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The 457 visa is dead! Long live the TSS?

20 April 2017

The latest changes to temporary migration are more than a rebranding, but they make a complex system even more complicated and are being sold in a way that damages social cohesion

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Welcome to Australia: graphic featuring this week on immigration minister Peter Dutton’s home page.

Welcome to Australia: graphic featuring this week on immigration minister Peter Dutton’s home page.


The federal government is “abolishing” the 457 “temporary work (skilled)” visa and replacing it with a “temporary skills shortage” or “TSS” visa. At first glance, this might look like a rebranding exercise, and while that’s certainly true in some respects, the change also reshapes both temporary and permanent migration in significant ways.

Prime minister Malcolm Turnbull says that the 457 visa has “lost its credibility.” Immigration minister Peter Dutton asserts that “the 457 brand was tarnished beyond recognition.” But temporary skilled migration will continue, so Turnbull and Dutton obviously hope they can alter the public’s perception of this complex and contentious policy area by changing the terminology from “457” to “TSS.” Good luck with that.

Both the manner of the announcement – via a prime-ministerial Facebook post – and the choice of words – “Australia first” – show that this was also an attempt to rebrand and reposition a struggling government. In the course of an interview on AM, the prime minister referred more than a dozen times to putting Australians first, putting Australian jobs first or putting Australian values first. Turnbull’s Trumpish rhetoric is aimed at reversing the voter drift to populist anti-immigration campaigners like Pauline Hanson and makes his celebration of Australia as “the most successful multicultural nation in the world” look mealy-mouthed.

Particularly egregious is the backhanded suggestion that 457 visa holders are somehow undermining “Australian values” (however they may be defined). There’s no evidence to suggest that they are doing much more than working hard and paying taxes, all without drawing on any government benefits or healthcare. They are the sort of people past conservative politicians were wont to describe as “lifters, not leaners.” The reality is less that temporary migrant workers want to undermine Australian values and more that many of them want to embrace them by becoming more fully Australian, as permanent residents and citizens. Turnbull’s cynical language promotes the divisive perception that a significant proportion of temporary migrants are here illegitimately or somehow rorting the system. In the context of increasingly assertive expressions of xenophobic nationalism, this is playing with fire in the pursuit of short-term political advantage.

Yet rebranding is far from the only thing going on here. Beyond the new nomenclature, the government is introducing a confusing welter of changes to the current 457 scheme. Some are substantial and some minor; some are belated responses to a thorough review of the 457 visa carried out when Tony Abbott was prime minister; others run contrary to that review’s recommendations. And though the government claims it is cleaning up a mess created by Labor, some of the changes actually reverse earlier Coalition initiatives.

The most substantial change is the splitting of the 457 program into two distinct temporary skilled migration streams. The first stream – described as a “short-term” TSS visa – allows for a two-year rather than a four-year stay, and can only be renewed once “onshore” (without leaving Australia). A migrant on this “short-term” visa can’t apply for permanent residency and must attest to being a “genuine temporary entrant” – that is, to having no ambition to stay long-term, as is already required of international students. The range of occupations open to “short-term” temporary migrants will be more limited than was the case for 457 visas; 216 occupations have been removed from the previous list of 651 occupations, and fifty-nine others have been restricted (some, for example, will only be available in regional Australia). Much of this is largely cosmetic, though, since many delisted occupations – such as goat farmer or antique dealer – were never used to bring in migrant workers anyway.

The second stream – described as a “medium-term” TSS visa – is valid for up to four years and, as with the current 457, is indefinitely renewable. It will be open to a narrower range of occupations, 183 in total, that have been “assessed as being of high value to the Australian economy and aligning to the government’s longer term training and workforce strategies.” This is a more significant culling of the occupation list, since some of the most frequently used 457 occupations have been excluded, including the top three: cook, restaurant–cafe manager and marketing specialist. Also cut from the list are the occupations of chief executive and university lecturer. This is the sort of detailed government regulation that could misfire badly. As ANU migration researcher Henry Sherrell writes, “Imagine being the chairperson of a Big Four bank or major law firm and not being able to offer potential CEOs a five-year contract due to visa restrictions?”

