b"APRIL 2021 APRIL 20212.2.2Relatively high skill levels and productivity 2.3Estimating the contribution to incremental Australias focus on attracting highly skilled temporaryFig 10. Labour force formal qualifications economic activity Fig 11. Net Overseas Migration contribution to GDP and permanent workers means that migrants typicallyNon-school qualications In this section we focus our attention on estimatinggrowth also contribute to the economys productive capacity% of group the contribution of migration to GDP growth throughy/y%via the impact they have on the average skill levelthe direct increase in the labour force. But as the4.0and productivity of the workforce. This contribution isBachelor degree 3.5or higher previous section notes, the contribution from migration critical, as productivity growth is ultimately the sourcegoes above and beyond this, via a more productive3.0of all improvements in per capita living standards; forAdvanced Dipoma workforce and spillovers to other employees. The2.5average household incomes to increase over time,/Diploma estimates presented here are therefore a conservative2.0the workforce has to become more productive, andmeasure of the contribution of migration to growth. 1.5increase the amount of output (and therefore income)Certicate 1.0per worker. Combining our estimates of the increase in the working0.5None age population and the participation rate differentials,0.0Quantifying the size of this channel is difficult, as itFig. 10 decomposes long run growth into five factors;FY01-10 FY06-10 FY11-15 FY15-20crucially depends on the skills migrants arrive with andincreases in the capital stock, increase in the labourCapital NOM contributionhow they are utilised within the workforce. But indirect0 10 20 30 40 50 60 supply from local residents, increase from overseasDomestic contribution to Labourto Labour ProductivitySource: BIS Oxford Economics/ ABS, Characteristics of recent information can be used to give an indication of theAustralia Recent migrants and temporary residents migration, and productivity improvements. As theHuman Capital GDPcontribution. Using formal education qualifications asmigrants, Nov-19 chart highlights, for most of the last decade the labour a proxy, it is clear that working age migrants are morecontribution to GDP growth has been dominated by NetSource: BIS Oxford Economics/Haver Analyticsproductive, on average. This is a natural consequenceThe prevalence of tertiary education qualifications inOverseas Migration. This was most pronounced over of the policy to target skilled migration, and its impactmigrants directly raises the skill level and thereforeFY06-10 when there was a surge in temporary workers. is clear; government estimates that as a result of netproductive potential of the labour force over time. InOver the full history, we estimate that Net Overseas migration, the proportion of the working age populationaddition, there is evidence from the economics literatureMigration has directly underpinned 0.6%pts (21%) of the with a formal qualification rose from 38% to 50% 3overthat there are positive productivity spillovers between2.9% pa average pace of GDP growth experienced over the ten years to 2010.workers; that is, the productivity of team membersthe last two decades.increases when they work with highly skilled colleagues 4 . Overall then, measuring the impact of migration on potential output by only considering the direct contribution of a larger labour force understates the importance of migrants to economic growth.Australias focus on attracting highly skilled temporary and permanent workers means that migrants typically also contribute to the economys productive capacity via the impact they have on the average skill level and productivity of the workforce.16 173https://immi.homeaffairs.gov.au/settlement-services-subsite/files/economic-fiscal-impact-of-immigration_access.pdf, More thanadditions to population: the economic and fiscal impact of immigration, Mark Cully, Department of Immigration and Citizenship.4 https://www.nber.org/papers/w12508#:~:text=We%20find%20strong%20evidence%20of,increase%20in%20a%20worker's%20effort., Peers at work, Alexandre Mas & Enrico Moretti, NBER working paper no. 12508"