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Low-skill migration may contribute to poor pay growth at bottom end of labour market – report

Support The Guardian, Australia, 29 July 2019 - The increased migration of “low-skill” workers could contribute to poor pay growth at the lower end of the labour market, according to a Grattan Institute report.

The paper, presented by chief executive John Daley at the Reserve Bank conference on Monday, argues for an increase in penalties and enforcement to prevent “rational” exploitation and underpayment of migrant workers.

It comes as the Morrison government has committed to criminalise worker exploitation in a bid to blunt Labor’s criticisms that the Coalition is pursuing legislation to increase penalties for union breaches of industrial law but failing to combat systemic underpayment.

The Grattan paper noted that current expert opinion is that “in general migration does not lead to slower wages growth” but suggested low-skill workers could suppress wages at the 20% of the labour market paid at or around the minimum wage.

It said while the full scale of underpayment is hard to estimate, the Fair Work Ombudsman had found 60% of 7-Eleven stores underpaid their staff and an audit of the harvest trail found serious underpayment at 130 of 836 businesses.

Contrary to perceptions of a high-skilled migration program, the paper noted that low-skilled migrants make up an increasing proportion of temporary visa holders.

Of 1 million temporary migrants, 450,000 have student visas, and 150,000 have working holiday visas.

“Of those temporary visa holders who do work, most (59%) are in low-skill occupations. Of those with student and working holiday visas who work, even more (about 75%) are in low-skill occupations, primarily labourers and personal and community service.”

The paper argued that migrants have “strong incentives to work because they generally don’t qualify for welfare payments”.

It suggested that migrant workers would be unlikely to complain about underpayment if they are in breach of visa conditions because they are working more hours than permitted.

“For people entitled to work, $14 an hour is better than no work at all, and they may well prefer not to imperil their employment.”

The paper noted that measured wages of people aged 20 to 34 “have not risen as fast as the wages of older workers for some time”.

“It is possible that the scale of this influx to the labour market is depressing wages and increasing under-employment specifically for low-skill younger workers,” it concluded.

However, the report said increased low-skilled migration “can’t possibly explain more than a portion of the low wage growth story” and does not explain stagnation at the middle and top of the income distribution.

The paper recommended that “there should probably be more enforcement” and current penalties for underpayment “are clearly far too low”.

“At the moment, the major risk for an underpaying employer is that they might have to pay a portion of the wages that they should have paid in the first place. In terms of pure incentives, it is rational for many employers to underpay.”

The paper also called for a rethink on visa conditions which “effectively give employers enormous bargaining power, and facilitate underpayment of wages”.

These include the limit on international visitors working no more than 20 hours per week and the requirement for working holiday makers to work in agriculture or specified regions.

On Wednesday Scott Morrison said the attorney general, Christian Porter, is “right now … drafting laws to deal with criminalising worker exploitation”.

Before the election the Coalition accepted recommendations from the migrant worker taskforce to introduce criminal penalties for systemic and deliberate underpayments.

The Coalition has reduced Australia’s permanent migration cap from 190,000 a year to 160,000. Before the election, Labor promised to instead crack downon underqualified temporary visa holders.

On Monday a One Nation motion in the Senate to establish a plebiscite on Australia’s migration rate was defeated 54 votes to two, with only party leader Pauline Hanson and senator Malcolm Roberts voting in favour.


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