Wage growth bubble in the making as IT, hospitality and health at risk from border shut down

The impact of border closures will further complicate Australia’s economic recovery from the pandemic by hitting some of Australia’s most important industries — and potentially helping wages growth.

Data from nearly 65,000 temporary work visa holders in Australia at the end of December shows that, after the general “professional” and “other” employment categories, the accommodation and food services sector was the biggest user of temporary workers, with chefs and cooks the two biggest visa occupations, and cafe or restaurant managers the sixth biggest.

Cafes and restaurants are currently confined to take away and look unlikely to reopen for dine-in meals until the second half of the year, but will have to rely on local staff once they do.

IT-related roles such as software engineers occupied the other three of the top five occupations. IT-related roles also formed three of the top five approved visa applications for the six months to December. Australian IT companies have long relied heavily on the former 457 visa program and its successor temporary work visa programs for staff, insisting they were unable to find Australian graduates with appropriate skills.

IT-related visa holders are particularly dominant in NSW and Victoria, with other states more likely to have medical professionals at the top of the list of visa holders or, in Western Australia, mining-related occupations. Medical professionals, such as resident medical officers and general practitioners, are seventh and tenth on the list of occupations of visa holders across Australia.

India and the United Kingdom are by far the biggest current sources of temporary workers, and with the Philippines, provide over 40% of temporary workers.

Border closures will also severely limit foreign student numbers (and Australia’s failure to support foreign students during the pandemic won’t help). That will undercut the supply of labour for the retail sector and cafe and restaurant sector, where foreign students have provided a readily exploitable source of labour for industry-wide wage theft. Another epicentre of industrial-scale wage theft, horticulture, will also be hard-hit by border restrictions.

With a considerable proportion of 65,000 temporary visa holders, and hundreds of thousands of foreign students, removed from the employment pool, employers in affected industries will need to attract Australian workers. In some sectors, such as hospitality, high unemployment will prevent any impact on wages growth, which is likely to collapse as unemployment surges.

But in more specialist industries such as IT, health and mining, pressure on wages is likely to grow as employers look for appropriately skilled staff from the ranks of locals. Health and social care has for much of the period of wage stagnation been the sector with strongest wages growth, and that doesn’t look likely to change any time soon.

And if borders remain closed, IT companies may discover that years of failing to invest in training for Australian workers will come back to haunt them.

No wonder business lobby groups and mining peak bodies have recently called for industrial relations deregulation to enable them to put further downward pressure on wages. Watch out for pressure to ease border restrictions in order to allow more temporary workers back in, to accomplish the same goal.