Backpackersvseasonalworkers:learningfromthecontrasting

temporarymigrationoutcomesinAustralianandNewZealand

horticultureRichardCurtain,MatthewDornan,StephenHowesand

HenrySherrell

Abstract

“Crowdingout”isawidelyacceptedclaiminmigrationanalysis,evolvingfromtheliteratureassessingpost-SecondWorldWarguest-workerlabourwhichhelpedfueltheeconomicboominEuropeandotherWesterncountries.Giventhecostsofregulation,thepreferenceofprofit-maximisingemployersforirregularandminimally-regulatedmigrantsoverregulatedalternativeswill,itisargued,undermineifnotcondemntofailurewell-regulatedtemporarymigrationschemes.Totestthecrowding-outhypothesis,thehorticulturallabourmarketsinAustraliaandNewZealandareexamined.TheexperienceofregulatedseasonalmigrantprogramsinAustraliaandNewZealandhasbeendivergent.Eventhoughthetwoprogramsareverysimilarindesign,theNewZealandvarianthasbeenmuchmorepopularthanitsAustraliancounterpart.Theevidencesuggeststhattherelativeattractivenessofregulatedandunregulatedmigrantlaboursourcesdependsonarangeoffactors,includingtheexportorientationofthesector,thecostsofcollectiveactionandregulation,differencesinpolicydesignandimplementation,andexternalfactors.Dependingonindustryandeconomy-widecharacteristics,qualityandreputationalbenefitsforemployerscanoffsetthecostofregulation.

DevelopmentPolicyCentreDiscussionPaper65November2017

SERIESISSN2206-303X

Backpackersvseasonalworkers:learningfromthe

contrastingtemporarymigrationoutcomesinAustralian

andNewZealandhorticulture

RichardCurtain,MatthewDornan,StephenHowesandHenry

Sherrell

RichardCurtain is an independent consultant andAssociate of

the Development Policy Centre. Matthew Dornan is Deputy

Director and Stephen Howes is Director of the Development

Policy Centre. Henry Sherrell was a Research Officer at the

DevelopmentPolicyCentreatthetimethispaperwasdrafted.

This paper was first presented at the Migration and Work

symposiumon6February2017attheUniversityofSydney.An

earlier version was presented at a 1-2 June 2016 Devpolicy

labour mobility workshop at ANU. Thanks to participants at

botheventsandtoreviewersfortheircomments.

Curtain,R,Dornan,M,Howes,S&Sherrell,H2017“Backpackersvseasonal

workers: learning from the contrasting temporary migration outcomes in

Australian and New Zealand horticulture,” Development Policy Centre

Discussion Paper #65,Crawford School of Public Policy, The Australian

NationalUniversity,Canberra.

TheDevelopment Policy Centre is a research unit at the

Crawford School of Public Policy, The Australian National

University.Thediscussionpaperseries is intended to facilitate

academic and policy discussion. Use and dissemination of this

discussion paper is encouraged; however, reproduced copies

maynotbeusedforcommercialpurposes.

The views expressed in discussion papers are those ofthe

authors and shouldnot be attributed to any organisationwith

whichtheauthorsmightbeaffiliated.

Formore information on the Development Policy Centre, visit

http://devpolicy.anu.edu.au/

1

Backpackersvseasonalworkers:learningfromthecontrastingtemporary

migrationoutcomesinAustralianandNewZealandhorticulture

1. Introduction

“Crowdingout”isawidelyacceptedclaiminmigrationanalysis.Itisoftenarguedthat

profit-maximisingemployerswillpreferirregularandminimallyregulatedmigrantsto

more regulated alternatives, given the costs of regulation. Thus, poorly-regulated

temporarymigrationschemeswillcrowdoutbetter-regulatedones.

This paper revisits the crowding-out hypothesis by comparing and contrasting the

horticultural labourmarkets in Australia andNewZealand (NZ). Both economies are

structuredonthesameliberalmarketprinciplesandhavelabourmarketsthatexhibit

highproportionsofmigrants.However,theexperienceofseasonalworkerprogramsin

Australia and New Zealand has been highly divergent. A regulated labour supply of

temporary migrants has thrived in NZ horticulture whereas an unregulated migrant

laboursupplyhasdominatedinAustralia.

Thispapersetsouttoexplainthesecontrastingoutcomes.Itfirstsurveystherelevant

literature,andprovidesthecontext,afterwhichadetailedanalysisoftheAustralianand

NewZealandhorticulturalsectorlabourmarketsispresented.Thefinalsectionsofthe

paperexplainthecontrastunearthedbythisanalysis.

2. Literaturereview

Since Castles’ 1986 obituary for European guest-worker systems, written on the

premisethattheseprograms“inevitablyleadtopermanentsettlement”(Castles1986),

much has changed in global migration. The apparent resurrection of temporary

migrationprogramswasacknowledgedbyCastleshimself(Castles2006).However,he

thencautionedthat“thefrequentpreferenceofemployersforundocumentedworkers

undermines temporaryworker programs” (Castles 2006: 755).We call a generalised

versionofthisclaimthe“crowdingout”hypothesis:theargumentthatthepreferenceof

2

employers for unregulated workers undermines regulated temporary worker

programs.1

The evidence for the crowding-out hypothesis typically rests on within-country

comparisons between small regulated schemes and large unregulated ones. For

example, Castles (1986) documents how Belgian and French employers came to rely

heavilyonmigrantswithatouristvisainthelate1960s:

“[These] clandestineworkersmet employers’ needswell. Theywere a flexible

sourceoflaborandtheirweaklegalstatuscompelledthemtoacceptpoorwages

andconditions”(Castles,1986:764).

Moregenerally,Wickramasekera(2002:5)findsthat“businessesandemployersinhost

countries reap enormous profits by exploiting migrant workers, especially irregular

workers”.

