Unintended consequences: British immigration reforms and the Australian reaction

Fascinating tid-bit over at news.com.au on a potential new visa deal for Australians heading to the United Kingdom.

David Cameron’s government decided to bring net migration down to tens of thousands, instead of hundreds of thousands, as a response to the rise of anti-migrant politics. This policy decision was made despite being in the EU, an area of near limitless internal migration. To put this into perspective: Australia has a net migration figure roughly akin to the British figure as it is now, with a third of the population and labour force.

A net migration figure of tens of thousands for the U.K. is a pipe-dream and everybody knows it. I don’t think Australia could manage this without blowing up our immigration framework, something the Cameron government thought was a good idea.

However the Tories are ploughing ahead. Skilled workers and international students from outside Europe got the chop. There are only 20,000 permanent skilled visas available to non-EU citizens per year. In Australia, an equivalent number gets approved about every seven weeks (noting we are not in the EU).

This is called an immigration cap. It is arbitrary and, as the British government is discovering, doesn’t make much sense. Apart from the massive negative impact on universities and employers, it also tends to piss off people and countries who are used to something different.

The cherry on top? These measures have not worked, with net migration still running in the hundreds of thousands.

This is where Australia comes in. Australian citizens are finding they cannot emigrate to Britain anymore. Boris Johnson says this policy “discriminates” against Australians, a word News.com.au ran with in their lede. I’m struggling to understand how as it covers all non-EU countries but lets move on. Tony Abbott is apparently going to raise the issue with the British government it is causing so much damage. Anonymous officials say a work-around visa is being discussed.

The most interesting question – away from the British policy disaster – is why is this exception being considered? Why is News.com.au, a rabid, populist website dedicated to clickbait seemingly stumping for little Aussie emigrants?

Because the idea of going to London and living the high life still resonates with Australians. Scratch a bit deeper and you see the attraction that the opportunity to emigrate (if only for a little bit) produces a tingly feeling. How unfair is it that Australians are being punished because British policy is borked? Even the Prime Minister is going to take up the issue.

(Sidenote: I’m glad the Prime Minister is going to discuss this. Hopefully he makes emigration opportunities for Australians a standing issue with international leaders. Other leaders should be taking up this issue with Mr Cameron also.)

If an exception is made for Australia (which I don’t believe will be), the door opens and every Commonwealth country will be beating on the front of Number Ten. This in turn will impact on the level of net migration, making it even more difficult for the Cameron government to meet its target.

The next time you read about capping immigration to Australia, think about this flipside from the point of view of an emigrant. Think about those people – in the United Kingdom – pining to come to Australia and unable to. It’s OK to worry about the impact on migrants on jobs (if that’s your thing) but a more balanced consideration of all the issues at stake will have improved policy implications over the long-term.

An early celebration: 20 Timor Leste citizens head to work in Australia

The press release is title, “Timor-Leste Seasonal Workers depart for the Northern Territory”.

20 citizens from Timor Leste are departing to work in the Northern Territory under the Seasonal Work Program. Since 2012, “more than 80” Timorese have made the same journey.

Good luck to these people and it is heartening to see at least some people migrating under the Seasonal Work Program.

But this media release perfectly sums up what is wrong with the program. 80 people in two years from one of the poorest countries in the region is a terrible outcome. We should be celebrating hundreds, not handfuls, of people.

Hopefully the Chief Minister of the NT, the Australian Ambassador and the head of the Timor-Leste Employer department, each who attended the ceremony, have also advocated to the federal government about the flaws of the program and are thinking about ways they can each improve it.

Instead of success, this type of media release highlights how far is still to go regarding Pacific seasonal migration in Australia and a reminder about how public policy that does not have a political champion will often fail to meet expectations. The contrast with New Zealand’s seasonal worker program continues to be stark.

I would have penned a media release beginning with,

“While we managed to provide 20 citizens the opportunity to earn 8-10 times the local wage, we have not done enough for those who remain unable to migrate.”

Perhaps the next time we can be a little more honest.

For those interested, I broadly agree with most of the stuff on Devpolicy regarding the seasonal work program.

The role of the government for emigration and development: Timor-Leste

Typically, the migration and development agenda is stifled by governments and public opinion in OECD countries. Wary of the impact on economies, labour markets, society and culture, the rich developed world has rather entrenched values about mass immigration from poor countries. However, there are more limited examples of where developing country governments have not put in place the right set of decisions to exploit emigration opportunities.

Starting in 2008, Timor-Leste and South Korea have maintained a bilateral relationship for Timorese citizens to work in South Korea. This paper from March 2014 outlines progress and roadblocks encountered since.

