KELVIN'S BLOG: Economists say lower immigration will lift wages

A lot of pre coronavirus economic commentary was to the effect that the Australian economy has been struggling due to a lack of wages growth. Essentially wages have been stagnant for years.

It was very interesting, therefore, to read Gareth Aird, Head of Australian Economics at the Commonwealth Bank, and Leith van Onselen, of Macrobusiness, concluding that the predicted lower immigration as a consequence of the coronavirus pandemic will help lift Australian wages.

They say this will happen because lower immigration will reduce labour overcapacity and improve the bargaining power of workers.

The Government has announced that it expects Net Overseas Migration to fall by around 30% in 2019-2020 and by around 85% in 2020-2021. The economists say that Australia has for years now run a high Net Overseas Migration program based on the notion of skills shortages, even when there has been plenty of slack in the labour market.

In 2018/2019 the “Skill stream” accounted for 70% of the total migration program. For workers, being in an industry with a skills shortage means that your bargaining power should improve and higher wages should be forthcoming. But the high intake of skilled workers has been a pre-emptive strike against skills shortages and has prevented employees from increasing their wages.

The economists believe that wage growth is going to be very weak in Australia for years now due to the impacts of the coronavirus pandemic on unemployment and underemployment rates, with resulting increase in labour market slack.

However falling Net Overseas Migration will reduce this slack, and assist the bargaining position of Australian workers.

Of course there are some people who say we should still run a high migration program, irrespective of its impact on Australian workers and their wages, because we have a moral duty to help people from other countries who are less fortunate then ourselves. It is true that we have a moral duty to help people less fortunate than ourselves, and our Aid Programs should reflect this.

However Skilled Migration is not about Australia helping those who are less fortunate. It is about Australia robbing poor countries of their best and brightest. It isn’t much different from the behaviour of the colonial powers in taking the mineral resources of the colonies back to the home country. It is essentially neo-colonialism, and we should take this opportunity to return the Skilled Migration program to the small numbers it involved 20 years ago.

MacroBusiness article:

The Hon. Kelvin Thomson
National Committee
Sustainable Australia Party