Impact of the 457 visa program on employment opportunities
One of the key concerns about the 457 visa program is the impact the
program has on employment opportunities for Australian permanent residents and
citizens. Over the last two decades, these concerns have been addressed by adjusting
the degree to which the 457 visa program is regulated. To a large extent,
regulation of the 457 visa program has therefore involved a trade-off between
the efficiency and productivity of the program versus the integrity and equity
of the outcomes.
Submissions generally reflected this tension between the competing aims
of efficiency and integrity, namely employers seeking to supplement their
workforce with overseas workers in the most efficient and flexible manner, and
unions seeking to protect the wages, conditions and job opportunities of
Australian workers by requiring certain pre-conditions to be met prior to the
hiring of overseas workers.
At the outset, the committee reiterates two points made in a previous
inquiry into these matters by the Senate Legal and Constitutional Affairs
References Committee. Firstly, 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 must, as a matter of
course, impact negatively on the opportunity for local workers to fill that
Secondly, and conversely, 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 negatively impact on both business activity (and the employment
of local workers) and the availability of critical services.
Given the concerns about the effect of the 457 visa program on
employment opportunities for Australian permanent residents and citizens, the
key issues raised by submitters about the 457 visa program include:
the balance between permanent and temporary migration, and the
responsiveness of the 457 visa program to changes in domestic labour supply (in
general, proponents such as employers and their organisations argued that the
457 program responded to changes in skills shortages in the domestic labour
market, while critics such as unions argued that the responsiveness was not
evident, particularly in a softening job market);
the displacement of Australian workers by 457 visa workers;
the importance of 457 visa workers to rural industries
(particularly in the agricultural sector) that have struggled to attract
the threshold up to which the 'market salary rate' is to be
the level and indexation of the Temporary Skilled Migration
Income Threshold (TSMIT);
the composition, flexibility, and regulation of the Consolidated
Sponsored Occupation List (CSOL) from which occupations may be sponsored under
the 457 visa program (including the make-up of the body responsible for
compiling the CSOL), and the balance between permanent and temporary migration;
the technical competency of foreign workers particularly in
sectors where safety is paramount;
labour market testing as a means to ensure Australians have the
first opportunity to apply for jobs (in general, employers criticised labour
market testing as an excessive and unnecessary burden on employers, while
unions supported labour market testing but criticised the requirements as
In order to provide context for the above issues, the chapter begins by looking
at the balance between permanent and temporary migration, and the degree to
which the 457 visa program responds to changes in the domestic labour market.
The next two sections present evidence on Australian labour markets. The
first considers evidence that 457 visa workers have displaced Australian
workers. The second considers the importance of 457 visa workers in certain
sectors of Australian agriculture. The role and impacts of the 417 visa
program, including both the importance of 417 visa workers in horticulture,
viticulture, and fruit picking, and the displacement of local workers by 417
visa workers in the meat processing sector, are covered in chapter 4.
This is followed by several sections that examine the policy settings
around the 457 visa program and Designated Area Migration Agreements (DAMAs),
including the 'market salary rate', the TSMIT, the CSOL, the technical
competencies required of temporary visa workers, and labour market testing.
The chapter finishes with the committee's view on these matters.
The balance between permanent and temporary migration
As background context to the discussion in the next section on the
responsiveness of the 457 visa program to changes in the domestic labour
market, the committee notes that unions and employers hold conflicting views on
the current direction of migration policy, and in particular, the balance
between permanent and temporary migration.
The Australian Council of Trade Unions (ACTU) expressed concern about
the greater reliance on temporary migration. The ACTU pointed out that the
short-term interests of employers are not necessarily consistent with either
the long-term national interest or the interests of migrant workers:
...this trend towards temporary and employer-sponsored
migration is effectively outsourcing decisions about our national migration
intake to employers and their short-term needs, over the national interest and
a long-term vision for Australia's economy and society.
Concerns about labour migration policy relying too heavily on employer
preferences are not just restricted to unions and certain academics. In 2009,
the Organisation for Economic Cooperation and Development (OECD) stated:
A regulated labour migration regime would, in the first
instance, need to incorporate a means to identify labour needs which are not
being met in the domestic labour market and ensure that there are sufficient
entry possibilities to satisfy those needs. In theory, employers could be
considered the group of reference for determining this, but historically, requests
by employers have not been considered a fully reliable guide in this regard, at
least not without some verification by public authorities to ensure that the
requests represent actual labour needs that cannot be filled from domestic
The ACTU set out the reasons for their preference for permanent over
...permanent migrants provide a more stable source of skilled
workers with a greater stake in Australia's future and in integrating into all
aspects of Australian community life. With permanent residency, migrants have a
secure visa status. This makes them less susceptible (though not immune) to
exploitation and less likely to generate negative impacts on other Australian
workers in terms of wages, employment conditions and job and training
The ACTU therefore recommended that:
...the current weighting of Australia's skilled migration
program towards employer-sponsored pathways should be re-evaluated, with
greater emphasis given to the permanent, independent stream as the 'mainstay'
of the skilled migration program.
The Australian Nursing and Midwifery Federation (ANMF) acknowledged that
nurses and midwives 'have a strong tradition of international collaboration, with
nurses and midwives moving around the globe to gain further training and
different clinical experiences', and recognised the 'clear merit in
international exchange and diversity'.
The ANMF noted that nursing features strongly in both the temporary and
permanent skilled migration programs (see Table 3.1 and 3.2 below).
Table 3.1: Number of 457 visa grants to nurses, 2005 to
Source: Australian Nursing and Midwifery Federation,
Submission 37, p. 5.
Table 3.2: Number of permanent visa grants to nurses, 2005
Source: Australian Nursing and Midwifery Federation,
Submission 37, p. 6.
While expressing a preference for permanent migration, the ANMF saw a
place for temporary migration provided that certain safeguards for both local
and overseas workers were met. These safeguards included genuine testing of the
labour market, investment in the training of local nurses and midwives, and an
English language standard of International English Language Testing System
The preference for permanent over temporary migration was condemned as
illogical by the Australian Chamber of Commerce and Industry (ACCI). ACCI noted
the economic benefits of growth in the education and tourism sectors that
results from the student and Working Holiday Maker (WHM) visa programs. It was
also pointed out that temporary work visa programs 'provide an effective feeder
into permanent migration' and that there were benefits to 'someone coming
temporarily in advance of making a permanent commitment'. Given these
connections, ACCI argued that temporary migration should not be reviewed in
isolation from permanent migration.
ACCI estimated the skilled workforce in Australia to be around 4.2
million, of which primary 457 visa holders accounted for around 2.1 per cent of
the skilled workforce (see Figure 3.1 below).
Figure 3.1: Australia's Workforce and Skilled Migration
Source: Australian Chamber of
Commerce and Industry, Submission 10, p. 14.
ACCI made the point that temporary and permanent migration is
inextricably linked and that the value of temporary migration in this equation
was its responsiveness to immediate needs:
The temporary skilled migration programme should be seen as
the responsive end of the total skilled migration programme. It enables the
fulfilment of immediate needs, and if those needs are temporary, then the
worker returns to their own country. If the need is permanent they are
sponsored or apply independently to stay.
Ms Jenny Lambert, Director of Employment, Education and Training at
ACCI, also argued that because employer sponsored migration programs required
strong employer commitment, the pay and employment outcomes for migrants would
likely be superior to those delivered by the independent skilled migration
The responsiveness of the 457 visa program to changes in domestic labour
supply and skills demand
In general terms, the advantage of temporary migration is its ostensible
responsiveness to changes in the domestic economy. In theory, a responsive
temporary migration program benefits the host nation during both economic
upturns and downturns. As Dr Joanna Howe and Associate Professor Alexander
In theory, when permanent migrants lose their jobs, they are
a burden on the Australian welfare state, whereas temporary migrants return
One of the key areas of contention regarding the 457 visa program is the
responsiveness of the program to changes in the domestic supply of skilled
labour. In the main, proponents (such as employers and their organisations)
argued that the 457 program responded to changes in skills shortages in the
domestic labour market, while critics (such as unions) argued that the
responsiveness was not evident.
The crux of the issue is whether temporary migration has a negative
impact on jobs particularly in a softening job market. This boils down to a
broader question about the extent to which the 457 visa program responds to
changes in the labour market and whether, for example, an increase in domestic
unemployment is matched to a reasonable extent by a reduction in demand for 457
visa workers. The more specific question is the extent to which the 457 visa
program responds to changes in the supply of skilled labour in particular
On the latter question, the Australian Government Department submission
provided evidence of an association between the demand for 457 visa workers and
skill shortages in the nursing and engineering occupations:
The number of primary subclass 457 visas granted for
Midwifery and Nursing Professionals (ANZSCO minor group) and Enrolled Nurse
declined from 3239 in 2011–12 to 2999 in 2012–13 to 1597 in 2013–14 (and 832
for the 9 months to 31 March 2015). Department of Employment research shows
that Registered Nurse has not been in national shortage since 2011.
The number of primary subclass 457 visas granted in the
Engineering Professionals (ANZSCO minor group) and Building and Engineering
Technicians (minor group, excluding Architecture, Building and Surveying
Technicians) declined from 7795 in 2011–12 to 5943 in 2012–13 to 3586 in 2013–14
(and 2349 for the 9 months to 31 March 2015). Most engineering professions
ceased to be classified as in shortage on the Department of Employment's national
Skill Shortage List in 2013.
The Australian Government Department submission also provided a graph (Figure
3.2 below) to illustrate a more general association between the granting of 457
visas and the unemployment rate between 2005–06 and 2013–14:
Figure 3.2: The association of grants of 457 visas and
the rate of unemployment.
Source: Australian Government
Department, Submission 41, p. 6.
The committee notes that between 2005–06 and 2009–10, there appears to
be a reasonably close association between the granting of primary 457 visas and
the unemployment rate. As the unemployment rate fell between 2005–06 and
2007–08, there was an increase in the number of primary 457 visas granted. As
the unemployment rate rose between 2007–08 and 2009–10, there was a
corresponding decrease in the number of primary 457 visas granted.
However, a similar association between the unemployment rate and the
granting of visas did not materialise between 2010–11 and 2012–13. During this
period, the unemployment rate rose from approximately five to five and a half
per cent and yet grants for primary 457 visas also rose from approximately
45 000 to approximately 70 000. Therefore, over a two-year period,
the continued increase in the number of primary 457 visas being granted did not
respond to the increase in unemployment for a period of two years. As the
unemployment rate continued to rise between 2012–13 and 2013–14, the granting
of primary 457 visas declined to approximately 50 000 (the figures for
2014–15 were approximately 38 000 based on the figures supplied in Table 2.3).
The number of primary 457 visas granted has therefore declined significantly,
although not quite to the levels of 2009–10 when the unemployment rate was
approximately five and a half per cent (the unemployment rate for the period
2014–15 averaged above 6 per cent).
In summary, an argument could be made both ways about the responsiveness
on the 457 visa program to the unemployment rate. However, it is clear that as
Australia's rate of unemployment has increased over the last four years, there
has been a time lag of two to three years in the responsiveness of the demand
for, and granting of, primary 457 visas.
The ACTU fundamentally disagreed with the proposition that the 457 visa
program was responsive to changes in the domestic labour market. The ACTU
pointed to trends in both the general rate of unemployment and trends in
particular industry sectors such as construction and food as evidence that the
457 visa program does not reflect the realities of the domestic labour market.
For example, the ACTU noted that the unemployment rate is above six per
cent with over three quarters of a million Australians unemployed and looking
for work, and the youth unemployment rate is over 13 per cent with over a
quarter of a million young people out of work.
Given the evidence on the granting of 457 visas at a time of relatively
high unemployment, the ACTU maintained:
...labour market testing is a sensible, appropriate, and
necessary measure to ensure that, before temporary migrant workers can be
employed, there is evidence that employers have made all reasonable efforts to
employ Australian workers and that Australian workers are not being displaced.
Concerns about the responsiveness of the 457 visa program to changes in
domestic demand for labour, and a corresponding impact upon job opportunities
for local workers, were echoed by certain peak bodies. Engineers Australia
...throughout the years when the demand for engineers was high,
the number of 457 visas increased and that there were falls in the number during
the GFC and in 2013–14 when demand conditions changed. However, given the
dramatic change in the engineering labour, Engineers Australia is astonished
that the 457 visa intake was as high as 5501.
Noting that the 457 visa program is 'designed to be a safety valve for
employers when there is excess demand for engineers', Engineers Australia
stated that the demand for engineers under the 457 visa program did not match
the situation in the domestic labour market for engineers:
There is no general shortage of engineers in Australia and
the number of 457 visa approved last year are far higher than one would expect
if some employers experienced difficulties recruiting an engineer practicing in
a particular area of engineering, especially in view of there being no skills
Engineers Australia stated that the 457 visa program as it applied to
the engineering occupation was having a detrimental effect on employment
opportunities for Australian engineering graduates particularly in a situation
where there was no shortage of engineers in Australia.
As engineering has become increasingly specialised, Engineers Australia
disagreed with the proposition that use of the 457 visa program in its current
format was of value to the profession:
Statistics show that pressures in the engineering labour
market have eased dramatically in all States and Territories. Jurisdictions
were differentiated essentially by when the decline commenced and the rate of
deterioration. Engineers Australia sees no evidence of any general shortage of
As the development of the Australian economy has become more
sophisticated, new areas of engineering specialisation have developed. Indeed,
the breadth of specialisation is an important characteristic of modern engineering.
It is entirely possible that somewhere in Australia an employer is experiencing
difficulties recruiting an engineer that matches a particular specialisation.
However, given that there are no formal assessments of qualifications and
experience for 457 visas, Engineers Australia fails to understand how temporary
recruitment assists this situation.
As a result, Engineers Australia believed that labour market testing
should be applied in all cases.