The most disappointing part is this:

In the first phase, the Government of Timor-Leste through SEPFOPE sent 50 workers to South Korea. In 2011 the South Korean Government was asking for 2,500 workers, but Timor Leste was only offering 400 workers; in 2012, South Korea raised the number of employees reached to 2750 people, Timor Leste once again releasing only 500 workers. In 2013 the South Korean government demanded workers jumped up to 3,500 people, but the number which derived from the Government of Timor-Leste only reach to 280 workers.

7570 positions left unfilled in just three years. If each additional emigrant sent home $5,000 per year for their work, this is equivalent to $37,500,000 in lost remittance income. For a country of just over a million people with a GDP per capita of just US$1,068, this is a lot of money, equivalent to over 3 per cent of GDP.

Of course, there are some explanations.

To participate in the program, you must pass a Korean language test. At first, I thought this must have been Korean government policy. Except:

“SEPFOPE (a Timor-Leste government agency) has its own criterias that should be met by prospective workers to South Korea such as attending Korean language course in a few months: in fact, many workers did not pass the final exam” (Alves.P 2014).

The language test appears to be Timor government policy, not Korean. Given the potential lost income, this seems a high barrier to entry in terms of emigration. Of course many workers do not pass the final exam, presumably because its extremely difficulty to learn Korean in Timor-Leste. I’m pretty sure I couldn’t pass the test, even with an enormous amount of time invested in learning Korean.

Further, the fact the program numbers have been going backwards is a poor sign for future outcomes.

The Timor government and SEPFOPE need to do more to ensure these opportunities are not wasted in the coming years. It is pleasing to see the problems identified in this report (the lack attendance to classes, the difficultly of Korean instruction in local dialects and the lack of priority the program receives from the government). Hopefully this has set in train a process where the number of Timor emigrants can increase. Perhaps the standard of Korean could be revised downwards for some participants and monitored for any adverse consequences.

The total remittance flow to Timor was just under $3m for 2013. For a country of over a million people, this is not a large amount relative to many of developing countries. Remittances will not solve development in Timor, yet they will assist the overall trend towards better economic growth and living standards.

One of the major issues is the lack of emigration to Australia. While over a thousand workers were in South Korea in 2012 (the work visas appear to be longer a year, with overlap of annual placements), a paltry 29 made it to Australia last year under the Seasonal Work Program. This is frankly embarrassing for both governments. Timor-Leste is one of the poorest countries in the world and Australia one of the richest. The lack of built in support and facilitation of the Seasonal Work Program is something which should be rectified as soon as possible, otherwise it will simply remain an under-subscribed immigration program, useless to regional employers and potential emigrants, angering Pacific governments and an excuse for the Australian government to point to something and say, ‘see, look!’.

English language should be easier than Korean given the residual level of English knowledge in the country . Further, the existing links between Australia and Timor, while seriously frayed at the current time, should make for a more smooth facilitation of emigrants over time. What is really required are a handful of major employers to participate in the program. The Accommodation trial in the seasonal worker program, with eligibility for the entire state of Western Australia and Northern Territory, would be a good place to start.

Timor-Leste should push harder on this. Lobby the Australian government. Contact large hospitality employers in Perth. Harass DFAT about the red-tape inherent in the program. The cold politics of the current relationship should see Australia looking for avenues in which to be more amenable. While this is small fry compared to oil and gas revenue, it is an example of where a small amount of support could transform the flow of people from a rounding error to something more substantial.

Rapid migration change in Europe

Via Marginal Revolution, this paper from David Brady and Ryan Finnigan explores the link between immigration and support for welfare and social policy. Generally they find there is very little to link higher immigration to reduced support for social policy, “Ultimately, this study demonstrates that factors other than immigration are far more important for public support of social policy.”

At the end of the paper, there is an important reminder about how European migration has transformed in less than a generation. The following graphs show the percentage of overseas born for 1995 and 2005 and the percentage of net overseas migration for 1995 and 2005:

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Graph A: In the decade between 1995 and 2005, Spain went from about 3 per cent foreign born to over 10 per cent. Ireland from 7 per cent to over 15 per cent. Portugal, Denmark, Sweden, Norway, Finland and the UK all show significant increases.

This stems from large inflows of migrants, as seen in graph B. The inflow of people for Spain and Ireland are mind-boggling large for countries with no history of immigration. France and Portugal also show these large inflows.

While other countries, like Australia and Canada, also had large inflows of migrants in this decade, this did not rapidly increase the percentage of overseas born because of the established populations of migrants already living in these countries.

