Fixing the 457 visa for temporary foreign workers

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The subclass 457 visa is Australia’s main temporary work visa for so-called skilled workers. The visa has become a highly contentious political issue. The Federal Labor Opposition and the ACTU vehemently oppose this visa in its current form, arguing that it threatens jobs and training opportunities for Australians, undermines wages and working conditions and exploits foreign (non-resident) workers. Both portray 457 visas as part of the government’s broader industrial relations strategy.

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Growth in 457 visas has been so rapid that in 2006-07, for the first time in Australia’s history, there will probably be more temporary skilled 457 visas granted than skilled permanent residence visas. This is a deliberate Federal government strategy. It has frozen the permanent skilled migrant intake at 2004-05 levels, and opted to aggressively promote employer-sponsored temporary visas as the best way to meet Australia’s skilled labour needs.

The projected number of 457 visas granted in 2005-06 is around 40,000 primary applicants and 71,000 including accompanying family members. This is a massive increase of 43 per cent over 2004-05, with even more likely in 2006-07.

Key features of 457 visas

Australia has a more deregulated temporary skilled visa than either the US or the UK. There is no US-style cap on the annual number of 457 visas and 457 visa rules do not require employers:

  • to show that there are no Australian citizens or permanent residents able to do the work (there is no ‘resident labour market testing’ except in regional areas); or
  • to pay market rates to 457 visa-holders. Instead, employers must pay the Australian award wage, or the gazetted 457 minimum salary, whichever is higher. From May 2006, the 457 minimum base salaries are generally $41,850 and $57,300 in some ICT occupations. Wages in regional areas are 90 per cent of those rates ($37,665 and $51,570 respectively). These 457 minimum rates are below the market standard for many skilled occupations.

457 visas: the evidence

The Federal government publicly maintains that the problems with the 457 visa are only “around the edges” and not at the heart of the program. But in July 2006, the Federal and State governments referred a wide range of 457 visa issues to a joint Federal-State/Territory task force. According to media reports, virtually all aspects of the 457 visa are being examined, including the contentious issues of wages for 457 visa-holders, more stringent labour market tests, English language requirements, and more co-operative compliance monitoring.

Even on the limited evidence the government makes available, concerns about key aspects of the 457 visa are justified.

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457 salaries and market rates

If 457 wages and salaries are undercutting market rates, these visas are not only putting downward pressure on Australian wages but are effectively a government subsidy to some employers, giving them an unfair competitive advantage.

It is not possible to determine if actual salaries paid to 457 visa-holders are undercutting market rates. This is because the Department of Immigration and Multicultural Affairs (DIMA) does not even collect information on actual base salaries paid by employers to 457 visa-holders through its compliance monitoring system or any other regular means.

The DIMA 457 compliance monitoring system only asks employers whether 457 visa-holders are being paid the original base salary determined when visa nominations were first approved.

A high proportion of 457 visas have been accepted at the minimum permitted salary which is below market rates for many skilled occupations. Between November 2003 and February 2006, 30 per cent of all 457 visas granted onshore were approved by DIMA at or below the gazetted 457 minimum salary – 18,300 out of 61,500 visas. (Gazetted 457 minimum salaries were between $34,075 to $39,100 at that time; and visa rules allowed wages below the specified minimums in “regional areas” of Australia up until May 2006.)

Some employers are not even paying DIMA-approved rates. Unpublished DIMA 457 compliance data for 2002-03 shows that of the 2,422 employer site visits that year, 27 per cent or 655 employers were referred to DIMA for a ‘possible breach’ of their sponsorship undertakings, including payment of DIMA-approved salaries. These were not separately identified.

The limited data available on actual incomes (not salaries) of 457 visa-holders also suggests some are paid below market rates. A DIMA-sponsored survey of some 457 visa-holders in 2003-04 found some reported relatively low incomes:

  • 25 per cent of 457s in the trades group reported average annual incomes of less than $35,000, around $13,000 less than the average ordinary earnings for a full-time male tradesperson at that time
  • One third of 457 professionals reported incomes under $50,000, including 3 per cent below $35,000 (when the median starting salary for new graduates with a bachelor degree was $38,000 in 2004).

