Almost a quarter of permanent skilled migrants in Australia are working in a job beneath their skill level with a cost to Australia’s economy of $1.25 billion over five years, according to a new report.

The report by the Committee for the Economic Development of Australia (CEDA) says that despite the apparent success of Australia’s permanent skilled migration program, nearly a quarter – or about 23 per cent – of permanent skilled migrants in Australia are working in a job beneath their skill level.

“The cost of this skills mismatch among permanent skilled migrants is significant. We estimate at least $1.25 billion of wages foregone for permanent skilled migrants who have experienced skills mismatch between 2013 and 2018,” the report says.

“There are also broader economic costs, including lost productivity and innovation, as companies are unable to access the critical skills they need in rapidly emerging and high-growth occupations.

Titled ‘A good match: Optimising Australia’s permanent skilled migration’, the report makes four key recommendations, including:

Establishing a new government-regulated online skills-matching jobs platform. This would allow permanent skilled migrants to register their skills, and let accredited employers hire migrants from within the platform. It would initially apply to a small proportion of the permanent skilled migrant intake before potentially being applied more broadly across the system;

The Australian Bureau of Statistics (ABS) should comprehensively update the Australian and New Zealand Standard Classification of Occupations (ANZSCO) codes to ensure that migrants with vital and cutting-edge skills can migrate to Australia and contribute to the maturing of our labour market. These codes have not been updated since 2013;

The Federal Government should be more transparent about the data and methods used to assess whether occupations are deemed to be in-demand and included on skilled occupation lists, and:

Reducing the ‘Newly Arrived Resident’s Waiting Period’ for unemployment benefits from four years back to six months, to give permanent skilled migrants a better chance to find the right job. Research suggests that increases to this waiting period since the late 1990s have exacerbated skills mismatch, while delivering only modest annual savings to the federal budget.

The report says permanent migration has been a central feature of Australia’s economic development over the last century. Australia welcomed more than seven million permanent migrants in the last 70 years, of which more than two million arrived in the last decade.

And that, on average, migrants are younger than the Australian population, more likely to hold post-second­ary qualifications and facilitate important foreign trade and investment relationships.

The report says recent waves of migrants have not had an adverse impact on the wages or jobs of Australian-born workers.

CEDA Chief Executive Melinda Cilento said Australia’s skilled migration system has served us well, but there are areas where it can and must be improved.

“As we emerge from COVID-19 we need a skilled migration system that is nimble and responsive to the needs of the economy. In addition to many migrants working beneath their skill level, the system is slow to respond to rapidly emerging skills needs, such as digital and data.” Ms Cilento said.

“This is where we can least afford to lag in the competition for talent. A system that does not enable access to critical skills in a timely fashion means we will be unable to keep up with global completion,” she said.

The report’s authors said: “we found the permanent skilled migration scheme that had the broad­est lists of eligible occupations and lacked employer involvement had the highest rates of skills mismatch,” the report’s authors said.

“For example, more than 32 per cent of state-sponsored migrants were working at a lower skills level than their nominated field. In contrast, employer-sponsored migrants experienced the best outcomes – only 13 per cent were working at a lower skills level than their nominated field,” they said.

“Of those who had difficulty finding work in any occupation, 33 per cent blamed having insufficient Australian experience. The most cited reasons were a lack of local work experience and local networks, fol­lowed by language difficulties,” the report said.