Occupational targeting in Australia’s skilled migration program

1. Occupational targeting in Australia’s skilled migration program Mark Cully Chief Economist Centre for the Economics of Education and Training Melbourne, 30 October 2009

2. Outline and Context • Migration involves a two-stage selection process • prospective migrants choose to apply for entry to Australia • government sets choice rules for sponsors (employers and State governments) and choose independent applicants • Can test the effectiveness of government rules by comparing migration outcomes in several ways to control for rule differences • for example, sponsored vs independent vs free movement of labour • Purpose here is to test effectiveness of occupational targeting rules in selecting permanent skilled migrants. This work forms part of the Government’s review of the Migration Occupations in Demand List. • Effectiveness assessed by: • how are migrant skills deployed • migrant contribution to population, participation and productivity

3. SLIDE 1 This is Australia’s first recession where migrant inflows have risen

4. SLIDE 2 Migrant flows are dominated by temporary long-stay movements and free movement Net Overseas Migration, 2008-2009 OUTFLOW INFLOW

5. SLIDE 3 Australia has four broad categories of skilled migration Sponsored Not Sponsored Employer Nomination Scheme (employer) Regional Sponsored Migration Scheme (Govt) Business Skills (Self) Not points tested Capped (dependents count towards cap) May be onshore or offshore Priority processing Skilled Independent Points tested Capped (dependents count towards cap) May be onshore or offshore Order of processing priority: CSL, MODL and Remaining applicants Permanent Residence The broad categories of skilled migration in Australia Skilled Graduate Not points tested Uncapped Onshore only Temporary long-stay business Not points tested Uncapped May be onshore or offshore Temporary Residence

6. SLIDE 4 Most skilled visa grants in 2008-09 went to temporary migrants. Almost half of visa grants went to people already in Australia. Of the 4 broad categories of skilled migration, temporary sponsored was the largest in 2008-09 Among primary applicants, a majority were onshore in Australia when granted a visa. Accompanying dependents count in total, and made up half of skilled visa grants in 2008-09. They have full working rights in Australia.

7. SLIDE 5 Australia’s points test places most weight on occupational targeting Up to 115 points are available in the three threshold criteria. The current pass mark for an independent skilled migrant is 120. There are between 40 to 80 points for occupation. Threshold criteria Bonus factors

8. SLIDE 6 Australia uses three occupational lists to target independent skilled migrants with particular skills Skilled Occupation List (SOL) Migration Occupations in Demand List (MODL) Critical Skills List (CSL) 60 point occupations 50 point occupations 40 point occupations

9. SLIDE 7 The Migration Occupations in Demand List responds to the economic cycle, but with a lag Decreasing unemployment MODL identifies occupations in national skill shortage The number of occupations on the MODL is inversely related (with a lag) with Australia’s unemployment rate. Increasing number of occupations on the MODL

10. SLIDE 8 Applications for temporary skilled sponsored visas closely track advertised job vacancies This spike is attributable to applicants lodging prior to the 1 July 2007 revision of the English language requirements This migration flow is pro-cyclical, serves as an automatic stabiliser in times of labour market adjustment

11. SLIDE 9 In 2007-08, 2 out of 3 independent skilled visas were granted to applicants who nominated an occupation on the MODL The proportion of applicants using the MODL has increased from 24 per cent in 2004-2005, to 63 per cent in 2007-2008. However, MODL points may not be needed to pass points test. We estimate that around one in ten onshore applicants with MODL points did not require them to pass. For offshore applicants, the proportion is much lower, at around one in four.

12. SLIDE 10 Sponsored migrants are most likely to make use of their skills. The MODL is highly effective in occupational targeting. • 18 months after arrival: • almost 4 in 5 sponsored skilled migrants in a skilled job • half of those nominating a MODL occupation were employed in the exact same occupation • only 2 in 5 of those with lower occupational points were in a skilled job

13. SLIDE 11 Is Australia’s skilled migration program succeeding in bringing in younger migrants, who work more and earn more? Are they earning more? (some are, some aren’t) Are they younger? (yes, very much so) NP G NP 60 G M Are a greater proportion in full time work? (yes, very much so) NZ <60 F NZ <60 60 F M NP M <60 60 NZ G F (F) Family entrants (NP) No points test (M) MODL occupation (60) 60 point non-MODL occupation (<60) Less than 60 point occupation (NZ) New Zealand Born (G) General population

14. SLIDE 12 Tighter occupational targeting would have labour market benefits Skills Australia has suggested an approach to workforce planning that identifies priority occupations for which Australia needs to guarantee a future supply. Targeting these occupations for independent migrants is likely to have participation and productivity benefits relative to the status quo.

15. Summary Messages • Australia’s processes for selecting independent skilled migrants are, at an aggregate level, effective • especially relative to non-selected migrants (family stream and NZers) • but less effective than when sponsors choose • The role of specialised assessing authorities is a complementary mechanism in identifying independent skilled migrants who have the skills and competence to operate in the Australian labour market • Occupational targeting (through a MODL style instrument) is effective for meeting specific skills in demand, but sponsored migration is more effective in putting skills to use