By contrast, Consult Australia the industry association representing the
business interests of consulting firms operating in the built and natural
environment, argued that the number of engineers on 457 visas varied on a
year-on-year basis 'in response to local skills needs and availability':
The numbers of engineers of all levels arriving on temporary
visas rose from 2260 in 2003–04 to 7490 in 2007–08, before dropping to 6900 in
2008–09 and further to 4460 in 2009–10, and then rising again to 6940 in 2010.
Consult Australia stressed the value that a responsive temporary
migration program brought to Australian business and submitted that the use of
engineers on 457 visas had not been subject to abuse. Consult Australia was
therefore very concerned that the inclusion of engineering in the labour market
testing regime would hinder project construction:
A flexible temporary skilled migration visa that is
responsive to market requirements is therefore essential for
engineering-related businesses. Consulting services in particular often require
specialist staff to join teams at short notice to address challenges that
invariably arise in complex projects.
Likewise, Fragomen, a global immigration law firm, emphasised both the
value of the 457 visa program to the Australian economy and the its
responsiveness to fluctuations in the domestic demand for skills:
The boom and then levelling off of demand for skilled workers
in most segments of the resources sector demonstrates the value of the subclass
457 programme to the Australian economy. It seems to us inconceivable how many
infrastructure projects could possibly have been undertaken without access to
the engineers, IT professionals, contract and project managers and other highly
skilled professionals from around the world. Australian companies and staff and
the underlying labour market in Australia would simply not have been able to
meet the demand for this work; either in terms of the volume of workers needed,
or the peaks and troughs of demand for particular skills sets as a project
moves though its various development phases. Equally, remaining one of the most
successful economies in the world in this post-boom period depends partly on
maintaining our attractiveness as a regional hub for global business.
Fragomen also highlighted the importance of two-way intra-corporate
transfers that benefit Australia by facilitating the bringing in of skills and
knowledge, often at short notice, that cannot be sourced from Australia while
also allowing for Australian employees to develop their careers overseas:
transferees are generally required in Australia because they have proprietary
knowledge and/or experience required to achieve business goals for the
Australian operations or to deliver a project or train the Australian arm of
the business. Because it is proprietary, this knowledge and experience cannot
generally be sourced from the Australian labour market, other than from within
the Australian business itself. These transfers are often connected with large
project wins or the expansion of a company's operations in Australia but can
also result from a policy of assigning individuals to different roles in
different country operations as part of the normal course of business or normal
career progression. As mentioned, Australian employees in these circumstances
also have the opportunity to work in the company’s overseas operations and
develop their careers.
In this regard, Fragomen also observed that the movement of employees on
intra-corporate transfers does not have a negative impact on the domestic
A person entering Australia for a specific, short term
project requiring proprietary knowledge is not competing with Australians for
the role. Because it is proprietary, this experience cannot generally be
sourced from the Australian labour market because the skills and expertise are
simply not available in Australia outside the business. Similarly, a manager
whose offshore role incorporates responsibility for Australian operations, and
who is required to visit for days or weeks at a time on a regular basis, is not
entering—or even seeking entry—to the Australian labour market despite
performing work while in Australia.
ACCI refuted the perception that the interaction between temporary
migration and employment was a zero-sum game and that jobs could be taken by
migrant workers. Ms Lambert from ACCI was adamant that the relationship between
temporary migration and employment was positive and that migration stimulated
economic growth and therefore created jobs.
Furthermore, Ms Lambert noted that unemployment rates and labour
shortages vary dramatically across Australia. She argued, therefore, that a
simple correlation between unemployment and the number of temporary migrant
workers in Australia was misleading because the demographic of the unemployed was,
in general, 'dramatically different' to the demographic being satisfied by 457
Similarly, the Migration Council of Australia (the Migration Council), a
non-partisan research and policy body with an independent board drawn from
business, unions and the community sector, maintained that labour markets in
advanced industrial economies adjust dynamically to immigration:
There has been a continual discourse that argues that
migration crowds out youth employment opportunities. This assertion rests on
the claim that 10 additional people will become unemployed, or will remain
unemployed at the same time 10 new migrants arrive, with the migrants 'taking'
the jobs that could have been filled by our domestic labour force.
Yet this ignores how labour markets work in practice, with
new workers adding economic demand or enabling investment, hence generating
other positions in the labour market. Employers who use temporary work visas as
dictated by legislation should not be substituting migrants for young workers given
requirement for market wages and the focus on skilled migration.
The Migration Council drew on data from their own modelling in Australia
as well as various international studies to support their view that 'a flow of
new arrivals into a labour market will change both demand and supply in the
economy, not a simple displacement of one worker for another', and that, over
the longer term, migration had 'very little impact on the unemployment rate'.
The National Farmers' Federation (NFF) stated that agriculture differed
significantly from other parts of the Australian economy in that many parts of
the agricultural sector could not support permanent employment. Consequently,
the NFF contended that, in general terms, visa workers do not compete with
local workers for jobs in agriculture because local workers are not applying
for the jobs that visa workers are doing.
With reference to the resource sector, the Australian Mines and Metals
Association (AMMA) pointed out that the demand for temporary skilled workers
under the 457 program did in fact match the changes in the economic cycle. For
example, as the resource industry moved from the construction phase of projects
to the less labour-intensive production phase, the number of primary 457 visa
applications lodged by the mining industry in the 2014–15 program year to 31
December 2014 had declined by 1010, or 24.9 per cent, compared to the same
period in the previous year.
nature of the Australian labour market
The committee notes that, in general terms, labour markets are not uniform.
The committee received ample evidence indicating significant differences in
labour markets including across industries, occupations, and regions, and over
time (for example, at different stages of the business and economic cycle). It
is therefore clear that concerns about the availability of labour and
employment opportunities for Australians vary significantly according to
For example, the committee heard from producers in rural Australia about
their difficulties in sourcing suitable local labour and their utter dependence
on 457 visa workers. Conversely, the committee heard from unions that 457 visa
workers were getting and retaining jobs despite the availability of job-ready
local workers. In some cases, the committee received evidence of local workers
being made redundant while less qualified 457 visa workers took their
The next section deals with evidence in support of the proposition that
457 visa workers have displaced Australian workers in certain industries.
This is followed by a section that explores the labour dynamics in the
agricultural sector and evidence in support of the proposition that 457 visa
workers are essential to the viability and prosperity of rural Australia.
457 visa workers displacing
The committee received evidence from several unions that 457 visa
workers were being used to fill positions that could have been taken by
qualified Australian workers, and that 457 visa workers were also displacing
some Australian workers.
The ANMF highlighted the 'parlous employment situation facing many new
Australian graduates'. As a result of a questionnaire completed by over 200
nurses in 2014, the ANMF stated that evidence from the questionnaire showed:
large numbers of new graduates fail to find employment in their
many graduates receive numerous employment rejections, in one
case over 70;
most graduates fortunate enough to obtain employment are engaged
on a precarious basis through agency, part time or casual arrangements;
many graduates go to extraordinary lengths to obtain work, for
example by moving interstate and separating themselves from their families;
most new graduates are saddled with a HECS debt and many believe
their university course was a waste of money; and
most employers named in the questionnaire as rejecting new graduates
use temporary offshore labour.
A similar questionnaire of nurses and midwives who graduated in 2014 was
conducted over ten days in early 2015. It revealed over a third had been unable
to gain employment, and only 15 per cent had been offered permanent employment.
The ANMF therefore drew attention to the disconnect between the lack of
employment for graduate nurses and midwives and the continued ability of
employers to 'access large numbers of nurses and midwives on temporary work
The committee was keen to understand whether the problem was in fact a
maldistribution of the workforce with graduates being unwilling to move to
areas where jobs are located in regional and rural parts of the country. The
ANMF assured the committee that many graduates have moved states to try to get
a job and have gone out to rural areas including in Western Australia to try
and secure employment.
The committee was also keen to understand why, in particular parts of
the healthcare sector, overseas workers were preferred to Australian graduates.
Mr Nicholas Blake, Senior Industrial Officer with the ANMF, stated that that
the ANMF believed that many employers, particularly in the residential
aged-care sector, 'see the foreign workforce as more compliant in terms of what
they are required to do' and that the barriers to accessing overseas workers
have become lower in recent years.
The consequences for nursing graduates of failing to obtain ongoing,
permanent employment can be dire because the Nursing and Midwifery Board of
Australia Annual recency of practice registration standard 'requires nurses
have a minimum of three months full-time equivalent practice in their
profession'. A failure to meet this requirement can mean graduates risk losing
their registration, without which they cannot work as a nurse.
Significantly, the problem is affecting not just first year graduates, but is
in fact an early career problem for nurses and midwives.
In addition, the failure of a large proportion of graduate nurses to
obtain employment has ramifications in terms of investment in the education of
professional health workers and future workforce planning.
Issues around employment opportunities are covered further in the section on
labour market testing. Issues relating to training, graduate programs, and
workforce planning, are covered in chapter 5.
The Australian Federation of Air Pilots (AFAP) submitted that abuse of
the 457 visa program was having a detrimental impact on the employment and
career prospects of Australian pilots. The AFAP noted that certain regional
airlines have employed pilots under the 457 visa program and yet 'all major
aviation operators in Australia, including the regional airlines...have
significant 'hold files' of qualified commercial pilots who wish to progress
their careers with that operator'. The AFAP concluded:
The practical impact of pilots being employed under the s457
visa program on the Australian labour market is that Australian pilots remain
unemployed or have their career progression delayed.
The AFAP therefore offered to assist the Department of Immigration and
Border Protection (DIBP) in assessing the availability of suitably skilled
Australians in cases of employers seeking to employ pilots under the 457 visa
program and determining the genuineness of employer claims that suitable
Australian candidates are not available.
The Australian Maritime Officers Union (AMOU) relayed the grave concerns
of their members, both younger members and the older generation of seafarers,
that their industry was undergoing irrevocable change as a result of what they
described as the 'perverse use' of temporary visas. The AMOU has a list of over
100 currently unemployed members
and noted that newly qualified seafarers are unable to secure work because
multinational companies persist in employing 457 visa workers even where
'suitably qualified locals are willing and able to perform the jobs'.
The AMOU set out the ramifications for a host of other maritime
positions of the short-term approach of employing temporary visa workers. Not
only will younger seafarers be denied the opportunities afforded to previous
generations in terms of securing a career at sea, but there will be a flow-on
effect in later years that will result in 'a scarcity of Australians able to
fill the many seafaring associated onshore jobs such as harbour masters,
pilots, vessel traffic officers and lecturers at the maritime training
facilities' which are positions that have typically been filled in the past by
seafarers with many years of experience at sea.
Ms Ros McLennan, Assistant General Secretary of the Queensland Council
of Unions, drew the committee's attention to the top three jobs for 457 visa
holders in Queensland: cook; cafe or restaurant manager; and customer service
manager. Ms McLennan argued that, taken at face value, these jobs did not
appear to be ones for which there would be skill shortages or any lack of Australians
willing and able to take those jobs given some training.
These matters are considered further in a later section on the skilled
occupation lists and also in chapter 5 on training.
The committee also heard from Mr Benjamin Loeve, a former employee of
Downer EDI Mining and Boggabri Coal in regional New South Wales (NSW), who was
made redundant and his position taken by a 457 visa worker. As a trade
qualified heavy diesel fitter, Mr Loeve had received specialised training from original
equipment manufacturers such as Caterpillar and Hitachi and was employed in the
maintenance section at the Boggabri coal mine in NSW.
Mr Loeve stated that about ten months after a number of Papua New Guinea
457 visa workers were brought onto the site, the company made 106 workers
redundant, including 40 staff in the maintenance division where Mr Loeve had
worked. Eight 457 visa workers were retained as maintenance workers for a further
18 months to do the work of the now redundant Australian workers.
Mr Loeve made the point that the visa workers did not have the necessary
competencies and skills that the Australian maintenance staff had. In addition
to making Australian workers redundant to be replaced by 457 visa workers, it
also appears that the company hired the 457 visa workers ahead of better
qualified Australian workers. Mr Loeve stated that he knew local workers (with
trade and original equipment manufacturer training) that applied for jobs at Boggabri
Coal but 'were knocked back' at about the time the 457 workers were employed.
Agricultural labour markets and the
role of 457 visa workers
The committee heard evidence from farmers and their industry
organisations that despite high rates of unemployment in general, and youth
unemployment in particular, the agricultural sector experienced ongoing difficulties
with the recruitment of willing and able local workers. The difficulties in
finding suitable local labour applied irrespective of whether growers were
seeking casual short-term employees for intensive periods during the picking
season or ongoing year-round employees in livestock production.
Ms Sarah McKinnon, Manager of Workplace Relations and Legal Affairs at
the NFF, estimated that 'about a third of the agricultural workforce in
Australia is from overseas', made up largely of 417 visa workers but also 457
workers and seasonal workers under the Seasonal Worker program.
Growers and their representative associations warned that without the additional
labour supplied by the 457 and 417 visa programs, many rural industries were at
risk of a contraction in production, and some businesses simply could not
continue to operate. These producers therefore stressed the vital importance of
the 457 and 417 visa programs in keeping many rural businesses afloat.
The two following sections present evidence from the pork industry and
the wine industry and the role of 457 visa workers in their industries. The
role of 417 visa workers in Australian agriculture is covered in chapter 4.
The pork industry
The Australian pork industry employs over 20 000 people in Australia and
contributes approximately $2.8 billion in gross domestic product to the
Australian economy. The pork industry contributes just over two per cent of
total Australian farm production with roughly 1500 pig producers producing
around 4.7 million pigs annually.
Noting that their industry 'has had significant long-standing
difficulties attracting and retaining skilled piggery workers', Australian Pork
stated that the labour shortages were 'compounded by the perception of the pork
industry being a relatively unattractive career choice, exacerbated by the
diminishing labour supply in regional Australia'. According to Australian Pork,
long term critical shortages existed in recruiting and retaining skilled
piggery stock persons.
