This post was published also at the Center for Global Development (CGD) website here.
High-income countries depend on immigration to help foster strong societies and economies. Yet when deciding who is allowed to enter, most use a simple dichotomy based on educational attainment: “high” and “low” skilled.
In this blog, based on a new policy brief by Labor Mobility Partnerships (LaMP) and discussions at a recent LaMP-CGD co-hosted event, we outline why this dichotomy is wrong, and how high-income countries can build mutually beneficial migration pathways at all skill levels.
Because there is no explicit general definition of a high-skilled versus low-skilled worker, such categorizations are often arbitrary and sometimes even contradictory.
To increase the overall complexity of their economies, and thus boost growth, high-income countries need a much broader variety of abilities than the traditional low- and high-skill dichotomy, which is solely based on a worker’s level of schooling.
Rather than using the arbitrary education-focused definitions of skill levels, labor mobility schemes should focus on the capabilities needed by employers hiring sectors, including a worker’s ability to learn and develop new skills during their employment in the host country.
Implementing better quality labor pathways for foreign-born workers with a broad variety of skills would add to the overall economic growth of the receiving countries while also assisting native-born workers with their own realization and potential career advancement.
An economy is a complex system, under which each worker’s skills and specialization has its own value that complements the capabilities of others—a process that ultimately leads to increased overall economic growth. As Hausmann found, complexity is in fact at the center of countries’ economic growth and development.[i] The argument may be easier to understand using the following metaphor. A simple economy makes bread, which only requires a few ingredients, including a great deal of flour, but no eggs. A more sophisticated economy produces both bread and cake, the latter of which requires flour and eggs. And an even more sophisticated economy might produce a variety of breads, pastries, and cakes, which requires the specialized skills of a chef, who can create new recipes using existing and new ingredients. Note that each of the economies still need flour to produce their goods. In terms of migration, high-income countries strive to attract more entrepreneurs, information technology (IT), and other experts with advanced degrees to continue expanding the range and depth of sophistication of their economies. However, the “recipes” for modern economies still require “flour”—in other words, there is still a need for caregivers for the young and the old—as well as cleaners, roofers, painters, and retail workers; and many employers in high-income countries struggle to fill these and other jobs due to increasing labor scarcities.
All workers—whether native- or foreign-born—offer a wide range of skills and abilities, from social and cultural skills to those learned from previous experiences or even at school, which advances and increases the complexity of an economy. And yet, when it comes to foreign-born workers, many existing labor mobility systems in high-income countries traditionally use a dichotomy based on educational attainment, simply splitting the workers into two groups: high–skilled or low-skilled. So-called high-skilled workers typically have at least a four-year degree and work as IT experts, medical doctors, scientists, or other professionals that require a postsecondary degree; while so-called low-skilled workers have less schooling than a bachelor’s degree and work, for example, as agricultural and construction laborers, welders, and caregivers.
In fact, the capabilities of foreign-born workers represent a kind of “skills mix,” consisting of educational attainment and knowledge of another language, skills acquired through previous or current employment, and interpersonal and other social skills. In other words, a foreign-born worker brings an entire package of abilities, which could possibly help both companies in employing sectors of high-income countries as well as workers and their families in their countries of origin if a worker decides to return. However, for a country to bring in a variety of workers with a broad range of skills, it needs flexible mobility pathways that allow for the safe entry of workers with skill sets that correspond to the needs of the host country’s economic sectors. Moreover, data show that, when combined with other enforcement measures, implementation of additional quality labor mobility programs for workers with diverse skill sets could help reduce irregular migration channels.[ii]
Nevertheless, high-income countries are not particularly willing to admit additional foreign-born workers who possess a broader array of skills. High-income countries have frequently demonstrated the political appetite for developing pathways to admitting highly skilled foreign-born workers to work in sectors, such as IT, medicine, and science. Since professions in these fields have clear and established training and certifications systems, it is easier for high-income countries to label them high-skilled. However, other occupations that require extensive training are not likewise recognized. Employers and workers in construction, care work, tourism, and similar fields are therefore often at a disadvantage due to the failure of countries to develop adequate mobility pathways that recognize the skills and training that is required for these sectors. Although the inclination toward highly skilled workers stems from a variety of factors, data show that many foreign-born workers traditionally labeled as low-skilled due to their lower level of schooling in fact play important roles in the lives of native-born workers and help increase overall productivity. Receiving countries may find that it is more beneficial to base labor mobility schemes on sector needs rather than on the educational level of workers.
Implementing additional quality mobility pathways for foreign-born workers with a broader variety of skills would increase economic complexity for both the receiving high-income countries and the sending countries because workers returning home can continue to use and teach others their skills. Research shows that such new abilities may make workers more attractive to potential employers or, in combination with accumulated savings, potentially allow them to open businesses of their own and train people in their native countries.[iii] Moreover, upon their return, workers can capitalize on their acquired skills to secure jobs that require higher skill levels and that provide better salaries than those they could have obtained prior to their migration.[iv] For example, a study on returnees to Brazil, Chile, and Costa Rica reveal that such workers are overrepresented in highly skilled occupations and underrepresented in least-skill trades.[v] A separate analysis by Natasha Iskander, focused on Mexican construction workers in Philadelphia, Pennsylvania, and Raleigh-Durham, North Carolina, revealed that “as immigrants move their knowledge from one labor market context to another, they change its form and composition.” The change is so radical that “it is more accurate to say that it is transformed, rather than merely transferred.”[vi] Increasing and improving mobility systems for workers with all kinds of skills and abilities, not only for those with a high level of education, could be a powerful tool in the development strategies of high-income countries because the resulting increase of economic complexity also impacts countries of origin.
The Traditional Dichotomy of Foreign-Born Workers’ Skills
Workers are typically considered skilled if they have reached a specific level of education, if they have obtained specific certifications, or if their expectedpay levels or wages are above a certain threshold. However, the exact definition of skilled varies by country as each sets its own eligibility criteria and types of visas.[vii] Moreover, when discussing labor mobility, politicians, economists, and other experts tend to use rhetoric that splits workers into two groups—high-skilled and low-skilled. High-skilled workers typically have at least a bachelor’s degree and engage in positions such as IT experts, medical doctors, and scientists. Low-skilled workers usually have less schooling than a four-year degree and tend to be engaged as agricultural or construction laborers, welders, caregivers, and cooks. This dichotomy has been used as an actual basis for the migration systems of high-income countries. The United States, for example, defines highly skilled foreign-born workers as those who have earned at least a bachelor’s degree;[viii] all other workers are considered low-skilled. In Europe, countries tend to establish their migration systems along the two skill levels as well. Spain, for example, defines high-skilled workers as those with at least a graduate degree.[ix] Japan issues its highly skilled professional visas to applicants seeking jobs in academia, engineering, and business management, which typically require doctoral or master’s degrees.[x]
Even when countries use other characteristics to divide foreign-born workers into groups, they still tend to end up with similar groups of “high” and “low.” Canada, for example, changed its system in 2014 to define its two categories of workers based on their wages rather than on their skills. The country’s temporary foreign-born worker program has been divided into two categories: high-wage workers, including positions offering wages at or above the established provincial or territorial median wage, and low-wage workers, with pay below the median wage level. In fact, however, the occupations in these two categories basically cover the same positions as the previous system of high- and low-skill, which divided foreign-born workers based on if they had obtained a postsecondary education or formal certification.[xi] Although this may be a less value-laden way to classify foreign-born workers, it still serves to give preference to one group over another.
This dichotomy toward foreign-born worker categories is problematic for multiple reasons. First, the overly rigid and simplified skills definitions often limit mobility pathways for workers who might have some postsecondary education or training but who lack a four-year degree—middle-skilled workers. In the United States, reports show that about 52 percent of jobs require mid-level skills,[xii] and 69 percent of human resources executives claim that their firm’s performance is often impacted by their inability to attract such talent.[xiii] Additionally, estimates indicate that middle-skill occupations will represent the largest share of overall job openings in the United States through 2024.[xiv] The Organisation for Economic Co-operation and Development (OECD), which defines middle-skill jobs as occupations with average wages “in the middle of the occupation-wage distribution”—a definition that does not even reflect the actual skills of the workers—says that these occupations represent slightly over 30 percent of the total employment in member countries.[xv]
Although some countries recently introduced programs for certain middle-skill occupations, such as caregivers, only a few countries’ migration schemes recognize middle-skilled foreign-born workers as a standalone stream.Therefore, middle-skilled workers are often categorized as low-skilled and thus restricted to the same few pathways merely because they do not meet the high-skillthreshold, regardless of their having training and certifications in their fields. This is the case in Spain, for example, giving employers very limited options for closing their job gaps by hiring from abroad.[xvi] As a result of such an approach, many foreign-born workers from the construction and health care sectors are considered low-skilled[xvii] even though they possess certifications in their field. They are then offered fewer and more restrictive mobility pathways than workers recognized as high-skilled.
Employing Sectors Need More Skills than Schooling
Another important issue with the skills dichotomy in countries’ labor mobility schemes is that it overlooks other difficult-to-measure skills that workers also bring to the receiving country, such as technical, social, and cultural abilities, and interpersonal competencies. Businesses are increasingly interested in workers with critical thinking, interpersonal, learning, and other soft skills. In a recent survey, the majority (65 percent) of U.S. employers claimed that soft skills are in the highest demand.[xviii] In other words, educational attainment alone cannot fully describe the actual skills of a foreign-born worker. There are other abilities and expertise that workers gain through specialized training or informally by performing their jobs.
The narrowly defined skill levels used in high-income countries’ labor mobility schemes often diminish the value of workers—native- and foreign-born—in occupations typically labeled as low-wage or low-skill. And yet studies show that foreign-born workers, who are considered low-skilled due to their lack of schooling, are “in fact quite skilled.”[xix] A recent study on work and mobility among Mexican migrants working in low-skill occupations in the United States show that a lack of schooling and credentialing does not correlate with a foreign-born worker’s “lack of ability, desire to learn, or ambition to advance in life.” It also found that foreign-born workers with low levels of schooling still bring skills from their home country that they use in the United States. For example, in the construction sector, nearly two-thirds of the interviewed foreign-born workers confirm that they had previous experience in their home countries, and about half say they use these skills at their jobs in the United States. Moreover, agricultural workers, who are often characterized as “easily replaceable, transient, and unskilled labor,” showed “substantial skill transfers, skill development, and social mobility.”[xx] Similar trends were reported in other sectors as well, including retail, hospitality, and personal services.[xxi] Further, the study finds that over three-quarters of the respondents had learned new skills abroad, sometimes through their occupations, including agricultural work, which typically offers only a few mobility pathways.[xxii]
The dichotomy based on workers’ schooling does not reflect the actual skills and value that workers bring to the receiving high-income countries and their societies. It is impossible to fully assess the ability of workers solely based on their schooling. In other words, workers’ abilities represent a “skill mix,” consisting of a wide range of skills and abilities gained through a variety of sources, rather than just through educational institutions. Clearly, the skills dichotomy, often used to create mobility schemes in high-income countries, completely ignores the experiences of workers from previous employment as well as their soft skills and ability to learn, which are often more important to employing sectors seeking to fill these so-called low-skill positions.
The seemingly simple skills dichotomy used for many high-income countries’ mobility schemes prevents employing sectors from bringing in the variety of workers they need, and thus hampers the process of increasing complexity in the involved economies, ultimately limiting their growth and development. For example, the construction industry needs all type of workers, including engineers, construction managers, electricians, carpenters, and laborers.[xxiii] Manufacturing companies hire researchers and scientists as well as machinists, welders, and cutters.[xxiv] However, the structure of mobility systems often makes it more difficult for employers to hire workers from diverse backgrounds because the employer must navigate multiple programs—some for highly skilled workers and others for less skilled workers. Rather than basing mobility systems on a worker’s education level, the receiving countries should consider sector-based schemes focused on the needs of the employing sectors and the overall economy.
Lastly, but perhaps most importantly, while the label low skilled might imply little value, in fact, such workers provide essential services to the public.[xxv] The health care industry, for example, often devalues women’s work, reflected in a 28 percent gender pay gap, with other industries and professions, such as janitors and maids and house cleaners, facing similar challenges.[xxvi] Combined with restrictions on the admission of foreign-born workers imposed by host countries, migration schemes often disproportionately block women’s migration, especially in occupations such as nurses, caregivers, and sometimes even domestic workers, which are not recognized as “skilled” even though they require a certain level of training.[xxvii] However, it is not only women who face devaluation of their work, as the same trends can be seen in other industries that primarily employ male workers, who are also frequently undervalued and face many migration restrictions.
High-Income Countries Face Labor Scarcity
Economists have long argued that the division of labor is the ultimate formula for a country’s wealth. As the “recipe” analogy at the beginning of this note describes, due to the specialization of companies and their workers in a variety of activities, as well as the interactions among them, a country’s economy becomes more complex, ultimately increasing economic efficiency. The complexity of a country’s economy therefore plays a central role in its economic growth and development.
However, due to inevitable demographic changes caused by low fertility rates and aging populations, the workforces of high-income countries are shrinking. This keeps employers from being able to hire enough workers with the required skills. These trends have resulted in an unprecedented scarcity of workers—a problem that employers across industries cannot address by simply increasing wages (table 1).
Table 1. Total Job Scarcity in Select High-Income Countries, Pre-Pandemic
The ongoing COVID-19 pandemic has caused economic swings as many businesses were forced to close their doors, and millions of employees around the world were furloughed, but long-term demographic trends are unlikely to change. Instead, data suggest that the situation will likely worsen (table 2).[xxviii] Labor mobility can serve as an effective policy tool for increasing the complexity and thereby the overall growth of the economies of both sending and receiving countries. Foreign-born workers, who return home after a time in the receiving country, bring back with them new and more developed skill sets, which allows them to enhance the economies of their countries of origin. At the same time, labor mobility can, at least partly, alleviate the labor scarcity experienced by the employing sectors of receiving countries.
Table 2. Projected Total Job Scarcity in Select High-Income Countries
Therefore, some high-income countries have begun to explore ways to bring workers from abroad. For example, Germany began to enforce its new immigration rules in early 2020 to provide more opportunities for workers from outside the European Union (EU).[xxix] The United Kingdom also introduced a new immigration system in 2020, following the country’s exit from the EU.[xxx] Canada made considerable changes to its system in 2014[xxxi] and launched a number of new pilots in 2019.[xxxii] Nevertheless, rather than focusing on employing sectors’ needs, the new mobility pathways are often targeted primarily at workers they consider skilled.