Unlike their short-term counterparts, medium-term visa holders can apply for permanent residence, although in future they will have to live and work in Australia for at least three years, rather than two, before becoming eligible to do so.

The new visa split is likely to affect the interaction between Australia’s temporary and permanent migration programs in ways that are not necessarily predictable or desirable. Since its introduction in 1996, the 457 visa has developed into a major pathway to permanent residency in what is sometimes described as two-step migration. Immigration department statistics show that around 50,000 temporary migrants on the visa made the transition to permanent residency in 2015–16, making up close to 40 per cent of Australia’s total annual (permanent) skilled migration intake. In three out of four cases, this shift from temporary to permanent status ran via employer sponsorship.


The phenomenon of two-step migration via employer sponsorship has been both a big plus and a big minus for the 457 scheme. It is a plus because it facilitates better matching of skills to positions: rather than migrants landing in Australia to fill part of an annual government quota and then looking around, perhaps unsuccessfully, for a job matching their qualifications (and potentially ending up driving a cab), employers directly recruit candidates to fill specific vacancies, initially on a temporary basis, and then sponsor them to become permanent if they prove a good long-term fit to the needs of the enterprise. The negative is that sponsorship can give employers inordinate power over migrant workers, especially when they are keen to stay in Australia long-term.

Closing the pathway to permanent residency will remove this form of leverage over future “short-term” TSS visa holders, but it will remain, and may worsen, for “medium-term” visa holders. These migrants must now work in Australia for an extra year before becoming eligible for employer sponsorship. Both short- and medium-term temporary skilled migrants will remain vulnerable to workplace pressure in other ways too, because, as with the 457 scheme, their visas are closely linked to their jobs. Temporary migrant workers are unlikely to complain about unfair wages and conditions if they fear that getting sacked means losing the right to remain in Australia. On the other hand, with the introduction of data matching – linking temporary migrants’ tax file numbers to records held by the Australian Tax Office – the government has given itself a swifter and more efficient means of combating workplace exploitation by checking whether employers are at least paying specified wage rates.

The recasting of temporary skilled migration is also likely to make the pathway from temporary to permanent status longer and harder – or, in some cases, to close it altogether. While many 457 visa holders have made a fairly quick and straightforward transition to residency, the image of “two-step” migration doesn’t do justice to the complexity of movement within Australia’s evolving hybrid migration system. Visa holders often take multiple steps, and may jump sideways rather than forwards, as they seek to establish a more stable foothold in Australia. In its 2016 report Migrant Intake into Australia, the Productivity Commission found that the average duration of a “multi-step” pathway to permanent residence was 6.4 years and involved more than three visa grants. This largely reflects the experience of migrants who first arrive in Australia as working holiday-makers or international students before moving onto a 457 visa.

The creation of “short-term” and “medium-term” temporary work visas could extend the multi-step pathway and make it more precarious. While “short-term” skilled work visa holders can’t apply directly for permanent residency, nothing appears to stop them from extending their stay in Australia beyond four years by applying for other temporary visa categories – including, perhaps, a “medium-term” TSS visa. If they don’t have an occupation that immediately qualifies them for a “medium-term” visa, then they might swap to an international student visa and upgrade their qualifications first, which could add years to their stay in Australia. Potentially, too, these temporary workers could be “recycled” – sent offshore at the end of their maximum four-year term and then brought back in on a new “short-term” contract. It remains to be seen whether such manoeuvres are ruled out in the accompanying regulations.

A measure that further complicates the pathway to permanent residency is the requirement that applicants for both of the new TSS visa streams must have at least two years’ full-time work experience “relevant” to the job for which they are recruited. A lot will hang on the definition of relevant, but this would appear to make it harder for international students to transfer to a temporary skilled work visa after graduation. The potential still exists, because an international student can theoretically gain the relevant professional work experience in Australia on a two-year post-study 485 visa. Though foreign graduates, like their local counterparts, often find it hard to move straight from university to a career-related position, this is another way in which the pathway from temporary to permanent may be drawn out.

