Most migrants and their families have skills and attributes that strongly match the needs of destination societies.The social and economic benefits associated with their migration are typically much larger than the costs – and this is true for both destination and sending countries. These are key takeaways from the World Banks’s new World Development Report (WDR) titled “Migrants, Refugees, Societies.”
Centering migration in its annual flagship publication is a significant shift in the Bank’s relationship with migration.Historically, the Bank (and broader international development community) has approached development with a much narrower lens, focusing its efforts on localizeddevelopment initiatives. Rather than a powerful tool to be harnessedfor sustainable economic development, migration has been seenas a negative byproduct of poverty, the effects of which need to be mitigated.
The WDR mirrors a broader shift in the global consensus on the need for migration.Faced with population decline resulting from decreasing birth rates, wealthy countries are starting to suffer from crippling labor shortages. Meanwhile, over a billion people are either living or want to live across international borders, and the number of people born in low-income countries is growing far faster than the number of jobs.
The World Bank now acknowledges that well managed migration can be a powerfulforce for prosperity with benefits for all: economic migrants,refugees, and those who stay behind, and fororigin and destination societies.Rather than engaging in ideological debates about whether migration is good or bad, it tries to answer a different, and much more important question: how can migration work betterfor global development?
This is at the heart of LaMP’s work as we help address market failures and regulatory barriers that impede safe and effective labor mobility.We do this by proposing and delivering innovative and market-compatible solutions that create sustainable labor mobility systems worldwide.
The WDR argues that when people bring skills and attributes in demand in the destination country, there are net gains forthemselves, as well as for both their countries of origin and destination.These gains materialize regardlessof migrants’ motives, skill levels, or legal status but both destination and origincountries can design and implement measures that further increase the benefits of migrationand effectively address its downsides.
The WDR finds that “by far the largest” group of people on the move do so in response to economic interests, motivated by the knowledge that there are employers demanding their skills and attributes.This is an important acknowledgement, as it allows us to focus on the tremendous opportunity in front of us. High income countries have large unfilled labor demand and low-income countries have the right labor supply to meet this demand. We now need to find ways to translate these words into action.
At LaMP, we work toexpand opportunities for migrants with strong skill matches, maximize gains during their journeys and help mitigate any related negative effects. For example, we aredeveloping a program to connect workers across Latin America with the 150,000 jobs cruise employers need filled; building and implementing a low cost worker voicemechanism to monitor and improve recruitment practices; and designing training and financing solutions for potential migrants in India, Colombia, El Salvador and beyond.
The WDR marks a historic shift in recognizing the potential of well-managed migration as a powerful force for global development. This shift will have far-reaching impact, as it paves the way for vital funding to be directed towards labor migration, unlocking immense development opportunitiesthat far surpass even the most effective development tools we know.We have a long way to go, however, as labor migrationcurrently receivesless than 0.4% of official development assistance and 0.5% of private foundation money for sustainable development.
We need to translate the powerful insights contained in the new WDR into action by directingmore operational funds from the bank towards labor migration.As we embrace this new era, organizations like LaMP are at the forefront, building a field that is committed to helping create sustainable labor mobility systems, lifting millions of workers and their families out of poverty.Our partner, the People on the Move Initiative is looking to help donors incorporate mobility into their giving, Malengo is pioneering educational pathways, Imagine Foundation is removing barriers for tech workers, Talent Beyond Boundaries is opening doors for displaced people, and Por Causa is working to change narratives.
We hope many more will join the effort.By embracing the potential of migration, addressing its challenges, and maximizing the gains for everyone involved, we can harness the transformative power of labor mobility for the betterment of individuals, societies, and the world as a whole.
Severe worker shortages continue to threaten the health care sector in OECD countries. Ongoing demographic shifts pose a double challenge to long-term care providers: as populations age, there will not only be more seniors in need of adequate care but also fewer working-age individuals to fill the jobs. As Dutch Health Minister Conny Helder put it, we may face a future in which “old people will have to rely more on themselves and less on professional caregivers.”
At the same time, there are many workers in developing countries willing to take on these jobs. The ongoing demographic shifts will inevitably lead to the need for workers from abroad to fill jobs in OECD countries. More and better labor mobility programs must inevitably be a part of any solution to the long-term care sector’s worker shortage issue. The time is ticking. It is up to the governments to take action and open more and better migration pathways for workers from abroad to fill the openings that employers desperately need.
The Growing Labor Scarcity
The recent strikes of U.S. nurses over understaffing and the resulting concerns about ability to provide patients with adequate care are just the latest drop in the bucket when it comes to health care worker shortages around the world. Other OECD countries, from the United Kingdom to Spain, Belgium and others, have been seeing similar trends in the sector for years. As a result, the lack of workers is not only actively undermining labor conditions for existing workers but also creating unsafe conditions for the patients.
The long-term care (LTC) sector specifically faces the direst challenges. Latest estimates show that essentially all high-income countries, regardless of their demographics, are facing a crisis within their respective social care workforces. By 2040, the number of LTC workers in OECD countries will have to increase by 60 percent. In South Korea and Cyprus, providers will have to find ways to hire over 120 percent more workers given current levels of productivity.
In an effort to put pressure on their countries’ policymakers, representatives from the LTC sector issued a joint call to action earlier this year, urging policymakers to find solutions to the problem of worker shortages. Published by the Global Aging Network (GAN), an organization representing a wide variety of LTC stakeholders, the call stressed various workforce issues, including sustainable funding systems within the LTC sector, recruitment and retention of staff, and training of employees.