However, many sectors that struggle the most with worker scarcity need workers typically considered low- or middle-skilled. In the United States, occupations that do not require any degree, including home health and personal care aids, as well as fast-food counter workers and restaurant cooks, were among the jobs with the largest absolute growth in worker demand projected for 2019–2029.[xxxiii] In 2020, European countries reported shortages in occupations such as nursing, plumbers, cooks, heavy truck drivers, and welders.[xxxiv] Although the pandemic exacerbated the alarming need for “low-skilled” essential workers in health care and agriculture, scarcity had already hit these sectors as well as the tourism, construction, and manufacturing sectors in the preceding years. Care work is among the essential sectors hit hardest by worker scarcity, with Australia expecting 250,300 job openings by 2023,[xxxv] and the United States expecting 7.8 million job openings by 2026.[xxxvi] Additionally, the Canadian farmworker deficit is expected to double by 2029 from the 16,500 reported in 2017,[xxxvii] and the Australian[xxxviii] and U.S.[xxxix] agriculture sectors have been stressing the need for more workers as well. Further, 81 percent of U.S. construction businesses reported struggles finding qualified workers in 2020,[xl] expecting to be short 747,000 workers by 2026,[xli] and UK contractors reported difficulties with recruiting as well.[xlii] Even before the pandemic, U.S. construction firms reported 434,000 vacant jobs in 2019,[xliii] and Germany had approximately 225,000 unfilled positions in the construction sector in 2018.[xliv] With regard to the tourism sector, over two-thirds of surveyed German hoteliers and restaurateurs reported that a lack of workers was their top issue.[xlv] Overall, it is clear that sectors employing low-skilled workers in a variety of high-income countries are facing worker scarcity. And yet, the nations have been struggling to introduce an effective labor mobility program to sufficiently fill such gaps.
High-Income Countries Favor High-Skilled Migrants
Despite employers’ proven need to fill their low-skill openings, it has been difficult for foreign-born workers without any or with only limited schooling to come and work in high-income countries. In fact, during the past few years, the political appetite among EU member countries for the opening of new mobility pathways and admitting foreign-born workers is less than what is needed by the employing sectors,[xlvi] even though such pathways could help reduce irregular migration—another issue of concern to many high-income countries over the past few years. However, to achieve the desired reduction, the expansion of new mobility channels would have to be established in a way that sufficiently increases the incentives for workers and employers to avoid irregularity, combined with other enforcement measures.[xlvii] Currently, even when a nation’s government does explore labor mobility as a solution to increasing labor scarcity, the efforts often target workers with college and university degrees.
That shift is dramatic compared to historical approaches toward immigration in high-income countries, such as the United States, Canada, and Australia. While a hundred years ago, these nations’ mobility schemes emphasized attracting laborers to fill low-skill jobs in factories and mines or on farms and ranches, today the focus is shifted toward recruiting science, technology, engineering, and mathematics (STEM) and management-level workers.[xlviii] Nowadays, politicians in the OECD member countries compete to attract what they believe to be “the best and brightest”[xlix] while controlling and reducing other migration channels, including low-skilled worker mobility.[l] While mobility channels for high-skilled workers tend to provide permanent pathways to the receiving countries, channels for low-skilled migrants are usually temporary and very restrictive.[li] The temporary pathways tend to be seasonal despite the need of many employing sectors to fill other low-skill year-round jobs. While temporary pathways for low-skilled workers may be more politically feasible, their restrictive nature may ultimately hurt both the employing sectors and foreign-born workers due to the number of barriers and constraints that must be overcome just so the worker can remain in the receiving country for a limited time.
There are very few channels through which employers in high-income countries may bring in nonseasonal low- and middle-skilled workers. For example, the U.S. mobility system currently provides zero pathways for nonseasonal occupations requiring less than a college degree. While there are programs for highly skilled temporary workers with a postsecondary education and for seasonal agricultural and nonagricultural workers,[lii] no pathways exist for workers to fill the country’s year-round shortages in low-skill sectors, such as care work[liii] and certain manufacturing occupations.[liv] Switzerland does not even allow individuals from non-EU countries to work unless they are considered “highly qualified,” which means they must hold a university degree and have professional work experience.[lv] Similarly, the Netherlands only has a few pathways to bring non-EU low- and middle-skilled workers.[lvi]
Some high-income countries appear generally open to receiving more foreign-born workers, but their programs are primarily focused on the admission of highly skilled workers. France, for example, has been relatively more amenable to labor mobility as the country seeks new ways of closing its job gaps. However, its channels have been selective, prioritizing workers with more schooling above others. Despite the growing demand for low- and middle-skilled workers in sectors such as agriculture, hospitality, and care work, the emphasis has been on recalibrating the mobility of highly skilled workers and students, as well as on family and humanitarian migration.[lvii] Although Canada provides opportunities for low-skilled workers to come through its temporary channels, they are, in most cases, disadvantaged compared with high-skilled workers, who have been given a clear path to permanent residency.,[lviii] Moreover, the opening to more low-skilled workers in Canada has been accompanied by a series of restrictions imposed on the program regarding employment, social residency, and family reunification.[lix] The United Kingdom’s newly introduced point-based system also disadvantages low-skilled workers[lx] and encourages employers to “move away” from relying on hiring from abroad.[lxi] Greater openness toward highly skilled over less skilled workers has been characteristic of the mobility schemes of many Southeast Asian countries as well. Singapore, for example, has novel policies to attract “foreign talent” and regulations for employing less skilled “foreign workers.” Hong Kong has a strictly regulated program for low-skilled migrant workers and a more open one for those with higher-level skills, under which the worker does not need a job offer and can eventually settle.[lxii]
It is important to note that seasonal work represents a significant exception to the above-described trend, but even those programs are designed to restrict low-skilled workers’ access to host countries. In the United States, for example, the nonagricultural seasonal worker program helps employers fill job vacancies during peak seasons. However, even though the program covers all sectors with seasonal need other than agriculture, it has been restricted by an annual cap of 66,000 workers.[lxiii] Although employers in those sectors have been calling for an increase since the early 2000s when their need began to considerably exceed the 66,000 limit, the quota has remained constant since the 1990s, preventing more workers from entering the country.,[lxiv] This trend is apparent also in countries that have recently piloted new programs for admitting seasonal workers. In 2019, the British government announced the beginning of its Seasonal Workers Pilot, or the “Initial Pilot,” through which farmers can recruit a limited number of temporary workers. The original pilot program was set up to provide visas for 2,500 seasonal migrant workers to come to the United Kingdom in 2019; the number increased to 10,000 in 2020;[lxv] and for 2021, the quota has been expanded to 30,000 workers.[lxvi] However, that is still far from filling the 80,000-worker gap reported by UK farmers.[lxvii] And what’s more, on its website, the UK government still calls for the recruitment of domestic workers and automation in effort to “move away from a heavy reliance on low skilled overseas workers.”[lxviii]
The Covid-19 pandemic, which caused an unprecedented shortage of essential workers, forced some high-income countries to implement fast-track immigration measures to address the situation, allowing more foreign-born workers with skill levels categorized as low or middle to come or remain for a longer period. Italy gave 600,000 undocumented migrants work permits in recognition of the need for these workers to provide care and put food on the table during the crisis.[lxix] Portugal has temporarily regularized all migrants who had applied for a residency permit before the declaration of the state of emergency. Despite border closures, Germany, the United Kingdom, Finland, and other countries have made special provisions to fly in seasonal agricultural workers.[lxx],[lxxi]In Canada, Prince Edward’s Island has fast-tracked immigration processes for health workers and truckers; and Nova Scotia has done the same for nurses.[lxxii]
Nevertheless, the argument that high-income countries tend to prefer and favor so-called high-skilled over low-skilled foreign-born workers is also evident in the discrepancy of the rights provided to each of the two groups. As Martin Ruhs suggests in his book The Price of Rights: Regulating International Labor Migration, programs targeting more highly skilled foreign-born workers tend to grant such workers greater rights than do the low-skill programs. This trend stems from the fact that the pool of highly qualified workers who are willing to migrate is relatively small, allowing selected individuals to choose among receiving countries, thereby prompting the competing destinations to offer high wages as well as more substantial rights. On the other hand, because the number of potential foreign-born workers willing to accept low-skill jobs is virtually unlimited, receiving countries often provide them with wages, employment conditions, and rights that violate local laws and are that fall significantly below international standards.[lxxiii] The countries of the Cooperation Council for the Arab States of the Gulf (GCC, formerly known as the Gulf Cooperation Council) are among the most open to low-skilled workers, representing a clear exception to the pattern described above. However, they also provide these individuals with very weak labor standards and limited rights. Singapore is similarly quite open to foreign-born workers while also imposing considerable restrictions on the rights of low-skilled workers. Despite recent efforts to raise the bar on worker protections, numerous reports continue to demonstrate how foreign-born workers’ rights are being abused.[lxxiv]
Why Are Low-Skilled Workers Out of the High-Income Countries’ Spotlight?
Lawmakers’ decisions regarding the regulation of the admission of foreign-born workers depend on national policy goals, such as economic efficiency and national security, given certain constraints, including domestic and international legal restrictions or a limited ability to control immigration flows.[lxxv] According to Ruhs, there are at least three reasons why high-income countries are more likely to favor highly skilled foreign-born workers: (1) they expect that such workers will better complement the existing skills and capital of their population; (2) they value the importance of human capital and knowledge for long-term economic growth as predicted by endogenous growth models; and (3) the dependence of the overall fiscal impact of immigration on workers’ earnings, which tend to be linked to their skills. In other words, a highly skilled foreign-born worker will likely pay more in taxes and be less eligible for welfare benefits than a worker with a lower skill level.
Since high-income countries tend to be quite knowledge-based, their lawmakers tend to think that recruiting “the best and brightest” in the “global competition to attract high-skilled migrants” will further speed up their countries’ technological advancement and development. A powerful lobby has helped shape the narrative around highly skilled workers, as hiring companies tend to be among the largest and best resourced to invest into their industry’s advocacy efforts. In the United States, for example, the most influential petitioners for high-skilled workers are multinational corporations, such as Deloitte, Apple, Cisco, Amazon, and Facebook, each with annual revenues in the billions of dollars. It is useful to compare this to the low-skilled nonagricultural temporary worker program in the United States, which serves companies from sectors such as landscaping and seafood processing, which generate much lower profits. There is nothing wrong with attracting highly skilled workers, but it should not be a country’s sole focus because employing sectors need workers with a wide variety of skills, experiences, and abilities.
Another explanation typically given by high-income countries to justify their preference for high-skill migration is the public attitude toward low-skilled workers. In 2018, a majority of surveyed individuals in high-income countries, including Sweden, the United Kingdom, Canada, Germany, the United States, and France supported high-skill migration (figure 1),[lxxvi] while at the same time, many saw low-skilled migrants as a burden and believed they were taking jobs away from native-born workers.[lxxvii] Some recent surveys conducted in high-income EU countries and the United States show that most people support quite restrictive immigration measures, especially against migrants from certain ethnic backgrounds, and would like to see a decline in immigration flows to their countries. These attitudes appear to be driven by sociopsychological factors rather than economic concerns.[lxxviii]
Figure 1. Public Support for High-Skill Migration in Select High-Income Countries
However, recent research showed that most people are not strictly for or against immigration but rather fall somewhere in the middle in that they are anxious, conflicted, or movable. Such individuals are usually quite open to some shifting of their views on immigration (movable), but they have concerns. This group is the most vulnerable to hostile narratives and misinformation spread by certain anti-immigration political actors, making it the main battleground for shaping public attitudes toward migration.[lxxix] At the same time, most people in this category could be convinced that their countries need more foreign-born workers at all skill levels if the argument were approached in a better way, demonstrating the economy’s need for these individuals. To address the hesitance of the “movable middle,” lawmakers in high-income countries should work together with immigration advocates to combat the hostile narratives around migration and come up with strategies to diminish misinformation and demonstrate the benefits that migrants bring to the society.
Figure 2. Grouping People based on their attitudes (including to immigration) in six countries
Despite the hostile narratives around low-skilled foreign-born workers, research reveals how important their roles are to the lives of people in the receiving high-income countries, and how much they increase overall productivity. Foreign-born workers often perform difficult jobs—mowing lawns, picking berries, washing dishes, or building roads, as examples. In other words, such workers add to the economic complexity described by Hausmann, and thereby contribute to the economic growth of the receiving country. Additionally, as foreign-born workers enter occupations that require lower skill levels, native-born workers tend to move away from such jobs and begin to improve their economic status. In the United States, data show that the increase in foreign-born workers entering the country who willing to engage in lower-skill occupations allowed the native-born population to become more educated and skilled and to pursue better jobs.[lxxx] A separate study reveals that low-skill immigration into the United States allows highly skilled women to decrease the amount of time they spend on household work and significantly increase the number of hours they can dedicate to their field, including law or medicine.[lxxxi] Similar research found that the outsourcing of household production to temporary foreign domestic workers significantly contributed to the increased labor force participation of women, especially mothers of young children in Hong Kong.[lxxxii] Overall, the research suggests that immigration reduces the total cost of household services, prompts the native-born workforce to become more productive, and helps highly skilled women work additional hours or have more children.[lxxxiii]
To increase the complexity of their economies and thereby boost economic growth, high-income countries need workers with a broad variety of skills and the ability to learn—not only workers with a particular level of schooling. Given the demographic challenges faced by high-income countries, foreign-born workers could help fill job gaps. However, the traditional dichotomy of low- and high-skilled workers, solely based on an individual’s level of education, prevents their labor mobility systems, which tend to favor high-skilled workers, from bringing in foreign-born workers with a broader variety of skill sets. Moreover, the existing systems tend to ignore the fact that workers learn and gain more skills while on the job in the host country, which benefits both the receiving country and the country of origin as some workers return. A productive society includes people with a broad range of skills that complement each other. Therefore, in lieu of the simplistic skills dichotomy, workers should be seen as offering a “skills mix” composed of all their experiences and abilities gained in and out of school, as well as their interpersonal, communication, cultural, and other social skills. Rather than building mobility pathways based on a worker’s level of schooling, receiving countries should consider schemes based on the needs of their employing sectors.
Opening more sector-focused mobility pathways could also positively impact people from both receiving and sending nations. Such an expansion of pathways could enable more native-born workers to access additional education and skills and thereby improve their economic status while also serving as a crucial part of a nation’s development strategy by allowing foreign-born workers to return to their countries of origin with experiences and skills gained abroad, thereby helping their families and communities escape poverty.
 For example, New Zealand recognizes mid-level skills in its labor mobility scheme.
 Based on the United Nations’ zero migration scenario, the working-age populations of OECD countries will decline by more than 92 million by 2050, while at the same time the elderly population (over age 65) will grow by more than 100 million people.
 More on worker scarcity can be found in LaMP’s separate policy note here.
 More on how labor mobility helps workers escape poverty can be found in a previous LaMP’s note here.
 The focus was on bringing these workers from northwestern Europe, especially, the British Isles.
 Canada has recently decided to lower the number of points one needs to enter the country through its point-based system to a record low, allowing some low-skilled workers to settle in the country. However, the new measure is mostly focused on skilled migrants who are already in the country rather than new temporary workers that still face other barriers to entry.
 Even when the government decided to increase the cap in FY2017, FY2018, and FY2019 by 15,000, 15,000, and 30,000, respectively, through a one-time regulation, the total number of admitted workers remained well below the employers’ need.
 The program has been created in reaction to farmers’ worriers about potential lack of seasonal workers after the country exited the EU and introduced its new points-based immigration system that focuses mostly on attracting high-skilled workers as discussed above. Moreover, in summer 2020 during the first wave of COVID-19, the country launched its ‘Pick for Britain’ campaign that attracted only about 8,000 locals, way below the estimated 80,000 needed workers, which also added to the farmers’ worries.
[i] Hidalgo, César A., and Ricardo Hausmann. “The Building Blocks of Economic Complexity,” June 30, 2009. https://www.pnas.org/content/106/26/10570#sec-7.
