Filling persistent workforce shortfalls in occupations and regions that South Australians choose not to work in creates opportunities in areas they do choose to work in.
Research released today evidences a positive correlation between regional demand driven migration, local job creation and an increase in gross state product. The research found that regional demand driven migrants are job creators, not job takers. Analyses of the impact of different migration policies on Australia tend to conclude that high-skilled, high-paid, young migrants are best for Australia most of the time. This report focuses on the ‘rest of the time’, finding that South Australia could be losing billions of dollars in Gross State Product and the creation of tens of thousands of new jobs due to ineffective migration policy for regional areas.
Undertaken by independent economic research consultants, BDO Econsearch, the report is titled ‘Understanding the economic opportunity of demand driven migration for South Australia’. The report was commissioned by Migration Solutions to identify a methodology to understand the business impacts in regional areas because of limitations that exist in the migration program. The report researches and quantifies the resulting labour shortages and creates a methodology to measure the lost opportunity cost to the economy and specified industries. It finds that although Australia’ s labour migration system is highly effective at achieving national goals, its singular application across the nation means that some states have found it more fit for purpose than others. There is a mismatch between the semi-and low skill needs of many regional businesses in South Australia and Australia’s focus on bringing in high-skilled labour. When migration reform is considered, it’s not based on regional demand driven migration but of that of larger cities. As the skills and wages of regional demand driven migrants are often less than the highly skilled, high income, higher lifetime tax contribution methodology that applies across the east coast of Australia, the approach that underpins the current skilled migration program benefits major metropolitan areas and not regions.
Filling persistent workforce shortfalls in occupation and regions that South Australians choose not to work in creates opportunities in areas they do choose to work in. For example, BDO Econsearch estimate that filling 100 horticulture vacancies in the South East of South Australia with demand driven migrants would generate approximately 162 fte jobs and $20.2 million of gross state product in the South Australian economy through flow-on effects, including approximately $4.9m in gross regional product and 41 fte jobs in Adelaide due to the inter-regional economic linkages to the South East.
Even as some South Australian businesses, particularly in regional areas, become more reliant on migration for addressing chronic skills shortages, the barriers to accessing lower skilled to medium skilled migrant labour have increased. The research found that many businesses struggled to access migrant labour to deal with these shortages because of; the complexity of the application process, the cost of accessing migrant labour, processing times, the absence of pathways to permanent residency, restricting migrant workers to only one role, restrictive occupation lists based on ANZSCO definitions and difficulty retaining migrants longer-term. This meant that many South Australian regional businesses simply cannot meet the workforce needs required to grow and thrive. While there is significant variation across businesses, sectors and regions, the aggregate effect of the workforce shortfall on the state is substantial and a long-run trend of declining access to labour was being exacerbated by short-run effects of COVID-19. South Australian regions that considered skills availability to be the number one issue facing their businesses included; Yorke Peninsula, Mid-North and Port Pirie, The Riverland, South East and Limestone Coast, Adelaide Hills, Murraylands, Mount Barker and Strathalbyn, the Eyre Peninsula, Whyalla, Port Augusta and Far North, Kangaroo Island and Barossa, Gawler and Light and Adelaide Plains. Only the Fleurieu Peninsula, McLaren Vale and Victor Harbor did not consider skills availability to be a top concern, with electricity costs the top rated issue. Whyalla, Port Augusta and Far North also gave an equal rating of importance to COVID-19 restrictions as its top issue in addition to skills shortages.
BDO EconSearch undertook extensive background research and consulted with South Australian businesses, associations and regional organisations as part of the research. Consultation included industry associations, RDAs and key employers reporting workforce shortfalls. Their preliminary estimates of the economic opportunity of a demand driven migration program are based on the review, consultation findings and their multi-region model of the South Australian economy (RISE-MR). Economic impact is quantified in terms of employment, gross regional and state product (GRP and GSP) and household income. Results are reported by region and industry where possible with particular focus on the horticulture industry as a case study.
