Blaming immigrants for unemployment, lower wages and high house prices is too simplistic

Robert Breunig, Crawford School of Public Policy, Australian National University and Mark Fabian, Australian National University

Australia should cut its immigration intake, according to Tony Abbott in a recent speech at the Sydney Institute. Abbott explicitly cites economic theory in his arguments: “It’s a basic law of economics that increasing the supply of labour depresses wages; and that increasing demand for housing boosts price.”

But this economic analysis is too basic. Yes, supply matters. But so does demand.

While migration has increased labour supply, it has done so primarily in sectors where firms were starved of labour, and at a time of broad economic growth.

Immigration has put pressure on infrastructure, but our problems are more a function of governments failing to upgrade and expand infrastructure, even as migrants pay taxes.

And while migrants do live in houses, the federal government’s fondness for stoking demand and the inactivity of state governments in increasing supply are the real issues affecting affordability.

The economy isn’t a fixed pie

Let’s take Abbott’s claims about immigration one by one, starting with wages.

It’s true that if you increase labour supply that, holding other factors that affect wages constant, wages will decline. However, those other factors are rarely constant.

Notably, if the demand for labour is increasing by more than supply (including new migrants), then wages will rise.

This is a big part of the story when it comes to the relationship between wages and migration in Australia. Large migrant numbers have been an almost constant feature of Australia’s economy since the end of the second world war, if not earlier.

But these migrants typically arrived in the midst of economic growth and rising demand for labour. This is particularly true in recent decades, when we have had one of the longest periods of unbroken growth in the history of the developed world.

In our study of the Australian labour market, we found no relationship between immigration rates and poor outcomes for incumbent Australian workers in terms of wages or jobs.

Australia uses a point system for migration that targets skilled migrants in areas of high labour demand. Business is suffering in these areas. Migrants into these sectors don’t take jobs from anybody else because they are meeting previously unmet demand.

These migrants receive a higher wage than they would in their place of origin, and they allow their new employers to reduce costs. This ultimately leads to lower prices for consumers. Just about everybody benefits.

Read more:
A focus on skills will allow Australia to reap fruits of its labour

There’s an idea called the “lump of labour fallacy”, which holds that there is a certain amount of work to be done in an economy, and if you bring in more labour it will increase competition for those jobs.

But migrants also bring capital, investing in houses, appliances, businesses, education and many other things. This increases economic activity and the number of jobs available.

Furthermore, innovation has been shown to be strongly linked to immigration. In the United States, for instance, immigrants apply for patents at twice the rate of non-immigrants. And a large number of studies show that immigrants are over-represented in patents, patent impact and innovative activity in a wide range of countries.

We don’t entirely know why this is. It could be that innovative countries attract migrants, or it could be than migrants help innovation. It’s likely that the effect goes both ways and is a strong argument against curtailing immigration.

Read more:
How migrant workers are critical to the future of Australia’s agricultural industry

Abbott’s comments are more reasonable in the case of housing affordability because here all other things really are held constant. Specifically, studies show that housing demand is overheated in part by federal government policies (negative gearing and capital gains tax exemptions, for instance) and state governments not doing enough to increase supply.

Governments have responded to high housing prices by further stoking demand, suggesting that people dip into their superannuation, for instance.

In the wake of Abbott’s speech there has been speculation that our current immigration numbers could exacerbate the pressures of automation, artificial intelligence and other labour-saving innovations.

But our understanding of these forces is nascent at best. In previous instances of major technological disruption, like the industrial revolution, the long-run effects on employment were negligible. When ATMs debuted, for example, many bank tellers lost their jobs. But the cost of branches also declined, new branches opened and total employment did not decline.

Read more:
New research shows immigration has only a minor effect on wages

In his speech, Abbott said that the government needs policies that are principled, practical and popular. What would be popular is if governments across the country could fix our myriad policy problems. Abbott identified some of the big ones – wages, infrastructure and housing affordability.

What would be practical is to identify the causes of these problems and address these directly. Immigration is certainly not a major cause. It would be principled to undertake evidence-based analysis regarding what the causes are and how to address them.

The ConversationA lot of that has already been done, notably by the Grattan Institute. What remains is for governments to do the politically difficult work of facing the facts.

Robert Breunig, Professor of Economics, Crawford School of Public Policy, Australian National University and Mark Fabian, Postgraduate student, Australian National University

This article was originally published on The Conversation. Read the original article.