[ii] Clemens, Michael, and Kate Gough. “Can Regular Migration Channels Reduce Irregular Migration? Lessons for Europe from the United States.” Center for Global Development, February 2018. https://www.cgdev.org/sites/default/files/can-regular-migration-channels-reduce-irregular-migration.pdf.
[v] Dumont, J.-C., and G. Spielvogel. “Return Migration: A New Perspective.” In International Migration Outlook, Part III. 2008. Paris: OECD Publishing.
[vi] Iskander, Natasha, and Nichola Lowe. “The Transformers: Immigration and Tacit Knowledge Development.” SSRN. NYU Wagner Research Paper No. 2011–01, January 23, 2011. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1745082.
[vii] Weinar, Agnieszka, and Amanda von Koppenfels Klekowski. “Highly Skilled Migration: Concept and Definitions.” SpringerLink. IMISCOE Short Reader, May 28, 2020. https://link.springer.com/chapter/10.1007/978-3-030-42204-2_2.
[viii] Moriarty, Andrew. “High Skilled Immigration – 5 Things to Know.” FWD.us, September 8, 2020. https://www.fwd.us/news/high-skilled-immigration-5-things-to-know/.
[ix] “The Guide to Visa Types and Work Permit Requirements.” How to get a Work Permit and Visa for Spain.InterNations GO!, September 14, 2020. https://www.internations.org/go/moving-to-spain/visas-work-permits.
[x] “Point-Based Preference Immigration Treatment.” Highly Skilled Foreign Professional Visa. June Advisors Group. Accessed April 9, 2021. https://www.juridique.jp/visa/hsp.php.
[xi] “Overhauling the Temporary Foreign Worker Program.” Canada.ca. Government of Canada. Accessed April 9, 2021. https://www.canada.ca/en/employment-social-development/services/foreign-workers/reports/overhaul.html.
[xii] “The Skills Mismatch.” Skills Mismatch. National Skills Coalition. Accessed April 9, 2021. https://www.nationalskillscoalition.org/skills-mismatch/.
[xiii] Burrowes , Jennifer, Alexis Young, Joseph Fuller , and Manjari Raman. “Bridge the Gap: Rebuilding America’s Middle Skills.” Harvard Business School. Accessed April 9, 2021. https://www.hbs.edu/competitiveness/Documents/bridge-the-gap.pdf.
[xiv] Kosten, Dan. “Immigrants as Economic Contributors: They Are the New American Workforce.” National Immigration Forum, June 5, 2018. https://immigrationforum.org/article/immigrants-as-economic-contributors-they-are-the-new-american-workforce/.
[xv] “What Is Happening to Middle-Skill Workers?” OECD Employment Outlook 2020 : Worker Security and the COVID-19 Crisis: OECD iLibrary. OECD, July 7, 2020. https://www.oecd-ilibrary.org/sites/c9d28c24-en/index.html?itemId=%2Fcontent%2Fcomponent%2Fc9d28c24-en.
[xvi] Hooper, Kate. “Spain’s Labour Migration Policies in the Aftermath of Economic Crisis.” Migration Policy Institute Europe, 2019. https://www.migrationpolicy.org/sites/default/files/publications/MPIE-SpainMigrationPathways-Final.pdf.
[xvii] Speare-Cole, Rebecca, and Emily Lawford. “What Is the Points-Based Immigration Bill, and What Is Classed as a ‘Low-Skill’ Job?” London Evening Standard. Evening Standard, July 13, 2020. https://www.standard.co.uk/news/politics/uk-immigration-points-based-system-threshold-unskilled-job-a4367206.html.
[xviii] Ashford, Ellie. “Employers Stress Need for Soft Skills.” Community College Daily. Community College Daily, January 16, 2019. https://www.ccdaily.com/2019/01/employers-stress-need-soft-skills/#:~:text=Among%20soft%20skills%2C%20employers%20said,Effective%20communication%20(69%20percent).
[xix] Hagan, Jacqueline. “Defining Skill: The Many Forms of Skilled Immigrant Labor.” American Immigration Council, November 18, 2018. https://www.americanimmigrationcouncil.org/research/defining-skill-many-forms-skilled-immigrant-labor.
[xx] Hagan, Jacqueline. “Defining Skill: The Many Forms of Skilled Immigrant Labor.” American Immigration Council, November 18, 2018. https://www.americanimmigrationcouncil.org/research/defining-skill-many-forms-skilled-immigrant-labor.
[xxi] Hagan, Jacqueline. “Defining Skill: The Many Forms of Skilled Immigrant Labor.” American Immigration Council, November 18, 2018. https://www.americanimmigrationcouncil.org/research/defining-skill-many-forms-skilled-immigrant-labor.
[xxii] Hagan, Jacqueline. “Defining Skill: The Many Forms of Skilled Immigrant Labor.” American Immigration Council, November 18, 2018. https://www.americanimmigrationcouncil.org/research/defining-skill-many-forms-skilled-immigrant-labor.
[xxiii] Torpey, Elka. “Careers in Construction: Building Opportunity.” Career Outlook. U.S. Bureau of Labor Statistics, August 2018. https://www.bls.gov/careeroutlook/2018/article/careers-in-construction.htm.
[xxv] Gardner, Mary. “The Case for Low-Skilled Immigrants.” Opinion. The Hill, June 14, 2018. https://thehill.com/opinion/immigration/391968-the-case-for-low-skilled-immigrants?rl=1.
[xxvi] O’Donnell, Megan, and Samantha Rick. “A Gender Lens on COVID-19: Investing in Nurses and Other Frontline Health Workers to Improve Health Systems.” Commentary and Analysis. Center For Global Development, March 25, 2020. https://www.cgdev.org/blog/gender-lens-covid-19-investing-nurses-and-other-frontline-health-workers-improve-health-systems.
[xxvii] Smith, Rebekah, and Megan O’Donnell. “COVID-19 Pandemic Underscores Labor Shortages in Women-Dominated Professions.” Commentary and Analysis. Center For Global Development, May 13, 2020. https://www.cgdev.org/blog/covid-19-pandemic-underscores-labor-shortages-women-dominated-professions.
[xxviii] Mallet , Victor, Daniel Dombey , and Martin Arnold . “Pandemic Blamed for Falling Birth Rates across Much of Europe.” Coronavirus economic impact. Financial Times, March 10, 2021. https://www.ft.com/content/bc825399-345c-47b8-82e7-6473a1c9a861.
[xxix] MacGregor, Marion. “Europe: Few Routes for Unskilled Migrants.” Understanding Europe. Infomigrants, January 27, 2021. https://www.infomigrants.net/en/post/29885/europe-few-routes-for-unskilled-migrants.
[xxx] “New Immigration System: What You Need to Know.” GOV.UK. Home Office and UK Visas and Immigration, January 28, 2020. https://www.gov.uk/guidance/new-immigration-system-what-you-need-to-know#skilled-workers.
[xxxi] “Overhauling the Temporary Foreign Worker Program.” Canada.ca. Government of Canada. Accessed April 9, 2021. https://www.canada.ca/en/employment-social-development/services/foreign-workers/reports/overhaul.html.
[xxxiii] Clemens, Michael, Reva Resstack, and Cassandra Zimmer. “The White House and the World: Harnessing Northern Triangle Migration for Mutual Benefit.” The White House and the World – Harnessing Northern Triangle Migration for Mutual Benefit. Center for Global Development, December 2020. https://www.cgdev.org/sites/default/files/harnessing-northern-triangle-migration-for-mutual-benefit.pdf.
[xxxiv] McGrath, John. “Analysis of Shortage and Surplus Occupations 2020.” Employment, Social Affairs & Inclusion. European Commission, January 12, 2020. https://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=8356&type=2&furtherPubs=no.
[xxxv] Darby, Fi. “10 High Demand Jobs to Look out for in 2020.” SkillsTalk. UpSkilled, December 26, 2019. https://www.upskilled.edu.au/skillstalk/high-demand-jobs-2020.
[xxxvi] Campbell, Stephen. “New Research: 7.8 Million Direct Care Jobs Will Need to Be Filled by 2026.” PHI, January 24, 2019. https://phinational.org/news/new-research-7-8-million-direct-care-jobs-will-need-to-be-filled-by-2026/.
[xl] “Strong Demand For Work Amid Stronger Demand For Workers: The 2020 Construction Hiring And Business Outlook.” Associated General Contractors of America, 2019. https://www.agc.org/sites/default/files/Files/Communications/2020%20Construction%20Hiring%20and%20Business%20Outlook%20Report.pdf.
[xlii] Price, David. “Labour Shortages Could Raise Rates ‘at Least 10%’.” Construction News, January 29, 2021. https://www.constructionnews.co.uk/brexit/labour-shortages-could-raise-rates-at-least-10-29-01-2021/.
[xlvi] Chrysoloras, Nikos. “Europe’s Bid for Self-Reliance Overlooks Need for Human Capital.” Bloomberg, February 16, 2021. https://www.bloomberg.com/news/newsletters/2021-02-16/supply-chains-latest-eu-self-reliance-overlooks-human-shortages.
[xlvii] Clemens, Michael, and Kate Gough. “Can Regular Migration Channels Reduce Irregular Migration? Lessons for Europe from the United States.” Center for Global Development, February 2018. https://www.cgdev.org/sites/default/files/can-regular-migration-channels-reduce-irregular-migration.pdf.
[xlviii] Chiswick , Barry R. “Immigration: High-Skilled versus Low-Skilled Labour?” Australian Government. Productivity Commission. Accessed April 9, 2021. https://www.pc.gov.au/research/supporting/sustainable-population/05-population-chapter03.pdf.
[xlix] Kapur , Devesh, and John McHale. “Give Us Your Best and Brightest: The Global Hunt for Talent and Its Impact on the Developing World.” Center For Global Development, September 1, 2005. https://www.cgdev.org/publication/9781933286037-give-us-your-best-and-brightest-global-hunt-talent-and-its-impact-developing-world.
[l] Czaika, Mathias, and Christopher R. Parsons. “The Gravity of High-Skilled Migration Policies.” KNOMAD, March 2016. https://www.knomad.org/sites/default/files/2017-04/KNOMAD%20Working%20Paper%2013%20HighSkilledMigration_0.pdf.
[li] Ruhs, Martin. “The Price of Rights: Regulating International Labor Migration.” Princeton University. Princeton University Press, August 25, 2013. https://press.princeton.edu/books/hardcover/9780691132914/the-price-of-rights.
[lxvii] Lindsay, Frey. “With No EU Workers Coming, The U.K. Agriculture Sector Is In Trouble.” Forbes Magazine, March 24, 2020. https://www.forbes.com/sites/freylindsay/2020/03/24/with-no-eu-workers-coming-the-uk-agriculture-sector-is-in-trouble/?sh=102480f7363c.
Tuesday, January 19th | 10:00 – 12:00 CEST | Online
Registration for this event is now closed.
This event is hosted on the sidelines of the Global Forum on Migration and Development and is organized by the Center for Global Development (CGD), Labor Mobility Partnerships (LaMP), Enabel, The European Commission’s Joint Research Centre, and the OECD Development Centre. This event will be simultaneously translated in English and Arabic.
Raffaella Greco Tonegutti, Lead Expert Migration and Development, Enabel-Belgian Development Agency
Dawit Dame, Manager, Jobs Creation Commission, Ethiopia
Khadijat Abdulkadir, Manager, Digital African Women
Linda Adhiambo Oucho, Executive Director of Research and Data Hub, African Migration and Development Policy Centre (AMADPOC)
Zainab Naji, Employment Expert, Enabel-Belgian Development Agency, Morocco
Simon McMahon, [Project Officer], Joint Research Centre, European Commission
Jason Gagnon, Development Economist, OECD Development Centre
Helen Dempster, Assistant Director and Senior Associate for Policy Outreach, Migration, Displacement, and Humanitarian Policy, Center for Global Development (CGD)
The youth population in Africa is booming, creating a large working-age group with the potential to contribute to labor markets around the world. African youth are nonetheless facing increased constraints in finding safe and regular pathways to countries of destination, a dynamic exacerbated by COVID-19. This event, on the sidelines of the Global Forum on Migration and Development (GFMD) will bring together experts focused on up-skilling and moving African youth. It will attempt to answer several questions. Why, how, and where do young people in Africa want to move? What skills, experience, and income gains will they acquire by moving abroad? What contributions will they make to their countries of origin and their countries of destination? And how can major countries of destination open legal migration pathways to allow them to migrate safely, regularly and orderly, maximizing the potential of migration?
Populations in high-income countries are rapidly aging while, at the same time, low-income countries are facing a sharp increase in their working-age populations. These demographic trends are an “unstoppable force” toward increased labor mobility, pushing against the “unmovable object” of political resistance from citizens in high-income countries to increasing immigrant populations. Temporary mobility programs (TMPs) may be a politically viable solution, as they increase the number of workers without the same political implications as permanent migration.
However, TMPs themselves are also politically unpopular, in large part because they have been plagued by bad outcomes for workers. Many of these bad outcomes have been related to the low quality of the existing mobility industry, resulting in migrant indebtedness, fraud regarding job terms and quality, worker abuse, and irregularity within temporary mobility programs. These bad outcomes in turn are driven by perverse incentives built into the design of mobility systems, information asymmetries, and poorly constructed migration controls. The primary point to take away from this analysis is that the mobility industry is not inherently unethical, but rather that it is badly designed.
In this report, we argue that the emergence of a quality mobility industry could improve outcomes in temporary labor mobility by reducing migration costs per worker through greater economies of scale (allowing a broader range of employers to benefit from labor mobility), increasing the accessibility of labor mobility for employers, decreasing the burden on migrant workers, and building trust and capability among actors within labor mobility systems. By improving outcomes and faith in temporary mobility programs, we posit that a quality mobility industry could lessen political resistance and allow for temporary mobility programs to be built at scale as a solution to the rapidly approaching demographic cliff in high-income countries. We then conclude by proposing the next steps toward facilitating the emergence of a mobility industry that is “a good industry and an industry for good.”
Jason Wendle, Strategy Lead, Labor Mobility Partnerships (LaMP)
Joe Martinez, Chief Executive Officer, CIERTO
Alex Silberman, General Manager, The Ethical Recruitment Agency (TERA)
Amit Saxena, Director, AMBE International
Darin Kingston, Organizational Development lead, Labor Mobility Partnerships (LaMP)
Populations in high-income countries are rapidly aging, while at the same time, low-income countries are facing sharp increase in their working age populations. These demographic trends are an ‘unstoppable force’ towards increased labor mobility, pushing against the ‘unmovable object’ of political resistance from citizens in high-income countries to increasing immigrant populations. Temporary mobility programs (TMPs) may be a politically viable solution, as they increase the number of workers without the same political implications as permanent migration.
However, TMPs themselves are also politically unpopular, in large part because they have been plagued by bad outcomes for workers. Many of these bad outcomes have been related to the low quality of the existing ‘mobility industry.’ Emergence of a ‘quality’ mobility industry could improve outcomes in temporary labor mobility by reducing migration costs per worker through greater economies of scale, increasing the accessibility of labor mobility for employers, decreasing the burden on migrant workers, and building trust and capability among actors within labor mobility systems.
