CPUR

Research Report May 2013

Centre for Population and Urban Research

Implications of the Chaney Report for the Labour Market Outcomes for International Students
Bob Birrell Ernest Healy

Implications of the Chaney Report for the Labour Market Outcomes for International Students*
The Australian labour market is softening with the end of the mineral industries investment boom. In this context, it is an urgent matter that Australias immigration settings be adjusted to reflect this softening. This report shows that most overseas student graduates from Non-English-SpeakingBackgrounds are already struggling to find professional level employment. The Professional Year Program (PYP) was introduced in 2008 to help overcome this problem. However, the PYP has since been marginalised in DIACs skill selection system. The Australian Government recently commissioned the newly reformed International Education Advisory Council to provide advice on a strategy to support the sustainability and quality of international education.i If its recommendation to give an additional advantage to overseas students graduating in Australia in the skilled migration selection system are implemented the PYP will be marginalised further. This report argues that such action would be ill-advised in present circumstances. Background The PYP was introduced following the 2006 Evaluation of the General Skilled Migration Categories. The Australian Government subsequently announced a new selection scheme in 2007 which reflected the Evaluations recommendations and was implemented in mid-2008. This report examines the reasons for the introduction of the PYP and the subsequent extent of its role in shaping migrant selection. It does this in the context of the various reforms introduced to the General Skilled Migration (GSM) program in 2008 and after. It concludes by exploring the implications of the recommendations proposed by the Chaney Report for the GSM in February 2013, but which are still under review by the Australian Government. The new selection system introduced in 2008 put more emphasis on relevant work experience and less on the possession of Australian qualifications, thus tilting the balance in favour of overseas applicants with relevant work experience.ii Previously, most former overseas students who completed courses in professional or trade occupations in Australia, which were judged to be in shortage were virtually assured of gaining a points-tested permanent resident visa. This was no longer the case under the new arrangements. Under the new arrangements, there was also a much heavier emphasis on English language skills. The minimum English language requirement was increased from Vocational English - 5 on the International English Language Testing System (IELTS) - to 6 (Competent English). The new selection system also allocated 25 points for those who could attain 7 (Proficient English). The latter was a crucial incentive in the context of the points required to achieve the pass mark under the 2008 system. Former overseas students who had completed an eligible Australian qualification were not guaranteed permanent selection even if they achieved Competent English. They were given several options. If any one of them was completed satisfactorily the required pass mark would be achieved. They were: 2

1. Prove that they had 12 months work experience in Australia in an occupation closely related to their qualification 2. Complete the newly established Professional Year Program (PYP) 3. Achieve Proficient English To complete one of these requirements overseas students needed time. This was provided by way of a new Graduate Skills visa (485) which allowed overseas student graduates to stay in Australia for 18 months with full work rights, during which time they could apply for a Permanent Residence visa. The provision of the PYP option was recommended by the Evaluation because of the evidence available at the time that many of the former overseas students who had obtained permanent residence were struggling to gain professional appointments. This was despite the relatively buoyant labour market for accounting, IT and engineering graduates at the time. A DIAC survey of recent overseas student graduates in 2005 showed that though most were employed, only 46 per cent were in positions where they often used their qualifications.iii The PYP (detailed further below) was a one year program with instruction on business communication skills, Australian workplace culture, job search skills and which required the completion of a three month unpaid internship in a relevant workplace. The cost ranged from $9,000 to $12,300. The PYP offered those with Competent English the opportunity to improve their English, gain relevant workplace and communication skills and connections with potential employers. The ten points gained for completion of the PYD was normally sufficient to achieve the pass mark when they applied for a points tested visa. In 2009, some 567 students enrolled in the PYP. It is estimated that there were 1,544 enrolled in 2010, 2,085 in 2011 and 1,737 in 2012. The majority (around 63 per cent) have been accounting graduates, with most of the rest being IT graduates. A PYP program for engineering graduates has also been established with enrolments at around 100-120. Changes to the selection system since 2008 A new selection system with a modified points system was introduced as of mid-2011. As before, applicants had to possess qualifications acceptable to the relevant occupation assessment authority in their field of qualification. To be eligible their occupation had to be defined as in shortage. A new Skills Occupation List (SOL) was established for this purpose. All the occupations for which PYP courses were available were included on the SOL. Competent English remained the minimum English language standard. Another significant change, discussed further below, is that the points allocated for completion of the PYP were reduced to five. This diluted the value of the PYP, relative to the points allocated for Proficient English (10 points) in the attainment of the required pass mark. As with the previous system, Competent English was not enough to achieve the required pass mark (initially 65, then subsequently set at 60 points in mid-2012 with the introduction of Skill Select detailed below). To achieve the 60 points former overseas student applicants with Competent English would, as before, need to obtain a 485 visa and over the ensuing 18 months obtain additional points through attaining Proficient English, the completion of the PYP or by gaining one years relevant work experience in Australia.