Exploring these labour dynamics in the context of “immigration policy and labour

shortages”,Anderson andRuhsnotehowprofit-maximising employerswill choose to

hiremigrantworkersillegallybasedonthree“businessandrecruitmentobjectives”:

(i) minimising labour costs, (ii) recruiting ‘good workers’ with the preferred

qualitiesandattitude, and (iii)minimising immigrationcosts, i.e. theeconomic

and other costs arising both from state sanctions and from complying with

bureaucraticrequirementsofthelegalemploymentofmigrants.Wherethelegal

employmentofmigrants isrestricted,recruitingmigrants illegallywill increase

laboursupplyandpotentiallyputdownwardpressureonwages,at least inthe

short term.Employersmayalsouse illegallyemployedmigrants to lowercosts

through non-compliance with employment and tax laws (Anderson and Ruhs,

2010:198).

Thereare twopossiblepolicy implicationsof the crowding-outhypothesis.One is for

moreenforcement.RuhsandMartin (2006:12-13)argue that “inboth theUSandUK,

thedebateoverhowtodealwithirregularmigrationincludestheargumentthatbetter1ThisisalabourmarketequivalentofGresham’slawthatbadmoneywilldriveoutgood.

3

enforcement of employment laws would reduce the demand for irregular migrant

labourbyraisingitscost…”.Ruhshimselfarguesinfavourofwelldesigned,regulated

andenforcedtemporarymigrationfromexistingsources(Ruhs2006,2013).

The other possible implication ismore defeatist: that temporarywork programs are

bound to fail. Castles (2006:755)writes that, because of crowding out, guestworker

programsarestill“unlikelytoachievetheiraimsofmeetinglow-skilledlabourdemand

andpreventingsettlement.”

As noted, the evidence for the crowding-out hypothesis is based on single-country

studies.Inthispaper,were-examinethecrowding-outhypothesisusingacomparison

ofAustralianandNewZealandhorticulturalsectorlaboursupply.

3. AustralianandNewZealandcontext

AustraliaandNewZealandareprimeexamplesof liberalmarketeconomies.The two

countries have similar migration regimes. The priority initially given post-war to

permanent “settler” migration gave way to a strong emphasis on attracting skilled

migrants, selected by points awarded for preferred characteristics. The growth in

temporary skilled migration and international students has also been important.

Employers have increasingly been given a direct role in skilled migrant selection,

including via a two-step migration process from temporary to permanent migration

throughemployersponsorship(Hawthorne2012).

One major difference between the two countries is New Zealand’s history of Pacific

migration. From 1951 to 1972, the Pacific Islander population in New Zealand grew

from3,600toover50,000(NewZealandGovernment,2016).Thelaissez-faireapproach

ofNewZealandpolicy-makerstoPacificvisitorsandvisaoverstayersinthe1960sand

1970swasgraduallyreplacedbyamoreformalapproach,withtheintroductionofthe

firstPacificmigrationprogramin1975-76(OngleyandPearson,1995).SpecificPacific

migration “windows” remain a feature of New Zealand immigration policy today

(Curtain et al. 2016). In Australia, theWhite Australia policy before the 1970s and a

rigidcommitmenttonon-discriminationthereafterensuredthatspecialconcessionsfor

4

migrationfromPacificcountrieswerenotforthcoming.Asaresult,thePacificdiaspora

ismuch larger inNew Zealand than in Australia. Pacificmigrantsmake up three per

centoftheNewZealandpopulation,whereasinAustraliaithasneverbeenmorethan

onepercent(Curtainetal.2016:Figure2).

While both Australia and New Zealand have traditionally emphasised permanent

migration,morerecentlybothcountrieshaveexperiencedmassivegrowthintemporary

skilledmigration.Themainfocushasbeenonskilledtemporaryvisas, the457visa in

Australia (now renamed the Temporary Skills Shortage Visa) and the Essential Skills

VisainNewZealand.Researchthemesinrelationtotheskilledtemporaryvisasinclude

precariousness (Tham and Campbell 2013; Velayutham 2013), fairness (Wright,

Groutsis and van den Broek 2016), marginalisation (Walsh 2014) and vulnerability

(Yuan, Cain and Spoonley 2014). Other major temporary visa categories are for

international students andworkingholidaymakers, and they toohave recently come

underbothpublicandacademicscrutiny.Boucher(2016)convincinglyarguesthatsuch

programs should be considered “de-facto low-skilled programs”. Mares (2016) and

Howe and Reilly (2015) discuss how lower skilledmigrants face amore constrained

environmentcomparedtothosewithhigherskilllevels.

Inthemid-2000s,bothcountriesintroducedtemporarymigrationprogramsspecifically

for horticulture. These schemes have been analysed separately (see Hay and Howes

2012,DoyleandHowes2015,andHoweetal.2017onAustralia;andBedford2013on

NewZealand),buttheircomparativeperformancehasonlybeenanalysedtodate ina

presentationandblogpostbyCurtain(2015,2016),onwhichthispaperbuilds.

4. HorticulturallabourinAustraliaandNewZealand

ThehorticulturalindustriesinAustraliaandNewZealandprovideausefulcomparison

toevaluatethecrowding-outthesis.Bothlabourmarketshaveaheavyshareofmigrant

workers and both have experienced similar policy changes with the introduction of

seasonalworkerprograms,albeitwithsomeimportantdifferencesintiming.

5

The Recognised Seasonal Employer (RSE) Scheme in New Zealand and the Seasonal

WorkerProgramme(SWP)inAustraliaareverysimilar.Theyarebothhighlyregulated

schemes for the employment of migrant labour. The contrasting use and different

employer preferences for the RSE and SWP show how the context within which

schemesoperateshapestheuseorotherwiseoftemporarymigrationprograms.

The following sub-sections explore the size and composition of the horticultural

workforceinthetwocountries,andthenlooksinmoredetailatthethreemaintypesof

labouremployed.