Aside from the lack of workers, the LTC providers have also faced the other result of aging within the OECD societies – the increased need for their services. In 2019, there were 703 million people older than 65 years in the world. Projections suggest the number will double to 1.5 billion in 2050 — one in six people around world will be at least 65 years old.
While recruitment difficulties in the LTC sector are linked to low pay, inadequate working conditions and a lack of appreciation for healthcare workers, the changing demographics in OECD countries clearly point to another fundamental problem. As societies get older due to declining fertility rates, their overall workforce shrinks, making it harder for employers to find enough workers to fill the gaps. Rather than “labor shortage,” the more fundamental trend is the one of “labor scarcity.” In the U.S., for example, the number of new jobs in the care sector alone will be higher than the total number of workers in the labor market by 2028. Simply increasing worker wages will not solve this issue.
Although improving working conditions and making the sector more attractive to local workers is an important step in the right direction, the demographic data clearly show that this alone will not fully address the underlying problem. Even with all local workers employed, there simply won’t be enough workers in OECD countries to fill the job openings in the LTC sector.
Labor Mobility as Part of the Solution
It is without a doubt that labor mobility, allowing workers to move across borders in a safe and reliable way, will have to become one of the key instruments within the governments’ tool kit. Currently, less than a handful of OECD countries operate dedicated labor migration streams for care workers. And those that do exist are either often operating at just a small scale or prone to issues around worker exploitation and continuity of care.
Stakeholders around the world have finally begun to recognize the need to include quality labor mobility as part of the solution to labor shortages in the LTC sector. In fall 2022, the European Commission set it as one of its priorities highlighted in the 2030 Strategy for caregivers and care receivers. The Commission will map the current admission conditions and rights of long-term care workers from non-EU countries and consider developing EU-level schemes to attract more workers to the sector.
The GAN call to action also pointed out the importance of staff mobility. Specifically, the providers highlighted the need for sufficient skills and language training as well as countries’ better ability to internationally recognize diplomas and credentials. However, labor mobility as one of the key solutions to labor scarcity has yet to take a major role in the industry’s global agenda despite the indisputable effect it would have on reducing the growing worker scarcity.
Interested stakeholders around the world have already recognized the potential of labor mobility to meet the sector’s needs, taking promising steps towards creating more and improving the quality of migration pathways for the care industry. The Australian Department of Foreign Affairs and Trade (DFAT) successfully piloted two new pathways for workers from Samoa and Fiji to come to Australia, including intensive aged care training before or after arrival. The Germany-based organization Care with Care helps to connect unemployed or underemployed nurses from across the world with healthcare institutions in destination countries with labor shortage, focusing on quality, training and integration of the workers. While the U.S. currently doesn’t have any migration pathway for LTC workers, LeadingAge, a community of U.S. nonprofit aging services providers, proposed the introduction of the “H-2Age” temporary guest worker program for certified nurse aides (CNA) and home care aides.
The Win-Win Scenario
Labor mobility is mutually beneficial for both sending and receiving countries. It helps to solve the worker scarcity in destination countries while promoting the development of poor sending countries. For example, a recent study showed that enrollment and graduation of Filipino nurses had grown substantially in response to increased demand from the U.S. At the same time, the supply of nursing programs expanded. For each nurse that left the country, there were nine additional nurses who obtained their licenses.
A well-designed migration model could provide mutually beneficial solution, supporting the health care sector in sending as well as receiving countries. The Global Skills Partnerships (GSPs) is an example of a program under which some trained workers stay at home while others leave for abroad. As a result, both sending and receiving countries benefit.
Labor mobility must be a key component of any strategy to address worker shortages within the LTC sector. The future of the sector is now in the hands of OECD governments. Finding a solution will not only benefit the LTC providers and workers, but serve a vital role for the aging populations in need for care. The time to act is now.
Since the global poor have been excluded from earning opportunities in rich countries for so long, nearly all development programs simply assume this is how it will always be. Historically, virtually all poverty reduction and development programs have been focused within the low-income countries, rather than trying to provide the people more and better economic opportunities abroad. And yet, labor mobility holds vastly more promise for reducing poverty than anything else on the development agenda. It allows workers from low-income countries move into higher earning jobs abroad, and thus support themselves as well as their families and relatives back home.
The ongoing demographic changes, resulting in lack of workers in high-income countries and youth bulges in low-income countries, provide a historic opportunity to finally address the single largest driver of income inequality in the world: the birth lottery. The time is now to deploy problem solvers and advocates from low-income, or the “Global South”, countries to start building more and better labor mobility. The alternative includes increasing high-risk irregular migration, labor trafficking, and declining OECD communities and economies.
As the rich world has started to wake up to a future of crippling labor shortages and aging societies, the Global South has a chance to openly advocate for the Global North to open its doors to more workers through expansion of their visa regimes.
The Ongoing Demographic Shifts
Millions of people around the world are trapped in poverty as a result of where they were born. More than half of variability in income globally is explained by country of birth; making it the most important determinant of your opportunity in life and meaning that mostly, “there are not poor people but only people in poor places.”
At the same time, these low-income countries of the “Global South” face significant increase in the numbers of young people due to the ongoing demographic changes. Estimates show that the working-age population in these countries will increase by millions by 2050, and in the cases of sub- Saharan Africa and South Asia, hundreds of millions. Within Africa alone, between 10 million and 12 million youth enter the workforce on average each year, but only 3.1 million jobs are created. This poses significant risks associated with youth underemployment, as the governments struggle to create the number of jobs needed to absorb their growing youth populations.
