I have been thinking about the issues facing students and immigrants coming to Australia. The biggest issue they face is to get a job. The issue is not lack of skills on their part or lack of jobs in Australia.
The issue is what economists would call “asymetric information“.
In this scenario, in any the two parties in a market, one party will have more information than the other. In the example of used cars, the seller generally has more information than the buyer. In a labour market, the employee has private information which is not known to the employer.
This creates “adverse selection”. In a path breaking work on this issue, George Akerlof, the joint Nobel Prize winner in 2001, wrote about the Market for Lemons. This paper and other work suggested that due to this asymetry the entire market tends to favour the lemons or lower quality products/services.
In the case of a immigrant/student who is new to Australia from countries like India, China and South east Asia they do not get a job or if they do get it; it is not matching their capabilities.
The problem stems from the fact that in the labour market they face specific issues.
One, the employers are not sure about their english language capabilities. Most of the time due to lack of knowledge the employers tend to believe that these immigrants have poor english language capabilities. People like myself have had a english medium education all through my life. The latest being from a university in Australia!
Two, the experience, skills and certificates are not being given the same value as somebody who studies in Australia or in a Anglo-Saxon country.
The problems stems from some perceived beliefs, lack of knowledge and not being able to screen the skill sets/certifications of these candidates. In this scenario, the employers are classifying all immigrants/students are lemons and most of them do not get the jobs matching their capabilities. How do we solve this?
The solution suggested by the the economists in these cases are “signalling” and/or “screening”.
Signalling could be where “Qualified candidates might be able to send a signal to potential employers that indicates that they are good potential hires. For example, the employee may have some difficult-to-obtain credential or an advanced degree from a good institution.”
Screening is used when “ neither the employee nor the firm knows the true skills of the employee. It is done either before hiring (through some test or other certification process) or after hiring, by closely observing the employee.”
Further research in this area directs me (Link from New Economist) to an OECD study into immigrants in Australia (PDF) and their experience in the labour market provides some good conclusions which match what I have stated above.