Beginning in mid-2012 there was a further modification to the selection system when Skill Select became operational. Skill Select kept the 2011 points system intact. But it put in place an adjustable pass mark (with a minimum of 60). Under this system an applicant first had to register an interest in applying for a GSM visa, at which time they had to present a recent assessment of their English language capacity and a satisfactory assessment of their credentials by the relevant occupational authority. It was then left up to DIAC or one of the State/Territory governments to invite them to apply a visa. The main visas in question are the Skilled Independent (189) and Skilled Regional (provisional) (489) subclass visas where there is no sponsorship involved and the Skilled Nominated (190) and Skilled Regional (provisional ) visa subclasses which required State/Territory sponsorship. Those sponsored received a five point concession, the significance of which is discussed below. In the year to 22 April 2013, 6,785 invitations have been issued by States and Territories and 17,660 invitations by DIAC for the other points tested visas. DIAC sets annual ceilings for each occupation. Once met, no further invitations in the year in question will be issued regardless of the points achieved by the applicant. When Skill Select began operation in late 2012 only those with a 70 point tally were invited to apply. However since that time most of those invited obtained 60 points. The points available for each item assessed are detailed in Appendix One. Under the current arrangements the achievement of the PYP or Proficient English is a necessary requirement for those with accounting credentials because the accrediting accounting bodies now require, as a minimum, the PYP or Proficient English. By contrast, the Australian Computer Society (ACS) does not specify any English language requirement. It accepts the minimum required under Skill Select, which is Competent English. Graduates in IT with Competent English can achieve 60 points by enrolling in the PYP or by gaining points on one or more of the other items listed in Appendix One. For the purpose of achieving the 60 points pass mark, Proficient English is undoubtedly the option of choice for overseas students. This is because Proficient English is worth 10 points but the PYP is worth only five. For the majority of overseas students who will be in the 25-32 age group, Appendix one shows that all they need is Proficient English in order to reach 60 points. For those in the younger age group (18-24) most applicants will need additional points to reach 60, even if they have Proficient English. It will be cheaper and easier to gain the points for a Designated language or perhaps to get married in order to gain the five points for partner skills than to enrol in the PYP. Unlike the PYP, none of these alternatives is likely to contribute to the achievement of professional level employment. As noted, under Skill Select there is also the option of seeking State/Territory sponsorship, in which case they are allocated five points. This situation further diminishes the need to obtain the five points for the PYP or even for Proficient English. As can be seen from Table 1 most those invited for the two State/Territory visa subclasses between 1 July 2012 and 21 September 2012 only achieved Competent English. On the other hand almost all those invited to apply for visa subclass 189 and 489 did achieve Proficient English.

Table 1

Numbers of principal applicants invited to apply for visas by visa subclass and language score from 1 July 2012 to 21 September 2012
State/Territory visa subclass IELTS score 6 7 8 9 Total
Source: DIAC, unpublished data

190 600 472 94 6 1172

489 119 24 3 0 146

Skilled Skilled Australian Independent visa sponsored visa subclass subclass 189 489 53 48 590 55 331 6 16 1 990 110

English proficiency and the value of the Professional Year Program The outcomes described are not desirable from the point of view of preparing former overseas students for the Australian job market. Proficient English is the minimum required for such graduates to obtain and successfully hold professional level employment in accounting and IT. However for many graduates from Non-English-Speaking-Countries (NESC) this may not be sufficient. Intensive preparation for the IELTS test, in which students are coached and cram for the test may well lead to success in meeting the standards for Proficient English. But this attainment does not mean that they have the capacity to communicate at a professional level in their field. The job outcomes detailed in the tables below, provide supporting evidence that deficiencies in communication skills are contributing to poor job outcomes. Another indicator is that the four major audit and consulting firms have made it clear that most former overseas students with accounting qualifications do not meet their expectations as regards communication skills. As a consequence only a handful are being offered employment.iv The PYP specifically addresses these deficiencies. It consists of a 44 week program specified in consultation with the professional accounting bodies, the ACS and Engineers Australia. Enrolees usually hold a 485 visa and have attained Competent English. During the program they are normally coached in preparation for the IELTS test. If they achieve Proficient English this is a bonus. However the main focus of the PYP, as noted earlier, is communication training specific to a business environment. This is unlike IELTS which has a more academic focus. In addition, the PYP also incorporates study in Australian workplace practice, a professional component which involves skills specific to accounting or IT professional practice and as well as a professional internship. Surveys of the outcomes for those completing the PYP indicate that most do find work at the professional level, often with the company which provided the Internship opportunity. A recent survey conducted by the providers in 2010 showed that 70 per cent of the accountants responding who had completing the PYP held jobs in their occupation and 72 per cent of the ICT graduates. As

