Immigration changes – a new direction under a new Government

It will be somewhat of a relief to both employers as well as migrants alike that the new Government has announced that the Minister of Immigration and Associate Minister of Immigration portfolios will be held by a Labour Members of Parliament (Iain Lees-Galloway – Minister, and Kris Faafoi – Associate Minister) rather than New Zealand First Members.  We have been waiting that news before drafting this opinion piece on what is coming, or more precisely, what is going.

The new Prime Minister has also made it quite clear over the last few days that it is Labour, not New Zealand First or the Green Party, who will be leading and driving the new direction in immigration policy.  For us this makes the direction where they are heading fairly predictable on most counts.   However, we are narrowing the content of this article to changes to “work rights” at this stage, as this is where there is the main risk for change before the end of the year.  We will continue to provide our opinion and advice on other areas (such as migrant investment) at a later date.

There are two fundamental drivers from the new Government perspective that set the scene for the need to change temporary visa policy, and they need to be highlighted before moving into the finer detail. They are:

1. House affordability/supply issues for Kiwis, in part fueled by very high levels of long term net migration (mostly students) in Auckland. The Government are looking to make owning a home more accessible and affordable for young New Zealanders (less demand = less cost).
2. Good job creation that doesn’t seem to be matched by an increase in youth employment. While there are more jobs being created, we are not seeing a corresponding fall in youth unemployment levels – therefore there is a perception that new jobs are being snapped up by migrants instead of young Kiwis.  The new Government want all jobs to fall to Kiwis, and only those jobs that in no way can be filled by a Kiwi or have a Kiwi trained for the role will be given to a migrant to resolve that temporary gap in the labour market.

With these two difficult challenges, the new Government is likely to tackle these issues by reducing long term net migration by 20,000 to 30,000 per annum based on the current figure of circa 70,000. It is important to note that the net figure is calculated by adding up the number of people that indicate an intention to stay more than 12 months on their passenger arrival cards, subtracted by the number that indicate they are leaving for more than 12 months on their departure cards. They are not all people who have the ability to reside here indefinitely.  This is a mistake often made.  They cover returning New Zealanders, migrating Australians, other residency holders, but importantly, a significant number of international students and work visa holders who only hold temporary visas with work rights.

While we have recently seen the figure start to soften, targeting migrants who are not Kiwis, Australians, or qualified residents will be the Government’s initial focus.  The spotlight will be on migrants who are seen of less value, especially those who are seen as competitors for jobs that should be available to young Kiwis.  In short, the residency policies appear to be well balanced, as they are sourcing the people New Zealand needs in the long term.  While these are in for some tweaking too, it is the temporary student and work visa policies where the focus will be, and this is not readily understood.  The residency numbers are not reducing, while the temporary visas with work rights are.

There will be three main targets for correction:

1. Most international students studying courses below degree level will no longer be able to work while studying and there will be more restrictions on availability of student visas for courses under degree level.

Most student visa holders who are studying qualifications that are less than NZQA Level 7 (bachelor degree equivalent) will no longer be able to work part time (20 hours per week) while they study, or full time in their holidays.  Lower NZQA Level courses that are not relevant to a recognised skill shortage may no longer be issued at all.

Students who are looking to study qualifications at NZQA Levels 3 to 6 should be very concerned (existing students will be transitioned out) if their course is not relevant to an area of skill shortage.

The Government predicts a drop of 6,000 – 10,000 as a result of this recalibration.  We note that around 8,000 historical long term net migration gain at one stage was attributed to growth in Indian student numbers alone, so that number appears to stack up to us.

A loss of 6,000 – 8,000 students that can work up to 20 hours per week and full time in their holidays is a significant work right reduction for the market to adjust to in the short term.

2. Possible cancellation of post study WD1 work visa and cancellation of WD2 work visa for students studying under degree level courses.

The WD2 work visa policy will not be available for students who have completed courses under degree level.  The WD2 is a 12 month open work visa that is granted to an international student upon completion of higher study in New Zealand.  It allows them to search for and obtain any type of part time or full time employment, in any role, without the position being labour market tested (checked to make sure a Kiwi is not available or trainable for the position instead).

This pathway work visa is a big draw card for students; therefore if this is removed the Indian student market (in particular) will fall significantly.  We are confident this is the case because that is what happened in Australia when they removed their pathway work visa.  When Australia removed their work pathway, student agents in India started sending their students to New Zealand in big numbers.

We are also predicting that the WD1 work visa policy will be cancelled too – perhaps initially for students studying under degree level.  However, that is not currently in the Government’s plan.  The WD1 allows a further two-year work visa extension for a job that is related to the qualification obtained here and, importantly, that is not labour market tested either.   We suspect a wait-and-see approach here, so if the changes to the WD2 have not made a difference to youth employment figures, this will be the next to go.

