Significant immigration policy reforms – “tweaks” that will actually have a major impact

The Government announcement yesterday on the proposed changes to Immigration New Zealand (INZ) policy may have been interpreted as minor tweaks to resolve some of the recent issues identified in the policy and in some circles not gone far enough to address these perceived problems. However, they are anything but that, and in-fact go a long way towards providing balance to the policy and equalise the labour market that drives these policies.

There is no question these changes are significant. From a New Zealand perspective these changes are very positive and well thought through both in a domestic sense (New Zealanders first), but also in an international context where our policies are competing for the same global talent that other developed countries are looking to attract.

The summary below outlines our initial views on the policies.  We will provide more detailed commentary once the full detail of the policies are released.

Skilled Migrant Category changes

These will be implemented on 14 August.

This is a major shift from assessing purely on the skill level of the position.  Income thresholds have been introduced to assist with the skill assessment, and in some instances, doing away with the need for it altogether:

1. If you have a skilled job (ANZSCO Skill Levels 1-3) and you earn at or over $48,859 a year ($23.49 per hour), you can apply.
2. If you have any job (ANZSCO Skill Levels 1-5) and you earn at or over $73,299 a year ($35.24 per hour), you can apply.

The first threshold signals an “up or out” policy and is in line with the temporary work visa review (see below).  Migrants can compete for lower skilled positions with New Zealanders (subject to labour market checking), however, unless they can quickly move up the skill/remuneration scale they will be out within three years and can’t simply stay here extending temporary visas indefinitely.  This is very sensible as only the best migrants will transition and move into residency from entry level positions following the completion of international study here.

The second threshold alleviates an existing problem with the policy for certain occupations that are skilled but are not deemed so using the current criteria.  This is a great change for a number of industries including farming and transport.  This simple solution has now provided a pathway to residency for jobs such as Truck Drivers, Herd and Assistant Herd Managers which was not open to them previously.

There are other tweaks but the other major change outside the income thresholds, and in our opinion really smart change to note, is the increase in points for age for those who are sitting in the 30-39 age bracket.   This is New Zealand’s sweet spot for attracting global talent with our country viewed by these migrants as a great place to raise children.  The policy change will make it easier for these people to come in.  They are generally more experienced and possess greater skills than younger migrants, and with the significant adjustments made to the Australian Immigration Programme recently we are really well placed to secure this talent.  In essence, we have shifted our residency focus from young graduate migrants (who compete with young New Zealanders for jobs), to a band of migrants who can contribute at a higher level.  This is a subtle but very positive change that most have not understood or appreciated.

South Island Contribution Visa – Work to Residency

This will be introduced on 22 May 2017, and will only be open until 22 May 2018.

To secure one applicants must:

1. Be aged 55 years or younger when they apply;
2. Be currently employed in the South Island on an Essential Skills work visa, and have been employed in the South Island on Essential Skills visas for more than five years (note if there is a small period of employment in the North Island they will be flexible);
3. Their employer does not have any significant adverse employment record; and
4. They meet the character and health requirements.

This is a great policy to transition long term work visa holders who really should be entitled to a resident visa.  It recognises the contribution they have made to the New Zealand economy, assists their employers with longer term retention, and at the same time allows for a conversion to residency following two years on this visa.  It will allow their children to attend tertiary education on the same basis as many of their Kiwi friends they have grown up with in New Zealand for many years.

Dairy farmers in the South Island will be eager to transition their migrants into this policy where they are under the (new) first Skilled Migrant Category income threshold, or perhaps are above the threshold but cannot qualify for a particular reason.  Our message for these employers is to line up those people now and submit the applications as soon as the policy is released in May, because it is only open for a year and therefore this is truly a limited opportunity.

Of course, there’s a range of industries that will take advantage of this change, but this is a huge win for farmers and the hard working South Island dairy farm workers who have committed to their local communities without the security of an ability to qualify for a resident visa.  They have made a massive contribution to the rural sector and are deservedly being recognised for that contribution.

Review of Temporary Work Visa policy

A review of the work visa policies has been announced, and some signals released suggest the changes agreed by Cabinet in principle are in line with the changes to the Skilled Migrant Category.

Below is a summary of the proposed changes.

