Andrew Barker's address on migration

Andrew Barker's address to CEDA's 2023 Migration Forum.

My name's Andrew Barker. I'm a Senior Economist at CEDA and I have the great privilege to be moderating a session today with Violet Roumeliotis and Steph Cousins on harnessing our economic potential.

But before we get on to that session, I'm going to set the scene a bit with some data analysis that we're doing at CEDA, showing how we're not harnessing the skills of migrants as well as we could be.

This is a work-in-progress that we're doing at CEDA using the ABS census data for 2016 and 2021, so you're getting this hot off the press, and hopefully it sets the scene, to set up a discussion with Violet and Steph about how we can potentially do things better.

The starting point is that we are focusing on hourly wages of recently arrived migrants from Census data. Obviously, employment is very important as well, there's a lot of analysis around that, but we're focusing on wages as it’s closely linked with productivity. We heard the importance from Minister Giles about productivity as a first objective in the reforms that are being made to the migration system.

The upper blue line on this chart, what that shows is average wages for recently arrived migrants, those who arrived in the past two to seven years compared to the Australian-born population.

The recently arrived migrants earn less than the Australian-born population, particularly recently arrived female migrants, and that's got worse over the past 10 years between 2011 and 2021.

Actually, the situation is worse than this because migrants are relatively more educated than the Australian-born population, and this has a bigger effect than the lower English language ability and their younger age in terms of their wages.

The lower blue line that you can see is comparing like with like, so adjusting for the higher education but lower on average English language ability and we can see from that that migrants on average earn about 10 per cent less than equivalent, similar Australian-born people.

This analysis is for recent migrants. Migrants’ wages do catch up after 10 or more years, which is consistent with other research. But that still means we're not making the best use of the migrants when they first arrive in Australia and we estimate that this costs about $4 billion in foregone wages and therefore a loss in productivity for the Australian economy, with costs for the migrants and for the Australian economy more broadly.

Drilling down a little bit, these wage gaps are only partly explained by differences in characteristics.

This is a more detailed breakdown of the factors affecting female recently arrived migrants’ wages broken up by education level.

At the left-hand end for people with just a school education, the lower wages for recently arrived migrants is fully explained by their lower English language ability on average.

But on the right-hand side it's a bit more worrying, in a migration system that's very focused on bringing skills. 

For those who come in with postgraduate degrees, these women are younger, which is associated with lower wages – particularly for highly skilled people, wages peak later in life. English is also important for more skilled migrants, although they have better language ability on average, communication is even more important in high-skilled jobs and lower wages for these reasons dominates the fact that migrants are more likely to settle in cities and to work in higher-paying industries.

Then even beyond that, we find that comparing like with like again, women with a postgraduate degree who have recently arrived in Australia as migrants earn 11 per cent less than otherwise similar Australian-born people.

One of the important drivers of this can relate to qualifications recognition and in fields like medicine, nursing, civil engineering, the trades, people need to be licenced to work in those occupations.

We heard Teresa Liu talk about the barrier and the challenge that this can present for migrants.

What this chart shows is on the left-hand side, this is wages of recent migrants versus the Australian-born population if they have education in a licenced field and they work in an occupation that's subject to licencing and they earn about 10 per cent less consistent with the average across that whole migrant cohort.

On the right-hand side, however, this is people who have education in a licenced field but are not working in an occupation subject to licencing and those people earn more than 20 per cent less than similar Australian-born people so they're, for example, people who can't get their qualifications recognised.

Wages, of course, vary considerably by visa stream. This will be no surprise to any of you in this room, but I think the scale of the differences is probably revealing. Humanitarian and family visas, of course, serve broader social goals, so it's not surprising that wage outcomes are lower and they also reflect lower English language ability and particularly for humanitarian migrants, lower levels of education on average.

But it's interesting looking at some of the other visa streams, so the business, innovation and investment programme, of course, does have an economic objective, but outcomes are relatively poor compared to other skilled visa streams, largely explained by the lower English language ability on average of people coming in under that stream.

Outcomes for employer-sponsored migrants are very strong, reflecting the importance of that employer-employee matching and also the importance of the skills that are really needed in our labour market.

But we can also see a big gap in the outcomes for female versus male recent migrants as a 17 percentage point difference in their outcomes there and part of the explanation and this also came up in the discussion this morning is around secondary applicants.

More than half of that gap in outcomes for employer-sponsored between male and female migrants is explained by secondary applicants earning considerably less and there's a big gap in the male and female shares.

For women, 57 per cent come in as secondary applicants across skilled visa streams in total compared to men, that's only 27 per cent. On the chart, we can see that this is a comparison of secondary applicants versus primary applicants.

Secondary applicants earn less because they are younger, less educated, work in industries that pay less and also have slightly poorer English as well, so that does raise some questions about whether we are making the best use of the skills we could get from secondary applicants.

Joanna Howe mentioned that this morning as well, it raises some questions about whether we could better harness the skills we can bring in from secondary applicants, but this is getting into policy and how we can better harness the economic potential of migrants, so I will now invite our panellists to come up.