Since the opposite demographic challenge is happening in high- income countries that face crippling labor shortages and aging societies, this also represents a historic opportunity to start building more and better labor mobility. With a shrinking working-age and growing elderly populations, high-income countries will need additional 400 million new workers over the next 30 years in order to maintain their safety nets and economic systems. This massive need for workers offers a path to quality employment for a large share of new working age people from the Global South who are not projected to currently be absorbed by their domestic labor markets.
The two opposing demographic trends provide a historic opportunity to bridge international labor markets. Improving the quality, scale and effectiveness of labor mobility programs between low- and high-income countries can address the labor scarcity – the situation resulting from demographic decline in high-income countries, in which simply increasing worker wages will not address the worker shortage issue. At the same time, such program would help increase the share of youth from the Global South that are engaged in quality employment and providing some transformative benefits for them and their families.
Labor Mobility as Poverty Reduction Strategy
Allowing people to leave their homes to work abroad through quality labor mobility, and thus secure better life for themselves as well their loved ones, has proven to be, the most effective tool to reduce poverty among people in low-income countries. When workers find employment abroad, estimates show they can increase their income as much as 6 to 15 times for their wage in their home country. Overall, implementation of effective policies, allowing for well-regulated migration programs, is far more effective than any other poverty reduction tool. It achieves powerful poverty reduction gains without an upfront investment from governments or donors, unlike other anti-poverty interventions.
Beyond offering quality employment opportunities for their workers, associated remittances and skill accumulation can lead to a powerful positive change on development outcomes in low-income countries. Remittances are as large or larger than foreign aid in many sending countries. In 2021, global remittances estimates stood at USD 773 billion, USD 605 billion of which went to low- income countries. This is approximately at the same level as foreign direct investment (FDI), and when excluding China as the biggest source of external financing, remittances are even larger than FDI. Nepal, for example, was able to reduce its poverty headcount from 45 percent to 15 percent over a 20-year period, despite low growth rates. This was in large part due to remittances, which accounted for 40 percent of the decline in the poverty headcount. The tremendous positive impact of remittances on well-being in sending countries in comparison to other external financing is given also by the fact that they flow directly into households who are able to use them to bolster their consumption and education and health spending.
Workers employed overseas also accumulate skills which they then bring back upon their return home. Return from abroad often allows returnees to capitalize on their acquired skills to secure a more highly skilled job – often with a better salary – than they would have if they had not migrated. As many as half of the skilled migrants working abroad eventually come home, bringing these new skills and connections with them. As an example, returnees to Brazil, Chile, and Costa Rica have been overrepresented in highly skilled occupations and underrepresented in least-skilled trades. This challenges the traditional ‘brain drain’ claim that skilled migration depletes the stock of human capital in sending countries and hurts their prospects of economic development, an argument that has often been a barrier to sending countries engaging on labor mobility.
Why Have Global South Countries Not Advocated for More Migration Programs?
Despite the positive benefits of migration programs, low-income countries have not been widely vocal in calling for labor mobility to expand opportunities for their people. Several factors have been contributing to the skepticism about labor mobility although as shown below, these concerns have not proven to be valid.
First, since government officials in low-income countries often view promoting labor mobility as a way to a better life for their people, it is perceived as admitting failure of their own development as migration is commonly believed to reduce with rise in income. However, this belief is not supported by evidence, which instead has shown an ‘emigration life cycle’ in which migration first rises, then falls as GDP per capita increases in low-income countries.
Second, a key concern among sending country governments is the risk of worker abuse and violations of their rights. This has concretely manifested as a political and reputational risk in sending countries, where cases of worker abuse have had direct and strong repercussions for government officials. Many times, such as in the Philippines, Ethiopia and Indonesia, cases of worker abuse have resulted in a complete ban from the sending country on recruitment of workers to a particular receiving country. However, these bans have largely served only to encourage even more risky irregular migration; for example, within two years of Ethiopia banning labor mobility to the UAE, as many as 30,000 Ethiopians were detained there for irregular migration.
Third, concerns around ‘brain drain’ are another reason low-income countries choose to not pursue labor mobility as an employment strategy. However, evidence shows more of a ‘brain gain’ than ‘brain drain.’ Migration opportunities increase earning potential within specific sectors, which in turn increase the return to skilling in that sector. This creates demand for training in this sector, which results not only in the emergence of specialized schools and vocational training institutes, but incentivizes more people to train than actually migrate. The most vivid example is the Philippines, where the migration of nurses increased the country’s stock of nurses and nursing enrollments increased so much that for every trained nurse who migrated, 10 additional nurses were licensed.
It is the Perfect time for the Global South to Begin Advocating for More and Better Labor Mobility
All the factors mentioned above contribute to the common belief that labor mobility as a solution to the ongoing demographic changes is politically impassable. Sending country officials with mandates to open new foreign labor markets for the country’s workers report the primary constraint to be knowing which countries to approach and, within those countries, which individuals and government bodies to approach and how. This ultimately leads to competition between sending countries that are trying to attract and convince high-income countries to open more pathways for their workers, resulting in hampered overall benefits and lowering of labor mobility standards.
However, it is clear that if the Global South countries are committed to the well-being of their people, they should consider labor mobility a viable and positive strategy. Bridging their labor surpluses with significant labor shortages in high-income countries alleviates risky employment pressures from their growing youth populations. Meanwhile, they stand to benefit from increased inflow of remittances and skill accumulation, both of which are powerful forces for bettering living standards in sending countries. However, all these benefits are lowered by the ongoing competition between the sending countries.
