Hooked on students

When I taught public policy, one of the key ideas I tried to put across, was that when you create a public policy, you create a system, and vice versa. One of the reasons, I argued, that policies often produced surprising effects was that the links between different parts of these systems were not well-understood.

Governments necessarily operate bureaucratically, which means that the types of systems they run are disguised by the myriad classes and classifications they use to process reality. Usually, the insiders know what is going on, although for those in government trying to keep control of it all, it may take time to catch up with some effects. But for those on the outside, it is much more difficult to piece the data together.

A prime example is the relationship between Australia’s immigration programs and national population build-up. Like many people, I had assumed the rapidity of Australia’s population growth was largely a result of our official migration program – which focuses on people successfully applying to become permanent residents of this country.

These numbers are substantial (190,000 permanent visas were granted in 2013-2014, including 128,000 for skilled migrants), which is a lot of people. But these numbers form only part of the story, because they do not include visa classes enabling temporary (but effectively long-term) periods of residence in Australia. These visa classes include visas for students, working holiday-makers and skilled workers. The number of visas granted in these classes in any one year is quite large (roughly 400,000 in 2013-2014). Working-out how all this activity affects the total resident population in Australia is difficult, because the net overseas migration figure reflects the difference between people arriving and people departing, rather than the numbers of visas granted.

For some time now, the numbers of people arriving in Australia on long-term temporary visas have greatly exceeded the numbers in these categories who have been leaving. When these comings and goings are translated into population data, the result is that net overseas migration, a key component of population build-up, is increased.

This seems an odd result, if we expect that (sooner or later) every person holding a temporary visa goes home again. In fact, many don’t, because it is possible for people who come to Australia on temporary visas to obtain other visas which extend their stay, until ultimately, they become permanent residents. This process is perfectly legitimate, and is in fact encouraged by governments keen to build-up the numbers of skilled people in the country.

We see this effect (of temporary entrants never going home) in a number of categories, but one of the more prominent is that of higher education student visas for first-degree study. If you work in a university, you cannot help but be aware of the extent to which universities are dependent upon income from international undergraduate students. Many of us working in the sector realised that it was not for any intellectual brilliance on our part that the students came, but because for many, coming to Australia as a student was a significant step on the path to becoming an Australian resident.

What I had not realised, until I looked at the data, is just how significant this educational program has become in the migration sense. The numbers are substantial. In 2013-2014, of just over 290,000 student visas that were granted, 153,000 were for study in higher education institutions. (Most of the rest were for vocational courses, which in turn offer a pathway towards onshore application for a higher education visa).

What do these undergraduate students do once they have completed their qualification? Many, understandably, wish to remain in Australia. Every year since 2006-2007 (the earliest year for which data at the relevant level of detail is readily available), the numbers of long-term arrivals in the higher education visa category have exceeded the numbers leaving by roughly 80,000 people per year. Clearly, this difference reflects successful translation to other types of visa, which enable the holder to stay.

As potential migrants, the newcomers have a lot to offer. These are young (or youngish) working-age people, most from countries that offer fewer opportunities than Australia, who obtain qualifications in Australia and who then, by obtaining employment, or because they have skills considered to be in demand, enter the general skilled migration stream. With appropriate advice and support and the necessary persistence, it would seem to be possible for just about any international student who is a graduate of an Australian university to become, eventually, a permanent resident.

So what are the pros and cons of this aspect of our skilled migration program? This is where the systems-thinking comes in – we need to consider the incentives that are operating, the relationships between them, and the overall impacts. Over the years, international students have brought a good deal of money to Australia and, each year, they continue to do so. Indeed the universities have become dependent upon them financially. The student-migrants are hard-working, and most get jobs.

But there are negative implications, too. Firstly, the need to attract, year in and year out, students in these kinds of numbers, has an impact on the prestige-value of Australian qualifications in the international market-place. This is because prestige is affected by the standards (including the English-language standards) that students must meet in order to graduate.

From a university perspective, it is enrolments that matter, so there is continuous pressure not to be too demanding when it comes to language skills, and if at all possible, to pass students as they undertake their degree-courses. (Similar factors operate in relation to domestic students). If potential residency is part of the package, prestige may not matter so much to many students. But over time, we would expect it would become harder and harder to attract the best students from specific countries, as their own educational institutions mature, and ambitious families have more options to pursue.