In this event, the LaMP team presented the findings of our report on the case for a quality mobility industry, and our efforts in the next stage towards facilitating the emergence of such and industry. This was followed by a panel of quality mobility industry actors and employers, who will discussed how to facilitate the emergence of such ‘quality’ mobility industry.
This event was the fourth in Labor Mobility Partnerships’ (LaMP’s) event series on the case for labor mobility from the perspectives of key actors (receiving countries, sending countries, employers, workers, and ‘mobility industry’). Sign up for our newsletter to stay updated on future events!
Low-income countries are unlikely to create sufficient number of jobs to absorb into productive work the millions of additional young workers who will enter their labor markets in the upcoming decades.
Income gains from labor mobility from low productivity to high productivity places overwhelmingly exceed gains from other programs aimed at poverty reduction.
Labor mobility has been an effective tool allowing people in low income countries around the world to escape poverty.
Many people around the world are trapped in poverty as a result of their country of birth. More than half of variability in income globally is explained by their country of birth; meaning that individual effort or luck can explain only a small portion of the global distribution in income.[i] This implies that, mostly, “there are not poor people but only people in poor places.”[ii] Labor mobility allows people to leave their homes to work abroad, and thus secure better life for themselves as well their loved ones. However, when addressing labor mobility, politicians, researchers as well as general public often focus primarily on the impacts on sending and receiving countries. While it is certainly important to consider and assess impacts of labor mobility on the involved nations, their economies and citizens, it is necessary to also analyze the impact on those who are affected by labor mobility the most directly – foreign workers and their families themselves. Despite a number of risks and challenges, labor mobility has proved to be, at the margin, the most effective tool to reduce poverty among people in low-income countries.
Why Do Workers Go Abroad?
Foreign workers’ desire to leave stems primarily from the desire to find better employment opportunities. There are already millions of workers in low-income nations, who are trapped in low-productivity places, and this trend unlikely to change. By 2050, low-income countries’ working-age populations are estimated to grow by millions, and even hundreds of millions in case of sub-Saharan Africa and South Asia (Figure 1). Most of these additional workers are young, between 19 and 30 years old, which presents a number of concerns. According to research, lack of productive employment at the beginning of a young people’s careers negatively impacts social cohesion, physical[iii] and mental health,[iv] as well as long term employment and income outcomes.[v] Youth bulges are also associated with increased risks of violent conflict[vi] that are particularly aggravated by youth unemployment.
At the countries’ current employment levels, research shows that up to half of the new workers would remain unemployed (Figure 2)[vii]. In other words, low-income countries are unlikely to create sufficient number of jobs to absorb the additional labor market entrants.
Figure 1. Change in working-age population (20–64) between 2015 and 2050[viii]
Source: UN DESA, Population Division (2015)
Figure 2. At current employment rates, only 819 million of the new working age people would enter employment
Sources: UN DESA, Population Division (2015); ILO (2019).
The size and demographic composition of the nations’ future labor force is expected to fuel migration outflow as many of the new workers will want to move and follow the opportunity[ix], since working abroad is the single most effective step towards improving their own well-being and in many cases prosperity of entire families as we discuss below.
Moreover, even if the nations managed to introduce reforms aimed at reduction of unemployment, it would not automatically guarantee lower level of emigration. A recent study revealed that while policy intervention to decrease unemployment, no matter whether among the relatively poor or the relatively rich populations, could lead to decline of emigration in the short term, the same would not be true in the long term. Higher income not only fails to prevent peoples’ decision to leave, it actually allows individuals in those poor nations to unlock more opportunities, and thus empowers them to go abroad. In fact, research shows that people in low-income countries, who are actively preparing to emigrate, have on average 30 percent higher incomes than those who do not actively prepare to leave.[x]
Therefore, in addition to reforms to boost peoples’ incomes in their home countries, politicians should also put more emphasis on establishment of well-regulated labor mobility policies, which are clearly more beneficial to foreign workers and their families.
Foreign Workers’ Income Gains
One of the main reasons why people decide to move for work, often across the entire world, is the opportunity to seek more lucrative jobs,[xi] and thus ensure better future for themselves and their families. And the differences have been quite considerable. 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.[xii] Additionally, workers from low-income countries hold about 7 percent of jobs in high-income countries, and as Jason DeParle cited economist Lant Pritchett in his book A Good Provider Is One Who Leaves, “every increase of a percentage point would leave them more than $100 billion richer.”[xiii] As for a more concrete example, a separate study on alleviating global poverty recently showed that income gains from allowing an additional low skill worker to move to the USA from various countries are between $10,000 and $20,000 a year (Table 1).
Table 1. The income gains from allowing an additional low skill worker to move to the USA from various countries
Similarly, in a separate example focused on specific occupations, the study showed a nearly $15,000 annualized gap between the real (PPP) adjusted wages of waiters in the top 10 wage countries when compared the bottom 30 countries. For occupations in construction sector, the difference is even bigger – almost $25,500 (Table 2).[xiv] Additionally, it is likely that the wage gains from labor mobility as a whole are even larger, as the total consists for a mix of skill levels; and higher skill levels typically equal larger wage gains. However, in this note we focus particularly on wage gains of individuals with lower skill levels, since the growing young populations in sending countries are very low skilled in comparison to richer nations.[xv]
Table 2. Earnings (PPP) for identical low to medium skill occupations are different between poor and rich countries
As the studies mentioned above suggest, labor mobility is clearly a powerful tool for poverty alleviation, as it provides even low-skilled foreign workers with an opportunity to obtain massive income gains if they get hired in a high-income country. For example, in 2011, an Ethiopian with very little to no schooling would, on average, earn PPP$405 annually. However, this same individual could earn PPP$24,000 in the Netherlands. It is also important to note that in many countries, the potential income gain from mobility exceeds the gain from investing in schooling. For an Ethiopian, potential return on investment in schooling (if he or she decided to pursue postsecondary schooling rather than remain without any schooling) is quite negligible in comparison to the return on moving to a country like the Netherlands. This is given by the fact that, on average and at the margin, an Ethiopian can increase his or her income by a factor of 6 by pursuing postsecondary schooling in Ethiopia, while the same individual with no schooling can earn 10 times the Ethiopian’s wage in the Netherlands (Figure 3).[xvi]
Figure 3. In many countries, the potential income gain from mobility exceeds the gain from investing in schooling
With such large income gains, labor mobility has been clearly a powerful tool allowing people in low income countries around the world to escape poverty. Research shows that implementation of effective policies, allowing for well-regulated mobile labor force, is far more effective than any other poverty reduction tool.[xvii] For instance, the Ultra-poor Graduation Program, has been touted as a gold-standard poverty reduction program that has been adopted by several nongovernmental organizations (NGOs) and widely celebrated for its demonstrated impact based on a cross-national rigorous study. On average across the countries studied, the program invests a net present value (NPV) of $4,545 over the course of two years and generates on average $344 gain in non-durables consumption gains in the third year. However, as the Figure 4 below shows, the less than 10 percent average rate of return on the program. Even on the most optimistic assumptions about the duration of the program gains, the lifetime gain from this program is much smaller than the additional wages from one year working in the USA.
Figure 4. Income gains from labor mobility dwarf the less than 10 percent average rate of return on the Ultra-poor Graduation Program—a gold-standard poverty reduction program.
Further, labor mobility achieves these powerful gains in poverty reduction without an upfront investment from governments or donors, whereas programs like the anti-poverty interventions mentioned above require someone to put up money. This means that the “least you can do for the world’s poor is better than the best you can do;” that is, simply not prohibiting workers and employers from engaging in mutually beneficial cross-border transactions is much more powerful than the best programs development aid can finance.[xviii]
The considerable increases in income gains stemming from labor mobility have been a strong incentive for individuals in low-income countries to seek jobs abroad. Labor mobility represents a much more effective poverty-reduction tool than other programs. And last but not least, besides helping the foreign workers themselves, the income gains also represent a great relief to their families back in their countries of origin. As Jason DeParle said during a LaMP virtual event, migration is in fact an anti-poverty program.[xix]
Remittances Received by Foreign Workers’ Families
Every year, many foreign workers send money back home to their families. These transfers, generally known as remittances, serve as a powerful tool uplifting well-being of families around the world, and especially in low-income countries. In many cases, remittances have been responsible for lifting the receiving families out of poverty. Specifically, a study conducted among seventy-one low-income nations revealed that a 10-percent gain in remittances reduces the number of people living in poverty by 3.5 percent.[xx] In Philippines, for instance, a 10-percent income gain from remittances lowered the poverty rate among receiving households by 2.8 percentage points.[xxi] For families in Afghanistan, remittances averaged $1,680 annually, which accounts for more than half of their income, and the households typically use them for basic needs.[xxii]
Since remittances flow directly into households who are able to use them to bolster their consumption, education and health spending,[xxiii] they have proven to positively impact nutrition standards,[xxiv] healthcare,[xxv] and children’s school attendance[xxvi] as well as reducing child mortality.[xxvii] In general, evidence suggests that consumption, health and education are the three main areas for which families in low income countries typically use their remittances. However, remittances are often touted also as a potential source of investment financing. Even though this trend has been less proven, there have certainly been places where it occurred. Scattered data suggests that families in low-income countries use resources accumulated while working abroad also for investment in building a house, starting a business, and financing education.[xxviii]
Overall, remittances inflows are counter-cyclical in sending countries, stabilizing income and insulating families of migrants from adverse economic shocks.[xxix] Estimates show that total global remittances reached $689 billion in 2018, out of which $529 billion went to “developing” or low-income countries.[xxx] In India, for example, remittances received from migrants in Gulf alone rival private investment the country gets from the entire world.[xxxi]
However, while incredibly powerful, it is important to keep in mind that remittances capture only a small portion of the foreign workers’ income gain. Adhikari and Stellitano[xxxii] estimated the total wage gains from 19 non-OECD countries residing in 8 OECD countries. Figure 5 below reflects these total gains compared to total remittances and foreign aid for each of the non-OECD countries, showing that the total wage gains are clearly way larger than either remittances or foreign aid.
Figure 5: Wage gains are vastly larger than either remittances or foreign aid
Source: Adhikari, S., & Stellitano, N. (2015). Migration as an Instrument for International Development. Retrieved October 26, 2020, from http://adhikarisamik.github.io/
Upskilling and Skill Gains Upon Return
Besides income gains and remittances that can be expressed in financial terms, workers employed overseas also accumulate skills which they then bring back upon their return home. Specifically, workers gain skills abroad due various training they gain either on the job itself, or through the company as well as other external mandated or voluntary courses. Upon their return, the workers can then capitalize on these acquired skills to secure a job that requires higher skills and provides better salary than they would have if they had not migrated.[xxxiii] For example, research showed that returnees in Brazil, Chile, and Costa Rica have been overrepresented in highly skilled occupations and underrepresented in least-skilled trades.[xxxiv]
Additionally, the new abilities may make the workers more attractive to potential employers, or in combination with potentially accumulated savings possibly allow them to open their own new businesses and train people at home.[xxxv] Evidence shows that when Indian- and Chinese-born software engineers, returned after the U.S. stock market bubble in late 1990’s, also known as the U.S. dotcom bubble, they had transferred institutional and technical knowledge and techniques to their home countries.[xxxvi] Also, when the Greek sovereign debt crisis spurred a return of large numbers of Albanians, more than half of the returnees took jobs as skilled workers in the industries, in which they were employed in Greece, while many other engaged in entrepreneurship using techniques they had learned abroad, creating jobs for themselves as well as non-migrants.[xxxvii]
Overall, migration opportunities increase earning potential for the workers, who in turn increase the return to skilling in their sectors. The new skills allow the returned workers to get better jobs, open new businesses, while teaching others what they had learned abroad. studies show, migrants return home wealthier, multilingual, more educated than people in their communities, with more work experience than those who have never lived abroad, and larger social networks and new technical abilities. Therefore, their homecoming typically results in a “brain gain” that benefit not only themselves and their families, but also their community and often even their country of origin as a whole.[xxxviii]
Challenges Faced by Foreign Workers
While labor mobility clearly represents the most effective tool to help individuals and their families to escape poverty, there are also some challenges that must be taken into account while creating and implementing labor mobility policies. The current labor mobility systems have been struggling with defects such as fraud, extortionary costs, worker abuse, and illegality, that adversely affect foreign workers. One of the best examples of these dynamics have been the nations of Gulf Cooperation Council (GCC), which have helped to millions of families to escape poverty through labor mobility flows, but also saw frequent cases of worker abuse and fraud.
It is well documented that many foreign workers in a variety of existing migration systems experienced practices such as wage withholding, forced overtime, workplace health and safety violations, passport withholding, and a range of other forms of abuse. Some of the most disturbing examples include the 2022 Doha World Cup, with repeat reported cases of migrants going for months without pay,[xxxix] being forced to work overtime, living in sub-standard conditions, and even dying.[xl] Nepal has recently experienced an alarming trend of kidney disease in its young population, primarily among migrant workers who do long hours of physical labor in the desert, become dehydrated, and use painkillers at higher rates, all of which combine to make them vulnerable to renal failure.[xli] Canada has had famous cases of temporary foreign workers being subjected to unsanitary housing, wage withholding, and recruitment fraud.[xlii] Additionally, women migrants, who often work in the domestic sphere where there is little or no oversight, are uniquely vulnerable, resulting in excessive working hours,[xliii] physical and sexual abuse,[xliv] and again in the most severe cases death.[xlv] Moreover, workers, especially those working at low-skill jobs, are less likely to feel “comfortable acknowledging that they have rights and exercising them,” as pointed out by William Gois, the Regional Coordinator of the Migrant Forum in Asia, during a LaMP’s virtual event.[xlvi]
The COVID-19 era has further stressed vulnerabilities of foreign workers in many countries. Migrants have been at higher risk of contracting the virus due to inadequate health care, worse economic conditions, and overcrowded living conditions. For example, 40 percent of Singapore’s COVID-19 cases in in mid-April were low-skilled foreign workers, resulting from their overcrowded and unsafe dormitory accommodations.[xlvii] At the same time, a majority of individuals infected by the virus in the Gulf are migrants.[xlviii] The International Monetary Fund expects the Middle Eastern and North African economies to fall by 5.7 percent in 2020, which will lead to a surge in unemployment, wage theft and unpaid work as businesses close their doors, spike in detentions and deportations due to visa expirations and increasing need for food handouts. In Lebanon, 250,000 foreign workers have been already hit by such hardship, being left abandoned and unpaid.[xlix] Overall, the pandemic further stressed the flaws of existing labor migration systems, pointing out the multitude of abusive practices and behaviors.
Moreover, labor mobility flows are frequently characterized by extortionary high costs that amount to as much as nine months to more than a year’s salary abroad. For example, a recent study revealed that workers from Latin America and Asia paid intermediaries between $3,000 and $27,000 to secure visas to the US,[l] while the World Bank reports that South Asian workers regularly pay $3,000 to $4,000 for jobs in Gulf Cooperation Council countries.[li] These costs are primarily paid towards recruitment agency fees; in Bangladesh, intermediary fees account for more than 75 percent of the overall migration costs.[lii] Therefore, many workers arrive abroad in debt which puts them into very sensitive situations, as they must maintain employment to be able to pay down their debts regardless of the potential abusiveness of their employers. A recent study on foreign workers in Singapore revealed that indebted workers “sometimes choose to endure harsh and/or unsafe working conditions rather than risk the [premature] repatriation” from raising concerns with their employers.[liii] It has been clear that the excessively high costs caused by the lack of transparency within the current market structure undermine the development potential of labor mobility.
