Migration is a quick fix for skills shortages. Building on Australians' skills is better

Prime Minister Scott Morrison has highlighted workforce skills as the “single biggest challenge facing the Australian economy” in recovering from the COVID-19 pandemic. Employer surveys also show it’s a top concern.

Adding to these concerns is an expected 85% fall in net overseas migration in 2020-21 from 2018-19 levels because of COVID-related border closures. The Committee for Economic Development of Australia (CEDA) has stressed the urgency of increased and more flexible temporary and permanent migration as global competition for skills and talent intensifies in the post-pandemic recovery. Australia also risks losing talented individuals to more attractive destinations.

Read more: There may not be enough skilled workers in Australia's pipeline for a post-COVID-19 recovery

Federal Immigration Minister Alex Hawke is more optimistic. He says the pandemic hasn’t harmed Australia’s reputation as a migrant destination. At a CEDA livestream discussion yesterday, Hawke said migration would be crucial for Australia’s recovery from the pandemic.

What is being overlooked in this debate is that, as a recent Productivity Commission report notes, Australia might not really have a skills shortage. Rather, the problem is a skills mismatch.

Why migration matters now

Australia typically relies on immigration for almost two-thirds of its population growth, and skilled migrants are an important source of talent.

COVID-related closures of national and state borders added to the problems of industry sectors that rely on temporary and permanent migrants to overcome skills shortages. Many have had trouble finding workers (e.g. fruit-picking) or will have trouble as the economy recovers (e.g. hospitality, digital and data opportunities).

CEDA recently launched a report calling for an increase in permanent skilled migration. This report and a 2019 CEDA report aim to show recent waves of migrants have not reduced wages or jobs of Australian-born workers.

CEDA’s latest report calls on the federal government to:

1. set up a government-regulated online platform for matching skills to jobs

2. update the Australian and New Zealand Standard Classification of Occupations Codes to ensure people with essential or cutting-edge skills can immigrate

3. be more transparent about how it assesses what occupations are in demand and included on the skilled occupation lists.

CEDA describes the Global Talent Scheme (GTS) as “very restrictive”. Minister Hawke acknowledged post-COVID Australia’s migration policies have to be more flexible and responsive. He pointed to the increased GTS intake of 15,000 spots in 2020-21, a tripling of last year’s allocation.

Yet the shape and make-up of the migration program remain unclear. Questions during yesterday’s discussion elicited few new details.

What are the issues with this approach?

According to the Productivity Commission, the way to modernise and grow the economy is via the three Ps: population, participation and productivity. As well as the population impacts of migration, CEDA claims to be offering solutions for both participation, as skilled migrants have “lower unemployment rates and higher labour-force participation rates”, and productivity, as skilled migrants are younger and contribute to human capital accumulation.

In practice, increased migration works by growing the population, increasing numbers of taxpayers and producing so-called spillover effects in housing, retail and domestic tourism etc.

CEDA cites an Australian National University study that found migrants account for 7% of the average rate of labour productivity growth between 1994–95 and 2007–08. However, the Productivity Commission reports productivity has slowed since the mid-2000s despite high migration.

Evidence indicates employers are not nurturing talent from migration to its full potential. Nearly one in four permanent skilled migrants work in a job beneath their skill level. Research also highlights the need to tackle the disconnect between identified skills shortages and the unwillingness of employers to employ new migrants.

Read more: There's one big problem with Australia's skilled migration program: many employers don't want new migrants

How to fix these problems

The solutions CEDA proposes are largely quick fixes and echo previous recommendations from CEDA and employer groups like the Australian Chamber of Commerce. Stop-gap government measures to help employers fill shortfalls include a 50% wage subsidy for apprentices or trainees and tailored quarantine arrangements for seasonal workers. But the systemic problem of skills matching, leading to underemployment and unemployment, has been neglected.

This problem is not unique to Australia. Migrants do essential work in many countries. Research has found many countries have designated these migrants – including those typically considered “low-skilled” such as crop pickers, care assistants and hospital cleaners – as “key” or “essential” workers whose supply needs to be protected and even expanded during the health emergency.

In Australia, some analysts have pointed to the skills shortage as a policy ruse to distract attention from the lack of infrastructure investment to cope with rapid population growth as well as employers wishing to restrict wages growth.

One in four unemployed Australians are graduates. But Australian employers might not want to employ and train them if they can get similarly skilled employees from overseas who are willing to work for lower pay.

Read more: 1 in 4 unemployed Australians has a degree. How did we get to this point?

The problem is worse among international graduates and students – 60% of the latter lost their jobs during the pandemic. Yet they studied in universities and through VET providers that were supposedly providing them with the skills Australian employers need.

The Business Council of Australia (BCA) has recognised the need to improve skills matching and development. It has called for a more flexible vocational education and training (VET) system that emphasises life-long learning with innovations like micro-apprenticeships. This allows for employees and apprentices to be rapidly trained and regularly upskilled in response to technology and market changes.

This is similar to micro-credentials – qualifications based on smaller blocks of learning. These can formalise soft and hard skills attained at work, such as teamwork, critical thinking and problem solving. They can also help fill skill gaps such as working with big data.

There are other gaps in the CEDA proposals. For example, when the federal government announced its Modern Manufacturing Strategy in October 2020, it recognised that not enough manufacturers have experience in scaling up in areas that provide good returns. Despite a brief mention of data scientists in regard to skilled occupation lists not being updated since 2013, the CEDA report largely focuses on traditional industries.

Our research shows Australia needs to develop new skills in disruptive technologies to capitalise on the opportunities of the Fourth Industrial Revolution.

Read more: Jobs are changing, and fast. Here's what the VET sector (and employers) need to do to keep up

The pandemic has simply added to the urgency of increased collaboration between the higher education and VET sectors, employer organisations, industry and government to deliver more targeted and flexible skills development programs.