Importing Chinese labor won't cut real wages

Gerard Jackson
BrookesNews.Com
Monday 10 January 2005

The Australian Workers Union (AWU) has objected to a proposal to import thousands of temporary Chinese workers to pick fruit in northern Victoria. According to AWU national secretary Bill Shorten, the "…importation of cheap Chinese labor will be used to drive down Australian pay rates, safety standards, workers' compensation and superannuation conditions."

But is Shorten right?

Shorten's assertion is another version of the anti-immigration argument that imported labour drives down real wage rates and living standards. As I have pointed out a number of times, this is not strictly true.

If the population is suboptimal in that capital accumulation has been expanding far faster than the labor force, then an increased labour supply can more fully utilise the country's land and capital structure and so increase per capita income.

The reverse is equally true. If capital accumulation lags behind the growth in the labor force then importing labor will drive down real wage rates and hence living standards. (See the The Wall Street Journal gets it wrong on the immigration question for a more detailed view of immigration and wages. Also see Rush Limbaugh: immigration, jobs and real wages).

So what would happen to Australian wage rates if thousands of temporary Chinese fruit pickers entered the country? Absolutely nothing. What Mr Shorten has missed is that these workers would not be competing against Australian workers. They would be employed to do what Australians, for whatever reasons, will not do – and that is pick fruit.

By confining these workers to fruit picking in northern Victoria the government would be deliberately segmenting the labor market. It's ridiculous to argue that this policy would have a detrimental effect on Australian wages rates.

There could only be a detrimental impact if this imported labor competed directly with Australian labor instead of indirectly complementing it.

(Let us not forget that this fruit will be processed and distributed by Australians and so might actually increase the demand for certain types of Australian labor. As Dean Josiah Tucker said about 250 years ago: "One man's work is another man's employment").

Whether the policy should be actually implemented is another question entirely. Opponents could agree with this analysis while arguing that it sets a dangerous precedent in favour of open borders.

I don't buy this argument. There is a monumental difference between issuing temporary work visas that will be strictly enforced and opening up Australia to unrestricted immigration, a policy that the Australian people would rightly strike down.

Gerard Jackson is Brookes' economics editor