Further, in many migration systems, work visas, and especially temporary work visas, are tied to a specific employer. This means that the workers cannot leave their employers without losing their visa status. For example, in the U.S., employer-tied visas have been directly linked to potential for worker abuse, as workers on employer-restricted visas filed over 100 complains to the Federal Court for wage and hour deception between 1990 and 2017 compared to eight from workers on unrestricted visas.[liv]
And last but not least, psychological studies show that migrant workers have been increasingly prone to serious, psychotic, anxiety, and post-traumatic disorders caused by a number of socio-environmental factors, such as loss of social status, discrimination, and separations from the family. The verbal or physical abuse that foreign workers often face when employed in dangerous, unhealthy jobs leads to a variety of disorders, including depression, anxiety, alcohol or substance abuse, and poor sleep quality, causing low life conditions.[lv] And yet, foreign workers are willing to undergo all the hardship and arrange their lives around family separation, rather than returning to the in many cases extreme poverty in their home countries. In other words, while we may see migration as tragedy, for many foreign workers it is an opportunity, as DeParle put it.[lvi]
Still, all the bad outcomes of labor mobility work to create a powerful political coalition against it, with irregularity fueling the anti-immigrant right wing and concerns around worker abuse building opposition from the left wing. However, it is important to point out that these outcomes are not inherent to labor mobility, but rather a result of poorly constructed systems and incentives. Therefore, workers from low-income countries need well-regulated efficient labor mobility systems, which will allow them and their families to escape poverty while protecting them from risks and eliminating challenges that come with the decision to move abroad. Moreover, as Joe Martinez of CIERTO suggested, a part of these systems should be also an ecosystem of actors creating oversight of governments and safety for the workers.[lvii]
Despite the unquestionable benefits labor mobility brings to foreign workers and their families, sending as well as receiving countries tend to implement inefficient policies that further restrict labor mobility. The stringent measures have been typically based on the thinking that without restrictions on migration, migrants from poor countries could transmit low productivity to rich countries.[lviii] However, models show that a 3-percent increase in the OECD labor force through relaxed restrictions on labor mobility would produce $150 billion in global welfare gains, accounting for gains to the movers, gains and losses in host countries, as well as gains and losses in sending countries. According to 2006 estimates from the World Bank, a 3-percent increase in OECD labor force over a decade-long period would result in $674 billion in global welfare gains, which is 5 times total development assistance.[lix] These vast gains, unrealized as a result of policies restricting labor mobility, are what economist Michael Clemens’ famously refers to as ‘trillion dollar bills on the sidewalk.’[lx] Additionally, according to a separate research, gains from lowering barriers to emigration appear to largely exceed gains from further reductions in barriers to goods trade or capital flows.[lxi]
So, what does this mean for the existing as well as future labor mobility policies? A recent study aimed at making the case for efficiency-enhancing migration barriers showed that while dynamically efficient policy would not mean any open borders measures, it would certainly include relaxations of current restrictions. In other words, the new efficiency case for some migration restrictions seems to be a case against the stringency of these existing restrictions.[lxii]
As an example, New Zealand is one of the first countries that have recognized the potential of seasonal worker programs to become part of international development policy. Its Recognized Seasonal Employer program is one of the most prominent systems designed through this perspective, and its results revealed increased per capita incomes, expenditure, savings, and subjective well-being among the participating migrants.[lxiii] At the same time, displacement of the native-born workers has remained low. Data also showed that foreign workers, who come to New Zealand through the program, seem to be more productive than local labor and their productivity rises as they return for more seasons.[lxiv]
Labor mobility clearly holds vastly more promise for reducing poverty than anything else on the development agenda.[lxv] It allows workers from low-income countries to go abroad, and thus support themselves as well as their families and relatives back home – a practice that eventually leads to overall poverty reduction. Therefore, the existing labor mobility systems with overly strict restrictions hurt not only the foreign workers themselves but also the involved sending and receiving countries overall. At the same time, the current policies often fail to prevent abuse of foreign workers, allowing for dynamics that leave physical as well psychological harm on the affected individuals.
It is necessary for the governments of sending as well as receiving countries, employing sectors and other actors in the mobility industry to cooperate with foreign workers and organizations that represent them. Together these actors can establish common policies and standards allowing for efficient and safe mobility of foreign workers, resulting in overall reduction of poverty on global scale.
 Figure 2 shows how many of the total number of new working age people would likely be able to find employment versus those who would remain unemployed by 2050, if the current employment rates were maintained. Under this scenario, an estimated 590 million of the 1.4 billion new working age people would have limited access to employment opportunities. Yet even this is an optimistic forecast, as the current projections of job growth would not be sufficient to absorb even the remaining 819 million.
 Measured across the five countries where the program has the biggest impact.
 Adhikari and Stellitano assessed a set of 19 non-OECD and 8 OECD countries. Wage data was provided by Claudio Montenegro of the World Bank. Bilateral migration data by educate and gender from 1980-2000 was drawn from the IAB Brain Drain Data. Bilateral remittance data for 2010 was drawn from the World Bank. Bilateral aid data for 2010 came from AidData.
 The study considered three main parameters – transmission, which is defined as “the degree to which origin-country total factor productivity is embodied in migrants”; assimilation defined as “the degree to which migrants’ productivity determinants become like natives’ over time in the host country”; and congestion, which is “the degree to which transmission and assimilation change at higher migrant stocks.”
[xxv] Amuedo-Dorantes, Catalina and Pozo, Susan. “New Evidence on the Role of Remittances on Health Care Expenditures by Mexican Households.” IZA Discussion Paper No. 4617. December 2009. http://ftp.iza.org/dp4617.pdf
[xxvi] Acosta, P. “Labor Supply, School Attendance, and Remittances from International Migration: The Case of El Salvador.” World Bank Policy Research Working Paper 3903. 2006. Washington, DC: The World Bank.
[xxviii] Wahba, Jackline. “Return migration and economic development.” Chapters, in: Robert E.B. Lucas (ed.),International Handbook on Migration and Economic Development, chapter 12. 2014. Edward Elgar Publishing.
Workers are at the heart of labor mobility. While a significant amount of research and advocacy on the topic (including our own) focuses on impacts in receiving and sending countries, at its core labor mobility is about workers filling needed jobs, and how this impacts themselves and their families. Overwhelming evidence shows labor mobility to be among the most powerful tools for lifting individuals and households out of poverty. More than half of variability in income globally is explained by country of birth, implying that “there are not poor people but only people in poor places;” labor mobility offers a way out. However, employment abroad also presents a number of risks for workers, resulting in indebtedness and abuse and undermining the powerful potential of labor mobility to improve the lives of workers and their families.
In this event, LaMP Research Director Lant Pritchett interviewed author Jason DeParle, whose book A Good Provider is One Who Leaves: One Family and Migration in the 21st Centuryoffers an intimate and nuanced look how labor mobility shaped the lives of one Filipino family. This conversation was followed by a panel discussion with migrant representatives and advocates, who discussed their experience of labor mobility and how they pursue more and better overseas employment opportunities for workers.
This event is the third in Labor Mobility Partnerships’ (LaMP’s) monthly event series on the case for labor mobility from the perspectives of key actors (receiving countries, sending countries, employers, workers, and ‘mobility industry’). Sign up for our newsletter to stay updated on future events!
Low-income countries face significant increases in their youth populations – the opposite demographic challenge than high-income countries whose populations are shrinking.
Traditional paths to job creation through manufacturing are closed off to these countries because of labor-saving technologies and the established position of Asian manufacturing exporters.
Labor mobility offers a jobs solution and is a powerful development tool through remittances and skill accumulation.
However, there are several factors limiting sending countries’ ability to unlock the potential of labor mobility for their people, including the (false) belief that it reflects a failure of development.
Solving these challenges requires a multi-faceted effort with receiving country governments, employers, and a quality mobility industry.
Low-income countries face significant increases in their youth populations – the opposite demographic challenge than high-income countries whose populations are shrinking. This poses significant risks associated with youth underemployment, as historic pathways to jobs creation through manufacturing growth are now for the most part closed off for low-income countries, making it increasingly difficult for these countries to create the number of jobs needed to absorb their growing youth populations. However, this also a historic opportunity to bridge international labor markets – rotational labor mobility from low-income to high-income countries can address labor scarcity caused by demographic decline in high-income countries, while increasing the share of low-to-mid skilled youth in burgeoning working age populations of low-income countries that are engaged in quality employment at any point in time.
Such labor mobility offers transformative benefits for sending countries; beyond offering quality employment opportunities for their workers, associated remittances and skill accumulation can effect powerful positive change on development outcomes in these countries. Ironically, labor mobility has often been viewed as a failure of development. As a result, governments in low-income countries have more often acted to discourage rather than promote it. This view misunderstands both the drivers as well as benefits of labor mobility, and prevents governments from working to overcome sending-side challenges to mobility. A partnership approach can help overcome these challenges, unlocking life-changing opportunities for their growing youth populations.
The youth bulge and labor mobility as an employment strategy
In previous notes, we have discussed the demographics in high-income countries, characterized by dramatically aging populations in significant need of workers.Many low-income countries face precisely the opposite demographic challenge: burgeoning youth populations which outstrip job growth. The total population in developing countries has been growing and is projected to continue increasing over the coming decades—in a status quo scenario, with a rising and large working-age population. The 2015 statistics from the Population Division of UN DESA estimate that by 2050 the working-age population in these regions/countries will increase by millions, and in the cases of sub-Saharan Africa and South Asia, hundreds of millions.[i] The numbers in Figure 1 represent the net absolute increase in the number of workers in the workforce between 2015 and 2050.
Figure 1: Change in working-age population (20–64) between 2015 and 2050[ii]
Source: UN DESA, Population Division (2015)
Job growth is not likely to be able to absorb all of these new labor market entrants, particularly as manufacturing is no longer a strong strategy for job creation. Even maintaining current employment levels, as many as half of the new working age people in these regions would struggle to find productive employment. Figure 2 below shows how many of the total number of new working age people by 2050 would likely be able to find employment versus those who would likely have limited employment opportunities, if the current employment rates were maintained. Under this scenario, an estimated 590 million of the 1.4 billion new working age people would have limited access to employment opportunities. Yet even this is an optimistic forecast, as the current projections of job growth would not be sufficient to absorb even the remaining 819 million. For example, the World Bank estimates that the working-age population of Africa will grow by approximately 450 million people between 2015 and 2035, only 100 million of whom can expect to find stable employment opportunities at current projections of job creation.[iii] This leaves a remaining 350 million young people in a 20 year period without productive employment.
Figure 2: At current employment rates, only 819 million of the new working age people would enter employment
Sources: UN DESA, Population Division (2015); ILO (2019).
The jobs challenge for these youth-rich countries is compounded by trends of low-skilled labor in an era of technology innovation biased toward “labor-saving.” The scarcity of low-skilled, low-cost labor in richer, more advanced economies has given rise to labor-saving technological progress that has substituted workers in labor-intensive manufacturing jobs. With openness to trade, Asian countries such as China and South Korea, with a comparative advantage in low-cost and labor-intensive activities, were able to industrialize, increasing their manufacturing output and thus their exports. These exports in turn replaced products made by advanced economies with high labor costs. In this way, such Asian economies achieved new levels of growth.
For current low-income countries, the introduction of widespread labor-saving technologies has made it difficult to create jobs by increasing manufacturing output. Even the most ‘labor intensive’ parts of manufacturing are now much less labor intensive than they were when Asian exporters used this as a strategy towards jobs growth. The “elasticity of manufacturing employment to manufacturing value added” has fallen in most places; in Asian economies it has fallen from ~1 to ~0.2, implying that you would need five times at much manufacturing value added to get a single job compared to historically.[iv] The decline in the labor intensiveness of manufacturing means that the future of jobs growth everywhere (in high- and low- income countries alike) are in services.
Moreover, the established position of the Asian exporters has made it difficult for current-low income countries to compete on manufacturing exports; again blocking them from replicating these Asian countries’ path to jobs growth (a view referred to amongst economists as the Flying Geese paradigm). This shift is happening at significantly lower income level than enjoyed by advanced economies and Asian exporters.[v] With their path to development altered by trade and technology, poorer countries will face the challenge of employing 1.4 billion workers, whose path to traditional labor-intensive manufacturing industries will be virtually blocked.
Growing youth underemployment presents a number of concerns for government officials in low-income countries. Studies show that underemployment at the beginning of a young persons’ career negatively impacts social cohesion, long physical[vi] and mental health,[vii] as well as long term employment and income outcomes.[viii] Youth bulges are also associated with increased risks of violent conflict,[ix] and youth underemployment in particular aggravates these risks. These risks make expanding youth employment opportunities a key policy priority for low-income countries, yet options are constrained (as noted above) by the changing nature of trade and technology which had historically provided the countries with a path to job creation.
Benefits of labor mobility to the sending country
Despite these risks and constraints, growing youth population in low-income countries presents an enormous opportunity. As we have previously discussed in another LaMP note, high-income countries are rapidly aging. 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 in low-income countries who are not projected to currently be absorbed by their domestic labor markets.
Beyond alleviating employment pressures, there are a number of additional reasons sending country governments should be interested in actively expanding overseas employment opportunities for their workers. The largest positive impacts of labor mobility are those going directly to the workers, which we will explore in the next note in this series. However, there are significant benefits to the sending country society as a whole. Chief among these benefits are remittance inflows and skill acquisition.
Remittances are as large or larger than foreign aid in many sending countries. As of 2018, global remittances estimates stood at USD 689 billion, USD 529 billion of which went to low-income countries.[x] This is approximately at the same level as foreign direct investment (FDI); when China is excluded remittances are larger than FDI as the biggest source of external financing.[xi] In his book A Good Provider is One Who Leaves, Jason DeParle offers further insight into how important these flows are to many countries: “Migration is the world’s largest anti-poverty program…Mexico earns more from remittances than from oil. Sri Lanka earns more from remittances than from tea.”[xii]
Remittances are likely more powerful in improving well-being in sending countries than other external financing, as they flow directly into households who are able to use them to bolster their consumption and education and health spending.[xiii] They have been shown to be powerful engines of change in remittance-receiving countries; for example, Nepal 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.[xiv] Remittances were responsible for poverty reductions of five percentage points in Ghana, six points in Bangladesh, and eleven points in Uganda.[xv] More broadly, a study of seventy-one low-income countries found that a 10 percent rise in remittances cut the poverty headcount by 3.5 percent (double the poverty reduction of a comparable rise in domestic growth).[xvi] The Philippines hosts an annual welcome home ceremony at Christmas for workers returning home, greeting them as “heroes” for all of the money they send back home throughout the year.[xvii]
Remittances offer important benefits for the economies of sending countries at a macro level. As a sizable inflow of foreign exchange, remittances can have a positive balance of payment effect, relaxing foreign exchange constraint and allowing for the import of investment goods (e.g., for construction of infrastructure and housing).[xviii] Remittances can further be used as collateral for international borrowing, as seen in the cases of Mexico, Brazil, and Turkey.[xix]
Remittances are a powerful tool to improving well-being for families in sending countries. As noted above, remittances have been responsible for lifting many recipient families out of poverty, as measured by poverty headcounts. In the Philippines, research shows that an 10 percent increase in income due to remittances reduced the poverty rate among recipient households by 2.8 percentage points.[xx] Further, the same study showed that increases in remittances led to increases in school attendance, decreases in child labor, and increased investment in capital-intensive businesses.[xxi] For families receiving remittances in Afghanistan, remittances averaged USD 1,680 annually, accounting for more than half of their income and were consumed in basic needs.[xxii] As noted above, remittances are also shown to increase education and health spending, resulting in proven positive impacts on nutrition standards,[xxiii] healthcare,[xxiv] and children’s school attendance[xxv] and reducing child mortality.[xxvi] Remittances inflows are counter-cyclical in sending countries, stabilizing income and insulating families of migrants from adverse economic shocks.[xxvii]
There is much discussion around remittances as a potential source of investment financing, but evidence shows that they are more often used for household consumption. There have certainly been places where remittances have increased investment in small enterprises; scattered data suggests that resources accumulated while working abroad are often intended for investment in building a house, starting a business, and financing own education plans.[xxviii] However, evidence of remittances being funneled as investment into industry is scant, and it appears more common for them to go into household consumption and health and education spending. While this does not make them any less of a positive influence (indeed, they are being funneled directly into improving well-being for these families), it is important to set expectations of what remittances likely will and will not do.
