How the 457 program creates employment in the Australian labour market

One concern that we hear from time to time is that the 457 program is being used to take jobs from Australians. We understand why people are concerned about this – of course Australian businesses should be hiring and training Australians first.

The 457 program is designed to ensure businesses hire locally first. Not only do we believe the program is meeting this goal, but in the process, overseas workers are stimulating growth in areas with labour shortages, leading to more employment opportunities elsewhere in the economy.

Below is a graph that shows the rate of lodgements for 457 visas compared with the ANZ job advertisement index.

 

The x-axis is a simple time line from January 2003 to the current period. The y-axis shows the change of both job advertisements and visa applications since January 2003. This index tells us that in January 2006, there were about double the amount of applicants and advertisements than in January 2003.

What are the important messages we can take from this? The data clearly shows that despite some small variations along the way, as job vacancies in Australia grow, and there are not enough skilled Australian workers to fill the positions, businesses will look to overseas workers to fill the vacancies. Importantly, the opposite is also demonstrated. As job growth slows, the use of overseas workers also slows.

An interesting sidenote is the ‘spike’ in visa applications which does not correlate to the job advertisements. This happened due to the introduction of an English language requirement for the 457 program. Despite this blip, business as usual established itself over the longer-term.

Another graph, showing the correlation between the unemployment rate and visa applications of 457 workers, also shows how the program acts to employ Australians before overseas workers.

This graph is a little bit more complicated but tells the same story. The x-axis is still showing the time period from January 2003 to the current period. However the y-axis now shows two indexes. The left side is again a base rate of visa applications but the right side shows an inversed unemployment rate.

When unemployment is low (and fewer Australians are available in the labour market) businesses start to look overseas to fill vacancies. That is, businesses employ overseas workers when they struggle to find Australians to perform the work.

So why do businesses employ Australians before overseas workers? Simple – cost. It is cheaper to employ local labour. There are no overseas recruitment costs, no immigration fees and no obligation to provide travel costs to overseas workers.  Plus the additional time spent on HR matters can be significant.

The 457 program helps to address labour shortages, ensuring they do not constrain business activity and jeopardise Australian jobs. Rather than taking jobs from Australians, the program is an important cog in economic growth and the creation of jobs for Australians.