As we edge towards post-COVID life, Australia’s economic choices remain the same

Kristina Keneally argued in the media that when we reopen our migration program, we should not return to same number and composition as prior to the crisis. She claimed that although our migration intake had played a key role in our economic prosperity (a method of generating economic growth she called “lazy”), it also contributed to unemployment, underemployment and low wage growth.

The evidence for these claims is weak at best.

Right now, wage growth is low across the western world, irrespective of immigration policy. However in the longer term, Australia has one of the best stories to tell in terms of wage growth. At every census from 1996 through to 2016, every decile of Australian society had positive, real wage growth.

During that time, even though several migrant categories more than doubled, unemployment nearly halved. Despite claims to the contrary from the left, Australia’s decades of economic prosperity has been widely shared across society.

Unemployment could have been lower in Australia – our labour market has structural rigidities that keep our unemployment rate above that of the US, for example – but there is little evidence that skilled migration is the culprit.

Much is made of the high numbers of temporary visa holders (more than two million in March last year), but rarely are those figures broken down. Doing so is instructive: 350,000 were visitors, more than 200,000 were bridging visa holders, almost 700,000 were international students and recent graduates, and a further 676,000 were New Zealand citizens.

Not only is there no evidence that immigration has substantially damaged our economy, there is little evidence Australia has imported huge numbers of unskilled, foreign workers or that those we have allowed to come have substantially displaced Australian citizens from the workforce.

Notwithstanding, Keneally is not alone in making the argument we need to cut immigration to protect Australian jobs. Increasing numbers on the right want to slash immigration too; not merely temporary migration as Keneally does, but all migration – on social cohesion, and economic, grounds.

The simple fact is that if there was a benefit to business in delivering a certain type of training, they would be doing so already. If they aren’t, it is because the costs outweigh the benefits.

As Paul Kelly noted in The Australian, there is a challenge to economic liberalism from those concerned with security (both national and economic) as well as economic resilience. As they chase working class voters, right-wing politicians and thinkers in the US and the UK have been questioning their commitment to free trade and immigration.

In their view, larger government isn’t so much a problem as long as it focuses its support on Australian communities. Kelly cites US Republican Senator Marco Rubio who argued “businesses and lawmakers prioritised maximising short-term gains over the long-term security of America, its communities and its people.”

Cutting off the supply of foreign skilled labour is one way of forcing businesses to reorient their focus – and make no mistake; this is about forcing a change to society – favoured by those making this argument. As Keneally put it, this will make businesses “deliver training and reskilling opportunities to Australian workers”.

This is a common theme. Emma Dawson from Per Capita, responding to my most recent piece in these pages on economic reform, also lamented “there is no talk from the private sector about investment in infrastructure or skills.”

Again it’s worth unpacking the generic terms “skills” and “training” because they have many connotations. The main issue here is who should bear the cost and risk.

First, a lot of the more generic ‘training’ delivered to the unemployed is useless, serving only to enrich training providers. Subsidising it further, or making it compulsory, will only result in a proliferation of dodgy providers and scams – as it did in the vocational education sector.

Second, workers are not blank boxes into which skills can be installed like a computer program. The assumption that they can be trained up quickly and easily is wildly optimistic. Many even lack the aptitude or interest for available jobs.

An even bigger issue comes from the difference between a certificate denoting supposed skills in an area and experience proving real competence. Training may deliver the former, yet it is overwhelmingly the latter that is needed.

The simple fact is that if there was a benefit to business in delivering a certain type of training, they would be doing so already. If they aren’t, it is because the costs outweigh the benefits.

Proponents of the need for investment in training are fully aware of this: when they talk about business investment in skills and training, they almost certainly mean that businesses should bear the cost of developing skills AND experience.

In many industries, this was how it used to work. Large businesses, often government-run, heavily unionised enterprises, would take far more apprentices, trainees or graduates than they needed. They would train them up and see them filter out into the broader workforce.

This was only a viable model when market competition was severely restricted. In a global market, with ever-increasing complexity of skills, this is a losing proposition for business.

It is not just the direct cost of paying for training, or the need to subsidise inexperienced workers until their abilities and productivity are worth their wages; it’s the higher wages needed to keep workers once they get there.

Skills and experience are valuable – and portable – qualities. Businesses would bear the enormous cost of developing workers, only for those workers to leave for better opportunities.

Forcing these costs onto business will undoubtedly cause the price of goods and services in Australia to rise. It will also make Australian companies less competitive internationally. It will cost jobs.

Arguments like these are fundamental to the structure of economy post-COVID-19.

Though coronavirus itself is novel, Australia faces the same choices it has in the past. Shall we return to the idea of an open, competitive economy that takes the good, and the bad, from the global economy? One where individual people and businesses make choices about what is best for them (ie. the very definition of the market)?

Those arguing against immigration, or in favour of “Australia-centric” economic solutions, are not calling for a new economic settlement. They are effectively calling for a return to the failed policies of the past. They want to disempower consumers and individuals and instead give that power to government, unions and business.

That “cure” may well be worse than the disease.