Workers employed overseas 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 (with a better salary) than they would have if they had not migrated.[xxix] Workers gain skills abroad due to on-the-job training, firm- and non-firm-specific formal training, and firm-provided external training courses on a mandated or voluntary basis. As many as half of the skilled migrants working abroad eventually come home, bringing these new skills and connections with them.[xxx] Some rotational schemes have skill accumulation baked into the design; for example, India’s agreement with Japan through the Technical Intern Training Program is considered a “win-win” because Indian workers are trained to Japanese standards and then return to India.[xxxi]
Such upskilling measures have a potential effect on the home country if returnees have new qualifications that the home country can and is willing to use. Research on return migration to Brazil, Chile, and Costa Rica indicates that returnees are overrepresented in highly skilled occupations and underrepresented in least-skilled trades.[xxxii] When Indian- and Chinese-born software engineers returned following the U.S. dotcom bubble, they were evidenced to have transferred institutional and technical knowledge and techniques to their home countries.[xxxiii] When the Greek sovereign debt crisis sparked a return wave of Albanians, more than half of the returnees took jobs as skilled workers in the industries they were employed in in Greece and many engaged in entrepreneurship using techniques they had learned in Greece, creating jobs for themselves and for non-migrants. Researchers concluded that this skill transfer allowed for intensive agriculture to spread in Albania and foster more productive activities, raising output and wages in the sector.[xxxiv]
This challenges the traditional ‘brain drain’ narrative, which has been a barrier to sending countries engaging on labor mobility. The ‘brain drain’ narrative argues that skilled migration depletes the stock of human capital in sending countries and hurts their prospects of economic development.[xxxv] This narrative has dominated the migration policy discourse in sending countries, and has been a key reason why more countries facing youth bulges have not pursued labor mobility as an employment strategy. These concerns stem from the fact that skilled migration constitutes a disproportionately high share of total migration. Using a measure of a “brain drain rate,” Gibson and McKenzie find that this rate for tertiary-educated individuals is 7.3 times that of individuals with primary education and 3.5 times that of individuals with secondary education.[xxxvi]
The concern that this emigration results in shortages of skilled workers in sending countries and worsens development outcomes is not borne out by the evidence. OECD analysis assessed 54 countries experiencing critical health staff shortfalls. The analysis shows that the estimated critical health staff shortage is five times the number of health staff who have emigrated and concludes that “although migration may be an important factor, it is not a decisive one, even in the most critical cases.”[xxxvii] Further, evidence shows that emigration of skilled workers in the health profession is not responsible for poor health outcomes in low-income countries.[xxxviii] Where ‘brain drain’ has occurred, it has resulted in a number of benefits for sending countries, such as remittances, wage gains, and knowledge transfer.[xxxix] Former Prime Minister Manhoman Singh of India was quoted as saying. “Today we in India are experiencing the benefits of the reverse flow of income, investment and expertise from the global Indian diaspora. The problem of ‘brain drain’ has been converted happily into the opportunity of ‘brain gain.’”[xl]
The evidence shows more of a ‘brain gain’ than ‘brain drain.’ The ‘brain drain’ narrative assumes a ‘lump of labor’ in which there is a fixed number of workers and thus a worker moving from one country to another is by definition a loss to the former and a gain to the latter.[xli] 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. As a result, countries which actively promote employment abroad in certain sectors have seen the number of workers trained for those sectors grow domestically. The most vivid example of this is with nurses in the Philippines: Abarcar and Theoharides[xlii] find that the migration of nurses increased the stock of nurses in the Philippines. Nursing enrollments increased so much that for every trained nurse who migrated, 10 additional nurses were licensed in the country.[xliii] They further found that the supply of (private) nursing programs expanded to accommodate the increased demand for nursing degrees. Many more Filipina nurses work in the Philippines today as a direct result of the government’s decision to actively pursue a managed migration strategy. Similarly, studies have shown that the opportunity from skilled emigration from Cape Verde[xliv] and Fiji[xlv] increased the number of university graduates living in these countries.
So why don’t sending countries more actively try to encourage workers to find jobs abroad?
While labor mobility is a powerful tool towards quality employment and poverty alleviation for sending countries, few have pursued it as a strategy to expand opportunity for their people. A few countries (such as the Philippines, Sri Lanka, Bangladesh, and Nepal) have actively worked to expand employment opportunities for their workers abroad, and to harness the benefits of remittances and returnee skills for development of their countries. However, these countries are the exception rather than the rule, with many more focusing on programming that encourages employment at home to discourage migration (though it is worth noting that these programs are often at the encouragement of donors and receiving countries). For example, prior to the Overseas Employment Proclamation of 2016, Ethiopia’s direct policy on labor migration was to promote local employment and deal with labor migration only to regulate it.[xlvi]Even the Overseas Employment Proclamation in its current form has such stringent requirements that it in practice serves to discourage rather than encourage labor mobility, though it is now in the process of being revised.[xlvii]
What explains this? We have already mentioned pressure coming from donors and receiving countries. However, much of this resistance to actively promoting labor mobility stems internally. Government officials in low-income countries often view promoting labor mobility as a way to a better life for their people as admitting failure of their own development. As a result, labor mobility is treated as an option of last resort, and something to be regulated rather than promoted. There are two fundamental flaws in this thinking:
First, the belief that labor mobility signals a failure of development is rooted in the inaccurate belief that migration decreases with development. A commonly held belief is that migration reduces as incomes rise, implying that if governments in these countries were successful in their development efforts, their people would not seek to migrate. 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. Figure 3a below shows the most recent estimates around this relationship; Clemens looks at all low- and middle-income countries between 1960 and 2019 and finds that migration increases with growth up to USD PPP 10,000 per capita GDP.[xlviii] The same research then looks at the relationship between changes in income and changes in the emigration rate within the same country over time (Figure 3b), and finds that as a country becomes ten times richer than it used to be, its average emigration rate rises by approximately five percentage points. These increasing emigration rates are a credit to improving development outcomes; as Clemens and Postel note, “as development proceeds, human capital accumulates, connections to international networks increase, fertility shifts, aspirations rise, and credit constraints are eased. All of these changes tend to raise emigration.”[xlix] We need a new narrative which recognizes that migration is often citizens of a country taking advantage of an expanded set of life options they are afforded by successful development.
Figure 3: Emigration rates increase as GDP per capita rises to middle-income
Source: Clemens 2020
Second, the success of governments is measured by the well-being of their country, rather than the well-being of their people. Measures of development are defined by what happens within a country’s borders; GDP or GNI per resident focus (and many other metrics of development) exclusively on the well-being of people currently residing in a given country. This is reinforced by the fact that development and aid programming are tied to these metrics, meaning that only activities whose impacts will be captured by these metrics are considered effective development programming. Pritchett and Clemens note that this “leads to untenable conclusions: if a Salvadoran moves from the countryside to San Salvador to get a factory job that raises her income 30%, this will be recorded as a welfare improvement for Salvadorans on average, but a 500% increase in income from a factory job in Texas does not.”[l] They go on to propose a new metric: income per natural, the mean per person income of those born in a given country, regardless of where they now reside. They find that the well-being of a country’s citizens looks vastly different when using this metric: Almost 43 million people lived in countries whose income per natural collectively is 50 percent higher than GDP per resident. For 1.1 billion people the difference exceeded 10 percent, and the numbers living under the poverty line were also vastly different using this approach.[li] If countries are committed to the well-being of their people, rather than well-being within their geographic territory, they should consider labor mobility a viable and positive strategy.
Beyond an ethos among sending countries that labor mobility reflects a failure on their part, there are specific concerns that prevent them from promoting labor mobility. A key concern 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, cases of worker abuse have resulted in a complete ban from the sending country on recruitment of workers to a particular receiving country. For example, in 2018 Philippine President Rodrigo Duterte permanently banned Filipinos from working in Kuwait following the emergence of several cases of murder and abuse.[lii] Similarly, from 2013 to 2018, Ethiopia banned its workers from seeking employment in the Middle East and it has only recently begun exploring options to enhance labor mobility rather than shut it down,[liii] while the Government of Kenya also banned recruitment for overseas employment from 2014 to 2016 while it reportedly weighed labor mobility as a way to provide job opportunities and increase remittances against the “bad publicity” towards the Government from examples of worker abuse.[liv] India,[lv]Nepal,[lvi] and Bangladesh[lvii]have all instituted similar bans in the past. 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.[lviii] As noted before, concerns around ‘brain drain’ are another reason low-income countries choose to not pursue labor mobility as an employment strategy, though the experience of the Philippines and other countries shows that they could gain skilled workers by doing so.
How can sending countries pursue labor mobility as a jobs strategy?
Even where sending countries are committed to pursuing labor mobility as an employment strategy, there remain a number of complex challenges to do so. In order to promote managed labor mobility, sending countries need (1) a labor supply which matches the labor demand in high-income countries; (2) a legal framework establishing the right to work in another country and defining all the associated terms created in coordination with the receiving country; and (3) an effective and efficient infrastructure implementing this framework, through which workers are connected and moved to safe jobs abroad. Each of these three requirements represent significant challenges in the status quo.
First, there is a broad mismatch between the labor supply in low-income countries and labor demand in high-income countries. Labor shortages in high-income countries are predominantly in occupations requiring specific skill sets.[lix] At the same time, the labor supply in low-income countries with growing youth populations currently does not have the requisite education or skill sets to fill these positions. The OECD’s Programme for International Student Assessment (PISA) shows that the majority of workers in low-income countries have low literacy and skill levels, significantly below those of workers in OECD countries where the labor shortages are.[lx] To some extent this can create complementarities; however, this at least in part presents a skills mismatch acting as a barrier to labor mobility. Given the global labor shortages of skilled workers in specific professions, high- and low-income countries will need to work together in mutually beneficial ways to address these skills mismatches.
One example of this is Global Skills Partnerships (GSP), which bundles training for migrants with training for non-migrants in the origin country and connects training programs to a legal framework for migration.[lxi] The GSP model has been piloted through the ‘Pilot Project Addressing Labour Shortages Through Innovative Labour Migration Models’ (PALIM) which links Moroccan ICT development and labor shortages in Flanders.[lxii] The team running PALIM notes that a difficulty they experienced early on in the design of the project was in identifying and matching labor market needs in Belgium and Morocco. Beyond the challenges identified above, this also resulted from the poor available labor market data, particularly in the sending country.[lxiii]
Second, sending countries have little bargaining power in establishing a favorable legal framework for labor mobility with receiving countries.Negotiations around labor mobility are historically conducted behind closed doors, with little information made public, and are driven by personal networks of officials.[lxiv] 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 official to approach and how.Beyond this, receiving countries hold significantly more bargaining power, as supply of foreign workers is much greater than demand to admit them in receiving countries, and sending countries often compete with each other for labor market access. This results in a ‘race to the bottom’ of sending countries lowering standards in order to be more competitive, while receiving countries take unilateral action. This results in a negative equilibrium where there is downward pressure on labor standards, while unilateral action leads to fragmented migration processes without transparency and accountability across borders. A Nigerian official noted that they have significant difficulties getting receiving countries to sign bilateral labor agreements (BLAs) and memorandums of understanding (MoUs), without with it is very challenging to protect the rights of their workers abroad.[lxv] This may change in the COVID-19 era, as receiving countries are more dependent on partnership with actors in sending countries to ensure workers are arriving COVID-19 free.[lxvi]
Third, sending countries have not built the capacity for efficient and effective implementing infrastructure, and there is little quality industry support. Excessive time and cost burdens of migration incentivize irregular migration and can undermine labor mobility if employers are not able to receive workers in a timely fashion. Therefore, the processes through which workers are matched with a job, screened for necessary clearances, and receive visa approval must be efficient, affordable, and convenient for applicants and employing sectors. Even more importantly, these systems must have the trust of the receiving country government and employers that the workers they receive are qualified for the jobs they are expected to perform, have been screened, and will abide by the conditions of their visa.[lxvii] This issue has become increasingly important in the COVID-19 era when receiving countries need to place significant trust in the health screening processes of sending countries; examples of fraud in these systems have already had important impacts.[lxviii]
Even before COVID-19, receiving countries have expressed concern that capacity within sending country migration management systems prevented them from building more labor mobility partnerships.[lxix] One solution would be rather than building capacity within government to rely on a mobility industry to deliver services required throughout the migration process. However, mobility industry services are currently low-quality, resulting in bad outcomes for migrant workers.[lxx] Sending and receiving governments, employing sectors, and worker representatives should work together to (1) streamline and strengthen necessary government processes and 2) facilitate the emergence of a quality mobility industry. This will be examined further in a forthcoming LaMP note.
Sending country governments have good reason to engage in labor mobility partnerships. 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. Labor mobility should be held up as a success of sending governments to open opportunities for their people, rather than a failure of development. However, there are a number of challenges undermining the ability of sending country governments to facilitate employment opportunities abroad for their workers. These challenges are best solved in partnership, with receiving country governments, employers, and a quality mobility industry.
Labor Mobility Partnerships (LaMP) aims to increase rights-respecting labor mobility, ensuring workers can access employment opportunities abroad. Its overarching goal is to make it easier for its partners to build labor mobility systems at the needed scale, thus unlocking billions in income gains t people filling the needed jobs. It focuses on connecting governments, employers and sectors, the mobility industry, and researchers and advocates to bridge gaps in international labor markets, and creating and curating a repository of knowledge and resources to design and implement mobility partnerships which benefit all involved. LaMP’s functions include brokering relationships between potential partners, providing technical support from design to implementation of partnerships, and research and advocacy around the impacts of successful partnerships.
 It is important to note that job creation is very difficult to accurately project; as such, these figures should be taken only to make the broader point that there will be a large population of new working age people needing employment solutions.