Ms Deborah Kerr, General Manager of Policy at Australian Pork Limited,
noted that the piggeries were predominantly looking for skilled permanent
workers rather than seasonal workers, and the industry therefore strongly
favoured recruiting workers under the 457 visa program rather than the WHM (417
Employees on 417 visas are estimated to comprise 3 to 4 per cent of the pork
industry workforce. Australian Pork also indicated there was limited use of
labour hire contractors in the pork industry and that there was no knowledge of
the extent to which labour hire contractors employed 417 visa holders.
Ms Kerr explained that the low use of labour hire firms by the pork
industry was due to the nature of the work required on piggeries, namely
permanent skilled work:
...pigs farrow a couple of times a year. There is always work
on a pig farm. That come-and-go workforce is not particularly suitable. The 457
visa holders are what we use more for the purpose of pig production. It is also
to do with the skill requirements. We need people employed in our sheds who can
look after the animals—can comply with animal welfare laws, can comply with the
Model Code of Practice for the Welfare of Animals, which is picked up in many
of the states' regulations, and are appropriately trained. And for our 457 visa
holders we require the appropriate skill qualification plus three years, or at
least five years of experience in our industry overseas, before they will come
in. The employer tends to want a different skill set to a 417, so we do not
interact very much with a labour hire company per se. As I said, they tend to
use 457 visas, and they tend to have them directly on the employee.
The committee was keen to explore why the pork industry experienced
difficulties in recruiting and retaining a suitably skilled domestic workforce
despite the high levels of unemployment and youth unemployment in particular,
in rural and regional areas. Ms Kerr attributed the difficulties to the nature
of the work (including close interaction with animals), the location of the
work, and competition for employment from the resource sector:
I think generally agriculture does tend to have difficulties
in rural and regional areas, and I think the two states where it is
particularly evident are WA and Queensland, where there have been a lot of what
were traditionally agricultural employees going to the mining and coal seam gas
sectors. We had this translocation of employment of choice, if you like. That
is one area. The other area is that to work on a pig farm you have to like
working with animals and in particular like working with pigs. It can be a
smelly job, and not a lot of Australian workers particularly want to go and
work in pig farms. Those who do tend to really enjoy what they do and love what
they do, whether they are Australian workers or are under a 457 visa. To
attract workers, our producers go out and advertise, and they do all the things
they are required to do under the 457 program to justify getting a 457 visa
holder in, but they still have difficulty. They cannot retain the workforce
My understanding is that our producers have actually done a
lot to advertise and to try to keep workers on. Unfortunately, they are in a
situation in which they do have a labour shortage. They are competing with
somebody who does cropping, for example, so the employee might be driving a
tractor rather than working with pigs. That can stop people. Livestock can be
particularly difficult and challenging for some employees. So it is not just
within the general workforce; it is also within the agriculture sector. Our
pig-producing farms are located in the wheat-sheep zone, and often people do
not want to relocate to those areas from, for example, a major metropolitan
area. There is the usual gamut of limitations around what our producers do, but
they certainly try to source Australian workers who are keen to be in
piggeries. They just cannot find the appropriate people.
The committee also heard from pork producers, Mrs Kerry Murray and
Mr Bernard Murray from Murray Free Range near Cobram in Victoria, and Mrs
Elizabeth Wallace from Windridge Farms in Young, NSW.
Mr and Mrs Murray and Mrs Wallace recounted their difficulties in
attracting suitable labour. Mrs Wallace noted that in the past year, only six
out of 17 Australian and permanent resident workers had been retained, and of
those six, two were Filipino permanent residents that had previously worked in
other piggeries, and one was a Filipino permanent resident with no piggery
experience. Of those workers that left Windridge Farms, one left because of
drug issues, one resigned, and nine simply did not come to work after five days
The committee was curious to know whether wages and conditions were a
factor in Australians not wanting to work on farms. Mr and Mrs Murray and Mrs
Wallace confirmed that their businesses pay above award wages. Mrs Wallace
stated that their workers are on a 38 hour week and that any work done above 38
hours a week is paid at time and half or double time, with public holidays paid
at triple time or time and a half based on the award. She also noted that the
company provided additional staff benefits:
We have regular barbecues for our staff on all sites. We have
four sites. We regularly provide barbecues, meals, tea and coffee, a lunch
room, shower facilities and amenities that would equal anything in a city area.
We give the employees an extra 20 minutes a day for their morning break, and
that is paid for by the company and not taken out of their time at work.
Mrs Wallace stated that a manager of five to ten people at their piggery
would be on an attractive salary package of $85 000 to $90 000 a year plus a
house and car. Similarly, Mrs Murray stated that a foreman who had been with
them for five years was on a $100 000 with a three bedroom house, a car,
electricity, phone and fuel.
Mr Murray dismissed the notion that producers might underpay their 457
visa workers by noting that two of their Filipino workers have now bought their
own homes. He also claimed that their farm pays their workers more than the
engineers and welders at the local engineering plant and yet still cannot
attract Australian workers.
Both sets of farmers agreed that without the workers from the 457 visa
program, their businesses simply could not survive.
Given that piggeries are looking to retain a permanent skilled
workforce, Ms Kerr also noted that the pork industry is actively assisting 457
visa holders to gain permanent residency.
The transition of staff from the 457 visa program to permanent residency
was confirmed by Mrs Murray. She stated that the Filipino staff currently
employed on their farm were previously 457 visa holders and are all now
The wine industry
Mr Brian Smedley, Chief Executive of the South Australian Wine Industry Association
(SAWIA) told the committee that over the last decade, approximately 38
winemakers and viticulturists have been recruited by South Australian wine
industry employers through the 457 visa system.
He noted that while these numbers are low in relative terms, the 457
visa program has been 'essential' in enabling wine industry employers to access
suitably skilled and experienced winemakers and viticulturists 'where the
employer has been unable to fill those roles with domestic applicants'.
SAWIA also pointed out that the global movement of skilled and
experienced winemakers and viticulturists brings mutual benefits to a global
...employees with experience and skills from key overseas
winemaking countries, including Spain, Italy, France, Chile, Argentina, USA and
South Africa can bring important know-how and different perspectives and skills
regarding wine grape growing and winemaking to the benefit of the South
Australian wine industry. Just as Australian winemakers and viticulturists can take
bring their different experience and skills with them to overseas vintage/wine
industry work arrangements.
Regulations and obligations under the 457 visa program, Designated Area
Migration Agreements (DAMAs) and Labour Agreements
Employees working under a temporary visa are subject to the same
Australian workplace laws as Australian employees,
and therefore issues of regulation, compliance and enforcement of these laws
are a key aspect of this inquiry, and are dealt with to a large extent in
In addition to the overarching requirement for compliance with
Australian workplace laws, further obligations are in place under the 457 visa
program designed to safeguard both the 457 visa worker themselves and the
wages, conditions and opportunities of Australian workers.
The two key obligations placed on the employer (sponsor) under the 457
visa program are that:
the employer pays their sponsored employee(s) the amount that was
originally agreed under the terms of the sponsorship grant; and
the sponsored employee does the work for which they were
The obligation to pay a 457 visa worker the amount agreed under the
sponsorship agreement is underpinned by what the migration legislation terms
the 'market salary rate' and the TSMIT.
457 visa holders are also required to work in the occupation for which
they were nominated (under visa condition 8107). This requirement is an
obligation on both the visa holder and the sponsor.
The obligations placed on employers combined with other policy settings
such as the skilled occupation lists (covered in a later section) play an
important part in ensuring that the 457 visa program is used for legitimate
purposes and that the entitlements of 457 visa workers are maintained and the
employment opportunities of Australian workers are protected.
Market salary rate
Employers seeking to employ a 457 visa worker must guarantee that as
part of the sponsor obligation the terms and conditions of employment of 457
visa holders, including pay and hours of work, are no less favourable than the
terms and conditions that are, or would be, provided to an Australian citizen performing
equivalent work in the same location. In other words, the DIBP must be
satisfied that a 457 visa holder will be paid the 'market salary rate'.
The purpose of this market salary rate requirement is twofold:
to ensure that Australian workers are protected from any adverse
impact on wages; and
to protect skilled overseas workers from exploitation by ensuring
they are not paid less than the market salary rate.
The obligation on employers to pay at least market salary rates is
monitored by the DIBP and the Fair Work Ombudsman (FWO).
On 18 April 2015, the threshold for exemption from a market salary
assessment for the 457 visa program was lowered from $250 000 to $180 000
However, the reduction was effectively revoked on 16 June 2015 when the Senate
disallowed the legislative instrument.
Submitters expressed different views on this matter. Employer groups
such as the Australian Higher Education Industrial Association (AHEIA) welcomed
the reduction in the threshold to $180 000.
In contrast, the Australian Institute of Marine and Power Engineers (AIMPE)
argued that the lowering of the market salary rate threshold from $250 000 to
$180 000 'had an immediate impact with many chief engineers and class 2's
losing their jobs'.
The AIMPE therefore recommended that the market salary rate threshold of $250
000 be reinstated.
Temporary Skilled Migration Income
In addition to the market salary rate, the income of 457 visa workers is
also protected by the TSMIT which is designed to ensure that 457 visa holders
earn sufficient money to be self-reliant in Australia:
The TSMIT, currently set at $53 900 per annum, provides
an income floor for subclass 457 visa holders, in recognition that visa holders
are temporary residents and are not usually eligible for the same income
support benefits as Australian citizens and permanent residents.
The TSMIT represents an entry level salary point for the
subclass 457 programme. The underlying premise of the TSMIT is that visa
holders should be able to reside in Australia without government support and
not find themselves in difficult financial circumstances that could make them vulnerable
to exploitation or encourage them to breach their visa conditions.
The Migration Council noted that the TSMIT acts as the floor for wages
for migrants on temporary work visas because 457 visa holders cannot fill
occupations with a market salary rate below the TSMIT.
The Migration Council further noted that the TSMIT has traditionally
been indexed according to average fulltime weekly ordinary time earnings (AWOTE)
each financial year. However, indexation did not occur on 1 July 2014 or 1
Without indexation, the salary floor decreases in real terms each year
as wage inflation occurs, meaning that temporary migrants are less able to
support themselves in society. The Migration Council therefore recommended that
the TSMIT be indexed as at 1 July 2015 to the AWOTE.
Designated Area Migration
As noted in chapter 2, labour agreements and Designated Area Migration
Agreements (DAMAs) allow a proponent to negotiate an agreement under which
employers in areas experiencing skills and labour shortages can sponsor skilled
and semi-skilled overseas workers.
Pointing to the softening labour market and the fact that the
construction boom in the resources sector had already peaked, the ACTU called
on the DIBP and the government to provide evidence to demonstrate the ongoing
case for DAMAs to be retained.
The ACTU was of the view that DAMAs 'should be explicitly limited to
skilled and specialised semi-skilled occupations' in 'high-growth, low
In order to ensure the integrity of a DAMA, the ACTU strongly suggested that a
DAMA be vetted by an independent tripartite body and that access to 457 visa
workers under a DAMA be restricted to 'best practice' employers.
The ACTU also recommended that labour market testing should apply to all
positions to be filled by a 457 visa worker under a DAMA.
Designated Area Migration
Agreements and the TSMIT
The Northern Territory (NT) government stated that the very low
unemployment rate in the NT
meant that 'many employers had no other option but to sponsor workers from
overseas to fill vacant positions'.
The NT government pointed out that the TSMIT was above the market salary
rate across a number of occupations in the NT. The NT government was therefore
concerned that paying 457 visa workers the TSMIT had the potential to generate
wider wage inflation across the NT, reducing the competitiveness of local businesses
and ultimately increasing the cost of living in the region.
However, under a DAMA, all employers throughout the NT would be able to
access the 10 per cent TSMIT concession. This would effectively allow all
employers to pay a sponsored temporary visa worker 10 per cent less than the
TSMIT, provided that the TSMIT was above the market salary rate for that
occupation. It was for this reason that the NT government negotiated a DAMA
with the DIBP.
United Voice noted an increase in the number of regional areas looking
to use a DAMA 'to fill the shortfall of workers in particular occupations and sectors
where Awards are the dominant mechanism by which conditions of employment are determined'.
United Voice noted that the areas where a DAMA might be used were often
isolated locations with a higher cost of living. Given that a DAMA allows the
designated region to have wages up to 10 per cent lower than the TMSIT
(equating to approximately $48 510), United Voice was concerned that temporary
migrant workers 'would not have sufficient income to independently support
themselves'. United Voice therefore recommended that DAMAs include the same
minimum standards as 457 visas.
The Maritime Union of Australia (MUA) opposed the use of DAMAs and
argued that allowing employers to pay 10 per cent under the TSMIT would
undercut wage growth in areas where a DAMA was in operation.
However, AMMA disputed these assertions by pointing out that the
potential 10 per cent reduction in the TSMIT under a DAMA was still required to
operate in conjunction with the market salary rate. As AMMA explained, this
means that any 457 visa worker must still be paid the comparable Australian
Under a DAMA, TSMIT of $53 900 can be reduced by up to 10% to
a minimum of $48 510 a year.
However, it must be remembered that employers are required to
pay the market salary rate (i.e. what they would pay an equivalent Australian
employee) or the concessional income threshold, whichever is higher. That means
if an employer pays an Australian worker less than $48 510 they can bring in an
overseas worker if they are prepared to pay that worker at least $48 510.
However, if the market salary rate (i.e. the comparable Australian worker's
salary) is $60 000, the employer must pay the foreign worker $60 000.
In simple terms, concessions to wages are only available
under DAMAs when the equivalent Australian wage is equal to or less than the
concessional income threshold of $48 510. So there is no possibility of foreign
workers undercutting Australian wages as a result of the concessions.
The mandatory stakeholder consultation requirements that apply to labour
agreements were criticised by the ACTU as manifestly inadequate:
Despite some improvements to the process in recent years,
most notably there is still no requirement for labour agreement proponents to
provide unions with any evidence to demonstrate there are in fact shortages in
those occupations where 457 visa workers are being sought and what recruitment
efforts have been made to fill them.