Why we are still convinced robots will take our jobs despite the evidence

Jeff Borland, University of Melbourne

The tale of new technologies causing the death of work is the prophecy that keeps on giving. Despite evidence to the contrary, we still view technological change today as being more rapid and dramatic in its consequences than ever before.

The mistaken view that robots will take our jobs may come from a human bias to believe that “we live in special times”. An absence of knowledge of history, the greater intensity of feeling about events which we experience first-hand, and perhaps a desire to attribute significance to the times in which we live, all contribute to this bias.

History repeating

In the 1930s, John Maynard Keynes envisaged that innovations such as electricity would produce a world where people spent most of their time on leisure activities. In the United States in the 1960s, Lyndon Johnson established a Presidential Commission to investigate fears that automation was permanently reducing the amount of work available.

Australia has not escaped the prophecy, with similar concerns about the future of work expressed in the 1970s.

In their history of Monash University, Graeme Davison and Kate Murphy report that:

In 1978, the historian Ian Turner, organised a symposium on the implications of the new technologies. The world, he predicted, was about to enter a period as significant as the Neolithic or Industrial revolutions. By 1988, at least a quarter of the Australian workforce would be made redundant by technological change…

Some years later, Barry Jones continued the gloomy forecasts in his best-seller Sleepers Wake!:

In the 1980s, new technologies can decimate the labour force in the goods producing sectors of the economy…

Of course, none of this came to pass in Australia; just as work did not disappear in the 1930s in the United Kingdom, or the 1960s in the United States.

Yet today, we are seeing the resurrection of the prophecy. Commentary on the Australian labour market abounds with claims that the world of work is undergoing radical and unprecedented change.

The increased application of computer-based technologies in the workplace is suggested to be causing a reduction in the total amount of work available; or to be bringing a more rapid pace of substitution of machines for humans than has been seen previously.

No evidence for the death of work

In recent research with Michael Coelli, we argue that the prophecy is no more likely to be realised in the 2010s in Australia than in the 1970s.

Certainly, there is no evidence that the death of work is at present underway. Since the mid-1960s the aggregate hours worked by the Australian population (on a per capita basis) has remained stable.

In particular, there has been no long-run decline in the aggregate amount of work that matches the timing of the progressive introduction of computers to the workplace since the early 1980s.

Source: Borland, J. and M. Coelli (2017), ‘Are robots taking our jobs?’, Australian Economic Review, forthcoming, Figure 3

Moreover, the pace at which workers are churning between jobs in the Australian labour market is not getting quicker. Not only is there no evidence that more workers are being forced to work in short duration jobs, but what is apparent is that the opposite has happened. The proportion of workers in very long duration jobs has increased over the past three decades.

Source: Borland, J. and M. Coelli (2017), ‘Are robots taking our jobs?’, Australian Economic Review, forthcoming, Figure 9

Why work is not disappearing

There are good reasons why we should not expect new technologies to cause the death of work. New technologies always cause job losses, but that is only part of the story. What also needs to be understood is how they increase the amount of work available.

One way this happens is through the increases in incomes that accompany the application of new technologies. With the introduction of these technologies, it may take less labour time to produce what used to be consumed, but higher real incomes, together with an apparently unlimited human desire to spend, bring extra demand (for existing products as well as for new types of goods and services), and hence for workers to provide those extra goods and services.

As well, new technologies are likely to substitute for some types of workers, but to be complementary to, and hence increase demand for, other types of workers. Computer-based technologies appear to be complementary to workers who perform non-routine cognitive jobs.

In a report on the digitally enabled workforce, Stefan Hajkowicz and co-authors suggest a range of examples for Australia – such as an increase in demand for photographers at the same time as demand for photographic developers and printers has decreased; an increase in demand for graphic designers versus a decrease in demand for printers and graphic press workers; and a decrease in demand for bank tellers simultaneously with an increase in demand for finance professionals.

The ConversationThe end of work is no closer in Australia today than at any time in the past. So, perhaps there is a need to keep disproving the prophecy, to change our mindset.

Jeff Borland, Professor of Economics, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Three charts on: job prospects for refugees in Australia

Pilar Rioseco, Australian Institute of Family Studies and John De Maio, Australian Institute of Family Studies


While refugees will always face major challenges in making the transition to employment, new research indicates their job prospects improve the longer they are in Australia.

But for those who do find work, it’s not always in their chosen profession. Most are in low-skilled occupations.

