September 21, 2020
A September 2020 Paper by The Committee for Economic Development of Australia (CEDA) Senior Economist Gabriela D’Souza assesses the impact Covid-19 has had on the migrant population in Australia, and suggests remedial measures to cushion the severity of the impact, and actions that the federal & state governments can take to ensure that migration comes back better post COVID-19.
COVID-19 has had an enormous impact on economies around the world. In order to stem the spread of the virus, many countries have temporarily imposed extreme restrictions on migration. This comes on the back of rising populism and increasing scepticism about the benefits of migration in the lead-up to COVID-19. This crisis will have long-lasting repercussions for migration policy across the world and in Australia – a country that is dependent on migration for its major industries and economic growth.
After 29 years of uninterrupted economic growth, the COVID-19 pandemic will see Australia enter a recession this year with a substantial deterioration in labour market conditions. Acting Minister for Immigration, Citizenship, and Migrant Services, Alan Tudge, recently noted that temporary migration is a demand driven system – “migrants will come as long as there are employers who will employ them. Migration is a pro-cyclical phenomenon, meaning that migration is high during periods of strong economic growth in the destination country. When there’s an economic downturn, demand for overseas skills is expected to fall”.
Migrants are more likely to lose their employment in a crisis due to a number of factors including that they:
- Disproportionately work in occupations that are vulnerable to job losses in economic downturns
- Are more likely to work in cyclical industries and occupations
- Are more disadvantaged by last-in first-out firing approaches
- Are more likely to work in insecure employment
Impact on Australia’s temporary migrants
Temporary migrants represent a small fraction of the total Australian workforce, with students comprising 2.5 per cent of employed persons, and other temporary workers comprising 1.7 per cent of the total Australian workforce. As of March 2020, approximately 2.17 million temporary residents called Australia home. Some were here on student visas, some on temporary skilled worker visas, still more were here on subclass 444 – a special category visa that allows New Zealand citizens to live, work and reside in Australia.
Temporary migrants and in particular international students find themselves concentrated in certain occupations. Students tend to work more in labourer jobs (like those in cleaning, food preparation, construction, freight and mining) than the rest of the population. These were the jobs that were most commonly lost in previous economic recessions and downturns, although other parts of the labour market have also been impacted during COVID-19 to date.
Working conditions and the challenges of social distancing measures in industries where temporary migrants are over-represented, such as food supply, construction and social care have been cited as possible explanations for high rates of COVID-19 infection for temporary migrants in some parts of the world. Such migrants also tend to live in over-crowded living quarters thus experiencing higher incidences of the virus.
Impact of migrants on Australian workers
CEDA modeling shows that recently arrived migrants have not had a negative impact on the wages or employment opportunities of Australian-born workers. On the contrary, in some cases, an increase in migrant concentrations in certain levels of qualification and experience is associated with a positive impact on wages and employment. This finding is consistent with previous research conducted in Australia, which shows no evidence that the entry of migrants had a negative effect on the labour market outcomes of incumbent workers.
Immigrants work and they consume, thereby creating demand for goods and services in addition to adding to the supply of labour. A 2015 report on the contribution of migrants to the Australian economy estimated that by 2050 the economy would be 40 per cent larger than otherwise due to migration, and GDP per capita 5.9 per cent higher.
Financial support for temporary migrants
When the pandemic hit, like many countries Australia rapidly put in place additional income and wage support for unemployed and furloughed workers. Australia did not extend these benefits to those who weren’t either citizens or permanent residents. This left many temporary migrants in the lurch – unable to return home and unable to receive income support in Australia.
Australia’s support to temporary migrants has been lacking compared to other countries such as Canada, New Zealand and the UK, which have all extended their wage subsidy programs to temporary migrants. Australia should do the same without delay.
Support from state governments has been piecemeal and councils like the City of Melbourne have created meal programs and vouchers for students. These programs have been so heavily subscribed that they had to be temporarily shut down. The state governments have offered some financial relief for students, to be administered by the universities, but the funds for some universities were exhausted in weeks.
The government has chosen so far not to extend the JobKeeper program to temporary migrants, even after updated forecasts suggested the program would cost less than first thought due to shorter than expected lockdowns and associated contractions in economic activity.
Temporary migrants and international students who are past their first year of study are allowed early access to their superannuation. 201,300 applications had been approved for temporary visa holders by May 2020. The total value approved for release to temporary migrants to date is $975 million with the average value of applications amounting to $4,852.
The global opportunity for Australia
Populist movements against immigration in the United States and increased negative sentiments towards immigration in Europe, along with the temporary closure of international borders, will only reinforce sentiments against immigration in many countries and perhaps influence long-term policy settings.
However, this also provides Australia with the opportunity to market itself as an attractive destination for prospective international students. Opening to international students will allow Australia to slow the negative effects on universities and sustain Australia’s reputation as a desirable place to study. As soon as it is safe and feasible to do so, the government should reinstate the trial of 3000 students’ arrival in the ACT, which can kickstart the arrival of international students in the future. This will have an impact on migrants’ future decisions about where to settle and sets Australia up to be an attractive destination for the world’s best and brightest.
However, challenges with the way the skilled migration system is structured could hamper Australia’s ability to attract migrants. The next few months should be used to fix these structural issues to ensure that when borders open up again, Australia is ready to become a destination of choice for skilled migrants.
One such example of reform is the introduction of the intra company transfer visas. This will enable those who work at offices overseas for companies that also have operations based in Australia to transfer to and work in Australian offices. Australia recently announced that special business investment visas would be made available to Hong Kong businesses to bring their operations to Australia. An intra company transfer visa would be a further way to assist these businesses as they relocate. Countries like the UK and the US already offer these visas.
There are 3 actions that the federal & state governments can take to ensure that migration comes back better in the wake of COVID-19 :
- Provide better financial support for temporary migrants through the crisis :
JobKeeper and JobSeeker payments should be extended to temporary migrants. Australia has an obligation as a good global citizen to support temporary migrants who now can’t return home due to international border restrictions. Temporary migrants pay taxes but don’t receive welfare benefits. This net fiscal benefit is acceptable in periods of prosperity, but in return Australia should provide insurance through an adequate safety net during extreme economic downturns.
- Continue to support the critical role of international education
In absence of an extension to JobKeeper and JobSeeker payments, states should top up their relief packages for international students. As soon as it is safe to do so, Australia should restart the flow of international students into the country in carefully controlled circumstances, beginning with the previously proposed ACT trial. International education is Australia’s largest service export, contributing $37.6 billion to the Australian economy last year and supporting 240,000 jobs.
- Lead the world in attracting the best global talent
Australia should introduce an intra-company transfer visa to assist multinational businesses looking to invest and expand their operations in Australia. The new National Skills Commission can also boost community confidence that Australia’s skilled occupation lists are targeted to attract skilled migrants in areas of the greatest demand that will assist Australia’s economic recovery. In addition, these lists would greatly benefit from the ABS conducting a comprehensive review of the ANZSCO occupation codes to ensure that the list can remain up to date into the future.
As noted in CEDA’s Effects of Temporary Migration, skilled migration has allowed large companies to import unique overseas experience, which is critical to attracting investment and training locals to build industry capability in areas such as advanced manufacturing. Australia’s economic recovery requires policy settings that make it as easy as possible for businesses to invest, expand and grow their workforces.
Source : Labour market policy after COVID-19 – Immigration and COVID-19 – by CEDA Senior economist Gabriela D’Souza