Free versus regulated migration: Comparing the wages of the New Zealand‐born, other migrants and the Australia‐born workers in Australia
| Published date | 01 April 2023 |
| Author | Tinh Doan,Nhung Nghiem,Nhan Doan |
| Date | 01 April 2023 |
| DOI | http://doi.org/10.1111/imig.13011 |
International Migration. 2023;61:297–327.
|
297
wileyonlinelibrary.com/journal/imig
BACKGROUND LITERATURE
Australia is a cou ntry of migrant s, with near ly 30 per cent of its p opulation bor n overseas (ABS , 2021). Since
the 1920s, various a greements have allowed the fre e movement of people between Aus tralia and New Zealand
(NZ). Since the 1970s, howe ver, more New Zealander s than Austra lians have chosen to cro ss the Tasman Sea
Received: 12 Jul y 2021
|
Revised: 14 Februar y 2022
|
Accepted: 25 March 2 022
DOI: 10 .1111/imig .13011
ORIGINAL ARTICLE
Free versus regulated migration: Comparing the
wages of the New Zealand- born, other migrants
and the Australia- born workers in Australia
Tinh Doan1 | Nhung Nghiem2 | Nhan Doan1
1Australia n National Universi ty, Canberra,
Australian Capital Territory, Australia
2Universit y of Otago, Wellingto n, New
Zealand
Correspondence
Tinh Doan, Au stralian Nation al University,
Canberra 26 01, Australian C apital Territory,
Australia.
Email: Tinh.doan@anu.edu.au
Abstract
New Zealanders ca n cross borders free ly, work and live in
Australia indef initely thanks to the Trans- Tasman Travel
Agreement. T his paper uses a recently develop ed decompo-
sition method to decom pose the weekly wage gap at vari ous
quantiles on the wage di stribution bet ween New Zealand-
born (NZ- bor n) and Australian- born workers, and betwe en
NZ- born workers, migr ants from other Englis h speaking
countries (OESC), an d from non- English speaking countries
(NESC) to determine h ow free and regulated migration infl u-
ences migrants’ pe rformance in the A ustralian labour m ar-
ket. We found that NZ- born workers earne d higher weekly
wages than both Aust ralian- born an d NESC workers but
earned lower wages tha n OESC migrants. Diffe rences in en-
dowment were primaril y responsible for the wage gaps be-
tween NZ- bo rn and Australian - born workers and betwe en
NZ- b orn and OESC migra nts. However, differences in r e-
turns to worker and job char acteristics are mainly respo nsi-
ble for the wage gap bet ween NZ- bor n and NESC migrants.
This is an open ac cess article und er the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which
permits us e and distributio n in any medium, provid ed the original wor k is properly cited , the use is non-comme rcial and no
modifications or adaptations are made.
© 2022 The Au thors. International Migration published by John Wil ey & Sons Ltd on behalf of International Or ganization for Migrat ion.
298
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DOAN et Al .
to seek better economic opportunities (Sinning & Tani, 2015). The New Zealand is a smal l country of about five
million people, but 565,000 New Zealande rs (equivalent to 12 per cent of its population) live in Aust ralia. NZ-
born migrant s in Australia account for abou t 2.2 per cent of the Australi an population in 2020 (ABS, 2021).Ne w
Zealanders have b een incentivised to cross th e Tasman beca use the average annual wage (in US D constant price
using 2016 base year and p urchasing power paritie s— PPPs) in Austr alia was 22 per cent higher th an in NZ (OECD,
2021), and there are no barr iers to labour movement bet ween the two countrie s (Green, 2007).
In recent decad es, Australian Immig ration has applied a point s election system for i mmigrants, part icularly for
skilled immigr ants. Unlike migrants fro m other countries in Austra lia, NZ migrants are offere d a special category
visa (SCV), th e 444 scheme via the Trans- Tasman agree ment, without any language, s kills, education and age limit
requirement s. The NZ- Austr alia migration flow is thus a typ ical example of the free movemen t of labour due to
wage different ials, where workers seek to m ove to higher wage labour market s.