The ongoing demographic changes provide a historic opportunity for the Global South to build a coalition openly calling for a dramatic increase in the number and quality of labor migration opportunities in the high-income countries. Such cooperation would allow the sending countries not only to increase their bargaining power with the high-income countries, but also provide space to share lessons learnt and collaborate on creation of labor mobility programs. Ultimately, it could help unlock more life-changing opportunities for millions of workers from low-income countries and their families.
The following excerpt was originally published by Boston Consulting Group (BCG) and co-authored by LaMP’s Executive Director Rebekah Smith and board member Janina Kugel, as well as Dr. Johann Daniel Harnoss, Marley Finley, Dany Bahar, and Hillel Rapoport on March 31, 2023 here.
Few of us would imagine it: innovation, perhaps the most pondered, probed, and pursued of business and societal imperatives today, is on the decline.1 Solutions to the critical challenges we face depend not only on a handful of exceptional individuals with breakthrough ideas, but on the broad array of people who help realize those ideas by keeping the engines running and greasing the wheels of progress. An essential ingredient in this mix is migration: a country’s blend of talent offered by populations drawn from beyond its borders—their brain power and brawn, their genius and common sense, and their creativity and fresh perspectives. Countries and cities that optimize their migration mix for economic potential can reap significant competitive advantage, now and in the decades ahead.
Yet most policymakers have failed to recognize this opportunity. In this report, we present a three-factor framework that can help public leaders stimulate economic growth through migration policy. BCG’s Global Talent Migration Index (GTMix) describes the elements of a winning migration mix—one that correlates squarely with greater productivity and innovation, as well as with public acceptance of immigrant workers. This novel, research-backed framework can help policymakers understand the current state of their migration strategy, benchmark it against the corresponding strategies of other countries, and ultimately design policies that will make their economy more vibrant, more innovative, and more resilient.
1 Bloom, Jones, Van Reenen & Webb (2020), “are Ideas Getting Harder to Find?” American Economic Review 110(4): 1104–44.
Featured on EconoFact’s podcast, LaMP’s Research Director Lant Pritchett spoke with host Michael Klein about the economic sense of allowing foreign workers from labor-abundant countries to fill job vacancies in other countries, while also addressing the political and social concerns about expanding labor mobility. The following is an excerpt from the podcast transcript published by EconoFact on March 26, 2023 here.
Michael Klein
Going back to the issue of technology and the scarcity of labor, you talk about in your Foreign Affairs article an example of self-driving trucks as an example of sort of a strange response to an absence of truck drivers. Can you talk a little bit about that?
Lant Pritchett
Yeah, it’s just a great illustration where the scarcest resources on the planet, which are high-level scientific and technological knowledge and entrepreneurship, are economizing on something that’s globally abundant. The number of people in the world that would drive trucks in America if they were legally allowed to is enormous. But, since they’re not allowed to, the Elon Musks and Jeff Bezos and Larry and Sergey of Google are all working on developing technology of self-driving, but they’re driven to that by the lack of available labor. This isn’t a natural technological impulse. There’s nothing intrinsically happening in technology that would lead to this. This is the response to their inability to satisfy their demand for workers, but there isn’t a global scarcity of workers or truck drivers. It’s an artificially created scarcity by lack of, again, legal mechanisms for people to move from other countries and drive trucks in America.
Michael Klein
So that speaks to the advantage in America of allowing people in. What about the advantage to those potential American truck drivers who are living abroad? They would benefit as well, correct?
Lant Pritchett
Oh, and as you said in the introduction, I’m a development economist. I’ve worked most of my career on how can we make people better off, and how can we increase their productivity, and the wage differential between truck drivers in most of the world and that in the US is at least four to one. And the reason it’s four to one is that truck driving is just a more productive value producing activity in a rich, highly productive country than in a poor country. So just by allowing these workers to move, it creates gains to them that are just enormous relative to anything else on the development agenda. There’s no development project or program that can increase people’s wages by a factor of four, but allowing them to move from a low productivity to a high productivity place does it instantaneously.
“We want to pull the youth out of gangs’ hands by providing them with better opportunities, like those offered by the cruise industry.” –
Captain Guillermo Jimenez, Executive Director of El Salvador’s Maritime and Port Authority
MAIN TAKEAWAY:
El Salvador is well positioned – by proximity and capabilities – to competitively deliver workers to maritime industries, especially to US cruise companies via C1/D “crew” visas. These visas can represent a significant safe and legal occupational mobility channel that mitigates against the pressures for irregular migration. Additionally, the global cruise industry is looking to quickly ramp-up operations following the COVID-19 operational halt, which is generating a big worker demand where labor has already been scarce, with industry insiders citing a need to hire 150,000 workers. Furthermore, stakeholders in El Salvador want to build the country’s capacity to supply workers that meet the demand of the industry. However, preparing workers with the requirements that meet the industry’s specific skill requirements is currently a challenge.
We want to eliminate investment barriers that prevent job seekers from accessing necessary training to secure jobs. There are a number of key capabilities that cruise workers need, including: certain level of English language proficiency, maritime certification, and hospitality-at-sea training. These all involve significant investments of time and money by potential workers, without a guarantee of work. Indeed, hiring from the industry in Central America has been low to date, precisely because there are few sufficiently trained workers and there have been no dedicated hospitality-at-sea courses. This dynamic creates a market failure, requiring coordination to address.
Together with the participating stakeholders, the LaMP team seeks to bridge the gap between skilled workers and industry demanded jobs. Aquila Center for Cruise Excellence – a Caribbean Cruise Association – presented their industry-demanded and newly developed “Preparing for Life at Sea” training curriculum. The job readiness training prepares workers in three steps: preparing for life onboard, foundational English and ship terminology, and service excellence and understanding the cruise industry. With the help of LaMP, Aquila and the EXSAL training institute will develop a model to help EXSAL absorb the training and ensure long-term sustainability. The government and philanthropic support can help and scale the program with early funding to defray costs of initial training and development of a long-term financing model.