Table 2 shows this is a far better outcome than is recorded for all recent arrivals from NESC birthplaces. Job outcomes The first major opportunity to assess the job outcomes for overseas born graduates came with the availability of the 2006 Census results. We examined the employment situation for recently arrived migrants (arrived in Australia between 2001 and 2006) who held a bachelor degree or higher by field of study. The Census did not indicate the place of study. However, by focussing on those recent arrivals who were aged 20-29 it was assumed that most would have been former overseas students who had gained their qualification in Australia. This is because the great majority of those visaed from overseas at the time were aged 30 or more, and conversely those visaed onshore were aged under 30.v Almost all of those visaed onshore would have been former overseas students. The migrants in question were divided into Main-English-Speaking Country (MESC) and NESC birthplace groups. The latter group, reflecting the surge in former overseas students obtaining permanent residence onshore was much larger than the former. A far higher proportion of the 20-29 year olds born in MESC countries reported that they were employed in professional positions (48 per cent) than those born in NESC countries (19 per cent). The outcome for the parallel age group born in Australia was even better, with 56 per cent reporting that they were employed in professional positions. There was some variation with the fields of study reported. For the NESC group with degree qualifications in IT, 23 per cent reported employment at the professional level. The result was the same for those with accounting qualifications. By far the best outcomes for the NESC group were for those with medical and nursing qualifications, of whom 45 and 53 percent respectively reported that they worked in a professional position.vi The 2011 Census results allow a further assessment of the progress of the large number of overseas students who gained permanent residence in the second half of the 2000s. Once again there were limitations in the Census data because they do not specify whether the qualification was gained overseas or in Australia, nor do they allow a differentiation between those who obtained their visa onshore through the skilled migration points system and those who gained it after applying offshore. There is no way of identifying those who had completed the PYP program. Even though several thousand overseas students had done so by August 2011 (the date of the 2011 census) their number was dwarfed by the total number of graduates who arrived in Australia in between 2006 and 2011 who were aged 25-34, were born in NESC countries and who held qualifications in management and commerce and in IT. Table 2 shows that there were 50,428 in this group in the case of management and commerce and 20,382 in the case of IT. As with the analysis of the 2006 census results, the outcomes are split by whether born in NESC, MESC or Australia. The focus in Table 2 is on those aged 25-34 who hold degree qualifications and who arrived in Australia between 2006 and 2011. In the case of those with management and commerce degrees there is no doubt that most received their PR visa onshore because the great majority of those visaed as accountants or in related occupations applied from onshore (and thus had to be former overseas students). The situation is not as clear cut for the IT graduates. A little 6

over half of those visaed with IT occupations were visaed onshore. Thus the results are heavily influenced by the outcomes for this offshore group. They would have had relevant occupation experience and at least on this dimension were better equipped to gain employment in Australia.
Table 2 Employment outcomes, persons aged 25 to 34 years by birthplace and time or arrival, Australia 2011
Managers Field of qualification@ NESC Arrived 2006-2011 Management and Commerce Information Technology Engineering and Related Technologies Other Inad. Descr./Not Applic./Not stated Total Management and Commerce Information Technology Engineering and Related Technologies Other Inad. Descr./Not Applic./Not stated Total Management and Commerce Information Technology Engineering and Related Technologies Other Inad. Descr./Not Applic./Not stated Total Management and Commerce Information Technology Engineering and Related Technologies Other Inad. Descr./Not Applic./Not stated Total 6 4 5 3 2 4 20 13 12 8 12 12 12 10 11 6 7 9 24 14 14 9 12 13 18 37 40 27 8 46 32 29 33 47 37 25 16 12 23 34 23 36 30 20 22 37 28 24 16 11 20 35 20 25 18 11 19 37 20 Professionals Other Inad. Descr./Not stated Per cent 1 2 1 1 2 1 1 2 1 1 4 1 2 3 1 1 5 2 1 2 1 1 3 1 1 2 1 1 3 1 Not applic. * Total Total Nos. 28 25 25 36 41 31 9 7 5 14 16 12 15 10 11 18 27 15 8 7 6 12 16 11 7 6 5 11 14 9 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50,428 20,382 20,484 63,620 5,059 159,973 9,118 1,760 3,796 26,441 627 41,742 64,556 26,805 17,048 66,653 3,624 178,686 8,823 1,884 2,480 27,228 819 41,234 105,735 21,120 29,523 347,771 10,457 514,606