4.1Thehorticulturalworkforce:sizeandcomposition

Thesizeofthehorticulturallabourmarketinbothcountriesisdifficulttoestimatedue

tothecomplexityofthesectoranditshighrelianceontemporaryworkers,andinthe

case of Australia, illegal workers. The Department of Employment and Workplace

Relationsestimatedaworkforceof55,000to65,000in1999(AustralianSenate2006).2

InNewZealand,HorticultureNZestimatedaworkforceof50,000for2009,whichgrew

to60,000by2016(Herbert2017).

Assessingthecompositionofthehorticulturalworkforceisalsodifficultgiventhelack

ofempiricaldataandtheincentivesforemployersnottorevealanyrelianceonillegal

labour. We have excellent data on seasonal workers, some data on other migrant

workers,andpoordataondomesticorlocallysourcedworkers.Ourbestestimatesfor

the two countries arepresented inTable1.They suggest thatbackpackers andother

migrantsdominatethehorticulturalworkforceinAustralia,butthatdomesticworkers

dominate in New Zealand.While seasonal workers are the smallest category in each

country,theirshareismorethantwiceaslargeinNewZealandthaninAustralia.

2 The horticultural sub-groupANZISC cohorts in the 2011Australian Census only total 37,000 people.However,theCensusoccursinearlyAugustwhichisoutsidethetimemostharvestseasonsoccur.

6

Table1:AnestimateofthecompositionofthehorticulturalworkforceinAustraliaandNewZealand

Domestically-sourcedworkers

Seasonalworkers

Backpackersandother migrantworkers

Australia 32% 8% 60%NewZealand 55% 16% 29%

Note:Basedonthediscussioninthetextabove,weassumealabourmarketof60,000ineachcountry.Seasonalworkernumbersarecloselymonitoredbygovernment,andavailablethroughofficialdatasources.ForAustralia,wederivebackpackernumbersfromsecond-yearvisaissuances,andderivedomesticworkersasaresidual.ForNewZealand,wetaketheshareofdomesticworkersfromBedford(2013),andderivethebackpackers/othermigrantcategoryasaresidual.Sources:Table2and3sources,Bedford(2013),Herbert(2017),AustralianSenate(2006).

4.2Domesticallysourcedworkforce

InAustralia, theshareof thedomestically sourcedworkforce isdeclining.Howeetal.

findthat“althoughlocalworkerstraditionallyformedthebulkoftheharvestworkforce,

theyarenolongertheprimarysourceoflabourforgrowers”(Howeetal.2017:20).

Domestically sourcedworkers are amore important contributor to theNew Zealand

horticultural labour market. Bedford examines multiple regions and employers and

suggestsalocalworkforceofapproximately55percentofthetotalfortheperiod2007-

2011 (Bedford 2013: Table 6.5). This is roughly equivalent to Horticulture New

Zealand’s own estimates of the domestically sourced labour supply (Herbert 2017).

AccordingtoBedford(2013),theshareof locallysourcedlabourisalsofallinginNew

Zealand.

Thereareanumberof reasonsbehinddomestically sourcedemploymentdeclining in

thehorticultural industry.Bedford finds retention is the “crucialproblem”becauseof

low wage rates combined with the prospect of only temporary work (Bedford,

2013:57). In both countries, an increasingly urbanised workforce is decreasingly

interestedinundertakingagriculturalwork.

4.3Backpackersandotherminimallyregulatedmigrants

Working holiday makers, known colloquially in both countries as backpackers, are

granted visas based on minimal eligibility criteria such as age, a return ticket or

7

equivalent, evidence of support funds, and in some cases a level of educational

attainment. The visa entitles them to live in Australia or New Zealand without

dependants and toworkwithout any supervision bymigration authorities. From the

perspectiveoftheemployer,backpackersareidenticaltodomesticallysourcedworkers

exceptthattheyarenotabletoworkforoneemployerforlongerthansixmonths.3

In 2005, the Howard Government introduced a second yearWorking HolidayMaker

(WHM)visaextensionavailabletofirst-yearvisaholderswhodidatleastthreemonths

of regional work. This was in response to pressure from horticultural employers to

addresslabourmarketshortages.Thisnewpolicywasimplementedasanalternativeto

a seasonalworkerprogram,whichNewZealandwas then introducing, butwhich the

Howard government was opposed to. This decision transformed the Australian

horticulturallabourmarket,asbackpackersactivelychosehorticulturalemploymentin

ordertoextendtheirresidencyinAustralia.TheDepartmentofImmigrationandBorder

Protectionreportedthat90percentofsecondWHMvisasaregrantedduetoworkin

horticulture (DIBP 2016a).4 The number of second-year backpacker visas grew

dramaticallyfromlessthan3,000in2005toover40,000by2013(Table2).Whilenot

allbackpackerswhoworkonafarmapplyforasecond-yearvisa,thisfigureofsecond-

yearvisaapplicantsisthebestproxyavailableforthenumberofbackpackersworking

onfarms.Althoughthegrowthhasmoderatedandeventurnednegativeinrecentyears

duetoafallinthenumberofbackpackerscomingtoAustralia,theabsolutenumberof

backpackersapplyingforasecond-yearvisahasremainedlarge.5

Hay and Howes (2012), in their nationwide survey of horticultural employers in

Australia, found that 73 per cent of growers report that backpackers are their main

source of labour. Doyle and Howes (2015), in a second survey of horticultural

employers,foundthat46percentofgrowersreportedthatbackpackersaretheirmain

source.

3Additional changes tobackpackeremployment ruleswereannounced in the2015NorthernAustraliaWhitePaperwhichrelaxedsingle-employeremploymentlimits.4The secondyearworkingholidayvisa is approved forbackpackerswhowork in agriculturewhich isfurtherdefinedas“theharvestingand/orpackingoffruitandvegetablecrops,fishingandpearling,treefarmingandfelling”.5Ontheotherhand,from18November2016,WorkandHolidayvisaholders(13,213visaholdersattheendof 2016)will be eligible for a second-year visa on the same requirements as the417 visa holders(DIBP2016b:4).

