Work and Holiday Visa, is it a pointless visa?

[Big A.D.]

For example lets say we got rid of the work and holiday visa and drastically reduced the number of skilled migration visas, etc and instead we made it easier and more attractive for foreign investors and business people and wealthy pensioners to come and live in Australia. We could replace a lot of workers with business people and investors who create jobs instead of competing with locals for existing jobs.

This is the neo-conservative fantasy that if government just got out of the way and let people with money do whatever they liked then everything would be great.

There are four factors to production:

Labour
Land
Capital, and
Entrepreneurship

"Let's get all the rich people to come here" is not a plan, it's a small part of a very complex system that requires equilibrium to function properly. You can't give capital free reign to go wherever it likes without extending the same right to labour, otherwise the economy becomes unbalanced.

It's not like we don't have more pressing problems in the other areas either: the Australian definition of "entrepreneurship" has basically become a a case of buying an investment property, taking a tax deduction on the holding costs, flipping it to someone else a few years down the track and taking a tax deduction on the profit.

Enacting protectionist labour policies isn't going to help with the way we mismanage land and enterprise incentives. For example...

For example Australia lets in all these foreigners but our infrastructure is not keeping up with population growth.

That's our own stupid fault for not managing our infrastructure requirements very well. Shutting down the free flow of people is treating the symptom, not the cause of the problem.

How about for example we put a special type of investor subclass visa where if a foreigner can pass a police check and invests $1 million AUD into approved residential property development (I am sure property developers would quickly assemble funds/schemes for them to invest in) or into a government public private partnership infrastructure investment fund, or an approved tourism or agriculture business, etc then they get automatic permanent residency. We could even give them tax breaks for their investments.

We do exactly that already.

You start out on a 188 sub-class visa and then, depending on your situation, you can migrate here permanently e.g. 888 visa.

 

[mmm....shiney!]

I’m in favour of incentivising immigration and attracting business investment, you’ll find a lot of posts on this forum by both myself and bordsilver about this very issue, we recommend both tightening entry requirements and adopting a free-market approach to migration that puts a market price on an individual’s desire to enter this country. But the topic is about temporary working visas, and the critical point about these is that employers use them out of need. Many of the jobs are not suited to locals as Big A.D. pointed out and often large projects require a guaranteed temporary workforce before any investors will back those projects. Gina Rinehart’s Roy Hill project being an example of the latter.

And Mmm...shiney! Before you say "why don't we just make it easier for everybody to come to Australia?"

I’ve never argued that.

 

[mmm....shiney!]

There are four factors to production:

Labour
Land
Capital, and
Entrepreneurship

"Let's get all the rich people to come here" is not a plan

+1

We’ve known this to be true for 250 years, politicians, central planners and crony-capitalists however ignore this truth because it advantages them at the expense of others.

Edit to add: as far as your “equilibrium” comment, there is no such thing. Equilibrium is unachievable. In the market there is only a tendency to equilibrium, this is upset when central planners interfere in their attempts to create what they perceive equilibrium to be.

 

[Bargain Hunter]

Big A.D. I know somebody who works as a migration agent believe me for those people trying to get 188 or 888 visas its still a pain in the ass process. All I am saying is a lot of other countries are managing the process a lot smarter then we are.

mmm....shiney! a few decades back larger companies would spend more time and money trying to train local employees up from scratch but over time the political and immigration system changed and they became more short-term focused, realizing that it is easier to bully the government into letting them import cheap foreign labour. I am sure if the government cut corporate taxes and regulations but at the same time tightened the importing of foreign labour then it would be viable for people like Gina Reinhart to employ locals and pay the higher wages.

All I am saying is that we can only let so many people into Australia without it becoming an overcrowded hellhole so why not focus on letting the wealthy (i.e. the capital) come in and create jobs? That is what a lot of other countries do and it seems to work well.

 

[mmm....shiney!]

I am sure if the government cut corporate taxes and regulations but at the same time tightened the importing of foreign labour then it would be viable for people like Gina Reinhart to employ locals and pay the higher wages.

How does Rinehart secure a guaranteed domestic workforce of say 1500 workers for say an 18 month period at some future point in time before she even gets finance?

Edit to add: we’re going around in circles now anyway. The bottom line is that business owners use temporary foreign workers because it is more profitable to do so. If we want to employ more local people then we have to make it more appealing to employers to do so, and the best way would be to lower wages.

 

[Bargain Hunter]

mmm....shiney! Are you trying to tell me in a country with 24 million people and an unemployment rate north of 6% (with under-employment probably at 15%+) that a company cannot secure 1500 workers? Of course they can, its purely an issue of the wage rates they are willing to pay. In a diversified and well educated economy of 24 million people you can almost always find the right people who can do the job properly. The only question is are you willing to pay them enough so that they will take the job.

Let's reduce mining royalties and corporate taxes and they will be able to afford those higher wage rates. Besides we need to incentivize businesses to invest more in apprenticeships and training and promoting staff (e.g. extra tax incentives plus much lower wage rates for trainees (e.g. expanding the definition of apprenticeships) . Importing foreign labour is a short-term band-aid solution.

