Calling time on the 457 migration two-step

This is the third post in a series that follows an Expert Workshop in Digitisation, Skills and Migration hosted by the Lowy Institute earlier this month in collaboration with the Department of Immigration and Border Protection.

In April, when Prime Minister Malcolm Turnbull announced that he was 'abolishing' the 457-visa and replacing it with two new 'temporary skills shortage' visas, many dismissed the changes as cosmetic. The implications, however, are far reaching, not just for Australia’s temporary migration regime but also for the way the nation selects future permanent residents and citizens.

Over the past two decades, the 457 visa has become a significant pathway to permanent residence in what eminent Australian economist Professor Bob Gregory has described as two-step migration. The ideal two-step scenario looks like this. After failing to find an Australian qualified to fill a specific vacancy in their enterprise, an employer recruits a temporary foreign worker with the relevant skills and experience. The worker performs well in the position, enjoys working for the business and likes living in Australia. After two years, the employer sponsors the migrant’s shift from a temporary visa to permanent residency.

Immigration department statistics show that in 2015-16 around 50,000 temporary migrants on 457 visas became permanent residents. In 75% of cases, this transition from temporary to permanent status ran via employer sponsorship under the Employer Nomination Scheme or the Regional Sponsored Migration Scheme. In most other cases, 457 visa holders would have successfully applied for skilled independent migration without support from their employer. In this way, over time, about half of all previous temporary 457 visa holders have become permanent residents of Australia. Most of the rest departed our shores, while a small percentage have remained in the country long-term on a succession of temporary visas. Looked at from another perspective, about 40 per cent of the 128,550 places in Australia’s annual (permanent) skilled migration programme are filled by temporary migrant workers who are already living in Australia filling full-time positions in local firms on 457 visas.

Two-step migration has significant benefits for productivity because it facilitates better matching of skills to positions than one-step migration. Before the introduction of 457 visas, skilled migrants would often be granted a permanent visa before arrival in Australia. Visas would be issued under the points system, which was the government’s attempt to match the annual skilled migration intake to its expectation of the number and types of professionals the economy would need in the year ahead. Migrants would often land in Australia and then search for a job to match their qualifications. Frequently, however, they might end up taking a position in which their skills were not well utilised. (We are all familiar with the scenario of engineers driving cabs, for example.) This might have been because government assumptions about the labour market were incorrect, or because those assumptions had been overtaken by a change in business conditions. Alternatively, migrants might have set their sights on living in Sydney, while the shortages in their profession were located elsewhere. Under the two-step migration model, employers recruit candidates directly into vacant positions, initially on a temporary basis, and a 457 visa is only issued when there is job to be filled. Employers will only sponsor a 457 visa holder to become permanent if the job is ongoing and if the migrant proves to be a good long-term fit for the enterprise.

This strength of the 457 visa program was also its weakness, however, because employers’ role as sponsors increased their power relative to migrant workers, particularly in cases where temporary migrants were keen to settle in Australia permanently. There have been numerous cases of workers tolerating underpayment, excessive working hours and unsafe conditions because they fear getting offside with an employer who is the gatekeeper on their pathway to permanent residence.

Putting the temporary back into skilled migration

The temporary skills shortage (TSS) visa scheme that replaces the 457-program will narrow the pathway to permanent residency without addressing this problem of exploitation. Two classes of temporary visa will be offered under the new system: short-term and medium-term.

The short-term visa is valid for two years and can only be renewed once, for a maximum stay of four years. It does not offer a route to permanent residence. The problem of employer leverage over migrant workers remains because the temporary migrant is entirely dependent on the employer for their visa and its one-off renewal. If workers complain about underpayment, abuse or unsafe conditions, they risk losing not only their job but also their temporary right to live in Australia.

The medium-term visa offered under the new TSS scheme does provide a potential route to permanent residence via employer sponsorship. But whereas 457 visa holders had to spend two years with an employer before being eligible to apply for permanent residence, under the new TSS scheme they will have to work for a minimum of three years. This extends the period in which migrant workers are vulnerable to pressure from their boss.

Whether a migrant will be eligible for a short-term or a medium-term TSS visa will depend on their occupation, but both visas are more restrictive than the 457 visa, for which 651 occupations were eligible. For the new short term visa, 216 occupations have been culled while another 59 that remain on the new list have been restricted in some way (visas for some jobs will only be available in regional Australia for example). Some of the changes to the list are cosmetic, since many delisted occupations – such as goat farmer or antique dealer – were never used to bring in migrant workers anyway. But the removal of a pathway to permanent residence for all short-term visa holders marks a significant departure from the previous two-step system.

The list of medium-term visa occupations is even shorter, just 183. These are occupations that have been 'assessed as being of high value to the Australian economy and aligning to the government’s longer term training and workforce strategies.' This is a more significant culling of the occupation list, since some of the most frequently used 457 occupations have been excluded, including the three most common jobs of cook, restaurant–cafe manager and marketing specialist.

Moving toward a guest worker system

At first glance, it might seem sensible for the government to make a distinction between occupations that are valuable enough to the Australian economy to warrant a pathway to permanent residence and those that are not. But it is in exactly such detail that problems arise. Take the example of aged care assistants. The role requires only a certificate level qualification and so might be seen as inappropriate for a temporary skilled visa. Surely we can train Australians to fill these jobs? Yet things are not always so clear-cut. Fronditha provides care to Melbourne’s ageing Greek community and needs Greek-speaking workers to provide linguistically and culturally appropriate care. It cannot recruit such workers locally and has brought them in on 457-visas under a labour agreement with the federal government, sponsoring the workers for permanent residence after four years in the job. If aged care assistants can be brought in at all under the new system, they will only ever be eligible for short-term visas and have no pathway to permanent residence. This means that rather than building up a reliable skilled workforce, Fronditha will constantly have to recruit and train new temporary workers. It is hard to see how this benefits the enterprise, the migrants, or Australian society.

The government’s changes to temporary skilled migration are being sold as a way of ensuring Australian workers get priority over foreign workers in employment. But this is taking aim at a problem that only existed on the margins. Foreign workers on 457 visa make up less than one per cent of the total labour force, and the number of visas issued has been falling in a slowing economy, so there is no evidence that 457 visa holders are displacing large numbers of Australian workers. This issue, such as it exists, is better addressed via a price signal, by increasing the visa charges employers pay to hire foreign workers so as to provide greater incentive to recruit locally.

Meanwhile the changes fail to address problems of exploitation in the 457 scheme and may indeed compound them.

Splitting the 457 visa into two streams also moves Australia towards a two-tiered system of temporary skilled migration: the medium term visa holds out the conditional prospect that you may eventually be accepted as a full member of Australians society, while the 'short-term' visa makes clear that your status will only every be temporary. This moves Australia away from the immigration two step and towards a guest worker system, in which some migrants can never be Australian.

Peter Mares