8

NewZealandalsopromotesadditionalbackpacker residency forwork inhorticulture,

but the incentive it offers ismore limited than inAustralia.Whereas abackpacker in

Australiacangainanadditional12monthsofresidencybyworkinginhorticulture, in

New Zealand the additional residency is limited to threemonths and the backpacker

mustcontinuetoworkinhorticulture.Thischangewasimplementedin2009,wellafter

theintroductionofitsseasonalworkerprogram.

Table2:NumberofsecondyearbackpackervisasgrantedinAustraliaandNewZealand,financialyear2005-06to2015-16

NewZealand Australia

Secondbackpacker

visas

Secondbackpackervisasas

proportionofall

backpackervisas(%)

Secondbackpackervisas

Secondbackpackervisasas

proportionofallbackpackervisas(%)

2005-06 -- -- 2,692 22006-07 -- -- 7,822 62007-08 -- -- 11,826 72008-09 -- -- 21,775 112009-10 1,163 3 25,315 142010-11 1,475 3 22,500 122011-12 1,963 4 30,501 142012-13 2,127 4 38,862 152013-14 2,911 5 45,950 192014-15 3,087 5 41,339 182015-16 3,731 5 36,264 17

Sources:DIBP2015and2016a;ImmigrationNewZealand2016.

Many backpackers working in the regional horticultural labour markets are not

motivated solely by income, but are also seeking to obtain a longer-termwork visa.

Approximately one in five backpackers from1991 to 2014 eventually ended upwith

someformofpermanentresidency(ProductivityCommission2015:373).Thefirstaim

for many is simply to get the second-year visa. This puts them in a vulnerable

employmentsituation,astheyaredependentontheiremployerforworkcertification.

The Fair Work Ombudsman recently found through an inquiry into the wages and

conditions of people working under the 417 Working Holiday Visa Program that

9

“unreasonable and unlawful requirements are being imposed on visa holders by

unscrupulousbusinesses”(FWO2016:4).

Illegalmigrantsalsoworkinhorticulture.ThesemaybepeoplewhoenterAustraliaona

tourist visa, and/or are visa over stayers. Four out of five (79 per cent) employers

surveyedin2015recognisedthat“undocumentedworkerswereusedtoatleastsome

extent in the horticultural industry” (Howes and Doyle 2015:13). Data from the

Australian Department of Immigration and Border Protection show that more than

64,000peopleare living inAustralia illegallyafteroverstayingworkandtouristvisas.

Thedepartmentestimatedthat20,000overstayersarealsoworkingillegally(Mcllroy

2017). Media reporting, including investigative reporting in the Fairfax Press,

demonstratehowtouristvisasareusedaspartofanorganisedlaboursourcingregime

rife with middle men and “fixers” in clear contravention of government regulations,

suchasnoassociatedworkrights(BakerandMcKenzie2016).

Finally, it is important torecognisethat the illegalandbackpackercategoriesoverlap.

Backpackers are a legal source of labour, but, as discussed above, are often paid less

thantheyareentitledto.A2017onlinesurveyof4,322temporarymigrantsinAustralia

showed that the worst-paid jobs are in fruit and vegetable picking and farm work,

where15percentofrespondentssaidtheyhadearned$5anhourorlessand31per

centhadearned$10perhourorless(BergandFarbenblum2017).

4.4Seasonalworkers

Aninfluential2006WorldBankreport,AtHomeandAway:Expandingjobopportunities

forPacificIslandersthroughlabourmobility,proposedaframeworktopromoteseasonal

migration from Pacific countries to Australia and New Zealand to address labour

shortages in horticulture (WorldBank 2006). TheWorldBankworkedwith theNew

Zealand government to pilot the sourcing of workers from Vanuatu (McKenzie et al.

2008:4).

The Howard Government, re-elected for a fourth time in 2004, did not support

temporary seasonal migration programs from the Pacific. Instead, in response to

horticulturalemployerpressure,itintroducedthesecond-yearbackpackervisain2005.

10

And in response to pressure fromPacific island countries for greater labourmobility

opportunities, it fundedtheAustralia-PacificTechnicalCollegetoupgradetheskillsof

PacificworkerstoenablethemtomigratetoworkinAustraliaasskilledworkers.

AnAustralianparliamentaryInquiryintoPacificRegionSeasonalContractLabourwas

setupinDecember2005butrecommendedagainstaseasonalworkerprogramforthe

Pacific.Thiswasdespitemostsubmissionsarguingthereweremajorlabourshortages

in theAustralianhorticulture sector (AustralianSenate, 2006).This conclusionof the

committeewasinstarkcontrasttotheWorldBankreport.

WiththeelectionofLaborin2007,thenewPMKevinRuddsaidthenewgovernment

“will closely monitor New Zealand’s experience of seasonal employment of workers

from the Pacific to decide whether Australia should create its own seasonal worker

program”(Maclellan,2008).Australiaintroducedapilotschemein2007whichbecame

anongoingprogramin2012.

The two schemes are very similar in design, not least because the design of the

Australianpilotdrewheavilyonthepre-existingNewZealandscheme.Employerswho

wishtoemployseasonalworkersinbothAustraliaandNewZealandmustengagewith

arobustregulatoryframework.Employerobligationsincludeobtainingpriorapproval

from government to employ seasonal workers, testing the local labour market

(advertising job vacancies), and meeting pastoral care responsibilities, such as

arrangingaccommodation,andhelpingwithsomecosts(particularlyflights).Underthe

Australianscheme,workersmustbesourcedfromthePacificorTimor-Leste.TheNew

Zealand scheme allows employers to recruit from Asian countries, due to legacy

arrangements, but in practice the focus of recruitment for the RSE is also from the

Pacific. The New Zealand scheme has always been capped to ensure that domestic

workershavepriority.However, the caphasbeengradually increasedover time.The

Australianschemewasinitiallycapped,but,afterseveralyearsoflowgrowthinwhich

thecapwasnotmet,thecapwasremovedin2015.

