Evidence of employers misusing 457 visas shows need for reform

The South Australian and Victorian governments have announced inquiries into abuse of migrant workers in the agriculture sector hired on 417 “working holiday” visa, following an expose by ABC TV’s Four Corners this week.

However, our research shows that the problem of employers evading their obligations is not limited to workers on the 417 visa. Some are also misusing the 457 temporary skilled visa.

The 457 visa is supposed to be used in industries suffering a skills shortage to allow employers to hire a skilled migrant worker for up to four years.

But new analysis shows that some employers readily admit they use 457 visa workers even when there is no skills shortage in their industry, suggesting that tougher regulation is needed.

Why hire a 457 visa worker?

The temporary skilled 457 visa, introduced in 1996 to address skills shortages, is supposed to allow Australian businesses to recruit workers with specialised qualifications, knowledge and experience.

In fact, our results found 457 visas were seen by many employers as an easy way to fill jobs without boosting pay, working conditions or other aspects of job quality.

Our research, presented to the Senate Education and Employment References Committee’s inquiry into the impact of Australia’s temporary work visa programs, analysed survey responses of 1600 Australian employers conducted in 2012. The data has only recently been made available to academic researchers.

The phone survey was conducted and designed by the Social Research Centre and commissioned by the Department of Immigration and Border Protection. The survey received a 90.3% response rate.

While the data has been previously used in a report by the Migration Council of Australia, our study is the first to use techniques testing for significance and variation in the data.

We sought to answer the crucial question: why do employers recruit workers on 457 visas? This question is important for understanding the impact of immigration on the labour market.

We found that a significant minority of employers are using the scheme to engage workers they saw as harder working or having a “better attitude” (19%) or are more loyal than their Australian counterparts (19%). Of employers surveyed, 10% said that Australian workers do not like doing the job and 6% claimed Australian workers have a poor attitude.

However, we found significant variation in these responses between employers in different industries.

Employer respondents across all industries are three times more likely to be more satisfied with workers on 457 visas than similar Australian workers, but most employers (67%) are equally satisfied with both groups.

The picture is rather different in the hospitality industry, where employers are 13 times more likely to prefer 457 visa workers than similar Australian workers, and only a minority (45%) are equally satisfied with both groups.

The risk is that some employers may develop an inherent preference for 457 visa holders in ways that could inhibit workers’ rights, advantage some employers over others and potentially deny employment opportunities to citizens and permanent residents.

So-called skills shortages

The current policy grants visas based on employer claims that they are experiencing skills shortages. But this policy is fundamentally flawed.

While the vast majority (86%) of employers surveyed say they experience challenges recruiting workers locally, this does not equate to a skills shortage. What they’re short of is workers willing to do the work for the wages and conditions currently being offered, which in some cases won’t be high enough to attract more people locally.

Fewer than 1% of employers address skilled vacancies by increasing the salary being offered, which economists generally consider to be necessary for a skills shortage to exist.

At least 14% of employers surveyed said they did not have difficulties recruiting from the local labour market, which begs the question why they were allowed to hire workers on 457 visas in the first place.

The 457 visa has elicited intense political controversy in recent years. Some unions claim that the scheme is taking opportunities for employment away from Australians, while business groups argue the visa is vital for meeting critical skills shortages.

Our research makes it clear that unions and employers are both wrong in this debate. Misuse of the scheme does not appear to be widespread; in fact, many employers (such many in education and health) are largely using the scheme for its intended purpose of addressing skills shortages.

But this is not the case in some industries, especially hospitality, where misuse of the scheme appears to be widespread. For instance, while addressing skills shortages is the visa’s main objective, only 42% of hospitality industry respondents cited “they have filled skilled job vacancies” as a benefit of sponsoring 457 visa holders, compared to 52% of employers across all industries.

By contrast, 41% of hospitality employers cited “increased loyalty from 457 workers” as a benefit of the 457 visa, compared to 19% of all employer respondents. Hospitality employers were also much more likely than average to prioritise interpersonal competencies over specialised qualifications, knowledge and experience when selecting potential skilled migrants.

Our research shows that the 457 visa clearly needs to be fixed. Currently, it is up to employers to determine whether they have a skills shortage that can only be addressed via the visa scheme. That right should be handed to an independent body that can identify skills shortages and rule the occupations for which 457 visas can and cannot be used.

Migrant workers are needed

However, the claim by unions that the 457 visa deters employers from training is somewhat misplaced. Australia’s education and training systems suffer from major deficiencies that will take a long time to address and, in any case, will never be completely adequate for meeting our skills needs. Immigration needs to play a role.

Skilled immigration produces substantial benefits for Australia. It delivers economic advantages, opens trade opportunities and helps to address the challenges of population ageing and declining workforce participation. The former Immigration Minister Scott Morrison was right to say that skilled immigration is “an integral part of the economic machinery that creates Australian jobs”.

Employers need to focus more on improving job quality and working more closely with the Australian education and training system in addressing skills shortages where they genuinely do exist.

But the practices of employers using the 457 visa need to be regulated more effectively to ensure the scheme meets its stated purpose.

The funding for Chris F. Wright and Andreea Constantin's research on migrant workers is provided under the University of Sydney Postdoctoral Research Fellowship Scheme (Project ID G162129). Chris F Wright has received external funding from the Australian Department of Industry, the UK Economic and Social Research Council and the McKell Institute for projects unrelated to this research.

Andreea Constantin does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.