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
https://grattan.edu.au/wp-content/uploads/2019/07/RBA-wages-and-migrants-as-submitted-22-July.pdfRaider