 The dot-com bubble in the US was a stock market bubble caused by excessive speculation in Internet-related companies in the late 1990s, a period of massive growth in the use and adoption of the Internet. Indian and Chinese-born software engineers were heavily represented in the workforce of these companies. When the bubble burst, large numbers of these Indian- and Chinese-born software engineers returned to their respective countries, in part due to an inability to extend their work visas and in part because there were better employment opportunities in their home countries (Debnath 2016).
 Docquier and Marfouk (2005) define a country’s brain drain rate for a particular educational level as the share of all individuals with that education level aged 25 and over born in that country who live abroad.
 In this case, the term ‘skilled workers’ is used to refer to workers who are trained and have the necessary qualifications for specific occupations (such as health workers).
[i] UN DESA (United Nations Department of Economic and Social Affairs), Population Division. (2015). “World Population Prospects: The 2015 Revision.” DVD edition. 2015. New York: United Nations.
[ii] Smith, Rebekah and Hani, Farah. “Labor Mobility Partnerships: Expanding Opportunity with a Globally Mobile Workforce.” Center for Global Development. June 26, 2020. https://www.cgdev.org/publication/labor-mobility-partnerships-expanding-opportunity-globally-mobile-workforce
[iii] World Economic Forum. “The Africa Competitiveness Report 2017.” World Bank Group. 2017. http://documents1.worldbank.org/curated/en/733321493793700840/pdf/114750-2-5-2017-15-48-23-ACRfinal.pdf
[iv] Osmani, S. R., 2006, “Employment Intensity of Asian Manufacturing: An Examination of Recent Trends”, Paper prepared for the Asian Regional Bureau of the United Nations Development Programme (UNDP), New York, March.
[xi] Global Knowledge Partnership on Migration and Development. “Migration and Development Brief 31.” World Bank Group. April 2019. https://www.knomad.org/publication/migration-and-development-brief-31
[xii] DeParle, Jason. “A Good Provider is One Who Leaves: One Family and Migration in the 21st Century.” Penguin Books. 2019.
[xviii] Holzmann, Robert. “Managed Labor Migration in Afghanistan: Exploring Employment and Growth Opportunities for Afghanistan.” World Bank Group. 2018. https://openknowledge.worldbank.org/handle/10986/29275
[xxiii] Antón, José-Ignacio. “The Impact of Remittances on Nutritional Status of Children in Ecuador.” The International Migration Review. 44(2). Summer 2010. https://www.jstor.org/stable/25740850?seq=1
[xxiv] Amuedo-Dorantes, Catalina and Pozo, Susan. “New Evidence on the Role of Remittances on Health Care Expenditures by Mexican Households.” IZA Discussion Paper No. 4617. December 2009. http://ftp.iza.org/dp4617.pdf
[xxv] Acosta, P. “Labor Supply, School Attendance, and Remittances from International Migration: The Case of El Salvador.” World Bank Policy Research Working Paper 3903. 2006. Washington, DC: The World Bank.
[xxvii] De, Supriyo et al. “Remittances over the Business Cycle: Theory and Evidence. Global Knowledge Partnership on Migration and Development. World Bank Group. March 2016. https://www.knomad.org/sites/default/files/2017-07/KNOMAD%20WP%2011%20Remittances%20over%20the%20Business%20Cycle.pdf
[xxviii] Wahba, Jackline. “Return migration and economic development.” Chapters, in: Robert E.B. Lucas (ed.),International Handbook on Migration and Economic Development, chapter 12. 2014. Edward Elgar Publishing.
[xxix] Debnath, Priyanka. “Leveraging Return Migration for Development: The Role of Countries of Origin.” Global Knowledge Partnership on Migration and Development. World Bank Group. November 2016.
[xxxi] Labor Mobility Partnerships. “Workers on the Move: Labor Mobility as a Jobs Solution for Sending Countries.” Webinar. September 10, 2020. https://lampforum.org/what-we-do/research-and-advocacy/events/1382-2/
[xxxii] Dumont, J.-C., and G. Spielvogel. “Return Migration: A New Perspective.” In International
Migration Outlook, Part III. 2008. Paris: OECD Publishing.
[xxxiii] Giordano, A., and G. Terranova. 2012. “The Indian Policy of Skilled Migration: Brain Return versus
Diaspora Benefits.” Journal of Global Policy and Governance 1 (1): 17–28.
[xxxiv] Hausmann, Ricardo and Nedelkoska, Ljubica. “Welcome Home in a Crisis: Effects of Return Migration on the Non-migrants’ Wages and Employment.” European Economic Review. 2017.
[xxxix] Gibson, John and McKenzie, David John, The Economic Consequences Of “Brain Drain” Of the Best and Brightest: Microeconomic Evidence from Five Countries (August 1, 2010). World Bank Policy Research Working Paper No. 5394. https://ssrn.com/abstract=1653198
[xl] Government of India. “Hiren Mukherjee Memorial Lecture 2010 Parliament of India Prime Minister’s Remarks.” Prime Minister’s Office Press Release, December 2, 2010. http://pib.nic.in/release/release.asp?relid=68026.
[xliv] Batista, Catia, Lacuesta, Aitor, and Vicente, Pedro. “Brain Drain or Brain Gain? Micro Evidence from an African Success Story.” IAE CSIC. September 10, 2007. http://www.iae.csic.es/investigatorsMaterial/a87315173392438.pdf
[xlv] Clemens, Michael and Chand, Satish. “Human Capital Investment under Exit Options: Evidence from a Natural Quasi-Experiment.” Center for Global Development Working Paper 152. September 2008 (Revised February 2019). https://www.cgdev.org/publication/human-capital-investment-under-exit-options-evidence-natural-quasi-experiment
[xlviii] Clemens, Michael. “The Emigration Life Cycle: How Development Shapes Emigration from Poor Countries.” Center for Global Development Working Paper 540. August 2020. https://www.cgdev.org/publication/emigration-life-cycle-how-development-shapes-emigration-poor-countries
[lii] Turak, N. “Philippines’ Duterte Declares Permanent Ban on Workers Going to Kuwait after Abuse and Murder Cases.” CNBC, April 30, 2018. https://www.cnbc.com/2018/04/30/philippines-duterte-declares-permanent-ban-on-workers-going-to-kuwait.html.
[liii] Agence France-Presse. “Ethiopia Lifts Ban on Domestic Workers Moving Overseas.” Arab News, February 2, 2018. https://www.arabnews.com/node/1237981.
[liv] ILO. “The Migrant Recruitment Industry Profitability and unethical business practices in Nepal, Paraguay and Kenya.” International Labour Office, Fundamental Principles and Rights at Work Branch. 2017. Geneva.
[lv] Whiteman, H. “Indonesia Maid Ban Won’t Work in Mideast, Migrant Groups Say.” CNN, May 6, 2015. https://www.cnn.com/2015/05/06/asia/indonesia-migrant-worker-ban/index.html.
[lvi] Pyakurel, U. “Restrictive Labour Migration Policy on Nepalese Women and Consequences.” Sociology and Anthropology 6 (8): 650–656. 2018. http://www.hrpub.org/download/20180730/SA3-19611136.pdf.
[lvii] Shamim, I. “The Feminisation of Migration: Gender, the State and Migrant Strategies in Bangladesh.” In Kaur, A., and Metcalfe, I. (eds.), Mobility, Labour Migration and Border Controls in Asia. 2006. London: Palgrave Macmillan.
[lxii] Enabel. “PALIM – European Pilot Project Linking Moroccan ICT Development And Labour Shortages In Flanders.” March 1, 2019. https://www.enabel.be/content/europees-proefproject-palim-linkt-it-ontwikkeling-marokko-aan-knelpuntberoepen-vlaanderen-0
[lxiv] Malit, Froilan. “Frontlines of Global Migration: Philippine State Bureaucrats’ Role in Migration Diplomacy and Workers’ Welfare in the Gulf Countries.” Chapter in P. Fargues and N. M. Shah (eds.), Migration to the Gulf: Policies in Sending and Receiving Countries. Fiesole, Italy: EIU Gulf Labor Markets, Migration, and Population Programme. 2018. http://gulfmigration.org/media/pubs/book/grm2017book_chapter/Volume%20-%20Migration%20to%20Gulf%20-%20Chapter%2010.pdf.
[lxvi] Smith, Rebekah. “Labor Mobility in the Post-COVID-19 Era: The Case for Partnerships.” Labor Mobility Partnerships. July 28, 2020. https://lampforum.org/what-we-do/research-and-advocacy/policy-notes/labor-mobility-in-the-post-covid-19-era-the-case-for-partnerships/
Dawit Dame, Innovation Manager, Ethiopian Jobs Creation Commission Dr. K.P. Krishnan, IEPF Chair Professor in Regulatory Economics, National Council of Applied Economic Research in India Dr. Sunday Onazi, Chief Labour Officer, International Labour Migration Division, Federal Ministry of Labour and Employment in Nigeria Grégoire Douxchamps and Zainab Naji, Pilot Project Addressing Labour Shortages Through Innovative Labour Migration Models (PALIM) Project, Enabel Belgium
Devesh Kapur, Starr Foundation South Asia Studies Professor and Asia Programs Director, Paul H. Nitze School of Advanced International Studies (SAIS) at Johns Hopkins University
While high-income countries face rapidly shrinking working-age populations, these same populations in low-income countries are sharply increasing. Bridging these markets through labor mobility offers transformative benefits for low-income countries; beyond offering quality employment opportunities for their workers, associated remittances and skill accumulation can effect powerful positive change on their development outcomes.
However, there are a number of factors limiting sending countries’ ability to unlock the potential of labor mobility for their people. Ironically, labor mobility has often been viewed as a failure of development, leading to a negative narrative making it difficult to promote labor mobility. Beyond this, there are a number of challenges relating to labor mismatch, legal frameworks, and implementation that limit their ability to expand employment opportunities through mobility. Solving these challenges will require a multi-faceted effort with receiving country governments, employers, and a quality mobility industry.
In this event, we heard from representatives from sending countries across regions on the impacts of labor mobility in their countries, the challenges they have experienced, and how these challenges can be overcome to let workers fill needed jobs.
This event is the second in Labor Mobility Partnerships’ (LaMP’s) monthly event series on the case for labor mobility from the perspectives of key actors (receiving countries, sending countries, employers, workers, and ‘mobility industry’). Sign up for our newsletter to stay updated on future events!
Employing sectors in high-income countries have been facing unprecedented labor scarcity, weighing on employers’ productivity and viability, and thus overall growth, prosperity, and well-being of the nations.
While automation may address some of the job scarcity, it cannot close all of the gaps as many of the needed positions are non-substitutable. Additionally, automation represents an economically inefficient solution that disadvantages certain native-born workers.
Labor mobility offers the most feasible solution, allowing employing sectors as well as employers in high-income countries to at least partially close their labor gaps, while spurring innovation and bringing workers with various backgrounds to their workplace.
High-income countries’ employing sectors face unprecedented scarcity of native-born workers, especially with low and medium skills. As the nations’ populations get older as a consequence of declining fertility rates, their overall workforce shrinks, preventing employers across industries to find enough workers to fill the gaps. Although many call this trend “labor shortage,” this note refers to it as “labor scarcity” since the employing sectors in high-income countries are unable to address the issue simply by increasing wages as discussed below. While the COVID-19 pandemic has caused some temporary swings with closures of businesses and thousands of furloughed workers worldwide, this underlining long-term trend is unlikely to change. Without sufficient number of mobile workers with necessary skills, employing sectors will continue to struggle to produce and deliver often vital goods and services, or even stay open for business. This labor scarcity has been negatively affecting communities and weigh on the high-income countries’ economies. Labor mobility can serve as an effective policy tool to help employing sectors in those countries to at least partially close their deepening labor gaps.
High-Income Countries Face Deepening Labor Gaps
In order to growth their economies and provide for prosperous societies, high-income countries need strong and booming employers. However, many employers in those countries have been experiencing ongoing hiring issues due to deepening gaps between their labor needs and available workforce. While this phenomenon, which occurs when the demand for workers for a particular occupation exceeds the supply of qualified and available individuals who are willing to take the position, is commonly-known as a ‘labor shortage’[i], we believe “labor scarcity” is a much more accurate term. Typically, economists define “shortage” as “a lack at a given price.” Therefore, common-sense solution to “shortages” is to allow prices to rise to match the supply and demand. However, in case of labor, this approach allows just for reallocation of workers from one employer to another, but not for creation of additional workers. Therefore, we chose to use term “labor scarcity.”
In recent years, job scarcity has weighed on productivity and viability of employers in high-income countries. The U.S. had nearly 7 million unfilled jobs – a record-high level[ii]– earlier in 2019, and the European Union has seen significant labor scarcity across all member countries as well.[iii] Germany, for example, reported about 1.6 million unfilled jobs in 2018[iv] and France saw some 200,000-330,000 job offers to go unfilled in 2017[v] (Table 1).
Table 1. Recent Total Job Scarcity Selected High-Income Countries
This trend is unlikely to stop anytime soon. Italy is expected to lack on average at least 100,000 workers across a variety of sectors per year,[vi] while in Poland, the scarcity is predicted to average 250,000 workers annually.[vii] Switzerland projects to have a scarcity of 500,000 workers by 2030, or approximately 50,000 each year from 2020 to then, which in total accounts for about 10 percent of the country’s total workforce.[viii] Additionally, Canada’s labor scarcity had been predicted to get close to an average of 120,000 per year.[ix] Similarly, Japan is projected to face a scarcity of approximately 535,000 workers on average each year[x] (Table 2). In general, companies are finding it particularly difficult to fill positions requiring lower and medium level skills.[xi]
Table 2. Projected Total Job Scarcity in Selected High-Income Countries
The lack of workers has been caused by previous, ongoing, and expected to continued demographic shifts in high-income counties. Specifically, aging population due to declining fertility rates has been the main cause of the deepening labor gaps. Based on the United Nations’ zero migration scenario, the working-age populations of countries in the Organisation for Economic Co-operation and Development (OECD)will decline by more than 92 million by 2050, while their elderly populations (over 65 years old) are predicted to grow by more than 100 million people at the same time (Figure 1).[xii] Moreover, nations such as Germany, Japan, Italy and Spain have been experiencing continuous drops in numbers of newborn children since at least the 1970s, with fertility rates falling (in some cases deep) below the 2.1-level necessary for a population to replace itself.[xiii]Inevitably, the ongoing changes in demographic of the high-income countries will adversely affect the size of their workforce, which will continue to shrink in the upcoming years.
Figure 1. While the working-age population in most OECD countries declines, these countries are gaining elderly citizens.
A shrinking youth population and growing elderly population (in thousands)
Overall, the analysis of the ongoing demographic changes showed there will be a great need for more working-age individuals across sectors in virtually all the high-income countries. While the ongoing pandemic of COVID-19 has undoubtably shaken dynamics at the high-income countries’ labor markets, with many employers being forced to close their doors and furlough their staff. However, while unemployment rate and job openings are likely to stumble in the upcoming months, the long-term trend has remained unchanged. The high-income countries are simply unable to produce enough workers to be able to sustain their economies and structures of social protection.
