1. Economics of International Migration3 Jan Brzozowski, PhD Cracow University of Economics

2. Labor market effects of migration where do migrants work? are they taking natives’ jobs? Cases: Gulf States and immigration, Poland after 2004: labor market structure and effect of postaccession

3. where migrants work? Segmented labor market theory: immigrants work in so-called 3D Jobs (difficult, dirty and dangerous) Immigrants employed in the poor-paid, menial and less prestigious occupations which natives do not want Immigrants are oriented toward home countries: they want to stay in host country for a limited period and return home to increase their social status and welfare

4. This is theory, but what about reality? Immigrants are heterogenous They differ in socio-economic context of reception, size, gender, age, education, skills Some have access to social capital (migrant network theories), while others (f.i. refugees) do not The labor market at host country might be heavilly regulated (with blocked mobility for foreigners), or relatively open and unrestricted The labor market at sending country might be also segmented, unnatractive for natives or mismatches in certain occupations might exist

5. GCC States and immigration GCC: Gulf Cooperation Council (est. 1981), formed by Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates Relativelly new countries of immigration (see maps) Specific socio-economic characteristics (welfare effects of Islam, role of women)

6. Oil revenues Before the discovery of Oil Middle East countries were poor and undervedeloped (no industry, underpopulatedd desert areas with few natural resources, few elites and masses of poor peasants) Oil discovered first in Bahrain (1932), than in Saudi Arabia (1938), finally in Oman (1967) Poor development of Oil sector before 1973 (colonization, global oligopoly of Western oil companies) Dynamic growth after 1973: oil crisis and the increase of oil revenues for the Arab producers

7. Immigration pioneer: Kuwait Kuwait: traditional trade center and pearl producer Decay of traditional economy due to WW1 and global economic recession Oil discovered in 1937, but the exploration delayed by WW2 After 1945 rapid expansion due to the British investments: foreigners accounted for 53% of Kuwait total population in 1963

8. Oil crisis OAPEC (Organization of Arab Petroleum Exporting Countries) oil embargo 1973-1974 Prices rise from 3 to 12 USD per barrel Nationalisation of oil companies: Arabs regain control over their oil reserves

9. National and foreign labor force

10. Saudi Arabia and Qatar: foreigners as % of workforce

11. Why such rapid inflow of immigrants? Growing demand for fast infrastructure construction and development As education and training of nationals would delay the modernization process (the effects of such policies would be visible after 10-20 years), the development policy based on short-term labour migration was developed

12. GCC labor market peculiarities Low participation&employment rates among nationals Segmentation and differentiation of labor markets Domination of immigrant labor in certain sectors Kafala system

13. Low participation&employment rates among nationals Rate of employment among Saudis remained stable between 2008 and 2012 (32-36%) Rate of male employment is lower than Western standards, but relativelly high: 61% Female employment in 2008 was 11.5% (!) Immigrant male employment rate: 94.2%, female 40.8% Other GCC states average employment rate higher but lower than in the West (40-50%), and female employment smaller (20-40%)

14. Why the employment rate is so low? Why the male employment rate is so low?

15. Oil welfare state Before the Oil boom: smal population size of most GCC states, the Islamic commitment to the poor (zakat rule, etc.) and poor education Rapid growth after 1973: the native population unable to acquire neccessary skills for the modernization of national economies Several sectors dominated by foreign workers State: distribution of oil wealth to the native population throug bureaucracy apparatus

16. Kuwait in 1980s: state controls 100% of oil sector, 60% of commercial and industrial companies, 25% of banks, and owns 99% of land State becomes the largest and more powerful employer Estabilishment of state institutions that provide generous welfare benefits, goods and services to nationals: growing demand for immigrants that work in this system (administration, healthcare, education, transport etc.) Publicly subsidized: petrol, electricity, water, housing and even food

17. Segmentation and differentiation of labor markets Dominance of state on the labor market Public sector: higher wages, flexible and shorter (than in private sector) working hours, higher social entitlements, generous retirement benefits 72% nationals work in public sector in Saudi Arabia(2008) and 87% in Qatar Nationals prefer to remain without jobs and wait for job vacancy in public sector than to work in private one

18. Private sector Relies mostly on immigrants Dominance of foreign workers both at the bottom and peak of employment pyramid Bottom: manual laborers that receive lower pay than nationals, but are better trained and more flexible Cultural barriers: jobs like taxi-drivers, food-service, housework pertain to foreigners (MENA and Asia)

19. But also skilled jobs are taken by immigrants… Local workers in GCC countries lack technical skills University graduates in the region – mostly in humanities and social sciences, too small number of physycians, engineers Immigrants comprise 97% of workers in private sector in Kuwait and Qatar and 99% in UAE

20. Domination of immigrant labor in certain sectors Qatar most important economic sector in 2009 was construction 44% of total employment, almost 100% immigrants Wholesale and retail in Saudi Arabia - ca. 80% immigrants Housekeeping in UAE- 95% immigrants But there are also skilled occupations: Financial services in Kuwait – 83% immigrants Health sector in Qatar – 83.1% immigrants Education in UAE – 73% immigrants

21. Kafala system System of temporary labor recruitment Immigrants are recruited by „sponsor” (kafeel) Foreign worker highly dependant on sponsor, who can finish the contract very easily (they cannot quit the job and look for another one!) Almost unlimited supply of labor from Asia and MENA countries High downward pressure on wages, limited workers rights, no access to citizenship and limited possibility of family reunification Abuse of workers rights, growing black market and massive illegal immigrant population Some changes imposed in Kuwait and Bahrain, but with limited effect on workers’ rights

22. Immigration management Contracts were terminated not only in the times of the economic slowdown/recession 1st Gulf War (1990): expulsion of ca. 2 million Arab workers and their dependants (mostly Palestinians) 2nd Gulf War (2003): expulsion of Arabs from countries that supported Iraq (1.5 million, mostly Yemenians) Replacement: massive inflow from India, Philipines, Bangladesh, Sri Lanka, Pakistan, Indonesia (1.1-1.3 per year to GCC region in 1990s)

23. Is immigration really temporary? 28% of immigrants in UAE reside in this country for more than 10 years Mostly Arabs (Egypt, Syria, Jordan and PA) But also new trend of settlement from Pakistan and India (immigrants who came with their families)

24. Limits to growth… Reliance on massive low-skilled immigration is a dead-end road Even wealthy GCC states are unable to mantain a welfare system in which most of the nationals do not work Government expenditures skyrocket: in Kuwait, government expenditures are expected to exceed oil revenues by 2017/2018 (these estimations did not include current oil price drops)

25. Poland after 2004: labor market structure and effect of postaccession Different perspective: sending country Migrants rights: citizens of the EU, beneficiaries of the free mobility principle Post-socialist labor market structure: mismatches Demand at destination: secondary sector, glass ceiling TBC – next class