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45 62 71 54 33

MESC Arrived 2006-2011

53
37 47 57 53 24

NESC Arrived Before 2006

46
43 61 68 58 35

MESC Arrived Before 2006

55

Australia-born Management and Commerce 22 45 Information Technology 13 61 Engineering and Related Technologies 14 69 Other 7 62 Inad. Descr./Not Applic./Not stated 13 33 Total 11 58 Source: ABS 2011 Census, TableBuilder @ Bachelor degree or higher NESC = Non-English speaking countries MESC = Main English speaking countries (USA, UK, Ireland, Canada, New Zealand, South Africa) * Not applicable includes those who are unemployed and not in the work force.

Table 2 shows that by 2011, there has been no improvement in the employment outcomes for recent arrivals born in NESC countries who held management and commerce qualifications. Only 18 per cent were employed as professionals in 2011. This compares with 45 per cent of the similarly qualified persons who arrived in Australia between 2006 and 2011 and who were born in MESC countries. The situation for young IT graduates was somewhat better. For those arriving in Australia between 2006 and 2011, were aged 25-34 by 2011 and were born in NESC countries, 37 per cent were employed as professionals (compared with 62 per cent of their MESC counterparts). The better outcomes for IT may reflect the higher proportion drawn from overseas. The professional job market in Australia by 2013

If former overseas students found it tough gaining professional level employment in the years to 2011, it will be much harder now. This is particularly the case for those with accounting qualifications. The Department of Education, Employment and Workplace Relations (DEEWR) latest assessment of the employment situation for accountants is that the occupation is no longer in shortage. It states that There is more than adequate supply of accountants. Employers generally experience little difficulty filling their vacancies, attracting multiple suitable applicants.vii 7

This DEEWR assessment is contested by the professional accounting bodies and by the Australian Workplace Productivity Authority (AWPA) which is responsible for compiling the Skills Occupation List. In its 2012 assessment of accounting, AWPA cites the submission from these professional bodies as well as projections for rapid growth in the employment of accountants as the basis for its decision to keep accounting on the 2012 SOL.viii Nevertheless, there is no doubt that the accounting market is softer than during the 2000s. Competition will be acute not just for this reason but also because there could be large numbers of former overseas students seeking to enter the profession. The number of overseas student completions in management and commerce from Australian universities is now similar to that of domestic graduates. There is also a huge stock of overseas students still enrolled in accounting, most of whom will have an interest in gaining permanent residence in Australia. As of 2011 there were 61,601 overseas students enrolled in management and commerce higher education courses, compared with 8,365 in IT and 7,395 in engineering.ix This means that from a policy perspective it is an urgent priority that these overseas students be properly prepared so that they can gain employment. The PYP program is the best mechanism to facilitate this outcome. Implications of the Chaney recommendation As noted, the Australian Government recently commissioned the newly reformed International Education Advisory Council to provide advice on a strategy to support the sustainability and quality of international education.x The key recommendation in the Councils 2013 report (the Chaney Report) which will impact on the PYP program is that the Government should Consider increasing the points available for an Australian education qualification in the skilled migration points test from five to 10.xi The Report argues that overseas students graduating from Australian universities with superior English skills or work experience can bring valuable skills to the Australian workforce. The effect of this recommendation, if implemented, would be that the 10 points allocated for the attainment of an Australian degree would be the equivalent to the 10 points currently available for offshore applicants with five years relevant job experience and for onshore applicants with three years relevant job experience in Australia. The Chaney Report does not acknowledge the experience during the 2000s when the selection system virtually guaranteed permanent residence for overseas students who obtained a degree qualification, as in accounting or IT. As the employment results above indicate, overseas graduates from NESC countries with such degree qualifications but without relevant job experience (or additional training as in the PYP) struggled to find professional employment. In the early 2000s when the concessions for overseas students were put in place, DIAC officers and employers believed that the achievement of an Australian qualification would put an overseas student in a strong position to find professional level employment. The belief was based on the expectation that, because this required the graduate to be trained in English to Australian professional standards, the graduate would be well placed to find employment relative to overseas

