ECO101: Migration and the Australian Economy: An Analysis

This essay examines the economic arguments for and against increased migration into Australia, focusing on the period from 1996 to 2018. It explores the benefits, such as filling labor shortages, increasing productivity, and boosting government revenue, while also addressing potential drawbacks like pressure on resources and increased unemployment rates. The analysis employs supply and demand principles, highlighting the impact of skilled and unskilled migrant labor on wages and the Australian labor market. The essay discusses the role of government policies in encouraging skilled migration and the effects of migration on the production possibilities frontier, housing, and infrastructure. It references various sources to support the arguments, emphasizing the importance of maintaining a balance between migrant and native workers for optimal economic outcomes. The essay concludes by acknowledging both the positive and negative impacts of migration and the need for balanced policies.

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Migration 1
Noteworthy, Chinese and Indian migrants form part of the largest migrants in Australia.
Specifically, the rate of immigration has risen from 85000 in the year 1996 to 208,000 in the year
2018. Whereas there are economists who advocate for the influx of migrants due to benefits such
as filling up labor shortage, increases the productivity of labor outcomes, might increase
government revenue through migrant taxes, provide an exchange of knowledge and technology
at the workplace among other benefits. Essentially, the market forces of demand and supply can
explain the labor outcomes in the Australian labor industry. Evidentially, there is a connection
between migrant labor and productivity. However, immigration could lead to pressure on
existing resources such as housing, infrastructure, and raise native unemployment rates. Also, an
oversupply of migrant workers, skilled and unskilled might lead to an increase in the native rate
of unemployment due to cheaper migrant labor.Inevitably, it is imperative that the Australian
labor industry maintains a balance between migrant workers and native worker labor
participation for better economic outcomes.
Notably, the Australian government encourages the migration of skilled migrants in an
attempt to boost its labor outcomes in the case of shortage.Over the years, the migrants labor
participation has fluctuated(Q-Q1) thus influencing the shift in the wages(W1-W2) as shown in
figure 1 below. The Australian population increase is attributed to procreation and immigration
(Philips & Simon-Davies 2016). Owing to the demand for skilled labor because most of the
Australian population is aged, makes skilled migrant labor key to the growth of the Australian
economy hence the entry of migrants to supply labor (Tani 2017).To avoid market failure,
demand ought to be met with supply for equilibrium outcomes. Currently, the Australian market

Migration 2
has a demand for workers but there is a shortage of skilled native workers due to respective
factors such as age, educational challenges thus it is encouraged to outsource skilled migrants to
meet the Australian labor market demand. Due to the influx of skilled migrants, the production
frontier of Australian goods and services will improve due to the different educational,
technological and experience at the workplace (Kerr & Kerr 2013).
Labor supply
Wages W=W1 Labor demand
Quantity of Labor
Q Q1
FIGURE 1
However, due to the influx of immigration, pressure can be exerted on housing and
infrastructure as experienced recently in Sydney and Melbourne (Doherty 2018). Despite the
demand for skilled workers, there is a limited supply of housing, infrastructure and other
resources due to the overpopulation thus the view that immigration influx isn’t always good for
the economy. Essentially, overpopulation might put pressure on the existing physical amenities
thus creating an overcrowding problem. Also, unskilled migrants are likely to negatively affect
the growth of wages and productivity levels in any economy under certain conditions (Epstein
2012). Whereas migrants could boost the productivity of an economy, the reverse is true due to
the capital adjustment to an expanding labor force (Migration council Australia N .d). Arguably,
migrant labor influx might cause a rightward shift in the demand curve negatively affecting the

Migration 3
wage growth. Depending on the circumstances, migrant labor might raise or lower the growth of
wage in any economy given the right economic conditions. Essentially, migrant labor has proved
effective in the growth of the Australian economy. However, in the event that immigration is due
to demand then the growth rate of wages might rise in the Australian economy.
Arguably, the migrant population has impacted the Australian production frontier.
Through labor participation, the effect will be felt on the available resources and infrastructure in
the Australian economy. The productivity of native labor population might be hindered by the
entry of skilled and unskilled workers.We are all aware than native Australian population also
suffer from shortage of employment opportunties.Consequently, migrants have put pressure on
the existing employment opportunities, housing facilities and infrastructure in Australian cities
hence shifting the transformation. Owing to the oversupply of migrant workers, factors of
production in the Australian might not yield efficient outcomes. It is imperative that native
population of Australian do not lose employment chances due to the fact that employment
demand might be few but there is an oversupply of migrant workers into the country hence
raising the unemployment rates in the Australian labor market. Imperatively, the Australian
government needs to be regulated so as to balance the interest of both native and migrant
workers in equal measure for better equitable economic and development outcomes.
Undoubtedly, there is an upside and a downhill to the influx of migrants in any economy.
The increase in the number of migrants into the Australian economy is attributed to the
encouraging government policy which seeks out skilled migrants globally. In addition,
procreation has also contributed to the population gain.On a positive note , skilled migrants
fulfill the existing demand for workers for already existing jobs, provide revenue for the

Migration 4
government through taxes, transfer of technology, knowledge, and experience among other
benefits. However, the influx of migrants might create pressure on existing jobs, infrastructure
due to oversupply and limited demand for skilled and unskilled workers. Also, migrants might
discourage wage growth and decrease productivity under certain conditions. While the influx of
migrants might help grow the Australian economy, it might increase the rate of native
unemployment. Overall, there should be a balance between migrants and natives when it comes
to the labor market for better outcomes.

Migration 5
References
Breuing, R. (2016) .The relationship between immigration to Australia and the labor market
outcomes of Australian workers. [Online].Available at
https://www.pc.gov.au/inquiries/completed/migrant-intake/report/migrant-intake-
supplementa.docx[Accessed 18 March 2019]
Doherty, B & Evershed, N. (2018). The changing shape of Australia's immigration policy. The
Guardian. [Online].23rd March. Available at
https://www.theguardian.com/australia-news/2018/mar/24/australias-fierce-immigration-debate-
is-about-to-get-louder[Accessed 18 March 2018]
Doherty, B. (2018). As Australia's population hits 25m, regions cry out for skilled migrants.
The Guardian. [Online]. 7 August. Available at
https://www.theguardian.com/world/2018/aug/07/as-australias-population-hits-25m-regions-cry-
out-for-skilled-migrants[Accessed 19 March 2019]
Epstein, S.G. (2012). Frontier Issues of the Political Economy of Migration. [Online].Available
at https://pdfs.semanticscholar.org/60be/e9a9c99df83eae59f065c4fef7a6a736a9d8.pdf[Accessed
18 May 2019]
Kerr, P.S & Kerr, R. W. (2013). Economic Impacts of Immigration: A Survey. [Online].Available
at https://www.hbs.edu/faculty/Publication%20Files/09-013_15702a45-fbc3-44d7-be52-
477123ee58d0.pdf[Accessed 18 March 2019]

Migration 6
Migration Council Australia (N. d).The Economic Impact of migration. [Online].Available at
https://www.aph.gov.au/DocumentStore.ashx?id=cd4721e9-17e8-4352-b5c7-
15b646a0382f&subId=350950[Accessed 18 March 2019]
Philips, J & Simon-Davies, J. (2016).Migration-Australian migration flows and population.
[Online].Available at https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/
Parliamentary_Library/pubs/BriefingBook45p/MigrationFlows [Accessed 18 March 2019]
Tani, M. (2017). Skilled Migration Policy and the Labour Market Performance of Immigrants.
[Online].Available at http://ftp.iza.org/dp11241.pdf[Accessed 18 March 2019]