Preparation for cruise industry jobs involves high training costs for individuals and a lengthy training engagement.The initial investment for most aspiring cruise workers is over $2,000 (including certifications, English courses, and living costs while training). This up-front cost represents over five months of work at minimum wage in El Salvador. During the visit, the LaMP team was able to estimate these investments and conceptualize a program that would make the return on investment worthwhile for the worker and the industry. LaMP seeks to design a financing mechanism to reduce a worker’s risk in this kind of investment, while ensuring long term sustainability by transitioning from grant funding to investment capital
Spain’s presidency is a political opportunity to have forward-looking action on labor mobility. On 1 July, Spain will assume the next Presidency of the Council of the European Union (EU). The timing of the Spanish Presidency is particularly relevant, taking place in the final stretch of the European institutional cycle and sandwiched by migration-resistant presidencies like Sweden and Hungary in the midst of a trying period for European labor markets. Spain stands uniquely as one of the more forward-looking European countries on migration; last year, the government passed a pro-active immigration reform with the aim of boosting labor mobility in crucial sectors. Such efforts can provide a template of concrete responses to the challenges posed across the EU by increasing labor shortages and persisting irregular flows. The Spanish government can find strong allies in other like-minded EU countries like Germany and Portugal, who have undertaken similarly progressive reforms, to clear a path for broader coalition at the EU level.
Spain is aging and has substantial labor shortages. This unique window of opportunity comes not a moment too soon, as the labor shortages caused by Spain’s aging population reach a critical point of urgency. Spain has one of the world’s most rapidly aging societies, with the median age having increased 4 years in only the last decade. By 2050, every one in three Spaniards will be aged 65 or over (up from one in five today); by 2100, the total Spanish population will shrink by a third. This rapid aging is repeated throughout the high-income world, resulting in crushing labor shortages that are already costing the global economy USD 3-7 billion every day. These labor shortages threaten to undermine Spain’s economic recovery from COVID, as there are no workers to deliver EU-funded recovery projects, leading to calls from industry associations for “transnational mobility.”
Spain needs foreign workers, even where there is high unemployment. More so than many other countries in the same position, Spain has accepted that this demographic aging requires increased openness to foreign workers. Social Security and Migration Minister Jose Luis Escriva justified the recent reforms to ease labor mobility by noting that “an aging population means you will have to depend more on foreign workers to help European countries maintain welfare states and pensions.” The idea that labor mobility can be an answer is often surrounded by skepticism; this is particularly true in the Spanish case where 13.3% of the population is unemployed, and more than 840,000 people under 30 could not find a job during the first quarter of 2022.
While a valid concern, this high-level view of the labor market fails to see the nuances across sectors and geographies within the Spanish economy. The first is a mismatch in skills and the jobs that young people want to fill, which tend not to match the needs in essential occupations where labor shortages are high (such as construction, transportation, agriculture, aged care). Second, there is a geographic imbalance between where the jobs are and where young people want to be. Even as the overall population shrinks, urban populations in Spain will grow by 11.9% by 2050 as young people move to economic hubs. This leaves rural areas ‘empty’ in a “perfect demographic storm” of aging population, low birth rates, youth exodus, and little in-migration. Migration solutions should be designed in a way that reflects and targets these nuanced needs.
Labor mobility is pivotal to reducing irregular migration. Voters are also concerned about expanding migration pathways in the context of high irregular migration. Despite a notable decrease in the number of arrivals, irregular migration to the Canary Islands remains a key focus. Misuses of asylum claims originating from Latin America persist too, adding burden to already-stretched national capacities. Migrant smuggling is fueled by high labor demand in Spain and few opportunities in home countries; this dynamic will remain hard to disrupt in the absence of viable opportunities for legal migration. If orderly and large-scale labor mobility pathways are not built to respond to global labor demand, smuggling services will continue to prosper, luring migrants desperate to move and often resulting in unethical working arrangements. In general terms, well-functioning and regulated labor mobility systems can offer alternatives to irregular pathways, reduce migrant smuggling, and answer critical labor market needs. Efforts that do not systemically integrate labor mobility as structural element of national policies risk falling short of the needed workforce.
Spain and Latin America offer examples of productive labor mobility partnerships. With about one third of the population living in poverty and many national economies within the region unable to produce enough stable, quality jobs, Latin American migration has almost tripled over the last 30 years. While North America and the Iberian Peninsula are the primary destinations for more than 70% of migrants due to deep economic and cultural ties, in the last decade, Latin American countries have experienced upheaval and new dynamics in regional migratory flows, driven by economic need, natural disasters, and political crises. Wealthier economies are experiencing an aging workforce and urgently need workers in essential sectors. Labor mobility represents a unique solution, and the relationship between Spain and Latin America has become a fertile space for innovation and experimentation, including new programs, pilot projects, legal regimes, and migration management mechanisms.
Spain’s relationship with Latin America represents a promising scenario. The expansion of the GECCO program, Spain’s main seasonal worker scheme, to some pilot countries in the region can demonstrate an approach that ignites a sense of well-managed migration. Such mobility also leads to mutual economic gains (agricultural wages in Spain can represent an approximate threefold increase in earnings for Honduran workers), something that does not happen with traditional local development programs. Spain and Latin America cooperation can inspire better labor mobility solutionsin other EU countries facing similar labor challenges. It can also encourage the EU to broaden its strategic partnerships on labor mobility. In this respect, the EU-Community of Latin American and Caribbean States (CELAC) summit in July 2023 marks the ambition of the upcoming EU Spanish Presidency to increase the EU’s focus in the region. This political opening offers a unique opportunity for Spain and Latin America to demonstrate to the rest of Europe how well-managed mobility pathways can address labor shortages and lift thousands of people out of poverty.
