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Enterprise Migration Agreements (EMAs) and section 457 visas

In recent years, the government introduced EMAs as an additional means of addressing the skills shortages and capacity constraints evident specifically in the mining/resources sector.  EMAs are 'custom designed' to allow large mining projects to source overseas labour on a temporary basis, only when genuine skills vacancies exist that cannot be filled by the Australian labour market (such as those present in engineering and the trades).  Overseas workers sponsored under an EMA will hold what are referred to as section 457 visas and they must be paid Australian market salary rates.  This means that Australian employers cannot 'legally' use the scheme to undercut Australian pay rates to the detriment of Australian workers.

The section 457 visas are designed to be uncapped and totally driven by the needs of the Australian labour market, with NSW and WA the two states making most use of the visas to supplement their workforces.  

In May 2012 there was significant controversy surrounding the employment of 1700 foreign workers (under section 457 visas) on Hancock Prospecting's Roy Hill iron ore project in WA. On the one hand, the company claimed that it could not source local labour, which added to costly delays on its project, and the provision of foreign labour would ease capacity constraints.  On the other hand, the union movement claimed the provision of these visas for semi-skilled workers, such as scaffolders and boilermakers, would erode the working conditions of Australians in those occupations because genuine shortages did not really exist.  

In 2013, there were widespread reports of businesses 'rorting the system' by attracting migrant workers on section 457 visas and paying them below market rates of pay for these occupations.  Surprisingly, use of section 457 visas has been increasing in industries that have experienced 'flat growth' over recent years, such as cooks in the hotels/restaurant industry and shop assistants in the retail sector.  Unions claim that this is not because of a shortage of these workers, but rather an attempt by employers to source cheaper foreign labour in an attempt to reduce production costs and become more competitive.  The government is in the process of tightening up the scheme to reduce the possibility of 'rorting' by employers seeking to reduce costs at the expense of local workers.

It is fair to say that the existence of EMAs and section 457 visa have the potential to reduce both capacity constraints and costs on Australian businesses, such as mining businesses.  However, they also help to constrain wages growth and contain any reduction in the numbers of unemployed Australians that would otherwise have occurred.  Importantly, it highlights the labour market effects of allowing an increasing number of foreign workers into Australia.  At the extreme, a totally unregulated global labour market would result in much lower wages and lower costs for businesses, helping to reduce inflation and promote economic/employment growth, but having real consequences for equity.

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