In order to reassure the community, the ACTU stated that a labour
agreement should include the following evidentiary requirements:
The evidence on which it is claimed that the nominated
occupations, and the number of positions for each occupation, will be required
over the life of the agreement, and the evidence for the claim that these
positions cannot be filled by Australian citizens and residents.
Evidence of recent and ongoing recruitment efforts, including
evidence of the wage rates the jobs have been advertised at and relocation
assistance that has been offered to allow Australian workers to take up the
The ACTU did acknowledge that:
To their credit, some labour agreement proponents do engage
with unions in a meaningful way and have had no difficulties in providing
additional evidence and information that is requested.
The ACTU emphasised that unions have collaborated successfully with
employers in order to help fill positions with local workers.
However, the ACTU also drew attention to the need for external scrutiny of
It is also worth noting that in several cases where unions
have challenged the inclusion of certain occupations in labour agreements on
the basis that the positions could be filled locally, the proponents have
agreed to drop them off their list of nominated occupations. This highlights
the importance of external scrutiny, and the fact that when such scrutiny is
applied the professed need for 457 visa labour can become less pressing.
The lack of transparency and public accountability of labour agreements
was also criticised. Mr Henry Sherrell, Policy Analyst at the Migration Council
noted that it was very hard to find out how many labour agreements are in
operation, the conditions they cover and the exemptions they provide. He noted
that while there may be some commercial-in-confidence aspects to a company's
application for a labour agreement, the remainder of the application should be
publicly available to facilitate greater understanding of how and why
particular labour agreements are used.
Consolidated Sponsored Occupation
List and Skilled Occupation List
Australia's skilled migration program operates under two designated
lists, one for the temporary skilled stream and the other for the permanent
the CSOL is a general list of occupations that may be sponsored
under the 457 visa program; and
the Skilled Occupation List (SOL) designates the relevant
occupations for the independent points-based permanent skilled migration
The CSOL and the SOL are prescribed in a legislative instrument. The
current instrument is effective from 1 July 2015.
Skilled Occupation List (SOL)
The SOL lists 190 high-value occupations. As such, the SOL 'identifies
occupations that would benefit from independent skilled migration for the
purpose of meeting the medium to long term skill needs of the Australian
economy, where such needs may not be more appropriately met by sponsored
migration programs or up-skilling Australians'.
The Commonwealth Department of Education and Training (DET) is
responsible for providing advice on the composition of the SOL. However, the
final decision on the composition of the SOL is taken by the Minister for
Immigration and Border Protection.
The functions of the former Australian Workforce Productivity Agency
(AWPA) were transitioned into the Department of Industry in July 2014.
The ACTU were critical of the decision to abolish the AWPA as an independent,
tripartite national skills body that previously provided advice on the SOL:
The discussion of the merits of a MAC-type body to provide
independent, labour market analysis really points to the mistake the current
Government made in abolishing the independent, tripartite national skills body,
the Australian Workforce Productivity Agency (AWPA). AWPA had a tripartite
board structure supported by a secretariat wide with a wide range of economic,
labour market and policy expertise. Among other things, AWPA was responsible
for advice on the Skilled Occupations List (SOL) which is used for the
permanent skilled migration program.
Similarly, Dr Howe and Associate Professor Reilly warned that the
abolition of AWPA risked diminishing the rigour and transparency around the
compilation of the SOL. In their view, a genuinely selective SOL would
encourage employers and government to address skills shortages with suitable
training as well as send a signal to citizens that the migration intake was
indeed focussed on areas of genuine need.
The DET outlined the current process for identifying occupations for
inclusion on the SOL. The first step involves identifying occupations that are
most susceptible to supply side constraints and/or most likely to warrant
government intervention should supply constraints occur. An occupation satisfies
this first step if it meets at least two of the following three criteria:
long lead time—skills are highly specialised and require extended
education and training over several years;
high use—skills are deployed for uses intended (i.e. there is a
good occupational 'fit' between qualification and occupation); or
high risk—disruption caused by skills being in short supply
imposes a significant risk to the Australian economy and/or community.
The second step involves analysing the medium to long-term skill needs
of the economy for each occupation identified in the first step in order to
determine whether it would benefit from skilled independent migration. The
analysis is done on the basis of stakeholder submissions in combination with
information on areas of economic activity where skills imbalances may be
observed. The areas of economic activity considered are:
the state of the labour market, focusing on indicators that
provide insight into current and anticipated occupational conditions;
the recruitment experience, focusing on the outcomes of
the education experience, focusing on the effect that skills
imbalances may have on a student's choice of study; and
new entrants, focusing on the outcomes of graduates and migrants
entering the labour market.
The DET noted that the assessment process incorporates education, labour
market, migration, and general economic and demographic data and considers views
from Industry Skills Councils, peak industry associations, professional and
trade associations, education and training providers, employee representatives,
and Commonwealth, State and Territory government agencies and the public.
The DET also noted that, based on the above analysis, a shortlisted
occupation would not be included on the SOL if:
the occupation is likely to be in surplus in the medium-to-long
there are other more appropriate and/or specific migration
options (for example, employer or State/Territory nominated or temporary
skilled migration); and
the occupation is a niche occupation with few employers or
Consolidated Sponsored Occupation
The CSOL is compiled by the DIBP. It has two components: the 190
occupations listed on the SOL, and another list of 460 occupations (set out
below) plus the addition of the occupation of Primary School Teacher which was
originally omitted by oversight. The combined total of occupations on the CSOL
is therefore 651.
The CSOL includes Australian and New Zealand Standard Classification of
occupations in Skill Levels 1, 2 and 3 (and the occupation of Driller at Skill
Level 4). The occupations are classified as follows:
Skill Level 1 Managers—qualification commensurate with a bachelor
degree or higher or 5 years relevant experience;
Skill Level 2 Professionals—qualification commensurate with an Australian
Qualifications Framework (AQF) Associate Degree, Advanced Diploma or Diploma or
3 years relevant experience; and
Skill Level 3 Technicians and Trades Workers—qualification commensurate
with an AQF Certificate IV; or an AQF Certificate III plus a minimum of two
years on the job training. Three years relevant experience may substitute for
relevant formal qualifications.
The committee notes that the CSOL is a list of skills, rather than a
list of occupations where those skills are in short supply. As such, the
committee received conflicting evidence about the nature of the CSOL and its
impact on the Australian labour market.
Dr Howe submitted that there are flaws in the CSOL—particularly when
compared to the SOL—which include:
the CSOL is particularly broad;
inclusion on the list is only determined by skill level and not
that the occupation is in shortage;
use of the CSOL abdicates responsibility for determining skill
shortages to employers as the 457 visa is entirely demand-driven;
the definition of skill used to determine the CSOL is too
wide-ranging and includes skilled occupations in which it would only take a
short time to train domestic workers; and
the CSOL does not operate to protect the precarious labour market
status of many 457 workers.
Dr Howe argued that it is difficult for the DIBP to independently assess
whether 457 visa workers are being employed in the appropriate position given
that the 457 visa scheme is based on employer demand, that there is a broad
range of occupations listed on the CSOL under which 457 visa workers are
eligible to be sponsored, and that certain occupations listed on the CSOL such
as 'Program or Project Administrator' (the second most popular occupation on
the CSOL for the 457 visa for 2012–13) have a very imprecise meaning. Dr Howe
therefore argued there is a risk that 457 visa workers may be employed for
reasons other than genuine skill shortage.
The MUA criticised the lack of reliable up-to-date data on labour market
trends that underpinned the CSOL and Regional Migration Agreements (RMAs). The
MUA noted the difficulties it had encountered 'in getting the NT government to
remove 'Marine Cook' from the RMA...despite significant numbers of unemployed
local Marine Cooks being available and seeking work'.
Unions NSW proposed that a five-year sunset provision apply to
occupations listed on the CSOL to provide the impetus to address skill
ACCI fundamentally disagreed with Dr Howe's position on the CSOL. Ms
Lambert from ACCI argued that any list that underpins an employer nomination
scheme has to be an occupation list and not a shortage list because a shortage
list could not possibly capture the myriad rapidly changing permutations of
skills shortages in a dynamic labour market:
...we need to be very clear about the role of the CSOL, which
is the underpinning for employer-nominated both temporary and permanent
migration, and the role of the Skilled Occupations List, the SOL, which is the
shortages list. The critical thing about anything that underpins employer
nomination schemes is that it needs to be just an overarching skills list. It
is not a shortages list and it should never be a shortages list. It needs to be
a list of skilled occupations that are allowed to be dealt with by migration.
The main reason for that is that you cannot possibly analyse every regional
town and every business in terms of their needs and say, 'You're not in shortage,
because our macro figure says that we're not in shortage.' You could not invent
a system that could actually suggest to a particular business in regional town:
'Your shortages that you may think you are experiencing, you are not
experiencing, because our figures tell us that.' That is an absurdity. It does
not work that way.
The Migration Council drew attention to difficulties with the CSOL
encountered particularly by small business and therefore suggested simplifying
the CSOL to mitigate these problems by introducing 4-digit unit codes:
...the classification index is complicated and very specific.
For example, under ANZSCO, an Accountant could be: Accountant (general),
Management Accountant or a Taxation Accountant. In the workforce, particularly for
smaller businesses, one accountant may incorporate each of the duties
associated with these occupations into their role. This is because each
occupation is defined to by a 6-digit code under ANZSCO, creating a high degree
To clarify this issue for employers, migrants and government,
the Migration Council recommends the Consolidated Sponsored Occupation List
used for temporary work visas be simplified to outline 4-digit unit groups
under ANZSCO instead of 6-digit occupations. In the previous example, a sponsor
could nominate a unit group 2221—Accountants instead of specifying exactly which
account occupation a 457 visa holder will work in.
Similar concerns were raised by the AHEIA. The AHEIA stated that the CSOL
lacked the flexibility to enable Australian universities 'to compete in the
global labour market for the best education resources'. The AHEIA provided an example
of how greater flexibility would assist the university sector:
Flexibility currently exists for medical practitioners (and
general managers) to work for an employer other than their sponsor or an
associated entity of their sponsor. This flexibility should be extended to
enable a medical practitioner to alternatively work for a university as a Clinical
Academic performing teaching and research closely aligned to their specified occupation.
Similarly, flexibility should also be provided to enable a Clinical Academic to
work for another employer performing work in their specialist medical field.
This outcome would pay proper recognition to the fact that Clinical Academics
perform clinical duties within the setting of teaching hospitals or medical
research institutes associated with the employing university.
An independent tripartite panel to
advise on temporary migration policy
As noted earlier, the 457 visa program is largely driven by employer
demand such that an occupation is taken to be in skill shortage if it listed on
the CSOL and if an employer can show evidence that their recruitment efforts
Critics of the demand-driven approach argued that the current system
fails to examine whether the skill shortage is genuinely a skills shortage as
opposed to, for example, being a 'skills gap', a 'labour shortage', or a
These critics warned that the 457 visa program risked capture by special
interests and therefore recommended the establishment of a genuine tripartite
body to advise government on skills shortages.
As noted in chapter 2, the Azarias review identified the need to provide
a more robust evidence-based approach to improving the transparency and
responsiveness of the CSOL.
The Azarias review therefore recommended that a new tripartite ministerial
advisory council, supported by a dedicated labour market analysis resource, be
established in lieu of the existing Ministerial Advisory Council on Skilled
The Azaraias review suggested that:
...it is important that the advisory committee be tripartite
and include representation from key stakeholders such as peak councils,
industry and trade unions. This construction would enable the council to create
stronger linkages between industry, trade unions, and government to provide
advice on matters relating to skilled migration.
MACSM was created on 1 July 2012 and sits within the Immigration and
Border Protection portfolio. It is a tripartite body comprising industry, union
and government representatives and was established to provide advice to the
Minister and Assistant Minister for Immigration and Border Protection on Australia's
temporary and permanent skilled migration programs and associated matters.
MACSM had its inaugural meeting on 19 June 2015.
While the reinstitution of MACSM by the current government attracted
responses ranging from cautious optimism to support, disagreements were
expressed over the role and constitution of MACSM.
The ACTU supported the development of a more rigorous eligible
occupation list for the 457 visa program through a tripartite MACSM. However,
the ACTU was adamant that such a list was 'no substitute for each individual
employer having to test the market'. The ACTU was of the view that 'an employer
should not be relieved of that obligation just because an occupation might be
identified as being in shortage nationally'.
ACCI was supportive of MACSM and the need for independent stakeholders
to be part of the process of providing advice to government on Australia's
temporary and permanent skilled migration programs. However, Ms Lambert stated
that ACCI thought that MACSM as currently constituted was adequate for its task
and that the technical expertise and analysis for the panel was best provided
Dr Howe and Associate Professor Reilly supported the establishment of a
genuinely tripartite body such as MACSM, but were critical of the way it is
currently constituted. They set out four key criteria for the establishment of
a what they viewed as a properly constituted MACSM:
independent from government;
transparent and publicly accountable.
Independent from government
Dr Howe and Associate Professor Reilly argued that in order for
recommendations made by MACSM to be based on the national interest, MACSM needs
to operate independently from government. They therefore preferred the
appointment of highly respected professional members whose terms do not
coincide with those of the government, rather than the current system where
labour market analysis is provided by officers of the department.
In this regard, Dr Howe and Associate Professor Reilly noted that the United
Kingdom (UK) has appointed an expert commission, the Migration Advisory
Committee (MAC), that was 'established as a non-statutory, non-time limited
non-departmental public body funded by the Home Office':
It is comprised of a Chair and four other committee members
who are appointed as individuals to provide independent and evidence-based
advice to the Government on migration issues. Committee members are selected on
the basis of their expertise in law and/or economics. The MAC's modus operandi
is to receive questions from the Government, which it seeks to respond to in a
timely fashion, usually within three to six months. The MAC's response is in
the form of a public report that identifies the questions posed by the
government, the economic analysis and its recommendations.
