International labour mobility Agenda item 7

Introduction Increase in international labour mobility due to opening of borders and markets, cheaper transportation, widening international contracting etc. Challenges both to measurement and to analysis of the national accounts.

Background – offshore-outsourcing, global manufacturing Growing offshore-outsourcing and global manufacturing. This does not necessarily involve labour mobility – could even lead to a decrease in the movement of labour (call centers f.ex.). However, flow of workers involved, if goods and services not easily sent across borders – constructions, personal services – or services, where there is a danger of leaks or spill-over of knowledge (R&D, innovation), which may endanger the revenues of the enterprise.

Background – services rendered by non- resident self-employed persons Services rendered by foreign self- employed persons, such as for example lawyers, architects or accountants (Mode 4 type of exports of services). May be acquired by a foreign enterprise, so that it may be problematic to estimate the value of the services. If within a multinational firm special problems of transfer prices.

Background – persons seeking employment in foreign countries Especially in professions, where skills are not country specific and language is of less importance – construction, agriculture f. ex. Some hired by foreign employment agencies, and may be compensated partly abroad. Others may work as self-employed performing short-time work as plumbers, painters, cooks etc. for households or small enterprises. May arrive as registered foreign workers, but stay on after permission expires and engage in unregistered work.

Main problems The involvement of employers or contracting agencies in other countries makes coverage and classification difficult. Unregistered employment may be widespread. The distinction between supply of services, which are part of a country's exports and imports, and compensation of employees, which is part of income may be problematic.

Impact on national accounts All have impact on GDP, productivity, final uses, income and international transfers. Impact of under-coverage of unregistered labour on GDP or productivity depends upon the ways production is estimated – if NOE estimates based on work-hours, then GDP is undervalued, but productivity may be less affected. If GDP is estimated by other means, then productivity may be overvalued.

Impact on national accounts Misclassification of trade in services as compensation of employees and vice versa will affect GDP, productivity, exports/imports, and income. Consumption expenditure will probably be most affected, since expenditure in the compiling economy of both registered and unregistered employees, and also of employed persons engaged by foreign institutions is usually not covered in household surveys, nor represented well in tourism statistics.

Definitions and statistical recommendations There are some slight deviations in inclusion and terminology used in various frameworks – in particular it should be noted that in national accounts self-employed are part of the labour force and therefore “international labour mobility” includes movement of self-employed. But definitions and recommendations are sufficiently harmonized to ensure that the population, tourism and labour statistics collected according to UN/ILO frameworks may be used in the national accounts and balance of payments without adjustments.

International information – only few databases

Country experiences – inflow data in the Czech Republic The Czech Republic has no single compulsory registration system for foreigners, so that three independent and overlapping databases operated by (a) the alien police (residence permits); (b) the employment bureau (work permits), and (c) the trade licensing offices (trade licenses) are used to obtain data. Estimates of foreigners by type - employees, entrepreneurs and non-workers (students, children and pensioners) and by country are obtained. Number of illegal immigrants not covered in the databases is estimated based on the number of expatriated foreigners.

Country experiences – inflow data in Israel In Israel there are different types of inflow of labour: Jewish immigrants, which in most cases become residents at the arrival, border workers from the Palestinian Authority, non-resident labour from countries such as Romania, Ukraine, Thailand, Philippines and China. Measurement is different for each type.

Country experiences – inflow data in Israel (cont’d) Data on work and wages of Jewish immigrants may be obtained from household surveys, since they are residents. Data on work and wages of employed persons from the Palestinian Authority are obtained from the PCBS labour force survey, which also covers activity outside the Palestinian Authority.

Country experiences – inflow data in Israel (cont’d) Data on other registered non-resident employed persons are obtained by combining various administrative data on inflow, outflow and stocks of persons entering with a work permit. In addition administrative individual data on inflow and outflow of persons entering with tourism visas are matched, and stocks of unregistered employed persons are estimated using various assumptions.

