Given the near-record employment growth last year, the sharp reduction in 457s appears to have nothing to do with demand for labour, but a response by employers and would-be employees to hiring and gaining permanent residency being made more difficult and expensive. The size of the fall and the breadth of occupations to experience it during a period of very fast employment growth should raise some interesting questions about the nature of the Australian workforce and how 457s have been used. From March 1, the 651 occupations eligible for 457 visas will be formally replaced by 435 occupations eligible for Temporary Skilled Shortage (TSS) visa, which comes in two flavours: a two-year visa that can be extended only once and offers no pathway to permanent residency; and a four-year visa that can lead to permanent residency. There are only 183 occupations eligible for the four-year visa.

The possibility of permanent residency seems to make an immediate difference to applications. Sherrell notes that while cook 457s plunged, visas granted to chefs rose slightly. Chefs are in the pot for four-year visas, cooks are left in the two-year pan. “The increase in chefs could reflect genuine growth in employer demand for chefs,” Sherrell writes. “However, it may also reflect employers who previously nominated cooks now nominating chefs as this is a more advantageous occupation for migrants and employers given visa conditions. If the job being performed in the business has not changed, this might be called ‘occupational inflation’, as employers upgrade their occupations to take advantage of more beneficial immigration policy settings.” Visa requirements tighten further from March. For the shorter TSS, applicants will need at least two year’s work experience – wiping out many of the foreign students and backpackers that have been transitioning. Employers will be subject to greater scrutiny, higher visa costs and a new training levy. There are stricter English language requirements and a lower maximum age for the four-year visas. Sherrill notes a lack of other useful data on 457s, such as salary figures and the number of applications that are rejected, and warns that isolating the effects of specific policy change is difficult amidst multiple factors, but he suggests the eligibility changes could further reduce demand for TSS visas. Before anyone gets too excited thinking fewer overseas workers will mean higher wages, Sherrell’s isn’t the only interesting paper to consider. Slate.com reports an American study that has relevance here on why workers aren’t getting decent wage rises despite jobs growth and falling unemployment.

The study suggests it’s not so much a matter of an excess of workers holding down wages, but a shortage of employers. The idea is that in various geographical areas and fields, hiring is concentrated among a relatively small number of businesses resulting in a monopsony problem – a lack of competition among employers. “Monopsony is essentially monopoly’s quieter, less appreciated twin sibling,” Slate explains. “A monopolist can fix prices because it’s the only seller in the market. A monopsonist, on the other hand, can pay whatever it likes for labour or suppliers, because it’s the only company buying or hiring.” Given the limited number of players in key Australian industries, it’s not impossible to think monopsony develops whereby it’s not in those players’ interests to compete too hard for workers, or to at least not compete on price. Meanwhile, back at the 457s, Sherrell says there’s a lack of analysis of the changes but cites an August report by the Australian Population Research Institute’s Bob Birrell – a campaigner against present migration levels. Birrell called the 457 changes “the first serious sign that either major political party is prepared to tackle the immigration issue”.

“Make no mistake about the significance of the rest,” he wrote. “When fully in place from March 2018, the flagship ENS (employer nomination scheme for permanent residency) program will fall to less than a third of its recent size of 48,250. The number of TSS visas will also fall sharply relative to the current number of 457 visas being granted.” Birrell expects further reforms by the government to make their immigration policy change more obvious to the public. The apparent contradiction here is that while fewer 457/TSS visas would mean a relatively small reduction in the number of people in the country, there’s been no sign of a change in the permanent visa quota of 190,000, plus humanitarian admissions. Family reunions – mainly spouses – get 60,000 places and skilled migrants and their families the rest. Whether the 130,000 should come as “newbies” based on their qualifications or those given a trial run through temporary work is a matter of further debate. The Productivity Commission has argued that temporary workers here should not be given an advantage in the selection process, but the Lowy Institute’s Peter Mares makes a case for the two-step temporary-to-permanent pathway having significant benefits for productivity because it facilitates better matching of skills to positions. “Before the introduction of 457 visas, skilled migrants would often be granted a permanent visa before arrival in Australia,” Mares wrote. “Visas would be issued under the points system, which was the government’s attempt to match the annual skilled migration intake to its expectation of the number and types of professionals the economy would need in the year ahead. Migrants would often land in Australia and then search for a job to match their qualifications.

“Frequently, however, they might end up taking a position in which their skills were not well utilised. (We are all familiar with the scenario of engineers driving cabs, for example.) This might have been because government assumptions about the labour market were incorrect, or because those assumptions had been overtaken by a change in business conditions.” p.s. despite the crackdown on goat farmers and kennel handlers, the list or eligible skilled occupations for foreigners remains somewhat curious. It includes “journalists and other writers”. Anecdotal evidence would point to no shortage. At least “federal politicians” doesn’t feature.