Although supported by a secretariat within the Home Office,
the MAC is operationally independent and is not influenced by Home Office
officials or the Minister. As such, the secretariat takes direction only from
the MAC on the deployment of resources delegated to it by the Home Office.
In order to reinforce the integrity and credibility of its work, Dr Howe
and Associate Professor Reilly therefore recommended a similarly independent
approach in Australia:
We recommend that the MACSM receive support from relevant
government departments such as the Department of Industry, the Department of
Immigration and Border Protection, the Treasury and the Department of
Employment. However, the MACSM should be operationally independent and not be subject
to influence from any one government department or minister.
Dr Howe and Associate Professor Reilly argued that a genuinely
tripartite body would act as 'a safeguard against regulatory capture by special
interests'. They believed MACSM 'should include representatives from both
business and unions, as well as, representatives from government and academia'
to ensure that its recommendations were 'balanced and credible'.
While acknowledging that it was a member of MACSM, the ACTU pointed out
that MACSM is not a genuinely tripartite body:
There may be a role for a body similar to MAC, but in our
view there also needs to be a body that is properly tripartite, not only a body
of expert economists, and it should have a role to provide policy advice to the
Minister, not only to provide economic and labour market analysis.
In this respect, the ACTU has consistently supported an
ongoing legislated role for a tripartite Ministerial Advisory Council for
Skilled Migration (MACSM) to provide independent oversight and advice in
relation to all elements of the program.
The MACSM was first established under the Labor Government in
2012 and we were disappointed to see it languish for more than 18 months under
the current government without a single meeting.
As the Committee would be aware, the MACSM has recently been
reconstituted. Part of its role will be a review of the Consolidated Skilled
Occupation List, which appears to be akin to the type of work the MAC does in
The ACTU is a member of the reconstituted MACSM, but there is
no longer a crossrepresentative of unions on it as we believe there should be
under a genuinely tripartite body. Dr Howe made the observation in her evidence
to the Inquiry that 7 of the 8 members of the new MACSM hold the same overall
view of the skilled migration program whereas the previous MACSM had a more
equal balance of views.
The ACTU noted that while the UK MAC was not genuinely tripartite, it
nonetheless engaged with stakeholders and seemed to perform a valuable role in
providing independent advice to government:
The evidence and advice available to the ACTU is that the UK
Migration Advisory Committee (MAC) has done a good job since it was
established. The MAC has responsibility for providing independent,
evidence-based advice to the Government on migration issues and has produced a
number of well-reasoned reports into which sectors of the economy are
experiencing skill and labour shortages and whether migration should be used to
It should be noted, however, that the MAC itself is not a
tripartite body. Instead, its membership comprises a chair, five other
independent economists, and several government representatives. There are no
representatives from unions, employers, or any other community groups for that
matter. That said, unions in the UK have confirmed to us that the MAC has
engaged proactively with unions, as it has with others, in developing their
Evidence-based analysis of skills
Dr Howe and Associate Professor Reilly argued that there was a lack of
robust evidence underpinning the inclusion of particular skilled occupations on
the CSOL. They suggested that establishing an expert commission on migration in
Australia would provide the opportunity 'to develop rigorous, transparent and
credible occupational shortage lists for both the permanent and temporary
labour migration programs'.
Dr Howe and Associate Professor Reilly noted that employers may 'use
labour migration for a motive other than to meet a genuine skill shortage' and
that historically, the OECD has found that the requests made by employers about
domestic occupational shortages have not been considered completely reliable.
Dr Howe and Associate Professor Reilly provided an outline of the
combination of objective (labour market indicators and formulas) and subjective
(submissions) criteria that the UK MAC uses to inform its assessment concerning
the composition of the occupational shortage list:
For the past five years since its inception, the MAC has
provided recommendations to government on an annual basis using a combination
of both hard economic data and input from stakeholders. With regards to the
former, 12 top-down labour market indicators are relied upon to determine if a
particular occupation should be deemed as being in shortage. Each indicator has
to reach a certain threshold in order for the occupation to be in shortage.
This data is publicly released by the MAC and the formulas involved are also
available for external scrutiny. This is supplemented by evidence through an
annual submissions process from employers, unions and others as to which
occupations are in shortage.
It was also observed that the MAC takes a nuanced approach to its
recommendations to government about which occupations are deemed to be in
shortage. For example, while there may be no general occupational shortage of secondary
school teachers, there may be a shortage of secondary school mathematics
Further, 'the MAC seeks to differentiate between skill shortages that
are best met by temporary migration and those that could be met by increased
training of domestic workers'. In this regard, 'the MAC can request a formal
review of the training system that trains British workers for that occupation
in question'. This approach facilitates a strategic approach to the allocation
of training resources in order to improve the employment prospects of local
Importantly, Dr Howe and Associate Professor Reilly emphasised that
while the independent commission makes credible and informed recommendations,
the final decisions should be made by elected representatives:
It is important to note that under the model we propose, the
MACSM would not make final decisions about the composition of the occupational
shortage list. This is a political responsibility best left to elected
officials with accountability to the parliament and to the electorate through a
cycle of regular elections.
As such, an Australian expert commission could make
recommendations which parliament could modify, reject or allow to take effect.
This would provide greater public confidence in the process as an expert commission
could develop agreed-upon definitions and measures.
Transparent and publicly
Dr Howe and Associate Professor Reilly drew attention to a lack of
transparency in the process for determining the composition of the CSOL. The
unfortunate outcome of this approach is that there is no way of discerning
whether or not the decisions have merit and whether they were based on robust
evidence or were instead potentially influenced by special interest lobbying:
One of the key drawbacks of the current Australian approach
to managing migration policy is that it is characterised by secrecy and there
is a lack of transparency and accountability around decisions. When decisions
are made in a non-transparent fashion and internally within government
departments, there can be confusion as to whether these decisions were made on
a sound basis or because of lobbying by a particular group. The recent addition
of flight attendants to the CSOL by the Department is one such example. The
addition of this occupation to the occupational shortage list for the subclass
457 visa occurred after the head of the Department met with the CEO of Qantas
who was lobbying for the reform. Although adding flight attendants to the CSOL
was opposed by unions who were not consulted on this change, a week after the
meeting occurred, the CSOL was amended. No public justification was provided by
the Department for this change. Whilst this decision may have been evidentially
sound and based on data revealing a labour shortage in domestic flight attendants,
this remains unproven because of the lack of accountability and transparency
that characterises decision-making in the labour migration program.
Dr Howe and Associate Professor Reilly also submitted that a further advantage
of making decisions in a transparent and publicly accountable way is that it
would not only improve ministerial decision-making, but would also enhance the
quality of public debate on labour migration matters:
This is because a more transparent and rigorous process for
selecting occupations to be on a shortage list has the benefit of increasing
public confidence that only occupations which are in shortage are eligible for
labour migration. In this way, the MACSM can also assist in communicating to the
public the shared prosperity and economic gains that ensue from labour migration,
leading to greater public acceptance of the use of labour migration to address
Eventus Corporate Migration strongly supported both the findings of the
Azarias review on a reinstituted MACSM to provide oversight of the CSOL, and
the role of the MAC in the UK. In effect, the position of Eventus broadly
aligned with the proposals set out above for an independent body that would review
future workforce needs in collaboration with external stakeholders, and advise
government on future labour needs.
Technical competency and English
Concerns were raised by certain submitters about the technical and
English language competency of some temporary visa workers.
As an approved assessment authority for most engineering occupations,
Engineers Australia stated that 'the procedures for permanent migration at
least compare to standards expected from new Australian engineering graduates'.
However, significant differences exist in the assessment of qualifications of
new Australian engineering graduates and applicants for permanent migration as
engineers, as compared to engineering applications for the 457 visa program.
Engineers Australia therefore expressed grave concerns about the lack of any
adequate process for assessing the qualifications of engineering applicants
for the 457 visa program:
Applicants for 457 temporary visas are not required to have
their qualifications assessed in any way. Providing an applicant satisfies an
employer as to their engineering capacity, they are deemed good enough to be an
engineer. Engineers Australia argues that that these arrangements are
unsatisfactory and risk compromising the standards of engineering work in Australia.
It was therefore the view of Engineers Australia that the use of
engineers employed under the 457 visa program was problematic in terms of
potentially lowering the standards within the profession as a whole.
The Electrical Trades Union (ETU) voiced similar concerns about the
technical competency of foreign workers particularly in sectors where safety is
While every effort can made to ensure technical equivalency
with Australian standards it is almost impossible for foreign workers have the
knowledge/experience with the Australian standards required to work in a safe
and compliant manner.
Electrical regulators are especially concerned that the gap
be addressed in regulated trade vocations such as electrical, refrigeration and
air conditioning, electricity linework and cable jointing, where the work
context may differ markedly in overseas countries and where such differences
could endanger lives, infrastructure or systems.
Mr Matthew Boyd, Branch Organiser for the ETU, pointed out that to
qualify as a linesman in Australia a four-year apprenticeship is required, but
in some other countries a two-year traineeship allows a person to be qualified
as a linesman.
The ETU therefore recommended formal, independent assessments of visa
worker qualifications and recommended that 'the mandatory skills assessment
that applies to all permanent General Stream Migration applicants should be the
standard applied to all visa types'.
Mr Boyd raised concerns about the low level of English competency that
ETU members encountered among visa workers, particularly given that a critical
aspect of being a lineworker is signing and understanding a permit that states
where the power is still live and where it has been switched out.
Safety concerns were also raised by the Australian Maritime Officers
Union (AMOU), particularly where 457 visa workers held positions of
responsibility but had only limited command of English:
Many members have related stories of situations where they
have worked beside temporary work visa holders who held positions of authority
on vessel and were responsible for the health and safety of the crew, the
seaworthiness of the ship and the protection of the environment but had only a
limited ability to speak or understand English.
The Freedom Partnership to End Modern Slavery (the Freedom Partnership)
noted that it had warned the DIBP 'not to make assumptions about the level of
English required for low skilled work'. Consequently, the Freedom Partnership
did not agree with lowering English language requirements. However, recognising
that the government had accepted the recommendation in the Azarias review to
lower the English proficiency requirements, the Freedom Partnership recommended
'providing access to the Adult Migrant English Program or a comparable program,
for workers with low to medium IELTS scores'. Such access would reduce social
isolation and help migrant workers to connect and share information on the
rights and responsibilities of workers in Australia.
Labour market testing
Given that the 457 visa program is driven by employer demand for skilled
temporary migrant labour, and with unions questioning the impact of the 457
visa program in a softening job market, there has been renewed focus on ensuring
that Australians have the first opportunity to apply for jobs.
This next section sets out the current requirements for labour market
testing. This is followed by a section on the potential impact of Free Trade
Agreements (FTAs) on the requirements for labour market testing. Subsequent
sections set out the key arguments for and against labour market testing. This
is followed by alternative methods for determining skill shortages in
Labour market testing was reintroduced for the 457 visa program on
23 November 2013. It currently applies to skill level 3 occupations
(Technicians and Trades Workers) on the Australian and New Zealand Standard
Classification of Occupations (ANZSCO) which are not otherwise exempt from
labour market testing on the basis of an international trade obligation. It
also applies to occupations in the fields of nursing and engineering.
The Australian Government Department submission set out the criteria for
testing the labour market:
To meet the labour market testing requirement, standard
business sponsors must provide evidence to DIBP that they have tested the local
labour market in the 12 months prior to nominating an overseas worker for a
subclass 457 visa. This may include providing evidence of their attempts to
recruit Australian workers, such as advertising details and information on how
they determined, on the basis of these attempts, that there were no suitably
qualified and experienced Australian citizens, permanent residents or eligible
temporary visa holders available to fill the position. Where there are
integrity concerns with the provided information, further inquiries may be
undertaken to validate the labour market testing process.
Where labour market testing applies, sponsors are required to
provide DIBP with information on retrenchments and redundancies in their
business or an associated entity that occurred within the four months prior to
lodging a subclass 457 nomination. In this case, sponsors must provide
information on labour market testing since the redundancies have occurred.
Labour market testing is not required where its application would be
inconsistent with Australia's international trade obligations under the World
Trade Organisation (WTO) General Agreement on Trade in Services, and under FTAs.
In addition, labour market testing is not required where the nomination is for
an occupation at ANZSCO skill level 1 (Managers) or skill level 2 (Professionals),
with the exception of the 'protected' occupational categories of nurses and engineers.
The ACTU strongly supported the Migration Amendment (Temporary
Sponsored Visa) Act 2013 which introduced the labour market testing
provisions. In particular, the ACTU welcomed the fact that there was now a
legal obligation on employers to provide evidence that they have sought to
employ Australian workers in the first instance and that no suitably qualified
and experienced Australian was readily available to fill the position.
The ACTU was also very supportive of the requirement for an employer
seeking to sponsor a 457 visa worker to advise the minister if any Australians
have been made redundant or retrenched in the previous four months, and which
requires labour market testing to be undertaken in such circumstances.
However, the ACTU noted that the vast majority of all occupations
available for sponsorship under the 457 visa program are exempt from labour
market testing. All skill level 1 and 2 occupations (except nursing and
engineering) are exempt plus occupations covered by FTAs with Thailand, Chile,
South Korea and Japan.
Based on the figures in Table 3.3 below, 77 per cent of all 457 visa
grants were exempt from labour market testing in 2014–15 up until 31 December
2014. The ACTU also noted that, depending on the outcomes of the FTAs with
China and India, an even greater proportion of occupations could be excluded
from labour market testing (see Table 3.3 below).