1. Remuneration bands to assist with assessing skill level of the role, that will also align with the remuneration thresholds introduced for the Skilled Migrant Category.This has the potential to be significant so all employers need to take note.  Typically, it’s the position that sets the starting point to consider the labour market in the current policy.  If it is accepted that there are no New Zealanders available or readily trainable to be employed for that role you can employ a migrant, as long as you are paying a “market rate”.  What this shift to remuneration banding indicates, is that it will become much harder to employ at a lower remuneration level, especially younger migrants moving into an entry level position.  This is understood and sensible, given this is where the risk lies for migrants taking entry level positions away from young New Zealanders where the opportunity is more valuable to them, rather than what they are being paid.

   Therefore much harder labour market assessments will be applied to pass for positions at a lower remuneration level, irrespective of their perceived skill level, to hold the door open for young Kiwis on a New Zealanders first policy.

   In addition, this change will also passively push some market rates up where remuneration levels are stagnant and not increasing with the cost of living, like the Queenstown region.  You will need to pay more to secure longer term visas there.  This will lead to a gradual lift in market rates, and at the same time allow those areas to attract New Zealanders into the region for those positions because they can afford to live there.  No doubt when it comes to Queenstown there will be further discussion and a likely softening of the policy because it is a unique region. Nonetheless, a shift has been indicated and this is the course the Government are taking.  It is no surprise to us that the Minister was down in Queenstown for a while and announced these proposed changes in the region to soften the receipt.

2. Maximum duration of three years for lower-skilled Essential Skills visa holders.This essentially means up or out, and also illustrates why the new South Island Contribution Visa Policy is in place for a limited time.  If migrants are going to be paid under the first threshold under the Skilled Migrant Category, they will have three years to reach that lower threshold to remain here.  Before they can apply for another visa at that lower skill level they have to complete a mandatory stand down period.  In practice, they will leave New Zealand and their former employer will employ someone else in the role.

   The result of such a policy will essentially create an environment of survival-of-the-fittest.  Younger migrants who have high level and transferrable skills will survive as they will be supported by employers into higher paying roles, others who do not have this ability will not.  In addition, this policy will also apply greater pressure on remuneration rates, as companies look to pay a higher rate to retain their talent, again, assisting to apply positive inflationary pressure on wage rates.

   There is a lot to lose for employers.  They may have to replace and train another employee after three years for multiple roles.  As a consequence, greater investment will be made by employers to recruit young New Zealanders for this work so they can avoid that three year cycle.

3. Aligning the ability of Essential Skills visa holders to bring their children and partners to New Zealand.It is going to get much harder for lower income earning migrants to bring their children and partners into New Zealand, if they are allowed at all.  The most likely outcome for migrants will be that they will not be able to sponsor partners and/or dependant children for temporary visas unless they can reach the income threshold under the Skilled Migrant Category.

   This will address three issues. Firstly, it affects partners holding open condition work visas and therefore taking employment opportunities off New Zealanders (including part time and casual roles) because those positions are not labour market tested.

   Secondly, it addresses the issue of people bringing in children and residing in New Zealand for many years on work visas because there is a labour demand, but not having the ability to transition into residency and therefore educate their children here at tertiary level for domestic student rates; despite those children growing up here and essentially being “Kiwis”.

   Lastly, it reduces Government exposure to costs to support migrant families at a lower income level where their taxes and greater contribution would not be sufficient to cover the range of funded benefits such as subsidised primary and secondary school tuition, and health care for acute issues or conditions diagnosed subsequent to visa issue.

Conclusion

These policies in combination mark a significant turning point in New Zealand’s controlled migrant programme.  They are sensible, well weighted, and on target for New Zealand’s current human resource needs.  Importantly they move to correct a number of issues that have resulted from the recent surge in international demand for a place to live in New Zealand that the current rules have not been able to manage, as well as start a process to correct over reliance on migrant labour in some sectors and regions to favour young New Zealanders to create balance.

The message to employers is to invest in Kiwi’s first, because we are setting our sights on a mid/high level of skill for the needs of our economy, as anything underneath that is going to become harder to manage in the long term.

The policies are not perfect – they never are.  There will be unforeseen issues that will need to be tweaked once they are active, but the direction is fairly clear, and well aimed.