The Building a New Life in Australia study is longitudinal, following the journey of almost 2,400 humanitarian migrants, including refugees and asylum seekers, from their arrival in Australia or when granted a permanent visa. The participants come from 35 countries and speak close to 50 languages.

Some 89% have experienced significant trauma such as war and persecution. Most have arrived in Australia with little or no English, and many had their schooling interrupted.

The challenge of finding work

At the first interview for the study (three to six months after arrival for most), 6% of participants aged 18-64 were in paid employment. This had risen to 16% around one year later (during wave 2) and 23% two years later (wave 3). This is a four-fold increase between the first and third interviews.

Employment rates for men were higher than for women, with 36% of men in paid work at wave three compared to 8% of women. Many women take on family and caring obligations in the early years of settlement, which partly explains their lower rates of employment.

We found searching for a job can be challenging and time-consuming for many humanitarian migrants.

Most participants had been in Australia for only a few months at the first interview. Over 80% of those job seekers found it hard to get a job. Consistent with previous research, humanitarian migrants’ employment is expected to gradually increase as they spend more time in Australia.

Importantly, humanitarian migrants in Australia seem to be entrepreneurs, showing higher-than-average engagement in small and medium-sized business.

One of the most challenging factors associated with employment is English proficiency. Not surprisingly, participants with good understanding of spoken English were much more likely to be employed.

However, there are other barriers to employment. These include lack of Australian experience and ongoing discrimination against certain ethnic groups in the labour market. For example, research has shown that African and Middle Eastern refugees had poorer employment outcomes than ex-Yugoslavs despite having similar levels of knowledge, skills and qualifications.

So educating employers on the skills of humanitarian migrants may be worthwhile.

What jobs can refugees get?

Even though more humanitarian migrants are finding jobs, certain areas remain a challenge. Our analysis shows some evidence of what is known as “occupational skidding”.

That is when humanitarian migrants cannot obtain jobs in line with their skills and qualifications. Think of the stereotypical surgeon who ends up working as a taxi driver in their new country.

The following chart shows a decline in the proportion of 18-64-year-olds working as managers and professionals, after arriving in Australia.

As you can see from the data, the most common occupations among humanitarian migrants were labouring (37% at wave 1, 36% at wave 2, and 42% at wave 3) followed by technicians/trades (29%, 26% and 22%).

This contrasts starkly with pre-migration occupations, where sizeable percentages were working in professional occupations (21%) and technicians/trades were most common (28%). Examples of professional occupations include engineers, teachers, doctors and lawyers.

There were almost as many managers as there were labourers prior to migration (11% and 16%). By the time of the third interview, no participants reported working in managerial positions.

Previous Australian research shows there are niches (cleaning, aged care, meat processing, taxi driving, security and building) where humanitarian migrants tend to find employment and that the process for recognising skills can be difficult in Australia.

Employment prospects improve over time

The longer humanitarian migrants spend in Australia, the more likely they are to find employment. Despite some improvements, many still struggle to obtain work in Australia commensurate with their previous skills and qualifications. This is also a problem in other resettlement countries such as Canada and Sweden.

The Australian government is piloting the Careers Pathways Pilot for Humanitarian Entrants and has recently launched a new Humanitarian Settlement Program.

The ConversationWe expect these programs will improve outcomes as employment helps to create new social and professional networks, improve English skills and can lead to financial independence.

Pilar Rioseco, Senior Research Officer, Australian Institute of Family Studies and John De Maio, Research Fellow, Australian Institute of Family Studies

This article was originally published on The Conversation. Read the original article.

The costs of a casual job are now outweighing any pay benefits

Joshua Healy, University of Melbourne and Daniel Nicholson, University of Melbourne

Low wages growth has been a spectre hanging around the Australian economy for some time. In our series What We Earn we unpick the causes for this and why some workers might be feeling it more than others.

Workers aren’t being compensated as much as they should be for precarious work in casual positions.

One in four Australian employees today is a casual worker. Among younger workers (15-24 year olds) the numbers are higher still: more than half of them are casuals.

These jobs come without some of the benefits of permanent employment, such as paid annual holiday leave and sick leave. In exchange for giving up these entitlements, casual workers are supposed to receive a higher hourly rate of pay – known as a casual “loading”.

But the costs of casual work are now outweighing the benefits in wages.