Seasonal workers are definitely a more expensive option for employers than

backpackers. Employers have to cover part of the airfare of theirworkers; they also

11

havetoincurthecostsofmeetinggovernmentapprovalandreportingrequirements;as

wellascostssuchasrecruitmentandpastoralcare.Thesecostscan,however,beoffset

bytheproductivity,qualityandreliabilitybenefitsofusingseasonalworkers.ForNew

Zealand, Bedford (2013) finds seasonal workers are more efficient than both

backpackers anddomestically sourcedworkers.This leads toproductivity gains from

“thetimelyremovalof thecropfromthetree/vineaswellasmoreskilfulselectionof

the individual pieces of fruit that are picked” (Bedford 2013: 311). She shows that

seasonal workers have “significantly higher rates of attendance at work, higher

maximum,minimum,medianandaverageearnings,andthereismuchlessvariabilityin

earnings between Pacific RSE workers than there is among the non-RSE workers”

(Bedford 2013: 312). There is also evidence from New Zealand to suggest returning

seasonal workers are more productive. The use of piece-rates in the horticultural

industry allows straightforward comparisons based on firmwage data. Bedford finds

the12-weekaveragewageforreturningseasonalworkersinHawke’sBay,NewZealand

wasapproximately10percenthigherthanfornewseasonalworkersin2011(Bedford

2013)..

In an analysis of payroll data for a large Australian horticultural employer, Pacific

seasonalworkerswere found tobe “significantlymoreefficient thanworkingholiday

makers”(LeithandDavidson2013:1).Theauthorsfoundthatseasonalworkersearned

anaverageof$24perhourwhilebackpackersearned$20.Theauthorssuggestthiswas

duetohigheron-farmexperience,returningemploymentandgreaterincomeincentives

forseasonalworkerscomparedtobackpackers.

Despite their similar designs and benefits, the two schemes show very different

trajectories(Table3).TheNewZealandschemequicklyreacheditscap,andhassince

increasedinlinewithmodestincreasesinthecap.NewZealandemployersconstantly

call for an increase in or removal of the RSE cap to address labour shortages (for

exampleHorticultureNZ2016),bothofwhichwouldleadtoalargeincreaseinseasonal

workers.TheAustralianprogramhasgrownmuchmoreslowly.Evenin2015-16,after

more rapid recent growth, therewere, despite theNZ cap,more than twice asmany

seasonalworkersinNewZealandasinAustralia.

12

Table3:SeasonalworkersinNewZealandandAustralia,2007-08to2015-16

NewZealand–RSEapprovedvisas(cap)

Australia–SWPapprovedvisas(cap)

2007-08 4,426(4,500) --2008-09 7,617(8,000) 57(2500over4years)2009-10 6,829(8,000) 63(2500over4years)2010-11 7,619(8,000) 423(2500over4years)2011-12 7,742(8,000) 1,067(2500over4years)2012-13 8,175(8,000) 1,473(2,000)2013-14 8,415(8,000) 2,014(2,500)2014-15 9,275(9,000) 3,177(3,250)2015-16 9,757(9,500) 4,722(*)

*Capremovedforthe2015-16financialyearonwards.Sources:Variousgovernmentdocuments.

The limited take up of the SWP in Australia supports the claim that employers in

horticulturepreferlowcostandirregularmigrantworkers.However,theNewZealand

experience contradicts this claim. As Table 4 shows, the ratio of seasonalworkers to

backpackers in horticulture is approximately 1:2 in New Zealand but only 1:10 in

Australia(measuringbackpackersusingthesecond-yearvisadata).Whiletheseratios

are only estimates, they are telling, especiallywhen it is recognised that demand for

seasonalworkersinNewZealandissuppressedbythecap,whichisbinding.Itisclear

thatthereisamuchhigheremployerpreferenceforregulatedseasonalworkersinNew

ZealandthaninAustralia.6

Table4:Ratioofseasonalworkerstoperthousandbackpackerswithasecondvisainhorticulturalindustry,2009-10to2015-16

Australia NewZealand2009-10 2 5,8722010-11 19 5,1652011-12 35 3,9442012-13 38 3,8432013-14 44 2,8912014-15 77 3,0052015-16 130 2,615

Source:SeeTables2and3.

6Another interestingdifference in thescheme is that inNewZealandthemajorityofseasonalworkersarehireddirectlybyfarmers,whereasinAustraliathemajorityarehiredbylabourhirecompanies.ThismayreflectthegreaterfragmentationoftheAustralianhorticulturalsector.

13

Thedifferences inpolicy formation also suggest that inNewZealand there is amuch

greaterinterestinregulatedlabouroptionstoprovideamorereliableandexperienced

workforce than in Australia. According to two key participants in this process

(WhatmanandVanBeek2008),NewZealandgovernmentofficialssawthehorticulture

industry as facing a crisis in the early 2000s. Thiswas due to tight profitmargins, a

growingdemandforlabour,lowwagesandpoorworkingconditions,poorqualitywork,

and low productivity due to the use of casual, often illegal workers (Whatman et al.

2017:2).ThepushfortheRSEcamefromemployersfacinga“crisisintheprofitability

ofthehorticultureindustrybecauseofaninabilitytogetsufficienthigh-qualityfruitand

vegetablespicked,packedandtothemarketintime”(Whatmanetal.2017:2).TheRSE

also had a long period of preparation involving a series ofworkshopswith growers,

governmentofficialsfromdifferentagencies,andresearchers(Whatmanetal.2017:3).

By contrast inAustralia the SWPwas designed and introducedwith very little direct

employerinput.7

Survey evidence from Australia confirms a lack of interest from employers in the

scheme. Howes and Doyle (2015: 11) show that even in 2015, after six years of

operation(includingthepilot)onlytwooutofthreehorticulturalemployerswereeven

aware of the program. Howes and Doyle also note that “28 out of 43 industry

associations had not received any information about the SWP from Government”

(Howes and Doyle 2015:12-13). While this lack of awareness can superficially be

regardedasacauseofthelackoftakeupoftheSWP,itismoreanindicationofthelack

of employer interest in the need for a stable, reliable and experienced workforce to

increaseproductivity.

