Looming Increase in Median Wage

In a recent article published by Lane Neave, we addressed the fact that Statistics New Zealand indicated that the New Zealand median wage increased to $27 per hour for the June 2020 quarter and that this was an important consideration for Immigration New Zealand (INZ) when assessing Essential Skills work visa (ESWV) applications and Skilled Migrant Category (SMC) resident visa applications.

The median wage is important because it is used by INZ to determine “income thresholds” which in turn impacts on whether a “Skills Match Report” (SMR) may be necessary to support an ESWV application, the duration of any ESWV granted, whether “stand-down” provisions will be applicable and also affects a potential applicant’s eligibility to apply for residence under the SMC.

We understand, as per customary practice at this time of year, the Minister of Immigration (Minister) will be considering raising the income threshold to $27 to align it with the increased median wage.

If this is signed off by the Minister this will have a major impact on any temporary visa holders (earning less than $27 per hour) due to “renew” their work visas in the near future, as the Essential Skills Instructions were amended in July 2020, introducing the requirement for INZ to determine an applicant’s remuneration level of their employment based on whether they would be paid ‘at or above the median wage’ or ‘paid below the median wage’.

Those paid below the median wage require a “Skills Match Report”, in addition to the usual evidence of “labour market testing” and any visas granted to them will be limited to a duration of six months. They will also be subject to the “stand-down” provisions of policy.

The increase of the income threshold to $27 could also create potential issues for any migrant workers considering submitting an EOI under the SMC who currently earn between $25.50 and $27. This is because INZ also announced this week that the suspension of EOI selections under the SMC had been extended for a further six months. It will be reviewed again in March 2021. It is highly likely in our view that the income threshold will be increased before INZ resumes selection EOIs again.

For those people wishing to apply for residence under the SMC who currently earn between $25.50 to $27 they can still submit an EOI in the SMC Pool. However, it is uncertain as to whether, in the event the income threshold is raised to $27 per hour, INZ will actually issue Invitations to Apply (ITA) for those who submitted EOIs based on their remuneration being between $25.50 and $27 at the time their EOI was lodged.

It is possible that current EOI submitted into the Pool earning between $25.50 and $27 may not ultimately receive an ITA for residence if the median level has been increased past their pay rate when INZ resumes selecting EOIs under the SMC.

Whether a transitional policy is put in place to allow invitations to those applicants (due to the unusual environment we are in) is unknown, and may well come down to the targeted residence numbers set by the new Government for the next quota year. If there are too many EOI as compared to the number of SMC residence places available, there is a strong possibility that EOI in the SMC Pool under $27 per hour will not be permitted to go on to apply for residency.

Moving Forward

INZ generally updates the income threshold once a year. It was increased for purposes of the SMC to $25.50 in February this year and introduced to ESWV applications during July 2020.

A reasonable expectation would be that any further increase should come into effect in early 2021 or even be delayed for review until early 2021.

Due to Covid-19 and the negative impact on the economy, there is a reasonable expectation that the number of unemployed people in New Zealand will increase in the first half of next year (treasury forecasts expect unemployment to reach 7.7% in 2021). This in turn may result in the median wage actually reducing in the future so it would be logical to hold and review first quarter next year to avoid an increase and subsequent rapid decrease as that would be unsettling for migrants and their employers.

Due to the uncertainty around when the income threshold may increase, for those applicants earning between $25.50 and $27.00 our recommendation is that they may wish to consider applying for a new ESWV earlier than they may have planned to stay ahead of this anticipated increase. If the new threshold has been introduced when they submit their applications, they may miss out on securing a three year work visa and only be issued the current term for those under the current threshold (six months).

For people currently being remunerated under $27 per hour who wish to apply for residence under the SMC, they may also wish to seek advice so they are fully informed of any potential risks to them securing an ITA before submitting an EOI into the SMC Pool, and if they decide to, they may well be reliant on a transitional policy being put in place, which we believe is fair and reasonable, but there is no guarantee of that.