Nearly 300,000 foreign workers have left the country. It has left a gaping hole in the jobs market.

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  • New analysis from the Commonwealth Bank’s economics team has found Australia’s labour market is being distorted by the exodus of foreign workers.
  • While job vacancies are breaking record highs, they have done so following the departure of 286,000 foreign workers, suggesting their absence may be driving explosive jobs growth.
  • There were almost the equivalent number of vacancies in February, with sectors reliant on foreign workers among those driving the hiring spree.
  • Visit Business Insider Australia’s homepage for more stories.

Job vacancies have been advertised in record numbers for months but the number of employed Australians aren’t even back to pre-pandemic levels. Only now are economists starting to come around to why.

The Commonwealth Bank’s economics team concluded on Wednesday that official statistics don’t “accurately capture the impact of the international border closure” with the consequent exodus of foreign workers having severely distorted the labour market.

“Employment was back to its pre-COVID level for resident workers in [the first quarter of 2021],” CBA head of Australian economics Gareth Aird said. “But the total number of people employed was down by 2.1% over the same period.”

Unemployment is back to ‘normal’ levels at a little over 5%, when more Australians are out of work than before and vacancies are still sky high. There are a few other factors — including large numbers of people dropping in and out of the job market — but it’s clear that foreign workers are firmly part of the equation.

Simply put, the official ABS labour force survey excludes overseas residents working locally altogether. It means that the figures published each month hasn’t recognised the demographic at all, despite the fact they number more than than half a million workers before the pandemic was declared.

The oversight means the figures also haven’t accounted for the fact that more than half of them have left Australian shores since, vacating 286,000 jobs. Some of their jobs may have ceased to exist due to lockdowns, hiring freezes and loss of business. But, curiously, the latest vacancy data shows there were 288,700 vacancies in February, mirroring almost exactly the number of foreign nationals who left the country.

What the absence of foreign workers means for Australia

While Australia has recovered well in the intervening period, it highlights the major role foreign workers play in the economy, with major implications for how we understand Australia’s economic recovery.

Inherent is the suggestion that many of these jobs can’t be attributed to a record jobs recovery as much as it can to closed borders. While a booming economy has certainly produced more jobs, a major shortfall in workers has no doubt helped lift Australians into work.

Net immigration typically adds around 200,000 people to Australia’s population each year, but foreign arrivals have now dropped to zero. With non-residents unable to return to Australia due to border restrictions, many of those same jobs are now hiring Australian workers in their absence, helping slash unemployment much quicker than forecasts have predicted.

The impact has been huge. Historically foreign workers have made up 4% of the total workforce, but now represent just 1.8%. Aird expects it to drop even further as long as borders remain closed.

The data is unclear on exactly where those jobs are appearing, with vacancies “high across a range of industries and skill levels”. Aird does point out though that the highest level of vacancies can be found in industries with the highest concentration of foreign workers, like hospitality.

This in turn is expected to force businesses to do more to attract and keep employees. The tech sector for one is already crying out for developers, and engineers among others to the point of paying raises north of $50,000.

As vacancies surge for all skill levels, Aird expects the jobs market to “tighten very quickly” in many more sectors.

“A lift is wages growth is the inevitable consequence of a tight labour market as firms are forced to pay more to attract workers,” he said.

While pay raises will be welcomed by a workforce that has long been deprived of substantial wages growth, it isn’t a free lunch. For one, businesses struggling to fill critical skills shortages, such as in IT, will also struggle to expand and grow amid a booming economy.

Even low-skilled positions such as in agriculture have been left empty, with Australians simply not wanting to do some kinds of work, especially given reports of low wages and poor conditions. Meanwile, restaurants and bars have repeatedly complained they can’t find applicants for empty roles, while the government has permitted foreign students to work longer hours to compensate.

Outside of the labour market, there is the added obstacle of stagnant population growth and the consequent lull in demand, the hit to key sectors such as education and tourism, as well as a shrinking tax base to consider. It is already driving inner city rents and apartment sales lower. In combination, closed borders could cost the country $117 billion by some estimates.

But for some, the short-term shortage of foreign workers may be a hand up at a time some Australians do need it.