Table 3.3: Coverage of labour market testing provisions
based on current and likely future exemptions
457 visa grants
2014–15 (to 31 December 2014)
Grants covered by LMT occupational exemptions
19 627 76.8%
Grants in LMT occupations that are covered by FTA exemptions (e.g. Thailand,
Chile, South Korea, Japan)
Total grants exempt from
Total grants covered by
Grants in LMT occupations from China and India
Total grants covered by
LMT if China and India FTAs have LMT exemptions
3 857 15.1%
Source: DIBP subclass 457 visa
quarterly pivot tables in Australian Council of Trade Unions, Submission 48,
Key: LMT = labour market
testing; FTA = Free Trade Agreement.
The impact of Free Trade Agreements
on the current requirements
Under two legislative instruments made under subsection 140GBA(2) of the
Migration Act 1958, which commenced immediately after the
Korea-Australia FTA (KAFTA) came into force on 12 December 2014, and
immediately after the China-Australia FTA (ChAFTA) came into force on
20 December 2015, the labour market testing condition of the 457 visa
program has been removed from the following international trade agreements:
Japan-Australia Economic Partnership Agreement;
ASEAN-Australia-New Zealand FTA;
Associate Professor Joo-Cheong Tham examined whether international trade
agreements to which Australia is a party prohibit the imposition of a labour
market testing condition under the 457 visa program. The provisions of the
various FTAs that relate to labour market testing are technical and complicated,
and are summarised below.
The power to remove the labour market testing condition of the 457 visa
program with respect to FTAs is provided in section 140GBA of the Migration
Act 1958 (Migration Act):
...the power of the Immigration Minister to remove the labour
market testing condition of the 457 visa program in relation to international
trade agreements can only be exercised when there is an obligation under
such agreements to which Australia is a party.
Associate Professor Tham noted that the removal of the labour market
testing condition under the 457 visa program in relation to the Japan-Australia
Economic Partnership Agreement, the Thailand-Australia FTA, and the ChAFTA appeared
to be lawful:
...with ChAFTA, Article 10.4(3) of that agreement prohibits the
application of quotas and economic needs test to commitments made under the
agreement. A similar situation applies under the Japan-Australia Economic Partnership
Agreement through Annex 10(2) of that agreement. With the Thailand-Australia Free
Trade Agreement, Chapter 10—Movement of Natural Persons, Annex 8 specifically
prohibits labour market testing.
By contrast, Associate Professor Tham observed that prohibitions on
labour market testing were not found in the ASEAN-Australia-New Zealand FTA, the
Australia-Chile FTA, or the KAFTA. According to Associate Professor Tham, this
meant there was no obligation under these agreements that would enliven the power
to remove the labour market testing condition on the basis of international
trade agreements pursuant to section 140GBA of the Migration Act. Therefore,
the lawfulness of removing the labour market testing provisions from these
three FTAs was 'seriously doubtful'.
In summary, it appears there is a clear legal basis to remove the labour
market testing provision from the Japan-Australia Economic Partnership
Agreement, the Thailand-Australia FTA, and the ChAFTA, but not from the ASEAN-Australia-New
Zealand FTA, the Australia-Chile FTA, or the KAFTA.
With respect to the Trans-Pacific Partnership Agreement (TPP), the TPP
appeared, on its face, to restrict labour market testing. However, in its Schedule
to Annex II, Australia reserved:
...the right to adopt or maintain any measure with respect to
the supply of a service by the presence of natural persons, subject to the
provisions of Chapter 12 (Temporary Entry for Business Persons), that is not
inconsistent with Australia's obligations under Article XVI of the General
Agreement on Trade in Services (GATS).
In addition, Article 12.4 of the TPP did not prohibit economic needs
tests like labour market testing or quotas in relation to commitments with regard
to temporary entry of business persons made in Annex 12-A. Therefore, with
respect to various articles and the application of the above Schedule,
Associate Professor Tham concluded that the TPP did not prohibit the imposition
of a labour market testing condition.
Further, Associate Professor Tham was of the view that the power
pursuant to section 140GBA(2) of the Migration Act was 'not enlivened by
the TPP as the TPP does not give rise to any obligation to remove the labour
market testing condition'.
The ETU stated that labour market testing would not occur in any of the
the worker you nominate is a citizen of Chile or Thailand, or is
a Citizen/Permanent Resident of New Zealand;
the worker you nominate is a current employee of a business that
is an associated entity of your business that is located in an Association of
South-East Asian Nations (ASEAN) country (Brunei, Myanmar, Cambodia, Indonesia,
Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam), Chile or New
the worker you nominate is a current employee of an associated
entity of your business who operates in a country that is a member of the World
Trade Organisation (WTO), where the nominated occupation is listed below as an
'Executive or Senior Manager' and the nominee will be responsible for the entire
or a substantial part of your company's operations in Australia;
your business currently operates in a WTO member country and is
seeking to establish a business in Australia, where the nominated occupation is
listed below as an 'Executive or Senior Manager'; or
the worker you nominate is a citizen of a WTO member country and
has worked for you in Australia on a full-time basis for the last two years.
Unions expressed concern about the impact that certain clauses within
FTAs signed by Australia would have on the domestic labour market and the
opportunities for Australians to have first access certain jobs.
The ETU stated that a key union concern related to 'attempts to
manipulate the classification of workers' so that they fell into an exempted
category, for example, 'mid-level employees 'dressed up' as executives and
senior managers under the intra-corporate transferee's category'.
Mr Owen Whittle, Assistant Secretary of UnionsWA noted that the new
investment facilitation agreements (IFAs) in the ChAFTA allowed companies with
projects worth more than $150 million 'to negotiate to bring in lower skilled
workers, rather than just skilled workers, at wage rates that fall below the
current floor for a standard 457 visa'.
The Freedom Partnership warned that it was 'unclear how the government will
ensure access to protections for workers' who come under the ChAFTA IFAs.
Mr Whittle was concerned that a similar provision would be included in
the proposed FTA with India. UnionsWA were of the view that 'blanket 457 visa concessions'
did not 'have anything to do with international trade' and therefore should not
be included in FTAs.
The Freedom Partnership also expressed concern that despite the ongoing
concerns about exploitation of WHM visa holders in Australia (see chapter 7),
the ChAFTA included a Work and Holiday Arrangement that provided working
holiday visas for up to 5000 Chinese workers.
The committee makes a recommendation in chapter 8 on the rights and protections
available to temporary visa workers under any visa issued pursuant to an FTA.
Effectiveness of labour market
During the inquiry the committee heard a number of views relating to the
current labour market testing provisions. This section presents arguments about
the effectiveness of labour market testing and the following sections present
arguments about the relative costs of employing 457 visa workers, and the costs
that labour market testing imposes on employers.
The effectiveness of labour market testing has been a highly contested
issue between employers and unions. Opinion was sharply divided on the merits
of labour market testing as a means to ensuring that Australians get first
access to jobs.
Dr Howe was scathing about the current labour market testing
requirements as being both inefficient and ineffective:
...employer-conducted labour market testing penalises decent
employers who wish to use the 457 visa in areas of genuine skill shortage
through making them go through the farce of advertising, but it is also
ill-equipped to deter unscrupulous employers from evading the statutory
requirement of advertising jobs locally.
Consult Australia agreed with Dr Howe's view and also noted that it was
consistent with the Azarias review which found that:
On the evidence presented to us we have concluded that the
labour market testing provisions introduced in 2013 are easily circumvented and
do not prevent employers from engaging overseas workers in place of
Australians. In addition, recruitment practices are highly diverse across
occupations and industries: to design a system that encompasses this diversity
is impractical. While the provisions are symbolic of what is trying to be
achieved, in practice they do not assist in achieving the objective of
providing evidence that suitable Australian workers are not available.
Therefore the requirement adds unnecessary regulatory cost for little or no
actual benefit. In its current form the labour market testing requirement is
costly for sponsors who have done the right thing and subject to manipulation
by those that have not made a serious effort to find a local worker.
Likewise, the NT government observed that the current labour market
testing regime 'adds little or no value in protecting the integrity of the
subclass 457 visa scheme as it is uniformly applied regardless of the location
of business or their employment practices'.
In general, employers have criticised labour market testing as an
excessive and unnecessary burden on employers, while unions have supported
labour market testing but criticised the requirements as lacking rigour.
The ACTU presented evidence based on unpublished DIBP data on the effect
of labour market testing since its re-introduction in 2013. The data showed
significant reductions in 457 visa nominations in those occupations covered by
labour market testing (see Figure 3.2 below):
Data made available to unions on the operation of labour
market testing to 30 September 2014 shows that it is having a significant
effect on those occupations it covers. This is evidenced by a much larger decline
in 457 visa nominations by employers in occupations covered by labour market
testing, compared to average monthly numbers in the occupations exempted from
labour market testing. Nominations for non-LMT occupations have fallen by 17%
whereas LMT occupations have fallen by 50% in Nursing, 46% in Engineering and
29% in Skill level 3 occupations.
Figure 3.2: Percentage change in average monthly 457 visa
nominations lodged (a) after labour market testing implemented, and (b), by
Source: DIBP unpublished
data, June and November 2014, (BE7406 and BE7826), in Australian Council of
Trade Unions, Submission 48, p. 27.
The AIMPE supported this analysis and noted that since the introduction
of labour market testing, the majority of its members had been able to find
ACCI disputed the conclusion by the ACTU that the decline in 457 visa
nominations was attributable to the re-introduction of labour market testing.
ACCI noted several salient factors that could account for the trend:
Evidence that the visa granted for trade occupations has
fallen since labour market testing was introduced does not take into account
other significant influences such as the introduction of the 'genuiness' test,
the work of the FWO and DIBP in ramping up compliance and a drop off in
economic conditions in industries that were accessing the programme including
Relative costs of employing local
and overseas workers
The Migration Institute of Australia (Migration Institute) is the peak
organisation representing the Australian migration advice profession. The
Migration Institute maintained that the economics of recruiting and hiring
overseas workers effectively ensured that local workers would be preferred and
that dodgy employers would be deterred by the extra effort and cost of
employing overseas workers:
The cost of becoming a Subclass 457 Business Sponsor,
nominating and bringing overseas skilled workers to Australia, exceeds the cost
of recruiting and employing from local labour forces, especially in the higher
salary bands. Sponsors only revert to the more costly practice of sponsoring
overseas workers where local labour is not available. The operation of market
forces and cost effective business practices should ensure that the lower cost
recruitment method is preferred, making the need to demonstrate LMT redundant
as a mechanism for protecting local jobs.
As the 457 programme is primarily designed for skilled
occupations and to fill genuine labour market shortages, businesses
legitimately requiring high skilled recruits are likely to be able to absorb
these costs, while those seeking to exploit the system with marginal salary
levels and in sham positions are occupations are less likely to bother.
This view was supported by the NT government which pointed out that 93
per cent of the businesses in the NT were small to medium enterprises, the vast
majority of them employing less than 20 staff:
The costs and complexity of sponsoring overseas workers under
the subclass 457 visa scheme are not insignificant, particularly for the
smaller business cohort. Therefore, for the overwhelming majority of Northern
Territory employers these factors alone are sufficient to ensure that
sponsoring overseas workers is a last resort.
In this regard, Mr Wayne Parcell, Director of the Migration Institute
and a partner at Ernst and Young, noted that an Ernst and Young survey of about
1500 client employers revealed that the costs of recruiting an overseas worker
and bringing them to Australia were as follows:
more than 10 per cent of the employers said it cost them less
more than 30 per cent said it cost them between $5000 and $10 000;
50 per cent of them said it cost them more than $10 000.
Likewise, AMMA completely rejected the idea that skilled migrants were
'able to cheaply displace the employment prospects of Australian workers'.
Indeed, AMMA argued that their commissioned research demonstrated that it 'may
cost up to $60 000 more to employ a foreign national rather than an Australian
to work in the resource industry when relocation, recruitment and compliance
costs are taken into account'.
However, the ACTU argued that the notion that it was far more costly for
employers to employ overseas workers was incorrect. Noting that almost half of
all 457 visas are being granted onshore (to workers already in Australia), the
ACTU pointed out that 'the extra costs to hire the overseas worker over an
Australian citizen or permanent resident are often negligible'.
This trend is even more apparent in the food and construction trades
where over 81 and 75 per cent respectively of all 457 visas are granted 'to
foreign nationals already in Australia at the time of the visa grant, many
already working for their 457 sponsor on other temporary visas, particularly
student visas and working holiday visas'.
The large pool of temporary onshore migrant labour is an outcome of the
combination of Australia's temporary visa programs. The ACTU noted that
officials from what was then the Department of Immigration and Citizenship had
acknowledged in 2013 that onshore temporary visa holders are eligible to apply
for a 457 visa if they can find an employer willing to sponsor them. The
presence of this pool of onshore visa holders has had a dramatic impact on the
increase of onshore 457 visa applications and this has occurred at a time when
the domestic labour market has softened.
The administrative costs of labour
The Migration Council based their critique of labour market testing on
the premise that there was no evidence to support the claim that labour market
testing benefits Australian workers. According to this view, therefore, labour
market testing merely places a cumbersome administrative burden on employers.
Likewise, the NT government pointed to extensive research that
identified ongoing skilled and low-skilled labour shortages in the NT. In such
a tight labour market, the NT government argued that labour market testing
merely imposed more 'red tape' on small and medium sized businesses while doing
nothing to protect job opportunities for Australian workers.
Fragomen stressed the potential economic losses that flowed from what
they described as an inflexible, protectionist approach that increased the
delays in sourcing labour with the requisite skills:
...particularly for time-sensitive project work or in other
circumstances where work must begin urgently. Even a delay of a few days in a
visa being granted can result in loss of production and potential penalties for
the employer. In circumstances where project timetables can shift regularly, it
is simply not possible for employers to plan their visa needs with the degree
of malleability that would enable them to allow for processing delays.