The second problem relates to population. If, like me, you prefer to see Australia’s population growth moderated, rather than remaining at very high levels, here is a significant part of the increase that is occurring as a result of an educational, rather than a migration program. More worryingly, because Australian universities need the money these students bring in (and this quantum has to be refreshed every year) it is very difficult to do anything about it.

The universities would strenuously resist any attempt to cap the numbers of initial visas on offer. It might be possible to make it more difficult for graduates to secure an ongoing visa while onshore, but the effect of this (to the extent that eventual residency is a large part of the incentive to come in the first place) would be to reduce substantially the numbers of incoming students. A deregulated university sector might be able to make up some of the shortfall, but at the expense of local students, who are already saddled with significant debt. Universities may seek to plug the gap with ‘virtual’ students (fee-paying students studying online in their home countries), but this type of market has yet to be tested, and would be very difficult to protect from fraud.

The third point is more contentious, but it has to be made. Everything is connected. If we are importing large numbers of young, skilled working-age people into our economy, what effect is this having on our labour markets, particularly for young people trying to get their first long-term job? As the economy slows, are there enough checks and balances in the complex visa system we have created, to increase the number of ex-students heading home, or will they decide that being unemployed in Australia is better than anything their home country might offer? It is difficult to know.

What should the overall assessment be? Some will argue that as a public policy system, this one is brilliant. Each year we attract a fresh cohort of young people from countries less fortunate than our own, educate them at tertiary level, and give them a start in life. They contribute to Australia in a number of ways, creating new activity, new jobs and new international linkages. If the resulting population increase is, potentially at least, never-ending, then (so this argument might run) Australian cities can always accommodate more people.

I am not so sure. The population arguments are, perhaps, best left to another day. It is the social side that should concern us at least as much. In general, the young people we attract are from the better-off families in their home countries, not the poorer folk. And the fact that many don’t go back means that the countries from which they came are denied the contribution they would (or perhaps should) have made to improving life for the people living in their homelands. Secondly, with Australia’s boom and bust economy, what happens in the bust? Have we not created a huge problem for the future?

This is a hard debate to have, not least because (partly for good reasons) so much of it is off-limits. The detail is complex, and no one wants to fan racist sentiments. It is quite extraordinary, though, the extent to which public and policy attention has been focused on boat people, rather than on far more significant developments in skills-based programs. Wily old John Howard understood that stopping the boat people would help to underpin support (or at least not fan opposition to), the very large migration programs his and other governments have sponsored. Is the wool being pulled over our eyes, or are we doing it to ourselves?

Bringing in skilled people on 457 visas is somewhat contentious, but at least the unions are watching. Moreover, as the economy slows, these numbers will fall away. However, few people outside the immigration policy communities (apart from Monash’s Bob Birrell) have paid much attention to the effects (particularly the employment effects) of the rest of the system: the literally dozens of visa sub-classes that are created, reviewed and re-constituted through regulatory action, as Ministers and officials juggle the often conflicting pressures of maintaining compliance while achieving economic outcomes. If anyone questions where it is all headed, it is the ‘Australia needs skills’ mantra that is recited.

I wonder, though, whether sufficient thought is being given to the long-term significance of the student-migration program (for that is, in fact, what it is)? By implementing, over time, a number of seemingly unrelated public policy decisions relating to the funding of Australian universities and the education of international students, we have created, largely without public debate, a self-perpetuating system that is difficult to manage and whose broader impacts are poorly understood.

This article first appeared in Quadrant, June 2015



  1. Geoff Berry

    I agree…it serves the interest of university coffers and serves as a brain drain from many countries where the expertise of university trained young people is desperately needed. Many of the international vocational education students I was working with had absolutely no interest in the course they were undertaking and were seeking permanent residency only. They blatantly broke their visa conditions and nothing was done by authorities to pull them into line…what message are we sending out!!!!

  2. Thomas Dodson

    I reside in the US and believe that the immigration policy is short sighted. Lake many wealthy countries we prefer to bring talented intelligent people here and they want to stay because of the quality of life that we bring to the table. This drains the countries of origin of talent and weakens them. Better to educate them, send them back, and focus more on immigration based on average Joe’s who share our values of hard work, fair play, and family values. It is a stiff pill to swallow for the visa students, but ultimately likely more meaningful as they will have the talents that will allow them to build their own countries and make them stronger.

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