The survey report concluded: ‘it would appear that many 457 visa-holders in occupations other than managerial and professional were paid a salary that was rather close to the minimum required by DIMA for the 457 visa sub-class’.

457 visa impacts on jobs and training opportunities in ICT

The 457 visa program (along with other factors) has contributed to greatly reduced demand for IT graduates since 2001 and poor graduate job outcomes leading to plummeting enrolments by young Australians in IT courses.

Since 2001 the proportion of Australian computer science graduates unable to find full-time work has been at record or near-record levels (25-30 per cent) and enrolments by Australian students in university IT courses have fallen by probably 50 per cent, to less than 9,000. There are now fewer Australians commencing IT courses than in 1996 when the Howard government first came to office.

On June 30 2004, there were an estimated 5,000 foreign nationals on 457 visas working in ICT in Australia, including 2,200 people under age 30 working as computing professionals. At the same time, some 2,000 computer science graduates and postgraduates were unable to find full-time work. On the available evidence, some of these ICT workers on 457 visas have become substitutes for Australian IT graduates.

Despite clear evidence of serious oversupply of domestic ICT graduates, DIMA continued to grant relatively large – and increasing – numbers of 457 visas in ICT in the 4 years to 2004-05. One half of these 457s were under age 30, and 80 per cent were under 35.

  • The number of 457 visas granted to Indian nationals grew by nearly 90 per cent (from 890 to 1,700 per year), accounting for the total growth in 457 visas in ICT. As a result, Indian nationals made up 42 per cent of all 457 visas granted in ICT by 2004-05.
  • 457 visas in ICT, especially for Indian nationals, were approved at low salaries compared to prevailing market rates, and even to graduate starting salaries. (Actual salaries paid are not known.) In 2004-05, in the computing professionals occupation where most graduates seek entry-level jobs:
  • Nearly one quarter (23 per cent) of Indian nationals were approved at salaries of $38,000 or less, the median starting salary for computer science graduates (vs 17 per cent of others), and 43 per cent were accepted at or below the minimum ICT 457 salary (vs 24 per of others).

There is no evidence that 457 visa-holders in ICT (as a group) have ICT skills which are in shortage in Australia.

Policy changes needed to 457 visas

A well-functioning temporary skilled visa program is an essential part of a modern open Australian economy. But if the government wants community support for the 457 visa program, it needs to make changes that address legitimate concerns about the visa.

First and foremost, there should be much greater transparency and public disclosure of information about the 457 visa program. This includes information about the individual jobs for which 457 visas have been approved, including DIMA-approved salaries; and aggregated data on 457 visas, beginning with the industry sector and/or detailed occupation groupings, such as ICT professionals, metal trades, nurses etc. This information should be posted on the DIMA website with open access to all, free of charge.

Second, DIMA should regularly collect and publish data on actual salaries paid to 457 visa-holders by occupation and locality compared to the relevant market rates. If DIMA cannot collect data on actual salaries paid, then a properly authorized body should take responsibility for matching DIMA 457 data against tax records of 457 visa-holders held by the ATO (eg, perhaps an independent agency like the Commonwealth Auditor-General).

Third, 457 visa rules should require employers to pay market rates. This is the single most important change needed to the visa rules, because it offers the greatest protection against cheap labour. Market rates should also apply to intra-company transfers.

Fourth, DIMA should review its blanket opposition to labour market testing (advertising job vacancies) in the 457 program. There are clearly some situations where labour market testing is not warranted but it should be mandatory in all other cases.

Fifth, DIMA should notify the State government departments in charge of workplace relations of the names of 457 employers within their jurisdictions, and details of their 457 visa-holders. Without that information, State authorities cannot monitor compliance with workplace health and safety and other laws by 457 employers.

Sixth, the Federal ALP position announced in May 2006 should be implemented. Under this position employers sponsoring foreign workers would have to detail their record of redundancies in the previous 12 months and demonstrate that “the qualifications of the proposed visa recipient(s) and the work to be performed by them are substantially different from those of the employee(s) who were made redundant.”

Seventh, labour hire companies should not be eligible to be “sponsoring employers” of 457 visa-holders. Under current DIMA 457 visa rules, they are eligible even though sponsoring employers must be responsible for day-to-day supervision of 457 visa-holders and have a satisfactory training record – two conditions which labour hire companies would struggle to meet.

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