Country experiences – inflow data in Israel (cont’d) Data on compensation of registered employees is available from the National Insurance Institute. For the national accounts annual average data and distribution of unregistered employed persons and their CE by industry is estimated using partial information and various assumptions. Consumption expenditure of non-residents is estimated using household survey data for a few non-resident families covered in the survey.

Country experiences – outflow data in Moldova Detailed data on outflow of labour and remittances are measured in household surveys performed by the CBSAXA with IOM. Among other things the number of persons, who were abroad at the time of the survey and still a member of a household in Moldova are measured. The year of their first departure abroad, destination country and plans to go abroad are also measured.

Country experiences – outflow data in Moldova (cont’d) Questions on employment and income are included, and provide data, which are especially difficult to obtain, when only inflows of labour are measured. For example are data on illegal residence status and monthly income obtained. One of the surveys is conducted as a panel survey, so that the behaviour of the persons working in another country compared to their original plans may be followed over time, and their status as residents may be determined.

Measurement proposals - inflows Data on inflow of labour and CE by combining administrative data on residence permits, work permits, social security recordings, tax recordings etc. Estimates of unregistered labour by combining individual data on entrances and exits at border control under certain assumptions. Household surveys mostly only cover residents, so only a partial picture of inflow of labour. But could be extended to include some non-residents. Using enterprise surveys has not been explored, but could be a good alternative, providing data on payments and productivity. Focus on relevant industries.

Measurement proposals - outflows Measurement of outflows through household surveys may provide better measurement of work hours and wages, and give better information on the nature of employment, kind of activities, and consumption expenditure abroad. Unregistered labour abroad may also be covered. ILO labour migration module is currently being tested and seems a useful basis for such surveys, although questions might have to be added for national accounts purposes.

Measurement proposals – combining measurement in partner countries Cooperation between countries in mirror exercises with comparisons between data on inflows in one country and on outflows in another. Sharing data from enterprise surveys in partner countries, with separate data for multi- national enterprises. The data from enterprise surveys would need to include separate information on persons employed or rendering services by country. Data on relevant countries, and relevant classes of enterprises for labour mobility may be of help in establishing such cooperations.

Analysis An analytical framework for correct integration of the data in the national accounts, presented in a way that allows users to analyze the impact of non-resident labour on productivity, wages, household expenditure, GDP and national income. An extended and detailed classification of labour input with links between labour statistics, and national accounts is proposed: Use of a social accounting matrix framework as a satellite account or as a labour account integrated in the national accounts, and with added details to the core national accounts.

Details on inflow and relevant transactions Inflow of non-residents should be classified to enable the correct integration in the national accounts and the balance of payments. The classification given in MSITS 2010, where tourism and migration data are combined, could be adopted, but changed a bit. Transactions may also be classified according to residence of institutions and employed persons involved, in order to see which transactions are relevant to the compiling economy, and need to be registered in the national accounts and the balance of payments.

Other extensions to accounts Ideally labour accounts should also be detailed by partner countries to allow for international comparisons of data. A sub- classification by gender may also be helpful. Other accounts that may be subdivided to correspond to the labour accounts and allow analysis of flows linked to non- residents' activities: Accounts of production and net value added, household expenditure and income, exports and imports, income paid and received from abroad.

Conclusion The challenges to measurement and analysis due to increase in international labour mobility are not easy to overcome, and new collection of data and new analytical frameworks are needed. Existing country experience and new initiatives by international statistical agencies provide some of the solutions, but further work is needed. Important to explore international cooperation, combining different sources of data including enterprise surveys and performing mirror exercises.

Conclusion Needs for improved analytical frameworks may be met by adding SAM or integrated labour accounts to the usual national accounts, linking between labour statistics, and national accounts. The proposed framework should be tried on data from other countries with different structures of inflow or outflow of labour and services rendered by persons, to ensure that the proposal fits the various analytical problems encountered.