Changes to post-study work rights and potential Auckland student exodus

The long awaited announcement by the Minister of Immigration (Minister) on the proposed changes to the post-study work rights for international students in New Zealand has now been released.  Most of the changes are unlikely to shock the market as they had been signalled for a long time.  However, there were two major surprises, one good, one bad.

The good, a very generous transition period for existing students which is positive for those students and their employers, the bad, may trigger an exodus of new students from Auckland to other regions for the next academic year which is very unfortunate news for private training establishments (PTE) in Auckland.

The changes in a nutshell

We do not propose to work through every single item of change as the announcements and associated media releases cover the changes in sufficient detail. We simply list them here for ease of reference, but the focus of this article is what these changes mean to the international student industry, the students themselves, and their employers, particularly in the service and hospitality sectors.

The changes are as follows:

  • Remove the employer-assisted post-study work visa. Formerly known as the WD1, this visa allowed graduating students to be issued a two-year work visa if they were sponsored for full-time employment in an occupation that was relevant to the qualification they had completed in New Zealand.  The visa was not labour market tested (i.e. an employer did not need to prove there was no New Zealander available or trainable for the job).
  • Provide a one-year post-study open work visa for students studying for qualifications at level 4 and above (but below degree level 7), with an additional one year available for graduate diploma students (Level 7) who are working towards registration with a professional or trade body.
  • Provide a two-year post-study open work visa for students studying qualifications from level 4 to under-degree level outside of Auckland, provided the study is completed by December 2021.
  • Provide a three-year post-study open work visa for degree level 7 or above qualifications.
  • Require international students studying level 8 qualifications to be in an area specified in the Long Term Skills Shortage List in order for their partner to be eligible for open work visa and, in turn, for their dependent children to be eligible for (free) domestic schooling in New Zealand.

No need to panic for existing visa holders and their current/future employers

 There is no need for existing student visa holders to panic in relation to these changes.  In fact, most students (and their employers) will secure significant benefit from a very generous transition policy that has been put in place.

Essentially, student visa holders for qualifications Level 4 to 10 who complete their qualification post 26 November 2018 will be eligible for a full three-year open work visa.

An employment offer relevant to the qualification is no longer required to secure the two-year extension (old WD1) to the existing open one-year work visa that was initially available upon completion.

It is apparent, therefore, that the Minister’s concern in relation to this area of the law is the exploitation of student visa holders in this sector.  It seems that the forefront of the Minister’s thinking is to remove the ability of employers to exploit young students in their quest (and sometimes desperation) to secure New Zealand residency based on their need to have employer support for the old two year visa extension.

From an employer perspective it is a double edged sword.  Existing post qualification students who currently hold WD1 can have the employer condition removed from 26 November, so they will no longer be tied to that particular employer.  There will therefore be some retention issues because of this.  On the other side, the service and hospitality sectors look to benefit significantly here. This is because any post qualification student can work for them in any role for three years following the completion of their qualification, whereas under the old system only 12 months could be guaranteed.

The concern we have in terms of the transition phase is that it is very generous for a long period of time, so could cause reliance issues that will be tough to manage later on.  However, the crunch will only hit-home in around three-four years time when the service and hospitality sectors will need to wean themselves off students studying below degree level.  But, that is a fair way in the distance, so for employers in these sectors it is “good times” ahead in the short to mid term.  Prudent employers will realise that there is a cliff coming in the long term, so if they wish to avoid that, some forward planning will be necessary in the event that increased student numbers at degree level 7 (refer below) don’t fill the gap.

For students commencing study next year – only the strong will survive

 The previous policy allowed, more or less, any student completing a two-year qualification in New Zealand to be granted a one-year open work visa (WD2) and at any time within that one-year open work visa (as long as they had an offer of full-time employment in New Zealand in an occupation relevant to the qualification they had studied), a further two-year work visa under the WD1 policy which, like the WD2 policy, was not labour market tested.

In essence, an international student could actually work in New Zealand for up to three years before being exposed to labour market testing under the essential skills work visa policy.  What this meant is that an international student who is lucky enough to secure a relevant offer of full-time employment could essentially work in New Zealand full-time for a period of three years.  This would provide them the skills necessary to demonstrate that they could hold an occupation where, subject to a labour market check, their employer could demonstrate at the end of that three-year period there were no New Zealand citizens or residents available or readily trainable to take that role.  A student who secured an offer of full-time employment could then cement their place under the temporary work visa framework and either secure residency, or place themselves in a very strong position to obtain residency under the Skilled Migrant Category at/or shortly after that three-year work experience timeframe.

The changes to the post-study work rights have made it much harder for new international students studying below degree level to transition into a position to apply for residency.

Most students are coming here with a view to secure residency. So, while it is good to see that an open post-study work visa for 12 months has been issued, perhaps as a gesture to allow those students a chance to secure an offer of employment and work towards residency, as a window of employment in New Zealand for a period of 12 months is not a very long time when, in most situations for those students, they are going to need to apply for a work visa extension that is labour market tested under the essential skills work visa category.  It will be very difficult for a lot of those students to demonstrate that they have appropriate experience in a role where it can be determined that there are no New Zealand citizens or residents available or readily trainable for the position on offer.