I have an article in the March/April 2023 issue of Foreign Affairs titled: “People over Robots: The Global Economy Needs Immigration Before Automation.” I encourage you to read the whole article there, but I wanted to add a little allegory that I think clarifies some main points and addresses the most commonly heard objections.
My key argument is that in the current global economy we have some of the scarcest resources on the planet devoting themselves to economizing one of the most abundant resources on the planet. Highly talented and capable business leaders and highly educated and trained scientists and engineers are working to reduce the use of labor by throwing themselves at developing labor saving technologies. For instance, Jeff Bezos, Elon Musk, and Larry and Sergei of Google have all at some stage had teams of superbly educated people working on developing a self-driving truck, despite the millions of people across the world willing and able to drive trucks. Now of course “economizing” should work in reverse—people should invest in production techniques that use less of what is scarce, not use less of what is abundant.
The problem is that in the current configuration of the global economy, capital can zip around the world at the speed of light (according to the BIS in April 2022 the volume of foreign exchange markets was estimated to be $7.5 trillion a day). Similarly, ideas and communication know no borders or boundaries, and lower administrative hurdles and improvements in logistics means even physical goods move around at such low cost that the production process of goods is often split across many countries.
But borders in rich countries–especially for “core skilled” people like truck drivers—prevent people from moving legally to jobs and employers from hiring people. Hence the cost to Amazon of a truck driver in the United States is based on prices that do not reflect global scarcity. As a result, their pattern of research and development is devoted to trying to replace people with machines. This is not because there are not people who would drive trucks for Amazon in the world, and not because “natural” scientific progress has made machines that drive trucks easy and cheap, but because in a global economy which is “flat” for capital, information, and goods, there is a legal “cliff at the border” for labor, as prices don’t reflect scarcity.
Therefore, we have the perverse situation that the richest people are hiring some of the most talented and technologically sophisticated people on the planet to engage in innovation aimed at driving down the demand for labor—the major and often only asset of the world’s poor.
From long experience of making this argument, I know the first objection is that I am somehow “against” technology or that, in trying to create conditions in which people can choose people over machines I am a modern Luddite. But I am not against technology nor against investments in innovations that improve productivity if they respond to actual global scarcity. But no economist believes that simply improving production processes in physical terms creates social value.
Let me give a simple allegory about sugar:
For a very long time the US has maintained strict quotas on the imports of sugar (due to the politically influential domestic sugar industry). From 1999 to 2016 these restrictions led the US refined sugar price to be about double the world price (34 vs 17 cents a pound).
Sugar was dear in the US not because there was a global shortage of available sugar or because global production costs were high but because of US trade policy of not allowing US consumers (and producers of sugar using products) to buy the amount of sugar from abroad that they wished.
Now, suppose the import quota covers the importation of refined sugar but does not cover the importation of pre-sweetened cocoa mix that is 95 percent sugar and 5 percent flavoring. Then a clever entrepreneur could buy refined sugar in a sugar producing country for 17 cents, add cocoa at 2 cents per pound, ship the mixture to the USA for 2 cents a pound, and then invent a technological process that extracts the cocoa for 5 cents a pound. Viola, this new “technology” produces refined sugar available to sell in the USA for 26 cents a pound (17 plus 2 plus 2 plus 5) which can be sold in the USA for 34 cents a pound.
There are now three “technologies” for producing refined sugar for sale in the USA: (a) grow it and refine it in the USA, (b) grow it and refine it abroad and ship it to the USA and (c) grow it and refine it abroad, add cocoa, ship it to the USA, take the cocoa out.
I hope we can all agree that, even if it makes financial sense for the individual entrepreneur at the import quota driven gap between world and domestic prices, this new technology is wasteful and, no matter how much cool science and technology and engineering—or even AI–goes into extracting added cocoa from sugar, doing so is just economically dumb.
Moreover, suppose that our sugar importing entrepreneur hired a team of scientists and they invented improvements in the cocoa extraction process that lowered the cost from 5 cents a pound to 2 cents a pound. This would be a technological “innovation” and “productivity” would go up and, depending on the investment to make the breakthrough, might be a profitable decision. But, whether it makes financial sense or not for the individuals involved, they are responding to distorted prices, not scarcity, and the world is not better off from their invention and innovation.
There is an old saying that “necessity is the mother of invention” but it is also true that policies can create false necessity and false necessity can be the mother of costly, resource consuming, dumb inventions.
If we collectively devoted the same levels of investment and inventive power and entrepreneurship to developing more and better legal pathways for people to move across borders to needed jobs, including a variety of modalities for labor mobility, we could solve the growing challenge of labor scarcity. At the same time, we would meet the needs for essential jobs in a way that, instead of driving down demand for labor, allows millions of people new opportunities and helps them move out of poverty.
Technical Note:
The following paper “Future of the Labor Market: Labor Mobility or I, Robot” was written as an independent research project by Masoomeh Khandan in Spring 2022, and as such represents her own views, not the views of Labor Mobility Partnerships (LaMP).
The following excerpt was written by LaMP Research Director Lant Pritchett and originally published by Foreign Affairs on February 28, 2023 here.