 

[mmm....shiney!]

mmm....shiney! Are you trying to tell me in a country with 24 million people and an unemployment rate north of 6% (with under-employment probably at 15%+) that a company cannot secure 1500 workers?

Yep.

 

[Bargain Hunter]

mmm...shiney! Its just not true. Gina Reinhart just wanted to secure her labour at cheaper wage rates. With the mining industry doing poorly compared to 4 or 5 years ago there are lot's of experienced people who got retrenched and are looking for work. Now I have been to countries in Asia and South America where due to the culture and economy, etc you almost can't find good employees at all. But Australia is not some backwards poor country with these sorts of cultural issues. I believe in Australia if you pay enough you can always find the right people for the job without too much difficulty.

I am sure if the government said to Reinhart "if you only employ Australian citizens and permanent residents at Roy Hill, we will abolish the mining royalties you would have to pay for the first ten years of the project" that she would have accepted the offer.

Besides even if what you said was true (it isn't) shouldn't we be incentivizing people like Gina Reinhart to train and up-skill locals instead of using a band-aid solution? After all if we just import foreigners to do everything meanwhile tax payers have to foot the centre-link bill for the unemployed locals that is really not a smart long-term system.

 

[mmm....shiney!]

Maybe you should be the CEO of Hancock Mining.

 

[mmm....shiney!]

Besides even if what you said was true (it isn't) shouldn't we be incentivising people like Gina Reinhart to train and upskill locals instead of using a band-aid solution?

My position is that we should leave business owners to employ who they think best to maximise their gains and productivity.

 

[Big A.D.]

Let's reduce mining royalties and corporate taxes and they will be able to afford those higher wage rates.

Yeah, and let's throw in loans, delayed royalties, railway lines and unlimited water rights while we're at it.

The five largest gas projects built here in the last 10 years are not going to pay any royalties until 2030 and possibly none after that either.

13% of that new capacity is Australian owned, 87% is foreign owned.

So...no royalties and (roughly) 87% of the profits go offshore to whichever Bahamas shell company the multi-national routs the cash through.

Sure, we really need to offer these companies more incentives because clearly giving them so much gas that it's cheaper to buy Australian gas in Japan than it is to buy Australian gas in Australia isn't going far enough.

 

[Bargain Hunter]

"Let's get all the rich people to come here is not a plan"

Well actually Australia leads the world (we are literally number one at 11,000+ millionaires moving here in 2016) for the number of millionaires coming here:
http://fortune.com/2017/03/01/millionaire-immigration/

However even though that is world leading, thats still only 11,000 people. Imagine if we replaced 100,000 or even 200,000 other types of migrants we typically get with foreign millionaires instead? Imagine the jobs that would create for Australia.

 

[Bargain Hunter]

My position is that we should leave business owners to employ who they think best to maximise their gains and productivity.

I am not saying we tell business owners who to employ, I am merely saying we should provide a carrot and stick incentive system for them to employ locals over foreigners. If they still want to employ foreigners then so be it. Or do you prefer that businesses keep importing foreign labour while you help fund the centre-link bill for our unemployed locals?

 

[Bargain Hunter]

Look at whats happened in U.S.A. over the past 20 or 30 years. They import huge amounts of cheap foreign labour, and wealth inequality has skyrocketed. Inflation adjusted wages for the majority of workers hasn't risen since the 1960s!
http://www.pewresearch.org/fact-tan...rs-real-wages-have-barely-budged-for-decades/

Despite all the economic and productivity growth. Also if you look at inflation adjusted household wealth you'll see that the bottom 90% in the U.S.A. have not made any gains in decades and have actually gone backwards over the last decade. Meanwhile the top few percent and the large corporations keep enjoying record incomes and net worth year after year.

Yes, I admit in the U.S.A. there are other issues going on apart from the importation of low cost labour that are causing these problems but its certainly a major factor. We need to shift our focus onto importing more investment capital whilst simultaneously importing less foreign labour, lest we end up like the U.S.A. Importing foreign labour merely lowers wages so that corporations can make record profits meanwhile taxpayers foot the bill for increased food stamps, unemployment payments and other transfer payments.

 

[Big A.D.]

Well actually Australia leads the world (we are literally number one at 11,000+ millionaires moving here in 2016) for the number of millionaires coming here:
http://fortune.com/2017/03/01/millionaire-immigration/

However even though that is world leading, thats still only 11,000 people. Imagine if we replaced 100,000 or even 200,000 other types of migrants we typically get with foreign millionaires instead? Imagine the jobs that would create for Australia.

"People with money" is not the same as "people who will create jobs".

Yeah, we really need a load of millionaires to migrate here and bid up the cost of our housing even more.

 

[Bargain Hunter]

Big A.D. that is a very easy problem to work around. For all these millionaires getting business or investment type permanent residency visas we could make rules that they can only purchase off the plan houses or apartments (which developers will build for them if they can know they can pre-sell it to them) or purchase land with development approval in place to build their own residence. That way they are adding to housing stock and not pushing up the price of existing houses. Its very simple to do. We could also put another rule that they can also choose the option to purchase existing properties where the fair market value of the property exceeds $5 million dollars.

