Submission to the new international development policy

This is my personal submission to the Department of Foreign Affairs and Trade who are managing the Australian Government’s new international development policy. My submission focuses on Pacific labour mobility and migration.

Using any metric, Australia is among the world’s most prosperous countries. Yet many of our closest neighbours remain poor, geographically isolated and structurally excluded from the global economy. Allowing Pacific citizens who want to the right to live and work in Australia is the most powerful development policy lever Australia has direct, unilateral control over. The immediate and life changing gains in income by allowing Pacific citizens to live and work in Australia is incomparable to any other development outcome.

Migration and labour mobility for development address each of the factors listed as the impetus for the new development policy: security, stability, prosperity and resilience in the Indo-Pacific. The primary motivation is economic. At its most basic, individuals who work in Australia can earn an order of magnitude more than in their home countries, doing either the same occupation or occupations which do not exist in their home countries. Critically, the societal and security gains stemming from these economic gains are also significant.

The Australian Government is to be commended on the strong progress to date in this area over the past five years. Growth in the Seasonal Worker Program, as well as the introduction of the Pacific Labour Scheme, represent genuine progress for Australia’s development policies. This short submission will outline why migration and labour mobility should now become first-order priorities for development policy in Australia and how to overcome barriers to support more migration. I recommend changes to the policy framework governing temporary migration and the introduction of a permanent visa category for Pacific island citizens.

What does the evidence say?

The economic case for migration as a development tool is overwhelming. Clemens (2011) finds the gains to global GDP from the elimination of labour mobility barriers is in the order of 50-150% of global GDP. At an individual level, Clemens, Montenegro, Pritchett (2019) find in the United States, based on their study of 42 countries, the average income gain for each migrant is in the order of USD$13,700 per worker per year. This means, without advocating for the removal of Australia’s migration borders, even small reductions in the barriers to movement can generate significant economic gains.

In our region, McKenzie and Gibson (2013) found the New Zealand Recognised Seasonal Employer program was ‘one of the most effective development interventions for which rigorous evaluations are available.’ This was due to increases in household income, increases in subjective standards of living, increases in household spending, and qualitative responses from community leaders indicating broad support.

Importantly, the authors find these benefits pale in comparison to permanent residency options. McKenzie, Gibson, Rohorua, and Stillman (2018) find the net present value of winning a permanent residency outcome in New Zealand’s Pacific visa lottery is worth at least NZD$315,000 in lifetime income gains for the average participant. Permanent migration such as this relies on a development policy approach geared towards people, instead of place as the development occurs because of the location of the person.

In Australia, existing development policy gains are clearly apparent. Using World Bank survey data, Howes and Orton (2020) find the aggregate net earnings of Tongan migrants in the Seasonal Worker Program outweigh the income gains from trade and aid combined. Further, this finding excludes the significant remittance flows from Tongan-born people working in Australia as either long-term visa holders or Australian citizens.

Put simply, there is nothing comparable to the income gains on offer from additional Pacific migration to Australia. This demands a more rigorous approach to fostering more Pacific migration as part of Australia’s development policy approach.

Australia’s competitive advantage

Australia is a world-leader in the administration of immigration policy. In addition to the development gains on offer, Australia has a substantial competitive advantage in migration and labour mobility for development policy. No other country in the Indo-Pacific is willing or able to create the potential for tens of thousands of additional Pacific citizens to live and work in Australia. This competitive advantage stems from the following institutional factors:

  1. A robust and highly functional immigration policy framework
  2. An Australian society that is both open to immigration and highly cohesive
  3. Parts of the Australian labour market where there is significant demand for additional labour, at and above award pay and conditions.

No other country in the region boosts this combination–twined with an expansive approach to development policy. Migration generates stronger, deeper, more robust bonds between people and countries. Unlike development programs which rely on long-time periods and multiple stakeholders, the income earned by migrants is immediately and efficiently moved into household expenditure, often with a single middleman (a currency exchange operator, e.g. a bank). This largely mitigates opportunities for institutional misuse and corruption.

Addressing policy barriers to more Pacific migration

There are many barriers to Pacific migration to Australia. Due to space limitations, I will focus on the two major policy barriers which constitute decisions by the Australian Government. Unfortunately from the perspective of development policy, both of these barriers fall outside the purview of the Department of Foreign Affairs and Trade. Despite this, they remain the clearest barriers to whether or not migration can play a larger role in Australia’s future development policy.

Removing the 88-day work rule underpinning the second Working Holiday visa

Regional horticultural labour markets represent one of the best opportunities to generate more income for Pacific citizens. The labour market is dominated by entry level occupations, allowing people with no previous experience to quickly become effective. Importantly, there is no labour shortage in Australia’s horticultural labour market, this is a long-standing myth (Sherrell, 2019). Instead, backpackers under Australia’s working holiday programs crowd out other participants, as backpackers can access a second 12 month visa if they work for 88 days in regional horticultural businesses.