The employer surveys also reveal a lack of aggregate labour shortage in the

horticultural labourmarket in Australia. Most employers, when surveyed, responded

they had no need to use the SWPprogram to provide a supply ofworkers,with this

figurerisingfrom60percentin2011to67percentin2014(HowesandDoyle2015:

Fig.4.2).

7ThenameoftheNewZealandscheme(RSE)stressestheemployer;thatoftheAustralianscheme(SWP)the worker. The objectives of the two schemes are defined in similar terms, but the wording of theobjectives in the NZ case places greater weight on the benefits for business. Both of these facts areconsistentwiththegreaterrolebusinesshadtoplayinintroducingtheRSE.

14

Why has a regulated labour supply of temporary migrants been crowded out in

AustraliabutnotinNewZealand?Thenextsectionofthepaperattemptstoanswerthis

keyquestion.

5. Economic,policyandsocialfactorsshapinglabourmarketoutcomes

Thissectionconsidersfoursetsoffactorswhichhelpexplainthedifferenthorticultural

labourmarketoutcomesinAustraliaandNewZealand:thegreaterexportorientationof

the New Zealand horticultural sector, differential costs of collective action and

regulationinthetwocountries,differences inschemedesignandtiming,andexternal

factors.

5.1Exportorientation8

HorticultureisNewZealand’sfourthlargestexportindustry.Thesectorexports61per

cent its total production to some 124 countries, particularly Europe, USA, Japan and

China (Horticulture New Zealand 2017: 1). In Australia, domestic consumption for a

limitednumberofretailersisthemajorproductdestination.Forexample,over60per

cent of New Zealand’s apple harvest in 2014was exported, but only 1-2 per cent of

Australia’stotalmarketableproductionofapplesandpearswasexported(PipfruitNew

Zealand2015,ApplesandPearsAustralian.d.).

Thishasimportantimplicationsforthelabourmarket.InNewZealand,growerswanted

toremoveanythreattotheirexporttradethroughbadpublicitybystoppingtheuseof

illegalworkersandimprovingtheworkingconditionsoftheworkforce.Thisprovideda

powerful incentive forsupporting theRSE.Moregenerally,high-valueexportmarkets

putexternalpressureonemployerstomeetqualitystandardsthroughcompliancewith

asourcingcodeofqualityandemployerconduct,supportedbyconsumerpreferencefor

ethicallysourcedproducts.TheEuropeancodeofpractice,GlobalGap,requiresgrowers

to show that they have production practices that meet specified quality and

environment standards. It includes the standard ‘Ensuring a responsible attitude

towardsworkerhealthandsafety’.Compliancewiththecodeisindependentlyaudited8ThissubsectiondrawsonCurtain(2015,2016).

15

(Tipples andWhatman2010:49). Related toGlobalGap is an add-on assessment tool

calledGoodRisk-basedAgriculturalSocialPractices(GRASP).This11-pointchecklistis

usedtoauditagrower’scompliancewithemploymentlawandworkerrightsonfarms

(TipplesandWhatman2010:49).9

EmployercompliancewithGlobalGapismuchmorewidespreadinNewZealandthanin

Australia.Accordingtothe2012annualreportofGlobalGAP,thereare1,516accredited

producers inNewZealandandonly153 inAustralia.HorticultureNewZealandnotes

thatabout80percentoftheproducegrowninNewZealandiscoveredbyathird-party

assurance certification program (Horticulture New Zealand 2017:13). In addition,

meeting higher product quality standards means employers place more value on

workforcereliabilityandquality.Asaresult,NewZealandemployersaremorelikelyto

bewilling to incur theadditional costsofhiringseasonalworkers,andmoreeager to

employmoreproductivereturnworkers.

Australian growers, by contrast, have been more focused on domestic markets with

their strong emphasis on price competition and cost minimisation. This means that

Australian growers are more likely to view transient, inexperienced backpackers as

adequate for the task.Without codes of conduct and quality requirements related to

exportmarkets,Australianproducershavehadlittleincentivetoincurgreatercoststo

meet quality standards. The incentives for Australian growers have been to cut

operating costs. The major supermarkets confirmed in their evidence to the Senate

InquiryintotheSeasonalWorkerProgrammethattheyplacestrongpressureonfresh

foodproducerstocuttheircosts(AustralianSenate2016:178,282).

Australia’shorticulturesectorisfocusednotonlyondomesticdemand,butspecifically

on the demands of the two largest supermarket chains. Coles and Woolworths

supermarket chains have 73 per cent of the Australian market serviced by

supermarkets and 350 to 400 fresh food suppliers (Leigh 2016). The supermarkets’

trading terms with suppliers require that they abide by all laws, regulations and

community standards in Australia, but in practice there has been littlemonitoring of

supplierstoseewhethertheyaredoingso(AustralianSenate2016:283-287).9SeetheNewZealandwebpage:‘GLOBALG.A.P.RiskAssessmentonSocialPractice(GRASP)Add-on’,http://www.newzealandgap.co.nz/programmes/grasp/

16

Insummary, thedifferentnatureof theirmarkets forhorticulturalproductshave two

significant effects which have favoured the greater use of seasonal workers in New

Zealand.First,inNewZealand,employersaremorelikelytofearlossofaccesstohigh

payingexportmarketsduetopoorlabourconditions.Thisgivesthemastrongincentive

toinvestinmeetinghigherlabourstandards.Second,NewZealandemployersaremore

likelytogiveagreaterweighttoqualityrelativetocost.

5.2Differentialcostsofcollectiveactionandcompliance

ThedecisioninNewZealandtoturntoseasonalworkerswasacollectiveone,madeat

the sectoral level. As noted earlier, in New Zealand growers played an active role in

settinguptheRSE.Theyhavealsotakentheleadinworkingwithgovernmenttoensure

thattheschemeissuccessful. InAustralia,growersplayedapassiverole insettingup

the SWP and have no direct role in shaping how it is implemented. It is argued that

collectivedecisionmakingiseasierintheNewZealandhorticulturalsectorthaninthe

Australianone.