This is critical context when looking at the anti-migration movement which has emerged in the wake of the global financial crisis. Many of these countries are historically emigration nations. Only recently have they experienced mass immigration, as economic growth generated massive demand for labour.

The economic and social institutions that support immigration in Canada, Australia and New Zealand simply don’t exist in many of these countries. Political and social division has been the result to date.

Gallup poll of global migration

Australia doesn’t seem to have trouble attracting migrants. Over the past decade, the trend of immigrant arrivals has been rising steadily. This week, Gallup released its semi-regular poll about global movement. The results estimate, if people could live anywhere they choose, what the population of each country would be. Lets sprinkle on a heavy pinch of salt to the methodology given the scope of the project, but this is about as good as it gets for an estimate.

The results are somewhat surprising. For Australia, the estimate is an increase of 136 per cent for 2010-12, down from 148 per cent during 2007-09. This means our population of 23 million would increase to ~54 million. I thought this would be a significantly higher figure given the economy, tourism and geography. Perhaps this is a subtle reminder of Australia’s place in the world as opposed to how many of us perceive it.

As a percentage of the population, the country with the largest gain is Saudi Arabia at 218 per cent. This shows how much value people in poorer nations place on the opportunity to work and earn income. Saudi Arabia is one of the largest destinations for low and unskilled labour migrants. However as a total number of people, no country comes close to the United States. While the population increase is only 45 per cent, this translates into about an additional ~140 million people. Further, this number is down 15 per cent from the previously measured period.

At the other end of the scale, Haiti is a -52 per cent, demonstrating the large segment of the population who would likely wish to move to the United States. Sierra Leone follows closely with -51 per cent. As a geographic region, sub-Saharan Africa is a -24 per cent overall. Overall, people wishing to migrate declined to 13 per cent of total global population, driven by reductions in Southern Europe.

There are obviously issues with trying to measure something as diverse as global population movements. However Gallup does policy makers a favour by providing renewed evidence about the pressures which drive global migration, especially the links between economic prosperity and individual security and the desire to move elsewhere.

An unheard progressive argument: The wage effects of immigration

For progressive types, the importance of increasing wages for low income workers is critical. This is especially the case in a society of rising inequality. However, from what I understand, it is difficult to increase wages at the bottom without also increasing them at the top. It can be done – lifting the minimum wage for example – however there are trade-offs along the way.

While the effect of immigration on wages is (very?) low compared to factors such as technology and education, immigration does plays a role. In what I consider perhaps the best known secret about Australian immigration, current policy is working actively to reduce income inequality in Australia. You might not see placards about immigration at your local Occupy protest, but perhaps you should.

This OECD paper from 2010 outlines exactly how significant these effects are for Australia, relative to other countries:

Wage effect of immigration: 1990-2000

This table shows two things. First, the findings estimate immigration to Australia has the second highest positive effect on average wages (after Singapore), at 1.5 per cent.

Second, and most importantly, low-skilled workers accrue all of the wage benefit from net migration in Australia. Between 1990 and 2000, low skilled workers wages were 3.9 per cent higher because of Australia’s net migration. Even a country like Canada, which is frequently compared to Australia in terms of immigration policy, pales in comparison at 1.8 per cent. The authors say this occurs as immigration is significantly more skilled than the labour market as a whole. If we take the effects of emigration out of the equation (something the government cannot actively control), the sole immigration effect on low-skilled wages rises to 4.5 per cent.

This is an incredible finding, as Australia is such an outlier. The results above show how European countries display a very different trend. The U.S., with a large family migration program and a sizeable irregular migrant population, also shows an approximate neutral immigration effect on low-skilled wages.

I’m no econometrician and cannot speak to the veracity of this specific model, but the authors (Peri, Ozden and Docquier) are three highly regarded migration policy analysts. Unlike some migration advocates, they also account for a range of negative factors. Their analysis contains assumptions that immigrant skills are worth less in home countries, ensuring it errs on the conservative side of the overall contribution. They also account for slow capital adjustment to migration and a crowding out effect which migration can create, common findings of European and American economic migration analysis.

Despite all of these assumptions, which may or not hold in a country like Australia, the impact for low-skilled workers in Australia is still robustly positive. Even the modelled ‘worst-case’ scenario is a neutral impact average wages with a smaller positive effect on low-skilled workers, while the ‘best-case’ sees gains across the labour market of 2.6 per cent instead of 1.5 per cent.

