Abolition of 457s marks landmark shift in global war for talent – with a high price to Australia – The Australian Financial Review

Rob Hango-Zada, co-Founder and co CEO of Shippit, Zhong Zheng - developer (and 457 holder) and William On co-founder and co-CEO of the company. "we just incentivising offshoring", says Hango-Zada

The federal government's abolition of the decades-old 457 visa system was first and foremost a piece of political theatre.

But it was the government's intense 'Australians first' rhetoric and its swathe of new limitations, caveats and seemingly arbitrary occupation lists that threw employers into tumult and uncertainty.

Business leaders and migration experts say the Coalition's position marks a significant shift in the way the country views skilled labour and comes at a critical time, when the economy is seeking to attract talent in its shift from a manufacturing economy to a services economy.

Mike Cannon-Brookes, co-founder of leading technology company Atlassian, told AFR Weekend it was the government's rhetoric, rather than the visa changes themselves, that threatened to create a "brain of drain" of skilled foreign workers.

He said talented prospective hires were already anxiously querying "does Australia even want me?" and questioning whether to make the big trip overseas.

Rob Hango-Zada, co-CEO and co-founder of software start-up Shippit, which coordinates retail deliveries, said he already struggled to recruit quality, mid to senior level engineering talent in Australia.

"We're going through a transition phase. But with the dot-com bubble bursting in the early noughties, we've seen a decline in the number of engineering or computer science-focused majors and what that's has left us with now, going through a second boom, is a shortage of talent locally."

While he believed his business would be able to survive the changes - the most nominated ICT jobs are still among the eligible visa occupations - Hango-Zada said he was concerned about the broader statement the government was making on Australia's innovation agenda.

"If you look at web developers [a job no longer eligible for visas], if you remove that facility, then basically you're asking business owners to look at [sending work to] offshore based options if there is a local skills gap in web development.

"My concern is are we just incentivising offshoring rather than creating Australia as a destination for international skilled workers to fill gaps that we have."

The coalition's startling backflip on the issue, after years of championing a flexible visa system, combined with Labor's calling for greater restrictions, may overshadow the benefits the skilled worker visas offered the economy.

Australian National University researcher Henry Sherrell said while it should be remembered 457 visa workers make up less than 1 per cent of the labour force, any restrictions could have flow-on effects on productivity.

Skilled visa holders earn an average $88,500 base salary and $92,000 total remuneration, which was above average full time earnings.

"As a proxy, that salary shows they are highly skilled and valued by their employers," he said.

A Migration Council report in 2013 also found that temporary migrants didn't just fill skills shortages but also improved skills deficits by training local workers.

More than three-quarters or 76 per cent of 457 visa holders said in a survey they helped to train or develop other workers.

The report concluded the 457 visa program was "critical in keeping us competitive in the era of international knowledge wars, when industry innovation is global".

"These type of things are not on their own going to kill labour productivity in Australia," Sherrell said.

"But when you add them up we're heading in the wrong direction in terms of how we want to compete on this, especially if you look at the share of jobs which are moving away from manufacturing to a service-based economy."

Hango-Zada said, while costly to enlist through the visa system, Shippit's 457 visa-sponsored technician had "paid back in multiples" through increased productivity and a better team culture.

"What 457 visas enabled us to do is bring that resource in house, help that member become a real contributing member of the team and absolutely help to change our business and take us to the next stage of growth."

For businesses operating in global market, foreign workers also offered real benefits beyond just a politically correct workplace.

"Working with a multicultural and diverse workplace is important now, especially when we're opening up trade lanes with south-east Asian markets and international markets," Hango-Zada said.

Perhaps the biggest change by by far was removal of the path to permanent residency for the new two-year visa stream, which covers the bulk of occupations, from March 2018.

The 457 visa is one of the most common ways to permanent residency, making up about 40 per cent of all permanent skilled migration and 28 per cent of all permanent visas.

Out of 95,000 workers, about 38,000 used the 457 visa as path way to a permanent visa in 2015-16.

University of Sydney law professor Mary Crock said the removal of permanent residency was part of a broader trend across visa categories away from using the temporary migration system as a "try before you buy" system.

"That try-before-you-buy system was basically saying it makes good economic sense and good for interpersonal relations to have workers you know and can be trusted because you've seen how they operate."

But without a permanent path, companies could find essential skills taken away after only a few years or lose a valuable enticement.

The full effects of the government changes are yet to be determined, with more detail to be revealed in the budget.

What is certain, however, is the uncertainty will continue.

The government has already agreed to meet with universities after admitting that heavy restrictions on researchers were an "unintended consequence" of its changes.

Legal principal of BDO Migration Services, Maria Jockel, said the list of visa occupations was likely to become a "moving feast" as the government makes changes every six months.

"This means that this already extremely complex area of law will become even more complex and uncertain," she said.

The mass of red tape and dozens of limitations, including bans on companies with less than $1 million turnover, would also make it "very difficult if not impossible" for some small businesses to recruit particular foreign workers.

"The new concept of occupations and businesses which are subject to 'caveats' means each case must be assessed on its merits," Jockel said.

"A 'cookie cutter approach' is no longer possible."

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Abolition of 457s marks landmark shift in global war for talent - with a high price to Australia - The Australian Financial Review