HorticultureNewZealandrepresents5,500commercialfruitandvegetablegrowers.It

was formed in2005basedon22affiliatedproduct groups.AkeyaimofHorticulture

New Zealand is to increase the collaboration between product, sector, regional and

district groups. Another aim is to develop and encourage industry-wide projects to

benefitallgrowers.Aprimeexampleofthiscollaborationonanindustrywideprojectis

the Association’s funding of a National Labour Steering Group. This committee

represents the key horticulture and viticulture employers and master labour

contractors. Horticulture New Zealand chairs the committee and provides

administrativesupportaswellasfundingaNationalSeasonalLabourCoordinatorwho

worksfulltimeontheRSE(HorticultureNewZealand2017:14).

Incontrast,industryrepresentationforhorticultureinAustraliaisfragmentedbyboth

product focus and geography. The Australian Department of Agriculture lists 43

horticulture industryassociations.Thetwoorganisationsthatplayanationalrole, the

NationalFarmersFederationandtheVoiceofHorticulture,appeartobelittlemorethan

lobbygroupswhosemainactivityismakingsubmissionstogovernment.Asonereport

17

put it: “agribusiness in Australia today is highly fragmented andmany industry-wide

intentions ‘fail at the gate’ because of a lack of an agreed peak industry body to

represent this ...sector of the Australian economy” (Agribusiness Council of Australia

2012:4).Thesamereportnotedthat“government-industryinterfacescanbefractious,

adversarial, and politicised at times, given the historical past of some representative

groups”(AgribusinessCouncilofAustralia2012:4).

ThecostsofusingtheregulatedmigrationoptionarealsolowerinNewZealand.Wages

inthehorticulturalsectorarecloselylinkedtotheminimumwageinbothcountries.In

NewZealand,theminimumwageis$NZ15.25perhourasatJanuary2017.InAustralia,

theminimumwageinthesamemonthwas$17.70.WhiletheNZ$/A$exchangerateis

variable, typically oneAustraliandollar buysmore thanoneNewZealanddollar. The

highertheregulatedwage,thegreatertheincentivetoavoiditbyusinganunregulated

option.

Second, the weaker the enforcement regime, the greater the incentive to use the

unregulatedoption.EnforcementtendstobemuchstrongerinNewZealand,foratleast

two reasons. First, theNewZealandGovernmenthasput inmore enforcement effort.

Alongside the development of the RSE program, the New Zealand Government

established a national contractor registration in 2008 for new and existing labour

contractorsforseasonallabour(Bedford2013).Similarreformsareonlynowbeingput

in place in some Australian states (Sherrell 2017). Second, the horticulture sector in

Australia ismuchmore geographically dispersed than in New Zealand. This not only

makes collective action harder to achieve in Australia, as discussed earlier, but also

makesbothself-regulationandexternal-regulationcheaperoptionsinNewZealand.

5.3Differencesinhorticulturallabourmarketpolicy

While Australia and New Zealand’s seasonal worker and backpacker programs are

broadlysimilar,therearethreedifferencesinthedesign,historyandimplementationof

theseschemes,whichmayalsohelpexplaintheirdifferenttrajectories.

First,AustraliaprovidesamuchstrongerincentivethanNewZealandtobackpackersto

work in horticulture. In Australia, the prize is another year ofwork anywhere in the

18

economy, whereas in New Zealand, the prize is just three months more and only of

horticultural work. This helps explain why 15 per cent or more of Australian

backpackersapplyforthesecond-yearvisa,butonly5percentorlessofNewZealand

backpackersdo.

Second, New Zealand developed its RSE first (in 2007), and then introduced a

backpacker visa extension (2009). In Australia, the sequence was reversed with the

backpackervisaextensioncomingin2005,andtheSWPpilotbecomingoperationalin

early 2009. Hysteresis may play a role here. It seems clear that there was a labour

shortageintheAustralianhorticulturalsectorpriorto2005.Itishardtounderstandthe

industrylobbyingthegovernmentifthiswerenotthecase.Thesecond-yearreformgot

ridof the labourshortageproblem. In thewordsofoneexperienced industry insider,

that one change “almost singlehandedly … pretty much rectified the issue of labour

shortages inhorticultureforunskilledworkers.”(HayesquotedinHowes2012).Once

thatproblemwasovercome,employerandgovernmentinterestintheseasonalworker

optionnaturallywaned.InNewZealand,bycontrast,thelabourshortageproblemwas

solvedbytheregulatedoption.IfAustraliahadintroducedaseasonalworkprograma

couple of years before its backpacker reforms, it is likely that industry would have

gottenbehindit,andtake-upwouldhavebeenmuchfaster.

Third, theNewZealandgovernment agencies involved in implementing theRSEhave

beenbettercoordinatedthanthoseinvolvedinAustralia.TheNewZealandDepartment

ofLabourwas initially responsible for theRSE (Whatmanet al. 2017:3).However, it

waslatersubsumedintotheMinistryofBusiness,InnovationandEmployment(MBIE),

which also includes Immigration New Zealand. MBIE therefore provides a “one-stop

shop”fortheRSE.Inaddition,ithasastrongfocusontheneedsofemployers.Asenior

MBIE manager told the RSE Employers Conference in Apia in July 2015 that “the

governmentwill continue tosupportRSE ...wedowant tomake itaseasy foryouas

possible.”(Mannering2015).

In Australia, the program is operated by the Department of Employment, which

approves employers for participation in the scheme. Approved employers are then

required to enter into a Special Programme Agreement with the Department of

19

ImmigrationandBorderProtection.Australia’semployers thereforehavetodealwith

thesetwodepartments,insteadofoneinthecaseofNewZealand.Inaddition,whereas

New Zealand’s MBIE sees its primary role as being to support employers to engage

seasonal workers, the Australian Department of Employment acts as a gatekeeper,

basedonitsprimaryobjective,whichis,asperitswebsite,to“helpAustraliansfindand

keep employment andwork in safe, fair and productiveworkplace”. TheDepartment

does little to promote the scheme, and it has a reputation for imposing a heavy

regulatoryburdenonemployers.10

5.4Externalfactors

Finally, there are two other explanatory factors between Australia and New Zealand

thatareexternal,i.e.,havenothingtodowithhorticulture.