Costs and benefits of casual work

Casual jobs offer flexibility, but also come with costs. For workers, apart from missing out on paid leave, there are other compromises: less predictable working hours and earnings, and the prospect of dismissal without notice. Uncertainty about their future employment can hinder casual workers in other ways, such as making family arrangements, getting a mortgage, and juggling education with work.

Not surprisingly, casual workers have lower expectations about keeping their current job. For example the Australian Bureau of Statistics (ABS) found 19% expect to leave their job within 12 months, compared to 7% of other workers. Casuals are also much less likely to get work-related training, which limits their opportunities for skills development.

The employers of casual workers also face higher costs. High staff turnover adds to recruitment costs. But perhaps the main cost is the “loading” that casual workers are supposed to be paid on top of their ordinary hourly wage.

Australia’s system of minimum wage awards specifies a casual loading of 25%. So, a casual worker paid under an award should get 25% more for each hour than another worker doing the same job on a permanent basis. In enterprise agreements, the casual loading varies by sector, but tends to be between 15 and 25%.

The practice of paying a casual loading developed for two reasons. One was to provide some compensation for workers missing out on paid leave. The other, quite different, motivation was to make casual employment more expensive and discourage excessive use of it. However this disincentive has not prevented the casual sector of the workforce from growing substantially.

Casual jobs aren’t much better paid

One approach in determining whether casual workers are paid more is simply to compare the hourly wages of casual and “non-casual” (permanent and fixed-term) employees in the same occupations. This can be done using data from the 2016 ABS Survey of Employee Earnings and Hours.

We compared median hourly wages for adult non-managerial employees, based on their ordinary earnings and hours of work (i.e. excluding overtime payments). If the median wage for casuals is higher than for non-casuals, there is a casual premium. If the median casual wage is lower, there is a penalty.

The 10 occupations below accounted for over half of all adult casual workers in 2016. In most of these occupations, there is a modest casual wage premium – in the order of 4-5%.

The size of the typical casual wage premium is much smaller, in most cases, than the loadings written into awards and agreements. Only one occupation (school teachers) has a premium (22%) in line with what might be expected.

Three of the 10 largest casual occupations actually penalise this sort of work. And overall for these 10 occupations there is a casual wage penalty of 5%. This method of analysis suggests that few casual workers enjoy substantially higher wages as a trade-off for paid leave.

Taking a closer look involves controlling for a wider range of differences between casual and non-casual workers. One major Australian study in 2005 compared wages after taking account of many factors other than occupation, including age, education, job location, and employer size.

All else equal, it found that part-time, casual workers do receive an hourly wage premium over full-time, permanent workers. The premium is worth around 10%, on average, for men and between 4 and 7% for women.

These results imply that most casual workers (who are in part-time positions) can expect to receive higher hourly wages than comparable employees in full-time, permanent positions. However, the value of the benefit is again found to be less than would be expected, given the larger casual loadings mentioned in awards and agreements.

It seems that while there is some short-term financial benefit to being a casual worker, this advantage is worth less in practice than on paper.

A recent study, using 14 years of data from the Household, Income and Labour Dynamics in Australia Survey (HILDA), finds no evidence of any long-term pay benefit for casual workers.

The study’s authors estimate that, among men, there is an average casual wage penalty of 10% – the opposite of what we should see if casual loadings fully offset the foregone leave and insecurity of casual jobs. Among female casual workers, there is also a wage penalty, but this is smaller, at around 4%.

This study also finds that the size of the negative casual wage effect tends to reduce over time for individual workers, bringing them closer to equality with permanent workers. But very few casual workers out-earn permanent workers in the long-term.

Inferior jobs, but fewer alternatives

The evidence on hourly wage differences leads us to conclude that casual workers are not being adequately compensated for the lack of paid leave, or for other forms of insecurity they face. This makes casual jobs a less appealing option for workers.

This does not mean that all casual workers dislike their jobs – indeed, many are satisfied. But a clear-eyed look at what these jobs pay suggests their benefits are skewed in favour of employers.

Despite this, the choice for many workers – especially young jobseekers – is increasingly between a casual job or no job at all. Half of employed 15-24 year olds are in casual jobs.

The ConversationIn a labour market characterised by high underemployment and intensifying job competition, young people with little or no work experience are understandably willing to make some sacrifices to get a start in the workforce. The option of “holding out” for a permanent job looks increasingly risky as these opportunities dwindle.