One part of the Turnbull–Dutton package that hasn’t received much attention is the higher language hurdle for permanent residency. To qualify for a permanent visa under the main pathways of the Employer Nomination Scheme (subclass 186) or the Regional Sponsored Migration Scheme (subclass 187), all applicants will now have to prove that they have “competent” English – that is, achieve a score of six in every component (speaking, reading, listening and writing) of the International English Language Testing System, or IELTS. Previously, an IELTS score of five (“vocational English”) could be sufficient.

The creation of two temporary work streams, the requirement for two years’ relevant work experience and higher English standards for permanent residency may convince some temporary migrants, including international students, to give up on any ambition they had to stay in Australia long-term. But it is hard to predict the full range of possible responses. The government’s new combination of measures may encourage temporary migrants to develop unanticipated workarounds or to extend their stay in other ways, such as undertaking further study or moving on to a working holiday visa.

The risk here is of creating a growing cohort of migrants who are not quite Australian, who contribute to Australian society for long periods without gaining a sense of belonging or accruing any of the rights and entitlements that come with membership of the political community.

What emerges most clearly is that the split of the 457 visa into two streams moves Australia towards a two-tiered system of temporary skilled migration: the upper class visa holds out the conditional prospect that you may eventually be accepted as a full member of “the greatest multicultural nation in the world,” while the lower-class visa makes clear that we want to extract value from your labour but have no other interest in you.


The larger threatening picture painted by Turnbull and Dutton is of 457 visa holders displacing local workers. Dutton told ABC Melbourne Drive, for example, that the 457 visa has created a “big problem” of “foreign workers taking Australian jobs.” Such assertions need to be treated with caution.

There are fewer than 100,000 primary 457 visa holders in Australia, and they make up less than 1 per cent of the total labour force. Even if we include secondary visa holders (partners and children who also have work rights, but who do not necessarily work), then the total count of 172,000 would only equate to about 1.3 per cent of the workforce. It might be tempting to think that replacing all these foreign workers with locals would drop the unemployment rate by the same amount, but such equivalences are simplistic.

About 56 per cent of 457 visa workers are at the top skill level under classifications used by the Australian Bureau of Statistics – in other words, they have skills commensurate with a bachelor degree or higher-level qualification. Another 41 per cent are at skill levels 2 (equivalent to an advanced diploma or associate degree) or 3 (equivalent to a Certificate IV). While qualified locals could potentially replace some of these foreign workers, most employers do not go to the trouble or expense of recruiting migrants if suitably qualified local staff are available. Dutton’s claim that employing foreign workers on 457 visas ahead of locals has become “the default position” is unsustainable.

If there is a problem of migrants displacing locals in employment, it is more likely with working holiday-makers and students than 457 visa holders. There are far more of them – around 140,000 working holiday-makers and 400,000 students – and they more commonly take up entry-level jobs that might also be sought by young Australians. But we must always keep in mind that temporary migrants create jobs as well as take them: working holiday-makers help keep our rural industries running and international students prop up our tertiary education system and pump billions more dollars into the domestic economy through their spending. Skilled workers on 457 visas also create jobs by taking up positions that might otherwise go unfilled and keeping enterprises competitive. Many regional meatworks, for example, rely on skilled slaughtermen and boners from countries like the Philippines and Brazil to stay afloat. Without those offshore workers, they would not have the capacity to employ locals in lower-skilled positions on the production line; plants would close, taking other jobs and services in country towns with them.

Yet Dutton is correct to point out that there are problems and questionable practices in the 457 visa program – such as the extensive recruitment of commercial cooks and restaurant–cafe managers, including in the fast food industry. Together, cooks and cafe managers make up about 12 per cent of the 457 labour force; if chefs are included, the figure rises to 15 per cent. One explanation is that the difficulties in regulating the hospitality sector make it easier for employers to pay below-award wages or demand excessive hours – conditions that most Australian workers would not tolerate.

