The Effect of Lower Immigration in Australia on After-tax Wages of Natives and Migrants

Speaker: Dr Ross Guest

Affiliation: The University of Queensland

Location: Level 6 Boardroom (629), Colin Clark Building (#39), St Lucia Campus

Teams Meeting: https://teams.microsoft.com/meet/477136561951641?p=v3unF3b5mrjHklbCHH

Password: Re3LU3ag

Abstract: The contribution of this paper is to apply new data and methodology for Australia in order to better understand the effect of net overseas migration (NOM) on relative wages of natives and migrants, before and after-tax. Despite the considerable literature on this question over decades, internationally and for Australia, the evidence remains mixed. Rather than an econometric approach, used in most empirical studies, a simulation approach is applied using a calibrated aggregate CES production function with a nested CRESH labour index of migrant and native labour using the ANZSCO 5 skill levels. The analysis takes account of the potential government expenditure savings due to lower infrastructure needs as a result of lower NOM. The key result is that both native and migrant after-tax wages could potentially increase as a result of cuts to NOM, depending on the response of the capital-labour ratio and on other assumptions such as the substitutability of labour inputs, reflected in parameter values in the CRESH labour index.