“Automation is often a solution in search of a problem. It is a choice people have made, not an inevitability and certainly not a necessity. For instance, the United States faces a scarcity of truck drivers. The American Trucking Association has estimated that in 2021 there were 80,000 fewer drivers than the total needed and that, given the age of current drivers, over a million new ones will have to be recruited in the coming decade. To deal with this deficit, many tech moguls, including Amazon founder Jeff Bezos, have invested in the research and development of self-driving vehicles, technology that would reduce the demand for drivers. For Bezos, such technology makes corporate financial sense; Amazon relies on low shipping costs to keep its prices down. But it does not make wider economic sense because millions of people would be happy to drive trucks in the United States—they just need to be allowed to work in the country.
There is no global scarcity of people who would like to be long-haul truck drivers in the United States, where the median wage for such work is $23 per hour. In the developing world, truck drivers make around $4 per hour. Yet firms cannot recruit workers from abroad even at the higher wage because of restrictions on immigration, so business leaders in the United States are impelled to choose machines over people and eradicate jobs through the use of technology. But if they could recruit globally, they would have less incentive to destroy those jobs and replace people with machines. The implacable fact of national borders steers businesses toward investing in technology that does not respond to global scarcities—and that no one really needs.
What is true for truck driving is also true for many other industries in the rich industrial world that require nonprofessional workers in specific work environments. A 2021 report by the financial services company Mercer estimated that, by 2025, the United States would face a shortage of some 660,000 home health aides, lab technicians, and nursing assistants.
Barriers to migration encourage a terrible misdirection of resources. In the world’s most productive economies, the capital and energies of business leaders (not to mention the time and talents of highly educated scientists and engineers) get sucked into developing technology that will minimize the use of one of the most abundant resources on the planet: labor. Raw labor power is the most important (and often the only) asset low-income people around the world have. The drive to make machines that perform roles that could easily be fulfilled by people not only wastes money but helps keep the poorest poor.”
Responsible recruitment practices play a crucial role in workers’ experiences with migration programs. However, workers themselves are not always heard and consulted when stakeholder groups try to improve these practices. The conversation around responsible recruitment must include worker voices, especially in seasonal agricultural programs. Their concerns, expectations, and ideas about recruitment are key to finding solutions that improve and provide access to these programs to more workers from new corridors.
The conversation around responsible recruitment revolves especially around workers in the seasonal agricultural programs, whose concerns, expectations, and ideas about recruitment are key to finding solutions to improving and providing access to these schemes to more workers from new corridors.
Therefore, the Equitable Food Initiative (EFI) created “The IRÉ Project: How Mexican workers define ideal recruitment and recruitment priorities,” with the goal of gathering insight into how farm workers recruited for jobs on fruit and vegetable farms in the U.S., Canada and Mexico would re-design the recruitment experience. The project sheds light on how these seasonal workers think about “responsible recruitment” and what matters to them most. Resourced and supported by the EFI and implemented by Cierto Global and &Wider, the project allows interested organizations and stakeholders to learn how workers define ideal recruitment and what they consider “ethical” and “fair.” The final report revealed three priority areas that workers see as a key part of a responsible recruitment experience:
Clarity
Community
Safety from health and financial risks – including extractive fees, hidden costs, and threats and exploitative promises by employers
These findings are in line with what the LaMP team learned from prospective and returning workers under the U.S. agricultural seasonal worker program, or H-2A, who provided us with feedback during our recent trips to Mexico and Guatemala.
Transparent and comprehensive information is the number one priority for workers when it comes to recruitment. Above other factors, like no fees, simplified paperwork or a choice in worksite destination, workers desire full and transparent access to information pertaining to the recruitment process, employer, worksite destination, and all associated costs. Migration is a household economic decision, so having clarity around the terms of migration allows households to make smart decisions and take calculated risks. Ensuring that workers have full knowledge to make informed decisions is a critical element for workers’ agency and dignity.
Having some kind of physical presence in the community was also highlighted as an important part of the recruitment experience. Workers expressed that when recruiters have a physical presence in their community, for example in the form of organizing interviews or orientations there, the process feels safer or ‘more official.’ One CIERTO-recruited worker said, “we know that if anything goes wrong or we need information, we can go to the church [where CIERTO holds community gatherings and recruitment events] and they can help us get in contact with CIERTO, almost as if they had a physical presence in our community.”
While the findings above were expected based on the IRÉ Project findings, the H-2A workers LaMP consulted also shared additional information.
Another important finding for LaMP is that the use of the internet and technology to find or vet recruiters and job opportunities is not widespread among the H-2A workers. As LaMP continues to design solutions to improve responsible recruitment, we want to understand how tools that rely on technology will be received and utilized by workers. For the workers we talked to, not everyone had access to technology resources or the internet, and even for those who did, the internet was not a primary source of information on H-2A opportunities. In the case of Facebook, it is accessible and somewhat used, but also considered not trustworthy. This means that workers in this community might be less susceptible to internet extortion but also less likely to adopt a technology-based tool for finding responsible recruiters or legitimate H-2A jobs. Overall, we found that most recommendations and opinions on job opportunities that help a prospective worker make decisions come from personal networks.
While a free of charge recruitment process was not mentioned as a priority for workers, many of the interviewees talked about the need for some form of loan in order to cover the costs associated with receiving the H-2A visa. While willing and able to obtain funding, workers explained that large loans can have long-term consequences, not just for them, but also for their employers. One visa applicant in Guatemala said, “collaboration and solidarity among workers are important for the success of the [H2A] program.” However, “the higher the debt a worker takes on to migrate, the more likely they are to abscond.” While abscondment is a concern for recruiters and employers alike, it also results in greater worker vulnerability. Reducing costs by eliminating unexpected costs or exploitative fees for workers can help reduce abscondment, which ultimately affects both workers and employers.