Joshua Healy, Senior Research Fellow, Centre for Workplace Leadership, University of Melbourne and Daniel Nicholson, Research Assistant, Industrial Relations, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Three charts on: the incredible shrinking renewable energy job market

Paul Burke, Australian National University

This is the first piece in our new Three Charts series, in which we aim to highlight interesting trends in three simple charts. The Conversation

Australia is embarking on a transition from an electricity system that relies largely on coal to one that may one day be 100% renewable. Last week’s closure of the Hazelwood coal-fired generator was an important milestone on this path.

The development of the renewables sector has not, however, been a smooth ride.

Estimates released by the Australian Bureau of Statistics suggest that the number of direct full-time equivalent jobs in renewable energy activities has continued to fall from its 2011-12 peak. Over a period in which the Australian economy saw around 600,000 additional people get jobs, employment in the renewables sector has been going backwards.

A small employer

The renewables sector is estimated to have directly provided only 11,150 full-time equivalent jobs in 2015-16. The Australian labour force exceeds 12.6 million people. The sector thus makes a small contribution to national employment, although one that is quite important in some local economies.

Around half of the jobs in renewables in 2015-16 were in installing (and maintaining) rooftop solar systems. Hydroelectricity generation provides 1,840 full-time equivalent jobs, a number that is likely to increase if pumped storage is to make a larger contribution to smoothing Australia’s electricity supply. Biomass provides 1,430 full-time jobs, and the wind industry around 620.

The fact that renewables is a small employer – especially once installations are up and running – is not a bad thing. If renewables were labour-intensive, they would be expensive.

Up then down

The rise and then fall in renewables jobs is primarily a result of what has happened to installations of rooftop solar. The annual number of small-scale solar installations (PV and solar water heaters) skyrocketed over the four years to 2011. This rapid growth was spurred by generous feed-in-tariffs, rebates, and rules for federal government solar credits. There was also a national program to install solar panels on schools.

When these arrangements were curtailed, uptake fell. Annual installations of small-scale solar PV and water heaters are down by more than 60% from their peak. We are still installing a lot of new systems (more than 183,000 in 2016), but fewer than before. Employment estimates for small-scale solar closely track installation rates. The decline in employment in the wind energy sector is also worth noting.

The largest fall in renewables jobs has been in Queensland, a state that substantially tightened its feed-in-tariff scheme for rooftop solar in several steps from 2011 on. Queensland also holds the title of having Australia’s highest residential rooftop solar PV penetration rate (32%). South Australia is not far behind, at 31%.

Ramping up large-scale renewables

Recent years of policy uncertainty and backtracking have not helped the rollout of large-scale renewables. The termination of Australia’s carbon price and downwards renegotiation of the Renewable Energy Target had chilling effects on investment.

Those events are now behind us. With continued reductions in the cost of renewables, brighter days for the sector appear to be ahead, especially if our governments get policy settings right.

We can expect particularly rapid growth in jobs installing large-scale solar PV. Just last week, for example, it was announced that South Australia is to have a large new solar farm.

Paul Burke, Fellow, Crawford School, Australian National University

This article was originally published on The Conversation. Read the original article.

The Snuggery: Turning Hugging into a Business

  1. In what can only be described as a novel approach to employment, Jacqueline Samuel has turned hugging into a business. What other ‘odd’ and ‘crazy’ ideas can be turned into a business – I’m sure someone out there is thinking about doing it if they haven’t already done so.

Article: Are Some Professions Off Limits to Christians?

The following article seeks to discuss the question of professions for Christians and whether any are off limits to Christians – what do you think? Are there some jobs that Christians simply shouldn’t do?

Plinky Prompt: The Most Important Thing I Learned This Year

Interesting, 01

This will be a lesson I should have learnt some time ago, but seemingly forgot. It’s a really simple lesson really, though apparently easily forgotten. Simply put – don’t over commit at work. Certainly, work to the appropriate level, not denying that – just don’t over do it. What I mean is, putting in a heap of extra hours doesn’t do your health any good – physically, mentally, etc. So keep the job in perspective and in balance with the rest of life.

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Plinky Prompt: Name One of the Best Decisions You’ve Ever Made


One of the best decisions I have made, if not the best, was to resign from my job after 20 years of work there. I moved on and now work in a lesser paid job – however, my health has improved across the board as a result and I am far happier now than I was back then. I no longer work the excessive hours and have more time to do my own thing. What’s not to like.

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