Wage thresholds better than skills lists to determine migration

The Productivity Commission has recommended doing away with prescriptive skill shortages lists to determine temporary and permanent migration in favour of minimum wage thresholds.

The Productivity Commission said employers were best placed to decide where expertise gaps in the workforce existed. Picture NCA Newswire/Gaye Gerard

The Productivity Commission has recommended doing away with prescriptive skill shortages lists to determine temporary and permanent migration in favour of minimum wage thresholds of at least $70,000.

The PC, in its five-yearly flagship report on how to boost the nation’s economic speed limit, said employers were best placed to decide where expertise gaps in the workforce existed.

Moreover, the government “should abolish visas with a poor rationale and questionable benefits, such as the Business Innovation and Investment permanent visa program”, which the report said “does not achieve its policy aim and has poor fiscal outcomes”.

Set a much higher minimum wage threshold and then let employers decide where they need overseas workers the most, the PC says. Picture: Jake Nowakowski

With business groups demanding action to facilitate more access to overseas workers, the report said “to improve the productivity dividend from skilled migration, the Australian government should move away from relying solely on skilled occupation lists for both temporary and permanent skilled migration”.

In place of lists, there should be wage thresholds for employer-sponsored skilled migration, it said, including age-contingent wage thresholds for sponsored permanent migration.

The PC said the income threshold for temporary skilled migrants should be “well above” the current $53,900 a year. The income threshold for the ­employer-sponsored permanent visa should increase with age, it said, though migrants over a certain age would cease to be eligible.

The commission endorsed the Grattan Institute’s proposal that permanent employer sponsorship should be available for workers in any occupation earning more than $85,000 a year, and temporary sponsorship should be available for migrants in any ­occupation who earn more than $70,000 a year. “Thresholds around the levels specified above are high enough to make skill lists redundant and to avoid concerns about displacing lower-wage incumbent workers, and low enough not to eliminate migration of many valued skilled workers,” the report said.

The shutting of international borders during the pandemic followed by a powerful labour market recovery out of shutdowns amplified skilled labour shortages that threaten to be a drag on economic growth.

With some of the most critical workforce shortages in the care economy, the PC recommended introducing a pilot special visa scheme for jobs in government-dominated industries such as aged and disability care – “but only if these are facing likely enduring and significant labour shortages that are weakly responsive to wage increases”.

Although Jim Chalmers has played down the prospect of the government running with the bulk of the PC’s recommendations, developing a more ­demand-driven immigration system may align with emerging federal policy.