Decent Work for All ASIAN DECENT WORK DECADE Measuring and Reducing Migration Costs Manolo Abella & Philip Martin

 Labor migration = big business: 10 million = $10 billion/year  Who receives this revenue? How much do workers pay, and how can worker-paid costs be reduced?  Policy to lower costs : Regulate recruitment? Exclude profit- motivated intermediaries thru G-to-G? Free movement?  Market reality : wage gaps are about 5-1, big variance in costs Highlights

 For origin country costs entailed by emigration is any loss in productivity. Loss of skilled may entail negative externalities.  There is much evidence that migration entails heavy pecuniary and non-pecuniary costs to individual migrants.  KNOMAD surveys : To measure costs to individual workers. What are workers paying for? How much incomes foregone during job-search? Fraud? Skills-job mismatch?  How can the costs be reduced through policy, regulation, information, and cooperation between origin and destination states?

Workers pay heavily for failure of recruitment “I was promised work on a construction site with a pay of 800 Riyals but I had to work as a shepherd, the pay being only 400 Riyals.” recalls Kukkala Butchanna, Adilabad, Khanapur mandal, India

 2014 Pilot Survey in Spain (workers from Bulgaria, Romania, Poland, Ecuador, Morocco)  2014 Pilot Survey in Rep of Korea (workers from Vietnam, Indonesia, Thailand)  2014 Pilot Survey in Kuwait (workers from Bangladesh, India, Sri Lanka, Egypt)  2015 Survey of Vietnamese workers in Malaysia  2015 Survey of Nepali, Indian, Filipino workers returning from Qatar  2015 Survey of Pakistani and Ethiopian workers returning from Saudi Arabia  2015 Survey of Guatemalan, Salvadoran, Honduran workers in Mexico KNOMAD Surveys of Migration Costs

 Country of destination : large differences in worker-paid migration costs for Spain, Korea and Kuwait. Policy and inter- country cooperation make a big difference.  Country of origin : large differences among origin countries ( e.g. those going to Kuwait from Sri Lanka & India vs Bangladesh and Egypt). Policy makes a difference.  Large standard deviation from estimated averages, suggesting governance issues (degrees of enforcement). Preliminary findings from pilot surveys in Spain, Kuwait and Republic of Korea

Most workers tripled their wages by working abroad

 Age : effect not consistent across countries - older workers who went to Kuwait paid less than younger ones, but not in Korea;  Education’s effect on migration costs also not consistent across countries; education reduced costs for workers going to Korea, but no pattern among those who went to Kuwait.  High cost of borrowing : in high cost corridors 3 out of 4 migrants borrowed money to finance migration. Preliminary findings (Con’t)

Worker Paid Migration Cost in US dollars Mean & Standard Deviation

How much are migration costs as percent of expected earnings?

Examining components of worker-paid costs

Which costs can be reduced? BangladeshEgyptIndia $$$ To obtain information Work visa International transportation Other costs Reducible costs

“The agents sell the “Azad” visa for a high price as Rs. 2 lakh, which enables the purchaser to stay in a given country for two years during which time he can search for employment.” The Hindu, Telangana Visa trading a major problem in some migration corridors

Much lower migration costs in free movement area

Lower costs in G-G recruitment for Korea

Evidence from other studies consistent with our survey findings e.g. study by I. Rajan

 Governments control entry to recruitment industry, impose standards, regulate activities of private recruitment intermediaries.  Competition Most governments provide free job placement services, for local and foreign employment  Price-fixing Most governments set ceiling on fees that may be charged from workers = 1 month’s foreign earnings (= 4.2% of earnings on 2-year contract, 2.8% on 3-year). Evidence from surveys: low-skilled migrants can pay 30-35% of foreign earnings ( = 1 year of 3 years foreign earnings) Policies aimed at reducing recruitment costs for individual workers

Individual:  Increase savings and remittances, which reduces poverty & speeds growth  Reduced vulnerability with less pre-departure debt Employers and governments:  Employers get more satisfied & productive workers, less likely to take 2 nd jobs, to violate contracts, abscond, etc  Governments have fewer “problem migrants” Recruiters & others who extract part of the wage wedge that motivates migration stand to lose Benefits of Reducing Migration Costs

 ILO and UN Conventions – workers should not be made to pay for their recruitment  Origin states prohibit or set ceiling on recruitment fees that may be charged from workers; some destination states also prohibit such fees  International labour market wide wage gaps  S > D leads to perverse relationship – as workers’ skills go down, worker-paid migration costs go up Imposing standards

Job matching problematic due to asymmetric information  Workers tend to overstate their skills/qualifications  Employers tend to overstate conditions, qualification requirements  Recruitment within borders –less asymmetry in information  Recruitment over borders  Excess demand for highly skilled workers - employers more willing to absorb cost to avoid mismatch  Excess supply of low-skilled workers - workers willing to absorb cost  For each worker recruitment is a rare event, not repetitive event like sending remittances  Where “visa trading” is practiced employers tend to over-hire, lowering productivity & wages over time Common risks in recruitment across borders

Facilitate skills-job matching ( i.e. reliable system for skills testing & certification) & allow direct hiring Facilitate skills-job matching ( i.e. reliable system for skills testing & certification) & allow direct hiring Not allow recruitment fees to be charged from workers Not allow recruitment fees to be charged from workers Prohibit visa trading To reduce migration costs there is a need to

Promote bilateral agreements for G 2 G recruitment Use “carrots and stick” to encourage ethical recruitment and adoption of codes of best practice Subsidize workers, not national airlines To reduce migration costs (con’t)

Establish credibility