The Migration Institute made the point that the 457 visa program is the
most heavily regulated of all the temporary work visa programs. The Migration
Institute noted that on top of the regulatory mechanisms built into the 457
visa program, recent developments meant that 457 visa workers were well covered
by both migration and employment legislation. These developments included the
risk tiering approach implemented by the DIBP to monitor business sponsors, the
memorandum of understanding between the DIBP and the Australian Tax Office (ATO)
to access salary payment details of 457 visa workers through their tax file
number, and increased resources directed to compliance and enforcement.
The Migration Institute also questioned the need for labour market
testing for 457 visa nominations given the vast majority of temporary visa
holders are not 457 visa workers. The Migration Institute noted that this much
larger cohort of temporary migrant workers are more likely to compete with
Australian workers trying to enter the job market:
The student and working holiday visa holders particularly
congregate in the lower levels and lower skilled sectors of the labour market
and potentially compete with new entrant and low skilled Australian workers at
Ms Lambert of ACCI began her critique of labour market testing by making
the point that under the 457 visa program, 'an obligation for 457 visa sponsors
to commit to employing Australians is already built into the system', and that
employers support that objective and the obligation to treat migrant workers no
less favourably than Australian workers:
There is a basic obligation in the program to do it. That was
there before labour market testing came back in and that is there now for
occupations which do not require labour market testing. It is a fundamental
tenet of the program that there is an obligation on sponsors to put Australian
It is part of the very objectives of the 457 program that is
very strongly supported by the employer communities that the 457 program is
there to enable businesses to sponsor a skilled overseas worker if they cannot
find an appropriately skilled Australian. The second part of it is to protect
those workers and to make sure that they are no less favourably treated than
Australians. Employers across the community fundamentally support those two
basic objectives. That is not labour market testing.
While insisting that employers supported the twin objectives of the 457
visa program, ACCI was contemptuous of labour market testing obligations on
employers arguing that the requirements were excessive, inefficient and
Labour market testing only works in the same way that asking
employers to walk through wet cement does. It provides a regulatory burden that
means that some will not be bothered. This is not good policy as it does not
allow the programme to be responsive to need.
The Ai Group pointed out that the additional cost of hiring a 457 visa
worker meant a business was already 'effectively prompted' to test the market.
By contrast the labour market testing as currently required was unnecessary and
For example, advertising in a period of time before applying
can be costly when a business may know from past experience that their chances
of sourcing labour locally are non-existent. Delays caused by such testing
could prevent a business from meeting urgent commercial needs. Labour market
testing is inefficient and unnecessary red tape for business.
Ernst and Young stated that labour market testing imposed a significant
burden for no observable benefit and was 'inappropriate in a modern global
economy'. Ernst and Young therefore recommended that labour market testing be
A similar view was expressed by Mrs Rita Chowdhury, Vice-Chair of the
Migration Law Committee at the Law Council of Australia. She stated that labour
market testing has created an unnecessary administrative burden because an
employer only has to show evidence of advertisements, but does not have to
demonstrate that they could not find a local worker. In other words, labour
market testing as currently conceived merely forces employers to go through the
motions for no actual benefit in terms of finding a local worker to fill a
Ms Donna Mogg, Commercial Services Manager at Growcom agreed that labour
market testing was important to ensure that Australian workers were given first
preference, but pointed out that employers in the horticulture industry had a 'fairly
strong sense of what skills are available' in their region at any given time
and that repeated testing was onerous and time consuming.
Ms McKinnon from the NFF advised that the NFF did not oppose the
principle of labour market testing, but suggested it was burdensome and unnecessary
for farmers wanting to use the seasonal worker program:
To make the seasonal worker program work well, you have to
invest in it over a number of years. You will not get to that point unless you
realise that you are going to have an ongoing labour force need because you
cannot fill your need from the local market. So, you have made a decision to go
with a good program which brings you in returning, reliable, productive workers
every year, but you are still required, before you access workers over that
program, to advertise under the labour market testing rules. So, you do that;
you advertise your jobs. And you cannot say, when you advertise for the job,
that only Australians need apply, because that would be discriminatory. But
that is why you are advertising: because you are required to test for
Australians, for local workers.
So, you advertise your job, and what happens is that lots of
backpackers apply. You get a stream of backpackers applying for work, and you
have decided as a business that you are not going to use backpackers anymore;
you are going to use the seasonal worker program. But you then have to process
a number and a number and a number of backpacker applications, even though you
have no intention of hiring those workers. You might get the odd application
from an Australian, and that will be considered, along with all of them, but
really we do not see that in this circumstance.
The ACTU disputed claims that labour market testing provisions are too
onerous and create a burden on employers. The ACTU noted that labour market
testing should occur as a matter of course 'if an employer was genuine about
sourcing Australian workers first'. Furthermore, the ACTU noted that 'the
majority of 457 visa occupations are not even covered by the labour market
testing laws by virtue of various exemptions in place'.
Finally, the ACTU pointed out that:
...the 457 visa program is not, and should not, be designed to
provide an unfettered right for employers to take on temporary overseas
workers. Even during periods when the program has been very poorly regulated,
access to the 457 visa program has always, at least in theory, been subject to
certain conditions and obligations, including an overriding tenet of the program
that it is there only to fill skill shortages that cannot first be filled by
Australian workers. In that sense, the labour market testing laws simply give
practical (and long overdue) effect to what has always been an understood
principle underpinning the program endorsed by both sides of politics.
Proposals for improving labour
While the NT government supported the intention of labour market
testing, it was very critical of its current application, arguing that it was a
monolithic and impractical approach that took no consideration of the actual
labour market conditions in various regions of the country.
The NT government therefore argued that labour market testing 'could be made
far more effective through better targeting'. Proposals for improvement
included that the DIBP adopt a 'risk-tiering' approach to focus on areas of
potential misuse. In other words, more resources should be directed to
compliance rather than additional regulations.
The NT government also argued that greater flexibility would reduce
unnecessary burdens on employers. This could be achieved by concessions and/or
exemptions to labour market testing requirements 'for employers located in
areas of low unemployment and in 'micro' labour markets, such as regional and
remote areas of the NT'.
The MUA submitted that the current requirements for labour market testing
were neither credible nor robust. Noting the advice provided on the DIBP
website, the MUA pointed out that the requirements for labour market testing
could conceivably be satisfied by a Facebook post. Furthermore, the MUA argued
that the current requirements lacked transparency because of the difficulty in
independently verifying that adequate labour market testing had occurred in a
While voicing similar concerns about the content of job advertisements,
the ANMF was also concerned that employers were placing unreasonable
requirements in job advertisements that effectively excluded recent Australian
nursing graduates from employment:
It is now becoming commonplace to see advertisements that
require extensive years of experience and multiple nursing qualifications. We
believe in many cases these vacancies could have been readily filled by an
Australian worker eligible to practice nursing who may have graduated in the
preceding one to two years.
The ANMF therefore proposed 'that sponsors demonstrate that their
attempts to fill positions locally also included realistic prerequisites with
regard to academic qualifications and years of experience'.
To improve the robustness and veracity of the labour market testing
process, both the MUA and United Voice recommended the establishment of a skilled
workforce database(s) listing people looking for work.
The MUA proposed an unemployed assistance service as set out below:
seeking work in a specific industry and/or location contact the database and are
able to list themselves on the database.
database provides contact details (mobile telephone and email) and the job category
they work in and or are qualified to do. These details are then collated.
Monday people seeking work are contacted by SMS to confirm they are still looking
for work—if they do not confirm by Wednesday they are removed from the database.
This ensures the accuracy of the database.
and agents are sent the database details in table form three times per week by
email. The database shows the types of skills and contact details of the people
looking for work.
- If employers
seek a position(s) to be filled, they contact the person directly and take matters
The MUA argued that an unemployed assistance service had several
advantages. The service would be relatively straightforward to coordinate and,
if using the service was free, participation rates would be high. Furthermore,
workers would be able to self-manage their availability for work, employers
would have ready access to a pool of experienced local labour, and workers and
employers could be matched quickly.
The MUA proposed that it be mandatory for an employer to use such a
database to satisfy the labour market testing requirements and that use of the
database should be a precondition to accessing the 457 visa program.
The ACTU also had some recommendations that would, in their view,
strengthen the labour market testing provisions and improve the system:
labour market testing should be conducted for at least four weeks
for it to constitute a meaningful attempt to recruit Australian workers;
given the potential for rapid change in labour markets, labour
market testing should be considered valid for no longer than four months;
job advertisements should contain basic mandatory information such
as the job title, main duties and responsibilities, location, relevant
industrial instrument, necessary skills, qualifications and experience, and the
salary and conditions';
job advertisements should be prohibited from targeting temporary
advertising should be local and national at genuine market rates;
job advertising should be supported by information on what the
results were (for example, the number of applications received, the number of
applicants hired, and reasons why unsuccessful applicants were not considered
Given the current high levels of unemployment and under-employment
amongst Australian professionals, the ACTU also recommended the government
reverse current exemptions on labour market testing for skill levels 1 and 2.
Similarly, Ms Ruth Kershaw, Research Consultant at the Victorian Branch
of the ETU questioned why electricians and linesmen were still on the skills in
demand list given that the unemployment rate amongst ETU members was
particularly high, and was getting worse with the 'downturn in power
construction and manufacturing.
United Voice also made a series of recommendations to improve
transparency around the use of temporary visas and to ensure that 'current
salary requirements are being met':
the DIBP should be required to publish information for which
temporary visa nominations have been approved, including data by industry
sector and detailed occupation groupings;
the DIBP, or an authorised agency such as the ATO, should also
collect and publish regular data on actual salaries paid to temporary visa
the FWO should also be required to publish information on
temporary visas where their investigations uncover issues relating to workers
on these visas, and that information should include salary level, occupation,
Proposals to change the 457 visa
Various organisations including employers, unions and independent
analysts proposed changes to the 457 visa nomination process. Certain proposals
involved a trade-off—such as replacing labour market testing with a sponsorship
nomination fee—while other proposals recognised a strong compliance record.
These proposals are covered below.
Higher nomination fees and altered
The Migration Council proposed changes to the sponsorship model, arguing
that this would reduce administrative costs for business and at the same time
discourage rogue employers from exploiting the 457 visa program. In exchange
for abolishing labour market testing, the Migration Council proposed an
increased nomination fee for employers seeking to sponsor a 457 visa worker.
The Migration Council argued that the increased cost of the nomination fee
would be offset by the reduction in administrative costs:
...the Migration Council recommends an improved price signal
that increases the initial cost to nominate a temporary work visa in exchange
for a reduction in administration costs...
A higher nomination fee would better discourage exploitative
employers to immediately seek migrants on temporary work visas instead of
Australians by increasing the difference in price between the two options.
Furthermore, the increased nomination fee would restore to some extent
the price differential between recruiting a 457 visa worker and an Australian
that has, in many instances, been eroded by virtue of the fact that almost half
457 visa workers are now recruited onshore (and therefore cost no more to
recruit than an Australian citizen).
Unions also recognised that the issue of a price signal is important.
For example, the ACTU noted that the claim made by employers that employers
will always seek to employ Australians first because it is easier and cheaper than
recruiting overseas is rendered fallacious by the substantial shift to onshore
recruitment of 457 visa workers.
The Migration Council also proposed a tiered system to better support
the 'market salary rate'. This system would enable closer monitoring at more
regular timeframes of 457 visa workers on lower salaries:
In addition to raising the price signal, a tiered system of
nominations should be introduced to better support the 'market salary rate'.
This would shorten the validity of the nomination for lower salaried migrants.
For example, instead of all 457 visa nominations being valid for four years,
the following validity could be introduced:
2 years: Salary above TSMIT but below AWOTE;
3 years: Salary above AWOTE but below the Fair Work High
Income Threshold; and
4 Years: Above the Fair Work High Income Threshold.
The AHEIA proposed a reward and incentive system 'such as priority visa
processing and fee concessions' for employers with a strong compliance history.
The ETU recommended rewarding employers 'who meet or exceed their obligations
to labour market testing and domestic employment and training' by introducing 'fee
reductions via a sliding scale linked to performance targets in the areas of
labour market testing, wages and training'.
The goal of the 457 visa program is to enable employers to address short
to medium term workforce needs by sponsoring skilled overseas workers on a
temporary basis to fill positions where the employer is unable to find suitably
skilled Australian workers. Evidence to the inquiry confirmed broad acceptance that
the goal of enabling employers to readily access skilled migrant labour must be
balanced against the twin principles of protecting the employment opportunities
and work conditions of Australian workers, and ensuring that 457 visa workers
enjoy no less favourable conditions than Australian workers and are not
otherwise subject to abuse or exploitation.
In order for the 457 visa program to be effective in achieving this
balance, the employment of 457 visa workers must match genuine, short-term
skill shortages. Concerns must therefore arise when evidence is presented that
457 visa workers have been employed in occupations not subject to skill
shortages, take positions normally filled by Australian graduates (covered in
chapter 5), suffer gross exploitation (covered in chapter 6), and when demand
for 457 visa workers seems unresponsive to the trend in unemployment.
Meeting these criteria is essential to ensure that temporary migrant
labour is not exploited and does not undercut Australian wages and conditions or
reduce job opportunities for Australians. Given this criteria, the key question
then becomes how to assess the genuineness of employer needs. In general, there
have been two approaches to this question.
The first approach, broadly put in evidence to the committee by
employers, is that a business is best placed to judge the skills shortages that
it is confronted with and best placed to determine the need for temporary visa
workers. Employers also argued that bringing skilled workers to Australia from
overseas involves significant costs for employers, and that those employers are
unlikely to incur these costs if they can find the skilled local workers. In
sum, this approach accepts the claims made by employers regarding skills
shortages and their need for temporary migrant workers.
The second approach, broadly put in evidence to the committee by unions
and certain academics, is that there should be either independent verification
of the employer's labour needs, and/or a requirement for employers to
demonstrate that they have explored the availability of suitably skilled local
labour. Unions noted that the demand for temporary migrant labour is currently driven
by the special interests of employers and may not necessarily coincide with the
national or public interest.
