Tuesday, February 09, 2010

Education and Australian skilled migration: a policy catastrophe?

I am still trying to get my mind around the changes announced 8 February 2009 to Australia's skilled migration rules. You will find a copy of the Minister's announcement here. More information is provided here on the Department's web site. The simplest explanation can be found in a speech the Minister gave.

On the surface, it seems sensible to tighten rules that had clearly become open to abuse, so I had no problem there. What did surprise me, however, was the apparent scale of the impact at personal level.

As with so many policy changes, the devil lies in the detail.

After looking at the official statement and at the associated press coverage, I am still not sure that I fully understand. However, the following summarises the position as best I can.

The Minister's announcement describes the first change in this way.

20 000 would-be migrants will have their applications cancelled and receive a refund.

All offshore General Skilled Migration applications lodged before 1 September 2007 will have their applications withdrawn. These are people who applied overseas under easier standards, including lower English language skills and a less rigorous work experience requirement. It is expected about 20 000 people fall into this category. The department will refund their visa application charge at an estimated cost of $14 million. Average applications cost between $1500 and $2000 and most contain more than one person.

Leaving aside the unfortunate turn of phrase "would-be migrants", the media has generally reported this, Al Jazeera or the Times of India are examples, in terms of number of applications cancelled. This is the headline number - "Australia to cancel 20,000 visa applications" Times of India - that grabbed initial global media attention.

In fact, while the Minister's release itself is somewhat ambiguous, it is clear that we are talking about people. At an average visa cost of $1,800, roughly the mid point of the average application fees quoted, we are talking about perhaps 7,800 applications covering 20,000 people.

Some of the media reports linked this change to students. We don't actually know who the applicants are now or indeed where they are at present. Without trawling through all the detail, I am left with the impression that these applicants are under the general program, still living offshore. The Minister described them in this way in his speech:    

First, for persons who applied from overseas before September 2007, the Government has determined to end their uncertainty by withdrawing these applications. About 20 000 people fall into this category.

The unfortunate situation was that these people applied when English language and work experience requirements were easier than they now are, and their backgrounds placed them low down the queue under priority processing arrangements.

As a result, they are unlikely to have ever been granted a visa. The Government will refund their visa application charge.

I am not sure why this item was listed first in the Minister's release, thus ensuring global media attention. At first I thought that it might be another case of Ministerial testosterone. In fact, it seems to be a badly handled case of a Government trying to do the right thing.

The real kicker in the announcement in terms of its impact on people lies in its effects on students presently studying in Australia, especially in the vocational sector.

Under previous arrangements, students acquiring skills listed on the Migration Occupations in Demand List (MODL) could be reasonably sure of obtaining permanent residence. Now MODL has been abolished with new, more tightly targeted arrangements to be put in place. This means that current students who have enrolled on the expectation of gaining permanent residency may no longer be able to do so.

In a Sydney Morning Herald article, Nick O'Malley provides a little of the history, if in a strongly weighted way.   

Facing a skills shortage, in 2001 the Howard government allowed overseas students to apply for permanent residency while here, and to work here until their applications were processed. I thought and still think that this was a pretty good idea. However, in 2005 the scheme was further expanded to cover skilled and semi-skilled trades in short supply included in MODL, Migration Occupations in Demand List.

The problem that then arose is that the combination of study with almost certain permanent residency led to an immigration driven explosion in student numbers. Between 2003 and 2009, the number of overseas vocational students jumped from 48,573 to 212,538.

The system had to change. The presence of some shonky operators supported by a network of immigration agents had become a national scandal. Yet the very change itself adds to what O'Malley correctly describes as a policy catastrophe.

The scale of the disaster is increased because it comes on top of the previous scandals and of the problems that have arisen with Indian students, a group heavily represented in the growth in student numbers.

The change affects not just the 213,000 current vocational students, but also the large numbers studying at Australian universities many of whom have also been attracted by the possibility of permanent residence. These students now face a more uncertain future. 

The Government has defined transition provisions, although for some reason (a lack of sensitivity perhaps because of the domestic focus?) these are buried in the detail rather than featured as a major point. I quote:

The government recognises that the changes will affect some overseas students currently in Australia intending to apply for permanent residence.

Those international students who hold a vocational, higher education or postgraduate student visa will still be able to apply for a permanent visa if their occupation is on the new Skilled Occupations List. If their occupation is not on the new SOL, they will have until 31 December 2012 to apply for a temporary skilled graduate visa on completion of their studies which will enable them to spend up to 18 months in Australia to acquire work experience and seek sponsorship from an employer.

Again, the devil lies in the detail, so we will have to wait to see what all this means. It will be six months, for example, before the new SOL will be ready. In the meantime, students (and their parents and friends) will have to live with uncertainty.

I do think that the fact that the Government has these still to be fully defined transition provisions in place should be recognised, although we also need to understand the distress and uncertainty created for students and their families. We also need to recognise that there will be flow on effects.

Part of these will come from the impact on Australia's international reputation. Based on the wording of the material, I just don't think that the Government has yet fully recognised this.

Part of the flow on effects will be economic, the impact on our international education sector. To the degree that growth has been driven the migration effect, the changes will have an immediate impact on student numbers, adding to pressures already present from previous problems.

The pressures will be most acute in the vocational sector. I would not be surprised to see this more than halve in size over the next twelve to eighteen months. There will be some flow on-effects in the university sector as well, although here we just don't know the proportion of migration driven demand (I suspect it's quite high) nor the possible extent of reputational effects.

While it will take a little while for these effects to come through, we need to be aware of them. We are talking big numbers here. If I interpret the stats correctly, the international higher education sector was worth $8.9 billion in 2009, the vocational sector $3.4 billion. 


Anonymous said...

When you use the phrase "labor shortage" or "skills shortage" you're speaking in a sentence fragment. What you actually mean to say is: "There is a labor shortage at the salary level I'm willing to pay." That statement is the correct phrase; the complete sentence and the intellectually honest statement.

Some people speak about shortages as though they represent some absolute, readily identifiable lack of desirable services. Price is rarely accorded its proper importance in their discussion.

If you start raising wages and improving working conditions, and continue doing so, you'll solve your shortage and will have people lining up around the block to work for you even if you need to have huge piles of steaming manure hand-scooped on a blazing summer afternoon.

And if you think there's going to be a shortage caused by employees retiring out of the workforce: Guess again: With the majority of retirement accounts down about 50% or more, most people entering retirement age are working well into their sunset years. So, you won’t be getting a worker shortage anytime soon due to retirees exiting the workforce.

Some specialized jobs require training and/or certification, again, the solution is higher wages and improved benefits. People will self-fund their re-education so that they can enter the industry in a work-ready state. The attractive wages, working conditions and career prospects of technology during the 1980’s and 1990’s was a prime example of people’s willingness to self-fund their own career re-education.

There is never enough of any good or service to satisfy all wants or desires. A buyer, or employer, must give up something to get something. They must pay the market price and forego whatever else he could have for the same price. The forces of supply and demand determine these prices -- and the price of a skilled workman is no exception. The buyer can take it or leave it. However, those who choose to leave it (because of lack of funds or personal preference) must not cry shortage. The good is available at the market price. All goods and services are scarce, but scarcity and shortages are by no means synonymous. Scarcity is a regrettable and unavoidable fact.

Shortages are purely a function of price. The only way in which a shortage has existed, or ever will exist, is in cases where the "going price" has been held below the market-clearing price.

Jim Belshaw said...

Hi Anon

Your comment is somewhat outside the scope of this post, but you do raise some interesting issues. I will come back with a preliminary response later today.

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