Australia is now running a predominantly low-skill migration system. People from this system form a material proportion of the younger workforce. Because of visa conditions, many of these migrants have incentives to work for less than minimum wages, and there is anecdotal evidence that many do. It is impossible for data sources on the Australian labour force to pick up all of this phenomenon. It is possible that the scale of this influx to the labour market is depressing wages and increasing under-employment specifically for low-skill younger workers. The primary policy implication is the interaction between Australia’s minimum wage system and its migration system. If Australia is going to run a substantial lower-skill migration system, and if it is committed to a minimum wages regime, then there should probably be more enforcement. In particular, the penalties are clearly far too low. At the moment, the major risk for an underpaying employer is that they might have to pay a portion of the wages that they should have paid in the first place. In terms of pure incentives, it is rational for many employers to underpay. That’s particularly the case if the employer’s competitors are underpaying. If there is little consequence for breaking the rules, then the overwhelming incentive is to cheat – repeatedly. It is likely that there would less underpayment, despite migration, if the penalties for underpayment were higher – in particular if employers who systemically materially underpaid could go to jail – and if there were rather more resources dedicated to effective enforcement.28 It may also be that some visa conditions need to be rethought. Some conditions effectively give employers enormous bargaining power, and facilitate underpayment of wages. These conditions include the limit on international visitors working no more than 20 hours per week, and the additional residency permitted to working holiday makers who work for a period in specified regions or in the agriculture industry. While these conditions serve public policy purposes, they need to be weighed against the cost of the extent to which they undermine Australia’s minimum wages regime. And policy makers should consider alternative conditions that would serve the same public policy purposes, but give employers less bargaining power