The Dutton–Turnbull package addresses this problem in several ways: some helpful, others not. First, as already noted, cooks and restaurant–cafe managers cannot be recruited for the medium-term temporary skilled visa, and while these occupations are still on the list for short-term visas, they have caveats attached to the regulations that prevent the employment of migrant workers in “fast food or takeaway food services; fast casual restaurants; drinking establishments that offer only a limited food service; limited-service cafes including, but not limited to, coffee shops or mall cafes and limited-service pizza restaurants.” The attempt to codify every class of restaurant in such daunting detail will create challenges for immigration officers, lawyers, courts and tribunals.


Another part of Dutton and Turnbull’s answer to the perceived problem of protecting Australian jobs is to strengthen labour-market testing by imposing more rigorous requirements on firms to advertise jobs locally before they can employ a migrant worker. Ironically, tighter labour-market testing has long been a core demand of the trade union movement and is detested by business as the kind of red tape that is easily evaded by the unscrupulous but entangles those who try to do the right thing. The Australian Chamber of Commerce and Industry has described it as “akin to asking employers to walk through wet cement.” Labour-market testing was part of the 457 scheme when it was introduced under John Howard, but immigration minister Philip Ruddock abolished it in 2001 because it was ineffective. The last Labor government restored labour-market testing in a more limited form in 2013 and was roundly chastised for doing so by the Coalition, which was then in opposition. In 2014, the independent Azarias inquiry into 457 visas, commissioned by prime minister Tony Abbott, recommended labour-market testing be scrapped again, but his government didn’t accept the recommendation.

The problem with labour-market testing is that it is almost impossible to police, especially in an era of online advertising. Two alternative mechanisms for ensuring that local workers get priority in employment hold out far greater promise.

One is the proposal from Adelaide University legal scholar Joanna Howe for an independent authority with its own research capacity that uses hard economic data and consultation with stakeholders to determine when an occupation is in shortage in a particular part of the country (given that shortages can vary greatly between metropolitan, regional and outback Australia). This expert body would also make recommendations on whether any shortage is best addressed through temporary migration, as opposed to other measures, such as the provision of more local training. The Azarias committee endorsed this model, and the government supported the recommendations in its response to the report, yet the resulting Ministerial Advisory Council on Skilled Migration doesn’t appear to be equipped or resourced to do the necessary work.

The second potential mechanism to ensure that local workers are the priority pick for employers is a stronger price signal. Migration expert Henry Sherrell has championed this idea for many years; he argues that increasing the fee that firms pay for employing temporary migrants would focus employers’ minds and “ensure they look to potential Australian workers first.” The extra revenue raised could be invested in local training, particularly for the young and the long-term unemployed, who struggle to break into the labour market because they lack skills. Vocational education is easily the most important and neglected pathway for getting disadvantaged Australians into jobs

The government may be moving in this direction: it has foreshadowed that the new TSS visa system will include “a strengthened training obligation for employers sponsoring foreign skilled workers to provide enhanced training outcomes for Australians in high-need industries and occupations.” The prime minister says that details of the training fund will be announced in the budget.

This is by far the most promising initiative to come out of the changes to temporary migration, and arguably has little to do with migration at all. It is all too easy to point the finger at foreign workers taking Australian jobs when the real issue may be that chronic neglect has left our domestic vocational education and training system unable to properly equip domestic workers for the needs of the economy. Let’s hope that the May budget produces a potent and effective package to revitalise vocational education, funded in part by a new training levy on TSS visas. But I wouldn’t hold your breath. •

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Right:

Change of tack: prime minister Malcolm Turnbull announcing the replacement of the 457 visa program in Canberra on Tuesday. Lukas Coch/AAP Image

Change of tack: prime minister Malcolm Turnbull announcing the replacement of the 457 visa program in Canberra on Tuesday. Lukas Coch/AAP Image