Besides its not as if millionaires are competing with first home buyers for the same houses. Who cares if some rich person bids up the price of a point Piper mansion? A middle class person was never going to be able to afford that house in the first place. The person that's really causing the prices of housing (at least that housing that most people can afford to buy) to rise is the middle class professional couple who come here on a skilled migration visas and buy an existing house in a middle class suburb for a million dollars.

Besides if you set up the visa system right these rich people will be investing millions into either infrastructure, property development, or local business. You have to put conditions on how they can invest the money if they want the visa. There is a stupid way of injecting capital into the economy (pointless speculation on existing assets) or a smart way (adding to the stock of assets/capital). Obviously I am talking about setting up the investment/business visas in a smart way.

 

[mmm....shiney!]

Big A.D. that is a very easy problem to work around. For all these millionaires getting business or investment type permanent residency visas we could make rules that they can only purchase off the plan houses or apartments (which developers will build for them if they can know they can pre-sell it to them) or purchase land with development approval in place to build their own residence.

Thereby creating malinvestment which leads to booms, bubbles and then overcorrections which waste scarce resources and channel production away from satisfying our most important needs into speculative activities. Every rule, every stipulation you place on investment or trade, every venture by a central planner into the market impairs productivity and retards wealth creation for all.

By all means incentivise by reducing taxes, red tape, regulations etc, but don't erect bogus barriers to investment or create honey pots on the other hand.

 

[Big A.D.]

Besides if you set up the visa system right these rich people will be investing millions into either infrastructure, property development, or local business. You have to put conditions on how they can invest the money if they want the visa. There is a stupid way of injecting capital into the economy (pointless speculation on existing assets) or a smart way (adding to the stock of assets/capital). Obviously I am talking about setting up the investment/business visas in a smart way.

Then we need to do a hell of a lot more work in getting our own tax and transfer system functioning to stop it misallocating our own capital before we even think about bringing in rich foreigners and creating a division between who's allowed to spend how much on what stuff.

Winding back the tax preferred status of real estate would release tens of billions of dollars of capital into the economy.

We have incredibly complicated rules around crowdfunded investments, so even locals trying to invest in new enterprises can't do it easily.

We have politicians who routinely ignore their own infrastructure investment advisors and allocate billions of dollars into their own ideologically motivated pet projects.

What exactly is the pitch to rich foreigners? "Yeah, so the rules for our own citizens are pretty f**ked up so you should come here and drop some bick bucks on all the things we'd like but won't spend out own money on?"

Unlike mmm...shiney I do think there is a role for central planning. To a certain extent, it's useful to have an disinterested authority that can rise above fads and popular trends to guide economic activity so that the chaos of the market is at least a little bit organized.

Dumping all our problems on backpackers and importing rich people is not a magical cure for our problems.

 

[Bargain Hunter]

You could legitimately argue about how to fix the migration system in Australia and there are many ways to skin a cat, but I still believe that the main problem with our migration system is that most migrants to Australia are coming to work and compete for existing jobs rather than coming to invest and create jobs. We need to somehow shift the focus of our migration system.

There are already a lot of countries in the world that have a migration system that hugely favors tourists, businessperson and investors over employees. Australia needs to wise up and start heading in that direction. Australia's current system is idiotic compared to a lot of other countries. We let in hundreds of thousands of people in to take our jobs (presumably the work of the business lobby groups in the background trying to depress the price of labour) and bid up the price of existing housing (good for old rich voters that already own expensive houses), damaging the quality of life for locals.

Big A.D. for what its worth I agree with you to some extent that we have a lot of stupid internal policies that we need to fix, but I believe it can be done while simultaneously radically overhauling our visa system.

 

[Bargain Hunter]

https://www.finder.com.au/new-retirement-plan-luxury-thai-visa-packs

For example if you read this article you for a $60,000 USD one off fee plus $600 USD per annum you can get a visa which is almost instantly and repeatedly renewable so you can stay in Thailand up to 20 years! Although I did not dig into the visa, but I am sure people on this visa do not have working rights. Also in Thailand foreigners cannot buy land or houses, only apartments (unless they buy a land or house in joint ownership with a Thai citizen).

Thailand is an example of a country with the right idea, if you just want to come and spend money they make it easy for you. Meanwhile even a wealthy middle aged person from a poorer country like Iran or Bolivia or Senegal, etc would struggle to stay in Australia for a year as a tourist/retiree let alone twenty years.

Or for example look at Colombia. You can invest as little as $25,000 USD in a local business (or start your own) and get a 5 year visa. I am pretty sure you would not have work rights (i.e. can't work anywhere as an employee) in this visa. Ecuador, Panama, Malaysia, etc all have clever visa systems that encourage investors and spenders (retirees/pensioners, investors, long-term tourists, etc) while protecting local jobs. Like I said before Australia has a moronic visa system.