Industry-Specific Labor Scarcity
Labor scarcity impacts each employer differently. As some of them try to address the issue by rising wages, this approach just “reallocates” workers creating shortages within sectors, rather than addressing the overall labor scarcity caused by demographic changes. While the labor gaps have been affecting employing sectors in virtually all of the high-income countries’ economies, many industries have been particularly hit. Among others, employers experience mismatch between the number of needed and available qualified workers in sectors such as care work, tourism, construction, manufacturing and agriculture. Although each of the high-income countries may struggle with job shortages in different sectors, virtually all of them have experienced labor scarcity in recent years.
High-income countries have been facing deepening scarcity of care workers. Australia expects 250,300 job openings in this sector by 2023 and the U.S. even 7.8 million by 2026. The gaps in healthcare industry have been especially critical, since the increased number of elderly persons, resulting from the ongoing demographic shifts, will need adequate care. As people get older, they require more labor-intensive support – not only health care but also personal care and household help. Without sufficient number of workers in those sectors, the high-income countries will be unable to take appropriate care of the increasing numbers of elderly persons.[xiv]
Tourism in some high-income countries has been also hampered by labor scarcity. In Germany, where tourism represents one of the key sectors, more than two-thirds of surveyed hoteliers and restaurateurs reported lack of workers as their top issue.[xv] These labor scarcities will result in shifting of work from workers to the travelers, who will either be asked to do the work themselves or it will not be done at all..[xvi]
However, other sectors face deepening workforce gaps as well. For instance, the construction sector in many rich nations has been lacking workers. The U.S. reported 434,000 vacant construction jobs in 2019,[xvii] while Germany saw approximately 225,000 unfilled position in this sector in 2018.[xviii] Similarly, U.S. construction companies are expected to be short of 747,000 workers by 2026,[xix] and the UK is predicted to need 200,000 construction workers already by the end of 2020.[xx] The situation has forced some construction firms to start asking more skilled workers to step in, increase prices or reject new projects as they struggle to meet deadlines.[xxi]
Figure 2. Changes in the number of jobs in the UK between December 2017 and December 2018, seasonally adjusted
Further, the agriculture sector has been facing deepening job scarcity as well, which weighs on the companies’ ability to produce food and could eventually result in broader food scarcity in the impacted high-income countries. In 2017, the Canadian agriculture reported a farmworker deficit of 16,500 – a number that is expected to double by 2029.[xxii] Australian[xxiii] and U.S.[xxiv] agriculture sectors have been stressing the need for more workers as well.
How Can Employers Address Labor Scarcity?
In effort to stay in business, employers have just a few available strategies to offset the existing scarcity of workers. As mentioned above, rising wages, which is typically the common-sense solution, just “reallocates” workers from one employer to another rather than fixing the overall labor scarcity. In other words, the industry overall cannot use this strategy as a solution to its lack of workers. No matter how much employers rise the wages, it simply doesn’t solve the problem. In Australia, nearly 75 percent of surveyed farmers offer above-average wages, and yet two thirds of them ranked labor concerns among the top three challenges they predict to face in the future.[xxv] Historical evidence also reveals this tendency. In the U.S. in 1960s, after termination of the Bracero Program, the U.S. growers were unable to recruit native-born agricultural workers, who would take the jobs formerly performed by the foreign workers, despite the many years of state and federal hiring efforts before and after closure of the program.[xxvi]
Additionally, some employers try to bridge their labor gaps by using other tools aimed at mobilization of their native-born workforce. In Slovakia, certain employers pledge to hire employees’ spouses. A Polish company has been reportedly using prisoners to boost its workforce[xxvii], as well as many companies in the U.S where they are paid very close to nothing or even work without any pay at all.[xxviii] Others provide incentives such as cash rewards for employees who help find new workers,[xxix] in addition to longer holidays, shorter hours and flexible shifts.[xxx] However, this approach again doesn’t address the labor scarcity caused by demographic changes in high-income countries.
Therefore, many employers decided to invest money into automation and digitalization to deal with the growing job scarcity. A recent report showed German employers have about 338 robots per 10,000 workers, and Central European countries such as Czech Republic, Hungary or Poland have been increasing their robot-to-workers ratios as well.[xxxi] In 2017, estimated 9,900 robots were installed in Central and Eastern Europe alone, which was 28 percent more than in the preceding year. However, not all employers facing job scarcity can rely on automation, since the process requires highly skilled workers experienced with programming, maintenance and servicing of the new machines, who are hard to find. Additionally, many, especially small, employers simply cannot afford to automate.[xxxii]
And last but surely not least, certain sectors cannot rely on automation because of the nature of the jobs they need. For instance, while U.S. construction companies have been exploring the potential of robotics, many jobs in this sector cannot be automated due to their overall complexity.[xxxiii] Similarly, professions such as nurses, care workers, janitors simply cannot be substituted by machines. In the U.S., for example, the economy was predicted to need 1.7 million high- and 2.8 million low-skill jobs that cannot be outsourced or mechanized by 2028 (Figure 3). Moreover, a recent study focusing on U.S. dairy industry showed that in the short run, technological gains were insufficient to entirely offset negative shock to production resulting from a shift in labor supply.[xxxiv]
Figure 3. Substitutable and Non-Substitutable Jobs in the U.S. (2018 vs 2028)
Overall, rather than addressing a true “scarcity”, automation attempts to solve “policy-induced” scarcity, and thus is economically inefficient. In the long run, it fails to benefit native-born workers with low skills, as it destroys jobs that, when paired with other labor, could have survived. There is no reason to choose machines over people, since there are many available workers around the globe. However, the goal of gathering capital makes many unwilling to unchain their imagination about how to address the social and political challenges preventing labor mobility. And yet, from labor scarcity perspective, labor mobility dominates among all the possible solutions addressing labor shortages in employing sectors.
Labor Mobility as a Solution to Job Scarcity in High-Income Countries
It is clear that while the options above may work for some, they are certainly not suitable for all employers in high-income countries. Therefore, many of them consider labor mobility to be one of the most effective tools to overcome the deepening labor scarcity. [xxxv] Overall, the International Organisation of Employers (IOE) found that “employers regard regular migration as a necessary and positive phenomenon.”[xxxvi] In Poland, many manufacturers have been hiring large numbers of employees from abroad to fill their job openings as they cannot afford to invest into automation.[xxxvii]
Besides filling vacancies and increased productivity, foreign workers bring also other advantages to their employers. For instance, hiring foreign workers increases employers’ access to international knowledge, which also supports upskilling of their native workers; strengthens the employers’ contacts in international markets as well as local networks through improved language skills and higher cultural awareness; and creates more diverse work environment with a variety of experiences and ways of working.[xxxviii] Also, employers appreciate dependability and reliability of foreign workers. Due to high turnover of native workers, to many foreign workers represent more stable workforce. A study of Pacific migrants in New Zealand found that employers appreciate dependability and enthusiasm of the foreign workers, and that the effects of having reliable workforce were “reduced recruitment and training costs, increased confidence to expand and invest, and reduced stress.”[xxxix] Moreover, another recent study showed that hiring high-skilled foreign workers brings more innovation than spending money on research and development.[xl]
However, inefficient legal pathways and labor mobility programs for foreign workers often prevent employing sectors from filling their labor gaps. This inefficiency has been reflected in a variety of ways. First, political maneuvering leads to lack of transparency and predictability, which makes it more difficult for employers to make effective workforce decisions. For example, the Trump administration has made nearly 50 changes into the U.S. migration system just since the beginning of the COVID-19 pandemic.[xli] Such abrupt and constantly changing environment has been negatively affecting every-day work and spurring uncertainty among the country’s employers as well as foreign workers.[xlii]
Second, the cost of compliance is simply too high for many especially small employers. Poorly designed labor mobility systems create burdensome regulatory requirements for employers, in some cases making it all but impossible for them to hire foreign workers. The Federation of Egyptian Industries reported that out of the 60,000 mostly small- and mid-size businesses, more than 95% have insufficient human resources structures to hire experts that would assist them with explanations of rules and policies related to hiring foreign workers – an issue that would be at least somewhat avoided with more transparency and clarity of the regulations mentioned above.[xliii]
Third, the negative perceptions and narratives around labor mobility create political and reputational risks which constrain policy makers and employing sectors from working together to build needed labor pathways. Currently, foreign workers are perceived by many in high-income countries in a negative way[xliv] despite the positive contributions they make to their social security systems.[xlv] Additionally, due to the negative migration narratives, employing sectors often face a backlash for hiring foreign workers, impacting their reputation and preventing them from more actively pushing for labor pathways.
Four, inadequate systems of skills and certification transfers also prevent many employers from hiring foreign workers, many of whom may have the needed qualifications but are unable to use them in the destination country.[xlvi]
Concerned that labor mobility policies are more often used to gain political points than fulfilling economic need of the involved employers, workers, and countries overall,[xlvii] employing sectors in a number of high-income countries have pressed their governments to design mobility systems which are responsive to labor market needs. For example, during the past decade, U.S. manufacturers[xlviii] and representatives of the agriculture sector[xlix] have been advocating for changes in the country’s immigration system. Their concerns go beyond levels of foreign workers, to the need for well-regulated movement of the individuals through rules mitigating risks that come with such mobility.
It is in the governments’ interest to listen to these calls as the countries’ economies rely on viability of their employers. In the recent years, inability to hire sufficient number of qualified workers has been weighing on employers’ productivity, and in many cases represents an existential threat to the impacted entities.[l] Subsequently, this reality has inevitably a broader adverse effect on economies of the high-income countries. For example, some experts worry that Germany could see an economic slowdown in the upcoming years. A recent survey showed that one out of every two German companies surveyed is unable to find qualified candidates to fill its openings over a long period of time, and six out of ten managers consider the situation to be threatening to their business.[li] Similarly, analysts expect slowdowns in economic growth rates among Eastern European countries in the upcoming two or three years, naming severe labor scarcity as one of the main factors contributing to this trend.[lii] Japan’s economic growth rate had been expected to fall to about 0.1 percent during 2026 and 2030, unless the country addresses the ongoing labor scarcity,[liii] and the forecast for the U.S. economy seems to be sluggish as well.[liv]
Additionally, a recent report found that by 2030, as many as 40 percent of Europeans may live in regions with shrinking labor markets, heightening the importance of labor mobility even more. According to the estimates, existing residents in many large cities will be able to fill less than 60 percent of the projected job growth. Besides remote work, commuting and physical moves, the employers will have to hire foreign workers to fill the remaining openings.[lv]
Figure 4. By 2030, As Many As 40 Percent of Europeans May Live in Regions With Shrinking Labor Markets
Recognizing the need for labor mobility, some of the high-income countries’ governments have started to implement policies to support employing sectors’ efforts to hire foreign workers. Germany has prepared a plan in 2019 to speed up the visa process and make it easier for employers to recognize foreign qualifications and credentials.[lvi] Croatia’s strategy is to allow more foreign workers from outside of the European Union into the country, raising its quota by about 35,000 in 2020.[lvii] Even Japan, the most homogenous among OECD countries, had announced launch of a pilot program in 2018 to bring in more than 300,000 workers over the following five years to fight labor scarcity. In Australia, migration has played a major role in the last almost three decades of country’s economic expansion. Over the last couple of years, Australian real economic growth hovered around solid 2 to 2.5 percent, out of which nearly one percent was a result of migration.[lviii] At the end of 2019, the country’s government even forecast a budget surplus for fiscal year 2020, attributable to an assumption of high net migration.[lix]
It is clear that labor mobility programs allowing for flexible movement of a sufficient number of foreign workers represent the most feasible option for many employing sectors in the high-income countries. Labor mobility allows employers within these employing sectors to not only at least partially fill their labor scarcity, but also take advantage of many other benefits stemming from hiring of foreign workers. Overall, although labor mobility may force governments to respond to some political, economic and social concerns, evidence shows that in the long run, it fuels economic growth, and makes positive net contributions to the economies and societies in which the foreign workers live and work.[lx]
Employing sectors across virtually all high-income countries have been facing unprecedented labor scarcity, which have been reflected in their productivity and viability. Since many employing sectors have been facing these gaps for years, it is unlikely that the COVID-19 crisis will eliminate this trend. Despite the likely short-term rise of unemployment rates due to the pandemic, employers will still need what they have always needed: a mobile labor force that is well regulated to reduce risks that come with movement of people. Labor mobility offers the most feasible solution, allowing employing sectors to at least partially close their labor force gaps, while spurring innovation and bring workers with various background to their workplace.
Overall, employers consider well-managed labor mobility “a vehicle for fulfilling personal aspirations, for balancing labour supply and demand, for sparking innovation, and for transferring and spreading skills.”[lxi] Since economies of high-income countries depend heavily on performance of their employers, it is in the governments’ interest to act. The issue is already pressing and will become even more so over time. It is time for employing sectors, government, and mobility industry in high-income countries to connect, and together develop labor mobility systems, enabling foreign workers to enhance productivity, and overall prosperity of the affected nations.
Labor Mobility Partnerships (LaMP) aims to increase rights-respecting labor mobility, ensuring workers can access employment opportunities abroad. Its overarching goal is to make it easier for its partners to build labor mobility systems at the needed scale, thus unlocking billions in income gains to people filling the needed jobs. It focuses on connecting governments, employers and sectors, the mobility industry, and researchers and advocates to bridge gaps in international labor markets, and creating and curating a repository of knowledge and resources to design and implement mobility partnerships which benefit all involved. LaMP’s functions include brokering relationships between potential partners, providing technical support from design to implementation of partnerships, and research and advocacy around the impacts of successful partnerships.
 For the purpose of this note, “employing sectors” have been defined as employer associations and other organizations as well as employers themselves representing a variety of industries
 Developed countries with key labor scarcity are referred to as high-income countries.
 Data used for this note considered the following OECD countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, South Korea, Spain, Sweden, Switzerland, the United States, and the United Kingdom.
 The Bracero Program was set of three bilateral agreements between the United States and Mexico to regulate the flows of temporary low-skill labor between the two countries, spanning almost the entire period from 1942 through 1964.
 Substitutable jobs are jobs which can be automated or out-sourced. Non-substitutable jobs are jobs which must be performed in a given location and must be performed by a worker.
 The analysis focused on EU-27 countries plus United Kingdom and Switzerland; analysis of long-term labor market trends and impact of automation was conducted before COVID-19 pandemic.
[xxvi] Clemens, Michael A., Ethan G. Lewis, and Hannah M. Postel. Rep. Immigration Restrictions As Active Labor Market Policy: Evidence From The Mexican Bracero Exclusion. National Bureau Of Economic Research, 2017. https://www.nber.org/papers/w23125.pdf.
Employers in high-income countries face unprecedented labor shortages. As populations in these countries get older and fertility rates decline, the overall workforce in these countries shrinks, preventing employers across industries to find enough workers to fill their vacancies and keep their companies running. While the COVID-19 pandemic has caused some temporary swings with closures of businesses and thousands of furloughed workers worldwide, this underlining long-term labor shortage trend is unlikely to change.
Meanwhile labor mobility pathways frequently do not reflect these needs, and are not flexible enough to adapt to their changing labor market demand. This has real impacts on productivity and innovation in these companies and in high-income countries more broadly.
In this event, our distinguished panel of speakers discussed the negative effect of labor shortages on communities and economies in high-income countries, and how to pursue labor mobility systems which unlock benefits for employers and workers alike.