The committee received evidence that a key indicator of the
effectiveness of the 457 visa program in addressing genuine skills shortages is
the responsiveness of the demand for 457 visa workers to changes in the general
rate of unemployment, and to changes in the supply of skilled labour in
Evidence to the committee indicated that the responsiveness of the 457
visa program to the upturn in the unemployment rate lagged by two to three
years. Furthermore, the committee received evidence that the 457 visa program
was having a detrimental impact on the employment opportunities for Australian
graduates in specific occupations such as engineering and nursing.
The committee acknowledges that it received conflicting evidence
regarding the balance between permanent and temporary migration. In theory, the
value of temporary migration is that it allows business to meet short-term
skills shortages. In this respect, there is an advantage in having some element
of temporary migration because addressing skills shortages solely through the
permanent migration scheme could result in a skills surplus, particularly if a
sector that was booming experienced a sudden down-turn (the resources sector
for example). Addressing short-term skill shortages with the 457 visa scheme
should be a way of moderating these types of rapid transformations in discrete
segments of the skilled job market.
However, the committee is concerned that the broader temporary visa program,
and specifically the 457 visa program, is not sufficiently responsive either to
higher levels of unemployment, or to labour market changes in specific skilled
The committee notes that the effectiveness and legitimacy of the 457
visa program is to a large extent underpinned by the combined effect of various
policy settings. The committee is of the view that it is better to correct
structural problems within the design of the 457 program than it is to monitor
and ensure compliance with the program's aims that may, in part, arise from
poorly calibrated and unresponsive policy settings.
The committee notes that the 457 visa program has been subject to
several substantial reviews and revisions under successive governments in order
to ensure its integrity and effectiveness. Given the concerns raised in this
inquiry, it is therefore appropriate to review the policy settings of the 457
visa program and labour agreements at this juncture to ensure they are set
Labour agreements and Designated
Area Migration Agreements
Labour agreements provide for the sponsorship of semi-skilled overseas
workers, as well as concessions to the Temporary Skilled Migration Income
Threshold (TSMIT). Evidence to the committee highlighted a disturbing lack of
transparency around both the numbers and substantive conditions of labour
agreements. The committee considers the transparency of labour agreements is
essential for public accountability and community endorsement.
The committee recommends that the Department of Immigration and Border
Protection be required to maintain an online public register of current labour
agreements in operation, as well as any future Designated Area Migration
Agreements. The committee also recommends that the register note any exemptions
provided under a labour agreement.
The committee recommends that the Department of Immigration and Border
Protection be required to advise all stakeholders that were consulted as to the
outcome of the labour agreement application.
The committee's recommendations regarding labour market testing for
labour agreements are contained at the end of this section.
Temporary Skilled Migration Income
Evidence to the committee confirmed that the TSMIT is an essential
aspect of the policy settings underpinning the 457 visa program. The TSMIT acts
as a salary floor for 457 visa holders and ensures that these workers are able
to support themselves in Australia.
The TSMIT has traditionally been indexed according to average fulltime
weekly ordinary time earnings (AWOTE) each financial year. However, indexation
did not occur on 1 July 2014 or 1 July 2015.
Without indexation, the TSMIT decreases in real terms each year, meaning
that temporary migrants on 457 visas are less able to support themselves in
The committee is of the view that the TSMIT should be indexed as at 1
July 2015 to the AWOTE, and that indexation should occur each financial year.
The committee recommends that the Temporary Skilled Migration
Income Threshold (TSMIT) be indexed to average fulltime weekly ordinary time
earnings (AWOTE) as at 1 July 2015 and that indexation occur each financial
Market salary rate
The requirement to pay the 'market salary rate' effectively means that employers
must guarantee that the terms and conditions of employment of 457 visa holders,
including pay and hours of work, are no less favourable than the terms and
conditions that are, or would be, provided to an Australian performing equivalent
work in the same location. The requirement serves the dual purpose of ensuring
Australian workers are protected from any adverse impact on wages, and
protecting skilled migrant workers from exploitation by ensuring 457 visa
workers are not paid less than the market salary rate.
Although submitters expressed different views on this matter, the
committee is of the view that $250 000 is an appropriate threshold for the
requirement to pay the 'market salary rate' and should be retained.
The Consolidated Sponsored
The Consolidated Sponsored Occupations List (CSOL) specifies the
occupations that can be sponsored under the 457 visa program. As such, it forms
an important element in assessing the extent to which the 457 visa program
addresses areas of genuine skills shortage.
The CSOL is a broad list of occupations incorporating the Skilled
Occupations List (SOL) and includes most occupations defined in levels 1 to 3
of the Australian and New Zealand Standard Classification of Occupations
The committee heard evidence that the CSOL is not a list of occupations
subject to skill shortages, but rather a particularly broad, imprecisely defined,
and poorly targeted list of occupations.
The committee heard arguments that the imprecise meanings of certain
occupations (for example, 'Program or Project Administrator') listed on the
CSOL, the very broad range of occupations listed on the CSOL, and the fact that
the 457 visa program is based on employer demand make it difficult to assess
whether 457 visa workers are being employed in the appropriate position. This gave
rise to concerns that the CSOL is open to abuse.
On the other hand, the committee heard evidence from employers that the
CSOL has to be an occupation list and not a shortages list because a shortage
list could not possibly capture the myriad rapidly changing permutations in a
dynamic labour market. Arguments were also made that the classification index
underlying the CSOL is too complicated and overly specific.
On balance, the committee is concerned that the broad nature of the
occupations listed on the CSOL undermines the value of the CSOL as a regulatory
mechanism because it allows the sponsorship of occupations for which a skills
shortage does not necessarily exist in Australia. The committee also notes that
the compilation of the SOL appears to involve a much more rigorous process than
that for compiling the CSOL.
In saying that, however, the committee is critical of the government's
decision to abolish the Australian Workforce Productivity Agency (AWPA). As is
the case with the CSOL, the committee is convinced of the value that an
independent, tripartite body can add in terms of providing rigorous,
independent, expert and transparent advice to government regarding the
compilation of the SOL.
The committee is therefore of the view that there needs to be a much
more rigorous, independent, evidence-based, and transparent process in place
for determining the CSOL. The details for such a process are described below.
Independent tripartite panel to advise
on migration policy
The committee notes that the Azarias review identified the need to
provide a more robust evidence-based approach to improving the transparency and
responsiveness of the CSOL. The Azarias Review recommended the establishment of
a new tripartite ministerial advisory council, supported by a dedicated labour
market analysis resource, be established.
The committee notes the government's decision to establish the Ministerial
Advisory Council on Skilled Migration (MACSM). However, the committee is of the
view that the MACSM is neither genuinely tripartite, nor sufficiently
independent from government.
In this regard, the committee condemns the abolition of the former AWPA.
Disbanding the only independent source of research and policy advice on matters
relating to tertiary education and the needs of the labour market was a
particularly short-sighted and counter-productive move. Incorporating these
functions into the Department of Industry effectively compromises the ability
of the government to receive independent expert advice on these matters.
Further, the consequent lack of transparency and public accountability flowing
from this decision seriously diminishes the credibility of ministerial
decisions on matters of workforce capacity, skills training, and, ultimately,
To address these matters, the committee recommends that the MACSM be
re-constituted to embody elements of the United Kingdom Migration Advisory
Committee such as operational independence, and public accountability in its
deliberations. This should help ensure the development of rigorous,
transparent, and credible occupational shortage lists for both the permanent
and temporary labour migration programs.
At the same time, MACSM needs to be genuinely tripartite. In this
regard, a close examination of the membership of MACSM reveals that seven out
of the eight members of the current MACSM hold a similar view of the skilled
migration program, and that the Australian Council of Trade Unions is the sole
union presence on MACSM. An impartial observer cannot help but conclude that
the current MACSM does not present a reasonably balanced range of views.
These are important matters. If MACSM is to be deemed credible by the
broader public, it must be seen to be representative. To be fit for purpose,
therefore, MACSM needs to include representatives from business, unions,
government, and academia.
It is the committee's view that a genuinely independent tripartite body
would be able to perform a de facto labour market testing function in that it
would be able to scrutinise employer claims that a particular skills shortage
Properly constituted, MACSM could improve the integrity of the CSOL and
provide valuable independent advice to government. It is expected that this
advice would differentiate between skill shortages that are best met by
temporary migration and those that could be met by increased training of Australian
workers. Such advice would not only add value to ministerial decision-making on
migration matters, but might also increase public acceptance of temporary
labour migration where necessary to address domestic skills shortages.
In this regard, the committee considers that a properly constituted
MACSM would be well-placed to address key policy questions such as the reliance
of key sectors of the Australian agricultural sector (in particular,
horticulture, orchards, and vineyards) on 417 visa holders. As will be evident
in chapter 7, the committee has grave concerns about the exploitation of whole
classes of temporary visa holders such as 417 visa holders. It is clear to the
committee that while specific recommendations around labour hire, monitoring
and compliance are made in subsequent chapters, holistic solutions to labour
shortages in specific industry sectors need far greater consideration than they
have hitherto received.
The committee recommends that the Ministerial Advisory Council on
Skilled Migration (MACSM) be re-constituted as a genuinely tripartite,
independent, and transparent body with responsibility and commensurate funding
to provide objective evidence-based advice to government on matters pertaining
to skills shortages, training needs, workforce capacity and planning, and
labour migration (including Designated Area Migration Agreements and the full
range of temporary visa programs with associated work rights). The committee
further recommends that the reports produced by MACSM be made publicly
The committee received evidence that stressed the value of
intra-corporate transfers and the need to introduce a dedicated intra-corporate
transfer stream within the 457 visa program. The committee notes that the Senate
Legal and Constitutional Affairs References Committee report into the 457 visa
program considered that the arguments in favour of establishing a dedicated
stream had merit, and therefore recommended that a dedicated pathway for
intra-company transfers be introduced into the 457 visa program. The committee
further notes that the government referred this recommendation to the Azarias
Cost of employing 457 visa workers
The committee received evidence from employers and independent
organisations stating that the additional costs of employing an overseas worker
were substantial. The implication of this proposition was that an employer
would only incur these extra costs if a suitable Australian worker could not be
found. In effect, it was argued that the cost involved in hiring an overseas
worker would deter unscrupulous operators that might be seeking to circumvent
The committee does not dispute that, in many cases, there may be a
substantial additional cost to employing a 457 visa worker if that visa worker
is brought in from overseas. However, the most recent statistics from the Australian
Government Department submission show that almost half of all primary 457 visas
granted in 2014–15 (to March 2015) were for people already in Australia.
It seems clear to the committee that in instances where the 457 visa
applicant is already in Australia, it is hard to avoid the conclusion that the hiring
of a 457 visa worker may actually involve negligible extra cost to the employer.
This effectively negates the argument that the hiring of an overseas worker
necessarily incurs greater cost to the employer than hiring an Australian
Labour market testing
The committee received a substantial amount of evidence from growers and
producers in regional Australia regarding the difficulty in attracting (and, in
some instances, retaining) suitable labour. The committee recognises that labour
markets are diverse and the demands for labour vary across industries, regions,
and time. At the same time, the committee also received evidence that the
employment opportunities for Australians across numerous sectors of the economy
Further, although the extent to which it is occurring is difficult to
quantify, the committee is deeply disturbed by evidence of workers losing their
jobs only to be replaced by 457 visa workers. In this regard, the committee is
of the view that there should be a prohibition against replacing local workers
with 457 visa workers.
The committee notes that the vast majority of all occupations available
for sponsorship under the 457 visa program are exempt from labour market
testing (all ANZSCO skill level 1 and 2 occupations except nursing and
engineering, plus occupations covered by Free Trade Agreements with Thailand,
Chile, South Korea, China and Japan). In fact labour market testing only
applies to ANZSCO skill level 3 occupations (technicians and trades).
The committee also notes evidence it received that in the food and
construction trades, over 81 and 75 per cent respectively of all 457 visas were
granted to foreign nationals already in Australia at the time of the visa
grant, many already working for their 457 sponsor on other temporary visas,
particularly student visas and working holiday visas.
Given the potential for a 457 visa worker to be employed at no greater
cost than employing a local worker, the committee considers it essential that
the policy settings of the 457 visa program are calibrated so as to ensure that
local workers still get the first opportunity to apply for jobs and that 457
visa holders are only employed in occupations subject to genuine skills
The committee notes evidence from the Australian Federation of Air
Pilots and the Australian Maritime Officers Union that qualified pilots and
seafarers respectively are unable to secure work because companies persist in
employing 457 visa workers even where suitably qualified locals are willing and
able to perform the jobs.
Conversely, the committee notes the Australian Institute of Marine and
Power Engineers submitted that the majority of its members had been able to
find work since the introduction of labour market testing.
The committee is also persuaded by unpublished data from the Department
of Immigration and Border Protection that shows a much larger decline in 457
visa nominations by employers in occupations covered by labour market testing,
compared to average monthly numbers in the occupations exempted from labour
The committee therefore considers labour market testing to be an
essential aspect of the 457 visa program and that the current labour market
testing provisions should be retained. In this regard, the committee notes that
in its response to the Azarias review, the government resisted industry
pleading to remove the labour market testing provisions in the current
Given the current high levels of unemployment and under-employment
amongst Australian professionals, however, the committee is of the view that
the labour market testing should be further strengthened. In particular, the current
exemptions on labour market testing for ANZSCO skill levels 1 and 2 should be
removed, and labour market testing should be required prior to all 457 visa
Further, the committee is of the view that labour market testing should
apply to all positions for which a 457 visa holder is nominated under labour
agreements and Designated Area Migration Agreements.
The committee recommends that the replacement of local workers by
457 visa workers be specifically prohibited.
The committee recommends that the current exemptions on labour
market testing for ANZSCO skill levels 1 and 2 be removed.
The committee recommends that the Migration Regulations be
amended to specify that labour market testing applies to all positions
nominated by approved sponsors under labour agreements and Designated Area
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