trained applicants. For this reason the requirement of work experience in the occupation needed by all offshore applicants was waived for overseas students trained in Australia. The subsequent employment experience detailed above has shown that an Australian professional qualification has not been sufficient to ensure professional employment for most graduates born in NESC countries. This is why the points tested visa arrangements were reformed in 2008 (and again in 2011). The reforms put much more emphasis on work experience. They advantaged overseas applicants with professional qualifications and work experience relative to those graduating in Australia without work experience. The reforms were expected to reduce the number and share of overseas students who gained a points tested visa. However, as indicated, avenues were left open for overseas students who graduated in Australia to obtain a skilled visa. But to be successful that had to possess much higher English language standards than had previously been the case. These graduates were also given an incentive to complete the PYP which was explicitly aimed at providing them with communication skills relevant to the Australian workplace. Unfortunately, as noted, only a few thousand have needed to take up this incentive. Despite the reforms, as is shown in Table 2, only a minority of those who arrived in Australia since 2006 and who were born in NESC countries had obtained professional level employment by 2011. The reforms introduced since 2008 have not rectified employment problems already evident by the mid-2000s. This finding implies that the deficiencies in communication skills which appear to explain the poor performance of overseas graduates at the time, are still present. Given that the professional labour market, particularly for accounting graduates, has softened, it is all the more important that overseas students graduating in Australia, and granted skilled visas, are well equipped to compete in the relevant professions. The Chaney Report recommendation, if implemented, will only worsen the situation. By allocating extra points for Australian training (assuming the pass mark is not increased) the result will be that overseas graduates will have even less need to obtain local employment experience or to complete the PYP than is already the case. Indeed, if the Chaney recommendation is implemented, it is likely that there will be very little demand for the PYP program from overseas students at all. As is evident from Appendix One, the extra five points available for Australian training will mean that neither those aged 18-24 or those aged 25-32 will need the PYP (or any other five point factor) if they have Proficient English. The PYP program is already threatened by the changes to the points system in 2011. It is unlikely to survive if the Chaney recommendations are implemented. Policy implications Just as when the PYP was recommended in the mid-2000s, there is now irrefutable evidence that a high proportion of former overseas students who have obtained a permanent residence visa through the GSM are struggling to find employment in their professional field. The increase in the minimum standard of English required for such a visa has not, by itself, improved the employment outcome situation.

The PYP offers the best available alternative to deliver better employment outcomes. Yet it has been marginalised as a factor in the selection system and if the Chaney recommendation is implemented, will be diluted further. The possession of Proficient English should be required for all GSM applicants including those sponsored by State/Territory Governments. At present Proficient English is a requirement for the skills assessment by many accrediting authorities (including those representing the accounting profession) but not by the Australian Computer Society, which is responsible for the skills assessment of those with IT qualifications. The weight of the PYP in the selection system should be increased to ten points (the same as for Proficient English). This would be an important reform because it would give those potential applicants who only possessed Competent English when they obtained a Graduate Skills visa (485) a strong incentive to enrol in the PYP. At the same time, DIAC should drop the points allocated to partner skills and for a Community language, neither of which have any significant bearing on the employment outcomes for those visaed. As for the accounting and IT accrediting bodies, in the light of the poor professional outcomes reported above, and the softening of the Australian labour market, they need to consider whether completion of the PYP should be a mandated requirement for their skills assessment. *The authors wish to acknowledge the financial assistance of the Recruitment Success Group

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Appendix 1 Points allocated for onshore applicants under Skill Select * Points allocated Age Degree qualification Australian qualification Proficient English Total Additional points available One year Australian employment Professional year Community language State/Territory nomination Study in a required area Partner skills
* Current pass mark 60

Applicant aged 18-24 25 15 5 10 55 5 5 5 5 5 5

Applicant aged 25-32 30 15 5 10 60 5 5 5 5 5 5

International Education Advisory Council, Australia Educating Globally, February 2013, p. i Bob Birrell, Ernest Healy, Katharine Betts and T. Fred Smith, Immigration and Resources Boom Mark 2, Centre for Population and Urban Research, Monash University, July 2011, pp 21-22 iii DIAC, Evaluation of the General Skilled Migration Categories, March 2006, p. 77 iv Bob Birrell and Ernest Healy, Migrant accountants: high numbers, poor outcomes, People and Place, Vol. 16, No 4, 2008, pp. 12-13 v Bob Birrell Ernest Healy, How are skilled migrants Doing? People and Place, Vol. 16 No. 1, 2008, Supplement, p. 5 vi Ibid, p. 9 vii DEEWR, Labour Market Research Accountants 2011-12, p. 1 viii AWPA, SOL Occupation Summary Sheet, Accountants ix DEEWR Higher Education Statistics x International Education Advisory Council, Australia Educating Globally, February 2013, p. i xi Ibid, p. 58
ii

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