Opinion & Commentary
Seasonal migration is not a solution
The World Bank recently joined a growing list of organisations putting pressure on the Government to open its doors to unskilled guest workers for fruit picking and processing.
Sections of the media, academics, farmers' organisations and Pacific governments all claim the scheme is a win-win deal, with benefits accruing to labour poor Australian farmers, cash poor Pacific guest workers and, most prominently, Pacific governments faced with high unemployment and rising social instability. There is no doubt the region is in trouble.
As the Government numerously (and mournfully) points out, the Pacific is our backyard, and Australia cannot escape the effects of its failure. For 30 years across the Pacific, economic growth has barely kept pace with population growth so countries are at best stagnating and at worst getting poorer. Each year about 200,000 young people join an army of 1.5 million unemployed and underemployed.
But a guest worker scheme in this context, even one that grows to 38,000 workers a year, as the World Bank suggests, would have almost no impact on the numbers of unemployed and underemployed in the region.
It may relieve some pressure from Pacific governments, but to make substantive inroads into unemployment and underemployment, more pressure on governments, not less, is needed to carry through reforms and create jobs in farming, manufacturing and the services sector.
Seasonal migration is not a substitute for economic development. The lucky workers selected as seasonal ''guests'' would undoubtedly earn more money in Australia than in their home countries, but these gains would be brief.
At the end of their stay, workers will politely be asked to go back to their home countries - back to lives of joblessness and hardship in the absence of reform. It is argued that money earned in Australia by workers could be used as a development tool in the Pacific.
But the use of remittances in the Pacific has been intensively studied and evidence shows that they are spent mostly on the consumption of processed food, beverages and other consumer durables. Limited investment occurs in education and housing, but not enough to add to the development of the region.
Where remittances have been a useful tool for growth, such as in South Korea and Taiwan, they have been married with good domestic economic policies. So without domestic reforms, remittances for development simply won't work. It is true Pacific guest workers could immediately be used to plug a rural labour shortage, but they would do so at a higher financial and opportunity cost than using existing sources of labour. Additional financial costs arise from accommodation, airfares, health and security screenings and other ''search costs''. Monetising these additional costs into an hourly rate would push wages as high as $25-$30 an hour - double the current rate.
The arithmetic is simple enough: same wage plus additional costs equals more expensive labour. So to be economical for employers, it's likely the scheme will have to be subsidised by workers or taxpayers.
The opportunity costs arise from not employing existing underutilised labour. Some 200,000 Aborigines in rural and remote areas who face chronic unemployment are obvious candidates for work. Their human capital characteristics are similar to Pacific islanders in that they have low English and literacy skills, so fruit picking and horticulture offer an ideal introduction into the labour force.
With a sixth of the working age population reliant on welfare, the challenge for Government should be to unlock this hidden supply of labour and create incentives to increase workforce participation.
Australia has had great success with permanent migration, and long-term migrants should continue to be welcomed. We have largely avoided the alienation and unemployment of migrant youth that is evident overseas by sticking to a migration policy that is selective and permanent.
International experience shows that integration becomes increasingly problematic as selectivity is diluted. Migrants in Denmark, for example, are twice as likely as domestic workers to be unemployed, three times as likely in Finland, and four times in the Netherlands. Such disparities do not exit in Australia, where the average migrant is better educated and has the same employment and workforce participation characteristics as the rest of the population.
The risk of creating a precedent that overturns decades of sound migration policy is a high price to pay for a policy that would have only symbolic resonance. Rather than symbolise a commitment to the region with a guest worker scheme, Australia would make a far greater contribution by supporting the reforms that are essential for a rapid acceleration of growth that will bring higher living standards for all.
As it stands, the scheme would be costly for Australia and have limited benefits, and possibly considerable costs, for the majority of the people in the Pacific.
Gaurav Sodhi is a Policy Analyst at The Centre for Independent Studies.
