Guest workers during the financial crisis

A report in today’s Sydney Morning Herald has outlined concerns over the treatment of migrants holding 457 visas. The concern, expressed by unions is that 457 visa holders are being sacked as employers try to cut costs during the financial crisis, but rather than returning to their home countries, they are trying to find work in Australia’s black market. The reason for this is that many of them owe significant money to migration agents which they do not currently have.

Under the regulations of the 457 visa, these migrants have 28 days to find a new job with an employer who will sponsor to fill a position that is eligible for the visa. This, along with the fact that they can not receive unemployment benefits (even if some of them may been here for a number of years and paid thousands of dollars in taxes) means that they are extremely desperate to find a new job, and are therefore likely to take any employment they can find. Nevertheless, this is the best possible outcome for them, their employment may still be monitored by the government to ensure they are receiving the required wages and are not being extremely exploited. The concern is for those who have to work in the blackmarket. They are no longer monitored by the government, and their employer can hold the threat of telling the government about them (and thus deportation) over their head. The risks of exploitation are extremely high.

Related to this issue (but not reported by the Sydney Morning Herald) is the relationship between unemployment and the number of 457 visas granted. In October 2008 the Chris Evans, the immigration minister, told a Senate Estimates Committee that:

One would expect, if the demand for labour was reducing, then demand for workers under the 457 scheme would reduce as well. It is purely employer nominated and not government controlled other than the approval processes. It stands to reason that, if economic activity was to come off and demand from employers for temporary labour was to come off, then the numbers on the 457 scheme would come off. You would expect there to be a direct relationship.

This was seen, and rightfully so, that the government’s expectation was for the number of 457 visas granted to fall in 2008/09, particularly from the record highs in 2007/08.  This is appears to be confirmed by the reports in the Sydney Morning Herald, but the data tells a different story.

The economic data for the second half of 2008 definitely shows the economy slowing, with unemployment rising. The latest labour force data shows unemployment rising to 4.5 per cent (seasonally adjusted) in December 2008, up from a low of 3.9 per cent in February 2008. The changes in various labour force indicators between July and December 2008 are as follows (data in brackets is for the corresponding time a year earlier):

  • the unemployment rate has risen by 0.2 percentage points (-0.1 percentage points);
  • employment has risen by 35,800 (+134,300);
  • unemployment has risen by 18,600 (-5,500); and
  • the participation rate has fallen by 0.3 percentage points (+0.3 percentage points).

These indicators show a slowing economy. Even the most positive of these outcomes, a growth in employment is well below that experienced a year earlier (and hides the massive shift from full-time to part-time employment). If these indicators are reflecting what is happening in the labour force (and there are legitmate concerns over this), one would expect the number of 457 visas granted to have also fallen. However, data released by the immigrationhas shown that this has not happened. In the first half of 2008/09, 29,630 primary 457 visas have been granted (these are the visas given to those who meet the occupational requirements and are sponsored, their families are granted secondary 457 visas). Significantly, this is a 14.8 per cent increase on the same period the year before. Rather than the downturn in the labour market, that is clearly indicated by the labour force data, leading to a reduction in the number of 457 visas being granted, there has actually been a significant increase. If this increase continues for the rest of the year, 126,934 457 visas will have been granted. The only state to show a reduction was NSW (a fall of 1.3 per cent), while the other states with significant numbers of 457 visa holders have increased: Queenland (+40.1 per cent); Victoria (+7.9 per cent); and WA (+25.4 per cent). It appears that employers may be turning to guest workers to fill positions during the financial crisis because they see them as a cheaper option than domestic workers.

What does not quite fit is the report in the Sydney Morning Herald today regarding the number of 457 visa holders being sacked and then entering the underground labour market. One explanation may be that businesses, in an attempt to cut costs are sacking large portions of their workforce (see for example BHP). Included in these sackings are probably quite a number of 457 visa holders, who possibly signed contracts a number of years ago with relatively good wages. These businesses may then be hiring more 457 visa holders, thus increasing the number of visas granted, to replace their old migrant workers and their Australian workers.

What is clear is that the government’s statements about falling numbers of 457 visas being granted due to the financial crisis are untrue. While the Australian labour market has been shedding full-time jobs, the number of 457 visas granted has continued to soar. Employers see them as a cheap source of labour, and have continued to hire. The report in today’s Sydney Morning Herald also shows how precarious the life of 457 visa holders in Australia is, and the risk of exploitation that haunts them. While the Australian Government continues to administer and promote a migration program that gives employers so much power over workers, employers will continue to access it to cut costs and increase profits. These workers should not have to rely on employers to maintain their visas, and should be allowed to come to Australia to work if they wish, for as long as they wish, with all of the protections that Australian workers enjoy.

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