English skills are e videnced to be the most impor tant factor for migrants to s ettle, find work and affec t em-
ployment outcom es in host countr ies. This is also tr ue in Australia, where English s kills are an impor tant factor
affecting e mployment outcomes for migr ants (To et al., 2017; Islam & Para snis, 2016; van de Ven & Voitchovsky,
2015). Cai and Liu (2015) f ound that relative to the n ative- b orn, both the compos ition effect (i.e. t he wage gap due
to difference s in worker characterist ics) and the wage structu re effect (i.e. the wage ga p due to different returns
to worker charac teristics) favour migrant s from English- speaking c ountries (ESC). English is the f irst language of
New Zealander s, giving them an advantage in t he labour market over migrant s from the NESC. Thus, we exp ect
NZ- born worker s to fare better than othe r migrants, particu larly NESC migrants , in the Australian labo ur market.
A similar study o n the United States a nd Australia l abour markets fo und that the disa dvantage of migr ants’
wages are largel y driven by NESC migrants (Chisw ick et al., 2008). Earlier studi es in the UK found that white mi-
grants earn ed as much as white natives, but n on- white migra nts experienced a wage dis advantage (e.g. Bell, 19 97;
Price, 2001). Hunt (2012) f ound that after controll ing for differences in o bserved characte ristics, ESC migr ants had
an earnings ad vantage, while NESC migran ts were disadvantaged rel ative to UK- born workers. Al gan et al. (2010)
found that fir st- generation migr ants in the UK earned les s than native workers, even af ter controlling for variab les
such as age, educ ation, experi ence, region, an d time of arrival, a nd that the wage dis advantage var ied between
immigrant grou ps. Obviously, English skills a nd country of origin play an i mportant role in labo ur market outcomes.
Education and s kills are also import ant factors affe cting employment ou tcomes for migrants in h ost countries.
To et al. (2017) showe d that educational quali fications were impor tant determinants of bot h employment and in-
dividual wages i n Australia. They also fou nd that OECD and ESC male migr ants earned a higher hou rly wage than
Australian- born men, and ESC female mig rants earned a similar wage to A ustralian- bor n women. NESC migrants
earned more th an Australian- born wor kers but, controlling for thei r education, NESC migrant s earned less than
Australian- born worker s. This implies that educatio n helps reduce the income gap bet ween these groups. Islam
and Parasnis (2 016) showed that alt hough migrants earne d a higher wage, this differen ce disappeared after con-
trolling for covar iates, including educ ation, age and gender. Overa ll, the migrant wage adva ntage reflects the ir su-
perior labour market characteristics, particularly education. Their decomp osition analysis indicated that migrants’
higher wages refl ect migrant s’ better educ ation profile, b ut migrants re ceived lower retur ns to their educat ion
than their native counterparts.
By looking at wage d ifferences b etween NZ- born and Austr alian- born worker s, OESC migra nts and NESC
migrants, th is paper offers a uniqu e contribution to the liter ature. First, the immigratio n selection process i s often
believed to result i n wage advantages for migra nts over the native- b orn, particularly fo r skilled migrants. If th ere
exists a large w age gap between N Z- born and A ustralian- born wor kers, the free m ovement of labour ac ross
the NZ- A ustralian bo rder provides a sp ecial case for tes ting whether w age differenti als between NZ- born and
Australian- born workers are attri butable to anything e lse, such as the self- selectio n effect rather tha n just educa-
tion/skill advant ages because immigration s election criteria, such as En glish skills, education and s kills and work
experience, are not applie d to New Zealand ers migrating to Australia. Fur thermore, by com paring the wage gap
between the NZ- bo rn and OESC migrants in Austr alia, we can provide furthe r insight into how (and how much)
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