This has a number of significant effects. Backpackers are working primarily for an additional 12 months of residency in Australia, as opposed to income. This distorts the incentives for both employers and employees, leading to a corrosive effect on wages and conditions. Unlike backpackers, Pacific citizens under the Seasonal Worker Program are motivated by income, as opposed to residency. Unenforced labour market legislation has meant backpackers have become the first preference for many businesses operating in the industry. This is actively preventing a larger expansion of the Seasonal Worker Program, and distorting the income gains on offer for all employees.

The 88-day rule should be abolished, as employers have ready access to better regulated labour market programs to address workforce hiring. This would be the single biggest policy decision to promote Pacific labour mobility in Australia, generating massive and sustainable income gains for Pacific island citizens and their communities. 

No permanent pathway for Pacific citizens

The vast majority of Pacific citizens are excluded from Australia’s permanent visa categories. This is largely due to thresholds being too high in terms of education qualifications, work experience, and English language proficiency. However the goal of Australia’s skilled migration program is not to induce development opportunities.

With this in mind, a new standalone Pacific visa category should be created, specifically designed to foster development and Pacific relationships for Australia. A new permanent visa would slowly build a larger diaspora, prevent family separation, and remove the micromanagement of development-oriented visa programs (Howes 2019).

Both the United States (through the Green Card Lottery) and New Zealand (through the Pacific Access Category) have well established lottery systems promoting permanent residency. Australia should follow. A dedicated visa lottery system, with relevant criteria for employment and English proficiency, would help promote access for Pacific citizens to Australia for long-term residency.

While this concept falls well outside of existing traditions of Australian migration policy, there are strong arguments such a program would act as a foundation for improving the security, prosperity, resilience and stability of Pacific countries, as well as Australia’s relationship with Pacific people. It offers the prospect of a genuine Pacific step-up, demonstrating to Pacific countries social and cultural links are just as important as economic opportunities.

To mitigate against employer exploitation, any Pacific permanent visa program should not rely on a model of long-term employer sponsorship. Bonding migrants to employers can work in some settings yet this is not one of them as the power dynamics would be too skewed.

Addressing the risks to more Pacific migration

There are a number of risks with a deliberate expansion of Pacific migration opportunities driven by Australia’s development policies. Owing to space constraints, this section outlines two major risks.

Exploitation in Australia

Successful Pacific migration in Australia relies on well functioning labour markets. However there is substantial evidence that industries with appropriate entry level occupations for Pacific citizens, such as horticulture, retail, and hospitality, are wracked by structural worker exploitation. Unfortunately, even a small share of employers who seek to undermine wages and conditions are able to become price makers in the labour market, as in some instances, others employers cannot compete with de-facto higher labour costs. Structural exploitation undermines the development gains on offer and presents a fundamental threat to Australian immigration.

Even under the status quo, with strong growth rates under the SWP, the Australian Government must address inadequate enforcement capacity. In addition, given the imbalance in knowledge between Pacific citizens working in regional communities and potentially malicious employers, the Australian Government should consider the role of community advocates. These actors could help address concerns around accommodation and social isolation.

Negative effects in home communities and countries

Concerns about ‘brain drain’ have often been used as a handbrake on receiving country policy for fostering emigration from developing countries. Despite the fact many development countries actively seek emigration opportunities for the citizens, and despite the fact many individual willingness choose to migrate where possible, these concerns persist. As Edwards shows in a three-part literature review (2019a, 2019b, 2019c), brain drain concerns stem from a theoretical concept which is largely not supported by recent empirical evidence. While ‘brain drain’ can occur, most of the time, ‘brain gain’ is more likely to occur over the long-run due to institutional and diaspora effects. Given this, ‘brain drain’ should not be a primary consideration of Australian development policy.

A more robust approach would be to address concerns at the community level where negative outcomes can arise from emigration. The long-term disruption to families under existing approaches, such as the Pacific Labour Scheme, need to be carefully considered. It may be appropriate for people to have access to family reunion in these circumstances. With the introduction of a permanent Pacific category, it may be appropriate to abandon the Pacific Labour Scheme.

In addition, it may be appropriate to investigate the potential of Australian aid funding to support and act as a multiplier to earned remittances. A common criticism of remitted income is the lack of evidence pointing to investment outcomes (as opposed to consumption). While this most likely reflects the priorities of the receiving community, there may be an opportunity for Australian aid funding to provide support for overcoming a lack of scale for remitted income. Both indirect measures (e.g. a broader range of financial instruments) and direct measures (e.g. business investment) may be appropriate, depending on the context of the financial environment (International Fund for Agricultural Development and World Bank Group, 2015).

2 thoughts on “Submission to the new international development policy

  1. Do you have a figure for average income gain arising out of migration to Australia, noting the figure is likely to be determined by the parameters of the framing of the question?

    1. Hi Nick. A 2015 World Bank survey estimates Tongans net earnings after costs (Tax, travel, living expenses etc) was ~$9800. But the hard part is knowing, a) what these peoples opportunities were in Tonga, b) and then using this to calculate the income gains. I agree the way questions are asked will determine the answer, but I believe the differences in wages are so enormous, the accounting is relatively straightforward (which explains why so many people seek these opportunities in the first instance).

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