It’s not migrants, it’s you: RBA’s Lowe slammed

RBA Governor Philip Lowe’s statements on low wages have been slammed by CEDA as a “myth” (Source: Getty)

Recent commentary from the Reserve Bank of Australia has perpetuated the myth that immigration harms employment and wages, an economist has said.

RBA Governor Philip Lowe recently said while Australia’s high levels of migration had helped to boost the economy, in some cases it diluted the incentive for businesses to train local workers.

Committee for Economic Development of Australia (CEDA) Senior Economist Gabriela D’Souza said CEDA analysis of migration data proves otherwise.

“It would be great if this question, which has plagued labour economists for decades, was resolved with such certainty, but there’s no evidence to suggest this is true,” D’Souza said.

“The literature shows that the interaction between migration and the labour market is complex.

“Migrants supply labour, but they also consume goods and services, and in so doing they add to broader economic activity.”

D’Souza said that the research shows immigtation doesn't hurt the employment prospects of local workers and any presumption it does is a “myth”.

“So much of Australia’s economy, including our ability to invest in capital and business’ confidence that projects can go ahead, depends on the know-how and skills of our often carefully-selected migrants,” she said.

“The existing body of research in this field has shown migration to have a small-to-negligible positive effect on aggregate wages in the economy.”

Skilled primary migrants have a positive impact on the Budget, D’Souza said, the most recent Intergenerational Report estimated skilled workers contribute $319,000 to the Federal Government over their lifetime.

“In addition to effects like these we can measure, there are also likely to be other spillover benefits that we can’t yet measure,” she said.

What will drive wages growth?

D’Souza said the answer to getting higher wages is clear, but how we actually achieve it is not as simple as it seems.

“Economists know that the true underlying driver of real wage growth will be productivity,” D’Souza said.

“Governments and businesses need to consider what levers they can pull to increase productivity to fuel wage growth. Playing around with immigration targets won’t get us there. In fact, it could move us further away from this ultimate goal.”

However, despite some economists saying higher productivity will lead to higher wages, others believe it is the other way around.

“Higher wages further improves productivity by encouraging the least productive businesses to lose people, shrink and go bust, transferring workers, land and capital to more productive businesses,” Leith van Onselen, founder of MacroBusiness said.

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