While policy reform and changed emigration trends have occurred since 2000, it’s likely these forces have built on these trends instead of reversed them. Immigration reform has seen further high-skilled migration and larger number of migrants as a share of the population. This means the effects on low-skilled wages for the decade between 2000-10 were likely as high, if not higher, than 1990-2000.

Unfortunately, this perspective is rarely recognised in immigration policy discussions. Except for maintaining a strong defence on the benefit of multiculturalism, I rarely hear a union speak of the social and economic benefits of  immigration (it does happen occasionally).

Nor have I heard the ALP claim this argument despite the substance it would provide to the progressive agenda. This is a shame given the complexities of this policy environment. These findings demonstrate how talking points about migrants stealing jobs is wildly off the mark in a dynamic labour market combined with a highly-skilled immigration policy. They also highlight a pathway to being able to better explain the benefits of migration to a sometimes wary public.

Of course, there are always two (or more) sides to any argument. In this case, while Australian low-skilled workers are the big winners, the losers are those people with low skills who wish to migrate to Australia and are stymied. Australia’s immigration policy is designed to benefit Australia. Across other OECD countries, about ~30 per cent of the growth in immigration is low-skilled, which actively helps foster economic development for poorer countries.

However as this is the purpose of Australia’s immigration policy, I would like to hear a little bit more from the broad progressive movement about the benefits of immigration instead of the more common lament on behalf of low-skilled workers.

Meet the migrants to Australia who already live here

I have a theory. If you asked most people where Australia’s most recent permanent migrants lived before they received their visa, you would get answers ranging from traditional (read ‘white’) migration countries like the UK to emerging migration countries like India and China. However I don’t imagine many people would say Australia.

94,819 migrants applied for and were granted permanent residency visas in 2012-13 despite the fact they already lived in Australia. This was half of all permanent visas available for skilled and family migrants.

Various temporary visa programs in Australia have completely transformed our immigration policy framework since the 1990s.  As you can see, the number of total visas has slowly increased to 190,000, from 171,000 in 2008-09.  Back then 37 per cent of permanent migrants lived in Australia, now it’s half.  To understand the magnitude of this shift, twenty years ago the total number of permanent skilled and family visas was 76,300 and I estimate between 2-5 per cent would have already been in Australia.

Over 1.4 million people in Australia were temporary migrants at 30 June 2013 (I have taken out the 200,000 visitor visas which the department includes for its calculation of temporary migrants). For those counting at home, that’s about 6 per cent of the total population and probably between 8-10 per cent of the labour market (but this is hard to work out as we don’t know who works and who doesn’t).

The main temporary migration categories –  Students, Working Holiday Makers, 457 visa holders, post-study work visas and Kiwis – all include many people who likely want to have the option to live and work in Australia longer than their temporary visa allows them. As it’s easier to initially get a temporary visa, this is what happens. Once here, your employer can sponsor you permanently (if you meet the criteria) or maybe a family member sponsors you.  International students are more likely to apply for points-tested visas where they don’t require an employer to sponsor them.

These people aren’t going anywhere. They stay in Australia and as can be seen from the permanent visa data, transition across visas. It is not inconceivable that within a decade, upwards of 80 per cent of permanent migrants will simply be people who have already been in Australia for years. If you just look at skilled migration, the number is already 57 per cent.

From my point of view this is a great thing.  Temporary migration is fast. A working holiday visa is processed almost instantly. Kiwi’s turn up at the airport and have full work rights on arrival without the need for a formal visa application. 457 visas take on average between 10 and 25 days which means businesses can fill vacancies quickly. Permanent migration is slower. Much slower. It is also much more expensive. If you are unsure about migration, and many people are, then temporary migration allows the process to occur without the pain.

Yet this is only a good thing as long as the number of permanent places is near equal to the demand from people who have made their life here and decide to stay for the long term. I don’t think this is an immediate problem judging from recent figures. If that 1.4m becomes 2m within five years, then we’ll have a problem.  It may also become an issue if political parties decide to try and look tough on migration by reducing the allocation of permanent visas without also reducing the ability of people to receive temporary visas. Reducing the number of permanent visas is as simple as dropping a few zeros in the budget. Changing temporary visa regulations is difficult – just ask Brendan O’Connor.

While I don’t agree with the common perception of the poor, exploited migrant, I do think if people wish to live here permanently then they should be subject to the same laws and responsibilities as everyone else. The easiest way to do this is through permanent residency and ultimately citizenship. The ALP government (which I supported) did a good job of increasing the number of permanent places over time. Hopefully the Coalition do the same.

(See Migration Program 2012-13 for more information and source data)