Michael Pascoe: Australia’s great migration wages experiment is under way
Australia has unintentionally embarked on a great economic experiment over the thorny question of whether migration lowers wages.
Counter to the usual posturing of the anti-immigration lobby, the economic literature generally suggests immigration increases wages overall, but not necessarily for the lowest-paid groups.
With immigration effectively halted, Australia will be labour market economists’ petri dish – a chance for real-time experience to sort out the veracity of torturing of historical data.
But that’s only if the government allows the experiment to run.
For example, the well-publicised shortage of fruit and vegetable pickers should have sent agricultural wages soaring. It hasn’t.
Instead, COVID exceptions are being made, South Australia importing 1200 Pacific Islanders who will work for existing wages.
That is part of the dark underbelly of the Australian economy, the former land of the fair go – the jobs we collectively want done cheaply so we can enjoy cheap stuff and rich profits but are not prepared to do ourselves.
You can hear it now from people forced to holiday at home instead of Bali. “Holidays are so expensive in Australia for what you get” – that’s the difference paying more than subsistence wages makes.
It’s the baseline of the gig economy, the food delivery riders pedalling into the night, lucky if they nearly make the minimum wage, not even afforded basic safety gear.
That’s the end of the market where a careless – or intentionally designed migration system – can suppress wages.
The experiment now under way is what happens further up the chain in middle- and higher-level jobs.
An intelligent migration program for a country with Australia’s massive potential should not be just a matter of adding extra demand by increasing the headcount.
A program favouring a cohort that is younger, better qualified, more entrepreneurial and more ambitious than the native population should result in one plus one equalling more than two.
A well-administered skills program, filling gaps that would otherwise prevent broader employment growth, should contribute to greater demand for labour overall and, therefore, wages.
Well, that’s the theory – at least until you run into the wall of broader wages suppression policy.
As reported last week, specialist recruiter Robert Half expects employers will have to offer more money this year to entice workers to leave existing jobs, the “stability premium”.
With tech and finance employers unable to turn on the migration tap to fill roles in parts of the economy recovering strongly from the pandemic slow down, the evidence will be in over the next year or so as to just how dogged is capital’s real wages strike.
I don’t hold an economic model, mate, but I wouldn’t bet on wages growth breaking out. And nobody will be able to blame migration.
The task for labour market economists will be sorting the impact of government wages policy, weak population growth, restricted skilled migration and the entrenched management culture of the past half dozen years or so.
The industrial relations warriors of the 1970s and ’80s wouldn’t believe how successful capital has become in grabbing an ever-greater slice of the pie.