From interviews with horticulture businesses and associations in October 2021, BDO Econsearch estimate that horticulture businesses in South Australia have approximately 3,400 job vacancies and that approximately 850 (25 per cent) of these could appropriately be filled by demand driven migrants. In addition to the employment and production of the migrants themselves, their modelling estimated approximately 1,000 fte jobs and $124.0 million of gross state product to be generated in the broader economy through flow-on effects. Just over half of the gross state product would consist of household income.
Migration Solutions CEO Mark Glazbrook said “the methodology of forecasting the benefits of migration reform outlined in the report was fascinating and it would be negligent of Government not to implement regional demand driven reform based on the findings of this report.”
Most of the flow-on employment is expected to occur in the top 7 impacted sectors:
- Services to Agriculture Forestry and Fishing (113 fte jobs)
- Retail (101 fte jobs)
- Health (67 fte jobs)
- Wholesale (67 fte jobs)
- Administrative Support Services (67 fte jobs)
- Education and Training (62 fte jobs)
- Road Transport (61 fte jobs).
Flow-on employment effects are largely expected to occur in the South East where most of the migrants would reside but a significant amount of flow-on activity is expected in regions where fewer migrants would reside due to inter-regional economic linkages. For example, around 65 fte jobs are expected in Adelaide’s Central and Hills region due directly to migration to the region, but an additional 237 fte jobs are expected due to the economic effects of migration across all regions and associated inter-regional linkages. A common theme from interviews in the horticulture sector was that the unmet workforce needs were causing underutilisation of assets such as glasshouses where planting has not occurred due to a lack of labour for harvest or produce being left unharvested. Further, opportunities for financed expansion of production are also not being realised due to a lack of labour to facilitate production.
South Australia has consistently had lower levels of permanent employer sponsored visas in comparison to high numbers of state / territory nominated independent (STNI) migrants. Numbers of employer sponsored visa grants in South Australia have been declining since 2012-13 and in 2019-20 these numbers dropped significantly. This balance of visas may be problematic for South Australia because the OECD (2018) has found that STNI migrants tend to have poorer labour market outcomes in comparison to employer sponsored migrants and they have higher interstate mobility. This is consistent with the findings of a survey of State-sponsored / nominated skilled migrants in South Australia under the General Skilled Migration programme during 2010-2014 which found that 58 per cent of respondents were dissatisfied with the employment opportunities available in South Australia and that 37 per cent intended to migrate or had already migrated out of South Australia (Tan et. al. 2019). Of those respondents intending to move, 82 per cent attributed this to a lack of employment opportunities, or better career opportunities being available elsewhere (Tan et. al. 2018).
While the challenges of COVID-19 are very different to those of the GFC, both involved large scale disruption to business in South Australia and across the country. The Rudd Government found that demand driven migration would play a useful role in recovery from the GFC. This report explains how it can also play a helpful role in Australia’s economic recovery from COVID-19. Demand driven migration was identified in a Rudd Government migration review as a means to ensure migrants are employed in industries that have the highest need. This contrasts with independent skilled migrants who have high human capital but no employment arranged in Australia prior to their arrival. The review took place following the global financial crisis in 2008-09 (Commonwealth of Australia 2010).
This research shines a light on the needs of regional Australia and the prejudice of the Australian immigration program towards the larger metropolitan centres. It also highlights the significant opportunity cost for our regions, industries and businesses resulting from national migration policy settings that do not support the South Australian or other regional and low population growth economies.
Established in 2001, Migration Solutions has grown to become the largest provider of migration services in South Australia and a leading advocate for regional migration reform.
Migration Solutions has been involved in the migration profession since 2001, assisting many thousands of businesses and individuals throughout various political landscapes and migration programs. This has given us a unique understanding of how to use the migration program to support Australian business and industry to thrive; finding the right people, with the right skills and experience to accelerate growth and strengthen long-term industry sustainment.
Where the local labour market is unable to provide the workforce required for a region, industry or business, Migration Solutions can work with organisations to design a solution through the Australian Immigration Program. Our clients have found that an upfront investment in international team members can result in long-term benefits to their business, enabling them to grow, expand or meet market or contract requirements.
Over 20 years in the migration profession, Migration Solutions has grown to become the largest migration services provider in South Australia. We have developed strong relationships with state and federal government departments, politicians, ministers, key industry sectors and business leaders to progress migration reform to benefit economic growth.