 2012). In WA, construction and mining are the largest sponsor industries involving many fly-in-fly-out arrangements.

Most subclass 457 visa holders originate from the United Kingdom, India, Ireland, the Philippines and the United States of America. Temporary workers are required to demonstrate a level of English language proficiency unless their income is in excess of $96,400. There are no English language requirements for dependents. A recent report identified that subclass 457 spouses do not have sufficient support and can struggle in terms of employment, English language acquisition and understanding of Australian culture.

Whilst subclass 457 workers pay taxes, they are not entitled to services such as employment assistance, English language classes, settlement support and Medicare (unless reciprocal health arrangements exist). Comprehensive private health insurance is compulsory. Those who become permanent residents may access settlement services, but only if their arrival in Australia was within the last five years.

Policy directions

The subclass 457 program is designed to respond rapidly to temporary economic and employer needs, but it should not be viewed from this perspective alone. The program has important implications for Australia’s population growth and for longer term skilled and unskilled labour market planning.

The program may benefit further from a consistent, planned and measured approach to monitoring and reform. Closer scrutiny of other temporary programs may also be worth consideration by the Parliament.

Further reading

J Phillips and H Spinks, Skilled migration: temporary and permanent flows to Australia, Background note, Parliamentary Library, Canberra, 6 December 2012.

J Philips, M Klapdor and J Simon-Davies, Migration to Australia since federation: a guide to the statistics, Background note, Parliamentary Library, Canberra, 29 October 2010.

For copyright reasons some linked items are only available to members of Parliament.

© Commonwealth of Australia