Lastly, the small group of indigenous women that the LaMP team met with in Guatemala added a whole another level of complexity to the issue of responsible recruitment, bringing the perspective of migrant women working in agriculture. For them, discrimination or equal access to opportunities is the biggest problem. One aspiring female H-2A applicant said, “what we are looking for is a legal and equal opportunity for work.” Women are heavily underrepresented in the H-2A program, and for them access and fair labor conditions, adequate housing and protection against harassment are key priorities.
Putting workers’ perspectives and lived experiences at the center is not only best practice, but also fundamental for building a “responsible recruitment” ecosystem. Giving workers a safe space to provide recommendations on how to improve the H-2A visa program is an empowering experience that benefits all stakeholders involved. Overall, understanding workers’ key priorities has been crucial for promotion of a responsible recruitment industry within the H-2A program.
Please direct questions or interest through our contact form. The following content was originally published on NPR January 25, 2023 here.
ARI SHAPIRO, HOST: There’s an imbalance in global birth rates. China’s population is shrinking for the first time in decades, raising fears that China’s economy could shrink with it. Europe’s population is quickly getting older, too. Meanwhile, parts of the developing world are facing a youth bubble. So could immigration help address both of these problems? Lant Pritchett is a development economist who studies labor markets and migration. Welcome to ALL THINGS CONSIDERED.
LANT PRITCHETT: Thanks for having me.
SHAPIRO: Before we get to the question of immigration, explain why it matters if a country has a slowing birth rate. How does the number of babies born change a country’s economic outlook?
PRITCHETT: Well, the problem isn’t so much that the overall population shrinks. It’s that during the period after the birth rate falls, it’s something we call inverting the demographic pyramid, which instead of there being a lot more young people than old people in it, the relative populations start to shrink and you go from having lots of people in the labor force to support the elderly, to headed towards a quality of people in the labor force and people in the aged population. And that just has never happened in the history of the world. And it’s not clear it’s a sustainable way to sustain the social contract that we have in which the young support the old.
SHAPIRO: Beyond China, how much of the world is facing this problem?
PRITCHETT: It pretty much is endemic across the rich, industrial world. I’ve done calculations from the standard U.N. projections, and, over the next 30 years, there’s going to be 100 million more old people but 143 million less people in the workforced age category. So this is across the rich, industrial world.
SHAPIRO: Meanwhile, parts of the developing world are looking at the opposite problem. The 10 youngest countries in the world are all in sub-Saharan Africa. Could those countries help provide a solution to the countries that are aging?
PRITCHETT: They definitely could and definitely would. Gallup surveyed people around the world of whether they would be willing to move to another country, and something on the order of a billion people in the world said they’d be happy to move and work in another country. So no question that there’s an ample supply of workers who would be willing to move and take up the jobs that the rich world needs and just don’t have youth to take.
SHAPIRO: And yet, immigration is not just an economic question, it’s a political one. And political sentiment seems to be going in the opposite direction. Anti-immigrant attitudes are growing across Europe and in many parts of the highly developed world.
PRITCHETT: That’s true. But I think, in part, that’s because we’ve traditionally forced two really high tension questions to be the same answer. One question is, who are the future citizens? Who are the future members of what we regard as us – our society, our nation? And the other question, though, is who are we going to allow to be legally present on our territory to do labor services? My feeling is if we allow those questions to be separated and we have a discussion about who are the immigrants that we want to form our future society as a separate per discussion about who are we going to allow to come to our country and work – I think once those questions are separated, we can manage the political and social consequences of migration while still meeting the very dire needs that these economies have to, you know, fill jobs that just won’t otherwise be able to be filled.
SHAPIRO: You’re talking about something like temporary work visas. I was recently in the strawberry fields of southern Spain, which tried that kind of a program. And Spanish officials told me a lot of people skipped out and stuck around when they were supposed to have gone back at the end of harvest season. Is that inevitable?
PRITCHETT: That is, by no means inevitable, but it is a pressure. There is no question that once people are in a country where wages are four or five times their home country, there will be a tendency to stay. But I think the prospects for building a good industry that recruits, prepares, places, protects and ensures compliance, I think we can build a good industry to do this. This is not impossible.
I feel we’re sort of in the position now that America was with Prohibition. We wanted to ban all alcoholic beverages, and it just wasn’t enforceable. And so the path to more control of alcohol was through less control of alcohol, through legalizing these flows. I feel the path to better migration is through more migration. We have to acknowledge that these economies really need these workers. And if we really need these workers, we should set up fair, transparent, legally enforced ways in which they can come and in which we can ensure reliable compliance with return, if that’s part of the legal agreement.
SHAPIRO: Does this serve the developing world, too? Or is it just a brain drain, where talent goes to wealthier countries with an aging population?
PRITCHETT: What I’m talking about is mainly labor mobility to meet the low-skill needs. If you look at the U.S. economy, over the next 10 years, the Labor Department says we’re going to have 5 million jobs that don’t require a college degree. And yet, over that same period, we’re going to have 3 million less workers 20 to 40. So what the rich world needs is not, in fact, high-skill, high-talent, brain drain kind of people, exclusively. They would love to get those people. But what I’m talking about is the people with core work skills. And I think that isn’t a brain drain. That is a wonderful thing for the developing world because people just aren’t going to be able to create the numbers of jobs they need to in the developing world. And hence, it’s super win-win.
SHAPIRO: Lant Pritchett is research director with the think tank Labor Mobility Partnerships. Thank you very much.
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