The real impact of these changes, therefore, will not be felt by these students at the completion of their study, but when they look to extend that 12-month open work visa at a later stage under the full labour market tested policy.  It is our view that many of those students will fail to secure extensions due to the fact that they would be well within the negative focus of the New Zealand Government because in reality these international students are actually competing for jobs with young New Zealanders.

The Minister has advised that new labour market testing rules are also going to come in, and we suspect it is going to be a lot harder to secure essential skills work visas for roles where less experience is required.  These roles will align squarely with where these students will be sitting, so it will be survival of the fittest in terms of students under degree level 7 having to match off against around 80,000 young New Zealanders not in education or employment who may well like that job. An issue the government is acutely aware of.

The unfortunate message here is a massive body blow to PTE’s, particularly in Auckland.  Once the international market becomes aware of this we expect to see a fairly negative slide in student numbers under degree level there.

It is business as usual for students who obtain a level 7 qualification or above – in fact, it has improved significantly. We believe these changes will be very good for polytechnics and universities in a competitive international student attraction perspective.  A three year open work visa following study is a big draw card, and is something that can be leveraged as a very good incentive to assist these establishments to compete internationally for these students, particularly against our largest rival Australia, who have slowly tightened pathway to residency avenues.

It is hoped therefore that institutions offering degree level qualifications will be able to attract more international students to New Zealand at this level, and thus softening the impact of a reduced number of students coming in to study below degree level.

Auckland Exodus 2019?

 As readers of this article will note, there is also a semi-transitional provision in place in relation to students who elect to commence study for a qualification below degree level outside of Auckland next year.  Students who elect to study outside of Auckland commencing in 2019 will, at the completion of their study (as long as it is completed by 31 December 2021), be eligible for a two-year open post-study work visa instead of a one-year open post-study work visa.

While the difference between an open work visa for a period of 12 months and 24 months may seem small, in our view it is quite significant.

The longer an international student is able to stay in New Zealand and work, the greater the chance they will have to secure an essential skills work visa at the completion of their non-labour market tested open post-study work visa.

We believe it will be very difficult for graduates who stay in Auckland to secure an essential skills work visa if, when applying for a visa, they have only been employed in New Zealand for a period of 12 months or less.  It will be far more difficult for those employers in the service and hospitality sectors to demonstrate that they cannot take on a young person and train them for that role where their existing migrant employee has not been employed for very long and, in fact, that migrant has actually been trained by that employer.

We think it is in the best interests of international students who are looking to come to New Zealand for the first time to study in Auckland for qualifications below degree level next year, to commence study with a PTE outside of Auckland if there is an underlying residency motive to their study in New Zealand.

Whether the market becomes alert to this advantage is anyone’s guess, although international students (and their agents) who are across this will, we suspect, be looking to shift placement of their students outside Auckland right now, and the main benefactor of that will be PTE’s in Hamilton.

Our view is that the policy is very smart, both in terms of it’s subtly and the end result. Most of the exploitation is in the Auckland region, and that ranges from poorly operated and managed PTE’s right through to employers taking advantage of the same individuals once they leave those PTE’s.  In addition, with the population pressure on housing, and competition for entry level jobs, it is an interesting change by the Minister. If the market truly does grasp what this means, we are likely to see a significant exodus of students studying under degree level from Auckland, and if so, this smart change masked under a transitional cover will produce the results the Minister is clearly after.

What does this mean generally for the international student visa industry and employers?

 The changes that have been announced by the Minister are far softer than the initial changes indicated in the lead up to the election.  Those changes, if implemented, would have struck a mortal blow to New Zealand’s international student training industry, and created serious labour constraints in the service and hospitality sectors.

The actual changes are very well balanced.  The Minister has considered the submissions and ended up with a policy that seems to meet everyone in the middle, apart from the Auckland PTE’s that will now be concerned as to whether or not their anticipated rolls for 2019 will in fact reach their forecast levels.

International students coming to New Zealand below degree level will be provided an opportunity to work in New Zealand in return for that investment and, if securing the right position that does not directly compete with a young New Zealander, they will be able to stay in New Zealand longer. They may also eventually secure residency under the Skilled Migrant Category once they hold a positon that is highly skilled. However, those opportunities will be far and few between in the main centres.

The rewards are all sitting with students who are coming to study at degree level and above, so not only will this lead to greater numbers of those students travelling to New Zealand, they stand to provide the greatest contribution to New Zealand society so from an economic perspective – this is great to see.

All in all, we are very impressed by these changes.  They address a number of the issues in the international student industry but at the same time provide for a fair transition period for New Zealand employers to deleverage off reliance on post student labour where they can.  For those employers therefore it is business as usual for the next three to four years or so, in fact, it starts off better as they can hire any student to work for them irrespective of their qualification so there can be no complaints (yet).

For those of us who really understand the policy objectives and finer subtleties of these visa changes, they are very well thought through and, we believe, will ultimately improve the outcome for many students, and the contribution more highly skilled students will make to New Zealand’s growing economy.  It’s 10 out of 10 from us on this set of changes.

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