EMA’s strike the right balance in a tricky policy area

Sitting between the two hot potatoes of immigration control and labour market regulation, work visas are an inherently controversial public policy issue. It is therefore of little surprise that Immigration Minister Chris Bowen’s announcement on Friday that Hancock Prospecting will be the first company permitted to use an Enterprise Migration Agreement (EMA) on its Roy Hill mining project has provoked the ire of union leaders and Labor and crossbench parliamentarians.

The agreement will allow Hancock Prospecting and subcontracting employers on the project to engage up to 1,715 foreign workers on temporary visas. The main concern of unions and their parliamentary supporters is that the EMA will deny employment and training opportunities to resident workers. These concerns are not without foundation, but essentially they are misguided.

Let’s leave a few issues to one side. The internal Labor Party politics, the timing of the announcement given recent job losses and plant closures in manufacturing and the inconsistency of awarding the first EMA to a company owned by one of the government’s main political targets have all been discussed at length in recent media coverage and do not warrant further attention here. But there has been little detailed analysis of the merits of EMAs as a policy mechanism for meeting a range of competing objectives.

Work visa policy is a very difficult policy area to get right. If visa regulations are too lax, then employers will have less incentive to recruit locally, to invest in developing the skills of their employees and to maintain wages at market rates. But if regulations are too tight and workers with the appropriate skills are not available locally, or cannot be trained quickly enough, then there is a risk that opportunities for new business investment will not be realised. Few countries have managed to strike a policy balance between work visa and skills policy to assist both the needs of industry as well as those of the workforce.

Australian governments have generally relied more on immigration policy to expand labour supply during periods of economic growth, on one hand, and on training policy to develop the skills of underutilised workers during downturns, on the other. But it is always a question of balance, as immigration is often needed to meet shortages in parts of the economy that are booming even when other parts are sluggish, as is currently the case. A key reason for this relates to the practical barriers associated with relocating unemployed workers to fill vacancies that exist elsewhere, particularly in remote communities (such as the Pilbara).

The right balance between work visa policy and skills policy in Australia has not always been found. In the late 1990s, the Howard government incrementally relaxed the rules for employers engaging temporary work visa holders on the grounds that existing regulations were too tight in a climate of growing labour shortages. But it went too far the other way. By 2007, stories of employers abusing the scheme were widespread. And as I’ve suggested elsewhere, the Howard government placed too much emphasis on work visa policy as a mechanism for meeting skills shortages and not enough on skills development.

The Rudd and Gillard governments have tightened work visa regulations to protect labour standards and given more attention to skills policy, without going over the top. Visa regulations have remained sufficiently liberal to permit entry to very high numbers of foreign workers by historical standards, which has been important for meeting labour shortages in the sectors directly benefiting from the mining boom. The new EMA scheme is an innovative measure that epitomises Labor’s concern to maintain a sufficiently liberal work visa policy framework without allowing employers to shirk their responsibilities to the Australian workforce.

The scheme is only applicable to major new projects in the resource sector worth more than $2 billion with a peak workforce above 1,500 workers. It allows subcontracting employers to engage foreign workers on temporary visas via the project owners or principal contractors, but only if they can demonstrate a shortage of resident workers with the appropriate skills. Work visas can only be used if attempts to recruit workers locally have proved unsuccessful.

Project owners and subcontracting employers must also make a defined investment in workforce training. This investment must be directed towards shortage occupations with the aim of reducing reliance on migrant workers. As with the temporary work visa program, employers must comply with certain regulations to prevent the EMA scheme from being used to undermine labour standards or to exploit visa holders.

Given that many more EMAs are likely to follow the Roy Hill project agreement, unions are correct to emphasise the importance of getting the policy settings right from the beginning. There are many examples in Australia and elsewhere of where lax labour market protections have produced unintended consequences and popular backlashes against liberal immigration policies.

But on the face of it, the EMA scheme is regulated in such a way to give employers in the mining sector ready access to migrant workers, which will allow the further continuation of the resources boom, without eroding employment and training opportunities for Australian residents. It therefore seems to be a rare example of a work visa policy containing the appropriate checks and balances to safeguard the interests of both employers and workers.

This article first appeared on The Conversation.