The cancellation of the WD2 for graduates with qualifications under degree level creates a predicted drop of 9,000 to 12,000. That number does not appear to include student visa applicants who will no longer come at all if a work visa pathway of some sort is not available. The damage will potentially be much more than just losing the numbers associated with the WD2 cancellation.

A reduction of 9,000 to 12,000 people who have the ability to work full time, amounts to a significant market correction that many retail and hospitality based employers will struggle with in the medium term.

3. Significant tightening of the labour market check criteria under Essential Skills Work Visa policy, and restricted visa availability under this category

This is predicted to “mop up” the rest, estimated to be 5,000 – 8,000.  The labour market test will be harder to meet across all occupations, but visas for ANZSCO Levels 4 to 5 will become very difficult to obtain unless provided for in a regional occupational skill shortage list– see below.  This is where all employers who employ migrants will really feel the pain.  Many of these people have easily secured visas by proving there is no Kiwi available or easily trainable for that role.  We believe employers on this one and feel that for at least 90% of this proposed reduction there is actually no one who can step in and take that role, at least initially at the required skill level that any reasonable employer would expect to manage.

What does all this mean?

Taken at face value, these changes will severely damage New Zealand’s international student visa market and will also result in significant operational challenges to a number of employers who employ large numbers of migrants.  It will especially impact on those who already actively work with Work and Income to take on and train young New Zealanders where possible as they will find it hard to replace the migrants they will lose.   This Government’s position will be that there are young Kiwis available for these freed up rolls, so employers simply need to adjust and take on the challenge.

Whether or not the new Government has an accurate understanding of the reality of the situation, is questionable.  Many of the employers we deal with would much rather hire or train a Kiwi for a role, rather than endure the expense and uncertainty of the temporary visa program.  But, there may well be some movement on the fringes (necessity is the mother of invention), but we don’t expect as much as this new Government will be predicting. This means that these negative changes will need to be monitored very carefully and adjusted to find the right balance, because without correct monitoring and balance the proposed general “corrections” could have far reaching consequences for many New Zealand employers.

What are the positive changes to counter the negative?

On the positive side, the Government is looking to find the right balance, and a large part of that message seems to be the introduction of new regional visa settings (regionalising skills shortages lists).  Managed correctly, this will hopefully address many issues that the blunt negative changes would create without check/balance (in a work visa context).   What is worrying to us though is that Labour has communicated that currently “few skill shortages are regionalised”, and this makes it “hard for a region with a skill shortage in a specific occupation to get on the list if the shortage is not nationwide”.  This is not correct.  The current Immediate Skill Shortage List is already a regionalised shortage list where occupations can be listed in shortage where that shortage may not apply for other regions.  In addition, there is the Canterbury Skill Shortage List that also currently exists and has proven to be quite successful.

What is more encouraging, however, is the Government’s announcement about the KiwiBuild plan.  That plan involves fast-tracking an extra 1,500 temporary migrant workers for residential construction to assist to build 10,000 new homes.  But, there is a catch, for every migrant taken on the company must also take on a Kiwi trainee.  Again, in practice, this may well be difficult for a number of smaller construction companies who are already finding it difficult to source suitable staff to train.  Not every unemployed person is trainable, although we think this is a step in the right direction and is a good example of a combined approach of investment in Kiwi training and subsidising that with migrant labour until those Kiwis reach a useful skill level.

We are picking that there will be a slow new uptake on this, but it will be used by larger construction companies who are training a number of Kiwis anyway. Essentially this will be a free new visa to use for business as usual for them.   The reality of the situation is that in order for that residential construction to take place there will need to be heavy use of skilled and semi-skilled migrant labour from offshore to do it – we simply do not have enough skilled Kiwis to build those houses fast enough. Even a stricter test being put in place for labour market checking should not create a problem for the construction industries in both Auckland and Christchurch.

Where does all of this leave us?

Our view is that correct and balanced phasing, or perhaps measured deleveraging reliance on migrant labour in certain sectors and skill levels over a longer period of time should be the approach, rather than ‘turning off the tap’ too quickly.  Funding needs to be directed into training our young people for many of the roles held by migrants and this Government has promised to do that. However, that cannot be at the expense of employers as many of these young people will take a while to train to replace the migrants currently in those roles.

The winners with the new Government visa policies will be any employer involved in residential, commercial or infrastructure construction in the main cities. The losers will clearly be employers nationwide operating in the hospitality, tourism, and retail sectors.

All in all, whether you agree or disagree, we are looking at some fundamental changes being introduced.  Reductions on this scale have never been implemented; therefore these changes will create challenges for many New Zealand employers.

As for timing, that is anyone’s guess.  But, if the new Government wishes to make an immediate impact the changes around student visa work rights and pathway work visas for graduates will need to be fast-tracked and put in place prior to the start of the 2018 academic year, otherwise they will be transitioning out another entire year’s worth of students.  We are therefore expecting policy change announcements to be made in November, before students complete their study this year and new students start to make visa applications for 2018.