Opinion article

Fixing migration policy to bridge the skills gap

CEDA Senior Economist, Gabriela D’Souza, shares some insights from CEDA’s upcoming report into skill mismatch in Australia’s permanent migration system and shows how more effectively using the skills of permanent migrants can prepare Australia for the labour market of the future.  

Migration has always been a crucial part of Australia’s history and a key contributor to the country’s economic growth. For a long-time, immigration policy has often been shaped around pursuing particular economic or cultural outcomes. The skills-based migration systems that Australia and many other countries use seek to find the ‘optimal’ migrant. In a delicate balancing act, government officials weigh the characteristics of migrants that will theoretically allow for better settlement outcomes. This criteria has varied through time – in the not so recent past, it has included rather unsavoury hurdles like a dictation test that ensured Australia’s migration intake heavily favoured European migrants.
More recently, the key theme of migration policy has been identifying the characteristics that ensure migrants transition seamlessly into the Australian labour market. Our system currently prioritises migrants who can speak English, who are young, who have qualifications that are in demand and who have experience working in their field.
In a post-COVID-19 world, Australia faces a challenge confronting many other western liberal democracies: skilled migration plays a major part in driving economic growth, but how do we ensure that the skills we are obtaining are the right ones, and, crucially, how do we minimise the level of skills mismatch among migrants?

Skills mismatch in Australian immigration

While selecting for the right skills in our immigration program is important, it is equally important that we make full use of the skills of these migrant when they arrive. The system strictly selects for skills that are in demand, yet many migrants still end up working in jobs that require less than the skills and training they possess.  
This skills mismatch and its consequence, occupational downgrading, is not a new issue. The economic literature contains many references to the problem, and points to a number of possible reasons for its occurrence.[i]
However, it is difficult to assess the level of mismatch in Australia, in part because our regular surveys of the Australian population tend to vastly undercount the number of migrants in Australia.
Our upcoming report gets to the heart of this question by assessing the extent of skill mismatch in our migration system and providing workable policy solutions. The report investigates this issue using the Continuous Survey of Australian Migrants, which, between 2013 and 2019, asked migrants about their experience when they first entered the Australian labour market, and then again 12 months later.

A new way forward 

While the COVID-19 pandemic has brought challenges for the arrival of migrants in Australia, we expect that Australia will continue to be a migrant nation into the future. In order to ensure that migrants are able to make the most of their experience here, and that our labour markets are able to absorb new migrants, Australia must ensure that settlement services are adequate and that we are selecting for the right skills. Other countries, like Canada, have embarked on a strategy to increase migration as an avenue to help their economies recover. Canada has upped its intake to almost one per cent of the Canadian population – a low target of 401,000 migrants.

COVID-19 has allowed us to pause and take stock about the way in which we do things. More people are working from home, and this trend looks likely to continue even after we are rid of the virus. It also affords Australian policymakers a chance to take stock of our migration system and to enhance the pathways that allow for skilled migration into Australia. The government estimates that in 2023-24, net overseas migration will reach 201,000, signalling a return to almost normal. How we get there is the all-important question.


About the authors

Gabriela D'Souza

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Gabriela D’Souza joined CEDA as Senior Economist in 2018 with eight years of experience in public policy. She has worked at some of Australia's most well-known and respected public policy think tanks and economics research centres. She has conducted research on a wide range of public policy issues including education, immigration, multidimensional disadvantage, and area-based measures of exclusion. Gabriela has a master’s degree in economics from Monash University and is an affiliate of Monash University’s Department of Business Statistics and Econometrics.