First,AustraliaismoreattractiveasadestinationforbackpackersthanNewZealand,so

the potential unregulated migrant horticulture labour supply is much larger in the

former.Accordingtotheofficialdataofthetwogovernments,in2014-15Australiahad

230,000 backpackers and New Zealand 63,000 (references as per Table 2). If New

ZealandhadasmanybackpackersasAustralia,butstillonly5percentapplyingforan

extension, that would give them not 3,000 but 13,000 backpackers working in

horticulture.

Second, it is possible that New Zealand’s greater Pacific diaspora has facilitated the

higher take-up of theRSE.Massey et al. (1994: 1525) argue that the development of

migrant networks “makes migration an increasingly common social and economic

practiceandlowersthecostsandrisksofmovement.”Thatsaid,itshouldbenotedthat

the largest worker-sending nation in the RSE is Vanuatu, which has a very limited

diaspora in New Zealand, so not too much weight should be given to pre-existing

diasporanetworks.

10ThoughwhethertheregulatoryburdenisbiggerthaninNewZealandisunclear.RecentreformsaimtoreducetheregulatoryburdenoftheAustralianSWP(MinisterforEmployment2017).

20

6. Conclusion

Thispaperexplainsthegreatersuccessofaregulatedlow-skilledmigrationprogramin

NewZealandrelativetoAustralia,withreferencetofoursetsoffactors.First,thereisa

strongerfocusbyemployersonreputationandqualityinNewZealandhorticulturedue

toitsgreaterexportorientation.ThismakesNZgrowersvaluethebenefitsofthemore

expensiveregulatedoptionmorehighly.Second,thecostsofbothcollectiveactionand

regulation for employers are lower in New Zealand’s horticultural sector, due to

strongerindustryorganisationandlowerenforcementcosts–bothatleastinpartdue

to the lower degree of geographical dispersion and product fragmentation of the

industryinNewZealand–aswellaslowerminimumwages.Third,subtledifferencesin

policy settings, timing and implementation arrangements have worked in favour of

regulated labour in New Zealand. Fourth, factors completely external to the two

countries’horticulturalsectorsmayfavourthegreateruseofregulatedworkersinNew

ZealandandunregulatedonesinAustralia.

It is certainly not possible to assign quantitative weights to this mix of economic,

institutional, geographical and policy factors. However, we would argue that the

differencesinpolicydesign,implementationandtimingarelikelytoreflectthedifferent

preferencesofthetwonationalgroupsofemployers.GiventhatAustralianhorticultural

employers in general prefer unregulated employees, it is not surprising that

backpackers got a first-mover advantage and a stronger incentive to work in

horticultureinAustraliathaninNewZealand.Andwearenotconvincedofthediaspora

argument, given Vanuatu’s success. Thus, we are left with four factors we would

primarily stress: New Zealand horticulture’s export orientation, its lower costs of

regulation and of collective action (both tied to its lesser geographical and product

dispersion),andAustralia’sstatusasabackpackerMecca.

Intermsoftheimplicationsofourfindingsforthebroaderliterature,thecrowding-out

hypothesisofCastles(2006),AndersonandRuhs(2010)andothersisover-simplistic.

There is no guarantee that unregulated will crowd out regulated migration labour

options. It will depend on the extent towhich regulated employees aremore valued

thanunregulatedones,andonthecostsofgoingwiththeregulatedoption.Thetrade-

21

offemployersmakebetweenthesecostsandbenefitswillvaryfromsectortosectorand

countrytocountry.

In terms of policy, thosewho support regulatedmigration options should take heart

from our findings. Preferences for regulated labour will depend on a wide range of

factors,someofwhichwillbeamenabletopolicyinfluence.Toillustratethis,consider

the case of the Seasonal Worker Programme. Whether to counter exploitation in

Australian agriculture or to promote development among Australia’s poor Pacific

neighbours,therearestrongreasonstosupportanexpansionofAustralia’sSWP.This

paperpointsthewayforward.

First, over time, Australia’s horticultural sector might itself become more export

oriented, certainly, Australia aspires to be ‘Asia’s food bowl’. Second, repeatedmedia

exposureandconsumerpressureonsupermarketsmightleadthosesupermarketstobe

more concerned with labour supply issues. Both these developments would shift

employers’ preferences in favour of the SWP. The same pressures might also lead

governments to invest more in enforcement, in particular, to follow New Zealand’s

exampleandrequire labourcontractingcompanies tobe licensed:anapproachwhich

has the advantage of pushingmany of the costs of regulation back on to the private

sector. Indeed, these developments are not just hypothetical, supermarkets and peak

bodiesarealreadyworkingonstrongercodesofconducttoimprovelabourpracticeson

farms (Field 2016), and three Australian state governments have moved to regulate

labourhirecompanies(Sherrell2017).Itishardtoseebackpackerslosingtheirplaceas

Australianhorticulture’spreferredlaboursource,andthereseemstobenoappetitefor

radical reform such as reduction in the incentive for backpackers to work in

horticulture. It is possible, nevertheless, to envisage a scenario in which Australia’s

SWP,nowuncapped,continuestogrow.Indeed,whilethenumberofseasonalworkers

in Australia is still small compared to the number in New Zealand, and miniscule

comparedtothenumberofbackpackersinhorticulture,therecentrapidgrowthinSWP

numbers (50 per cent in 2015-16) combined with the decline in the number of

backpackers(Table2)givescauseforhope.

22

Rightnow,Australianhorticulturesupports thecrowding-outhypothesis,but it isnot

inconceivable that in the future itwill joinNewZealandhorticultureon the rejection

sideoftheledger.

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