2017/SOM1/HRDWG/WKSP/017 Why Is Cooperation on Labour Mobility So Important? Submitted by: World Bank Group Workshop on the Development of an APEC Labour Mobility Framework Nha Trang, Viet Nam 18-19 February 2017
I. Why is cooperation on labor mobility so important? Issue of our time and yet. Dr. Manjula Luthria The World Bank Social Protection, Labor and Jobs global practice What s in a conjunction? OR AND AS 1
Migration AS Development - Places vs. People Total Wages Gained in Comparison to Remittances and Aid Chart Reference: Samik Adhikari and Nicholas Stellitano. Data Reference: World Bank 2010, IAB 2000, AidData 2010 Jobs to People and People to Jobs Gap Between Population Growth and Jobs Growth in Developing Countries Chart Reference: ILO Trends Econometric Models and UN World Population Prospects 2015 2
Migration can have enormous benefits for sending AND receiving areas Gains from Relative Liberalization Gains Compared to Other Interventions 40000 30000 20000 10000 0 104 156 All remaining trade liberalization 3% increase in host country labor force 39833 Full liberalization of labor markets Intervention Country PV lifetime wage increment Microcredit Bangladesh 700 4 Anti sweatshop activism Additional year of schooling Indonesia 2,700 30 Bolivia 2,250 11 Deworming Kenya 71 0.3 Weeks of US work equal to lifetime NPV Chart Reference: Hamilton and Whalley 1984; Winters and others 2003. Table Reference: Pritchett 2010 But there are risks and challenges that need to be addressed Market Failures in International Labor Markets 1. International labor markets don t clear easily reducing information asymmetries, intermediation, and preparation and selection of workers, especially at the low skill end. 2. Cost on vulnerable workers is huge creating legal pathways for mobility, regulating recruitment, and strengthening protection mechanisms for migrants. 3. Externalities identifying policy levers to foster integration, and shifting public perceptions in host countries. 3
A strong case emerges for Cooperation At national, bilateral, and regional levels Cooperation can: Solve coordination failures and lower monetary and other costs Prevent public bads Enhance benefits to sending and receiving areas Scarce Labour resources (ok but why doesn t it feel like a seller s market yet? ) Competition + Cooperation= Coopetition 4
Coopetition area 1: High-skilled Problem: seen as zero-sum game between sending and receiving countries Solution: joint mechanisms to turn Brain Drain to Brain Gain A Proposal: Global Skills Partnerships * Coopetition area 2: Mid-Skilled Problem: Frittering away a scarce resource? Brain Waste prevalent at mid skill level Solution: joint mechanisms to recognize skills and certification Proposal: Seeing is not believing! These programs need careful design 5
Coopetition area 3: Low-skilled Problem: Competition among sending risks a race to the bottom and regressive burden on vulnerable populations Solution: cooperation in lowering migration costs, support services while abroad AND creating legal pathways to move in the first place through BLAs Proposal: i) Rebrand low skill migration! ii) Technology The SPL & J global practice in the World Bank is Already Using its Operational Entry Points into this Crucial Agenda Active Labor Market Policies Social Safety Nets Protection for Vulnerable Workers Urban Integration Skilling for Employment Pensions Refugees Aging Youth Employment Productive Inclusion 6
Our policy dialogue and engagements at the country level Source countries 1. Afghanistan 2. Bangladesh 3. India 4. Nepal 5. Pakistan 6. Morocco 7. Tunisia 8. Indonesia 9. Tajikistan 10. Pacific Islands 11. ASEAN regional work 12. Guatemala 13. Belize Host countries 1. Saudi Arabia 2. UAE 3. Qatar 4. Germany 5. France 6. EU 7. Australia 8. New Zealand 9. Malaysia 10. Mexico 11. Jordan 12. Lebanon 13. Turkey Questions for discussion How do you achieve regional cooperation in a polarizing world on issues such as immigration? How do you determine what unit is feasible for regional cooperation on labor mobility issues? Is it better to do it through Bilateral Agreements? Or is it better to use a Multilateral Framework? What are best practices that can be scaled up within APEC? 7
II. How can we achieve better integration outcomes? Trillion dollars on the sidewalk New McKinsey Global Institute report on migration International migrants represent 3.4% of the global population but contribute 9.4% of global GDP Total value of the contribution - $6.7 trillion or $3 trillion more than they would have contributed if they had stayed in their country of origin Same report conservatively estimates that global output can increase by some $800 billion to $1 trillion by implementing successful measures for migrants in host countries 8
Elements of integration Spatial Immigrants settle in big urban areas where house prices are more expensive Lower ownership rates (e.g. in the UK 43% vs 68% for natives) Difficulties in accessing formal rental markets and public housing Access to services Lower access to healthcare (55% less expenditure in the US) Lower scores and higher dropout rates in most OECD countries (exceptions: Canada, Australia) Lack of proper identification Labor markets Huge wage differentials with respect to natives (40-50% less in many OECD countries) More likely to be unemployed Over-qualification is more prevalent Entrepreneurship to overcome discrimination in the labor market but lower survival rate Select measures of integration in high-income APEC countries Source: McKinsey Global Institute (2016), Global Migration s Impact and Opportunity 9
Better integration changes attitudes towards immigrants and vice-versa Perceived economic impact of immigrants 3.7 3.5 3.3 3.1 2.9 2.7 Attitudes Economy and Income Integration R² = 0.3144 SPA BEL FIN UK ICE NOR FRADEN SWI SWE GER IRE 2.5 0.6 0.65 0.7 0.75 0.8 0.85 0.9 0.95 1 Relative income immigrant/natives US POR Sources: ISSP survey on perceptions of immigration and OECD. Housing and urban planning: How can better integration be achieved? Inclusionary zoning programs (Washington D.C.). Intermediation between renters and landlords (Dublin and Antwerp). Policies to avoid isolation of migrant neighborhoods: Mobility programs, public transport (Toronto) Services Municipal IDs for undocumented migrants to access public services. Community-based outreach and multi-linguistic system. Active engagement of parents in education (Paris) Increasing quality of schools with high share of migrants to attract native students (QUIMS, Zurich). Mentoring programs ( Ethnic mentoring, Netherlands and Teachers with a migration history, Hamburg). Labor Market Introduction programs: language and cultural lessons combined with active labor market programs (ALMP) (Sweden). Targeted ALMP to migrants can have much larger effects than general ones. Promotion of immigrant networks (Bremen Mentors for Migrants) 10
Questions for discussion Where does integration begin? Should questions on integration begin from questions on entry and legal pathways? Aren t issues on entry on labor mobility issues suboptimal the way it is set up currently? Do we focus on the seeds or the soil? How does receiving country engage with its natives on immigration issues? Because clearly showing facts aren t enough! What are some promising examples of cases where better outcomes on integration is achieved and how to scale them up through regional cooperation? III. What are some Regressive Costs that hamper Mobility and Migrants? 11
The poor stand to gain the most from mobility yet they are the ones that have it the least Chart Reference: Clemens 2014 Three Regressive Costs Migration Costs Remittance Costs Costs due to Lack of Portable Benefits 12
Migration Costs What are they? Costs borne by migrants for moving to another region Why are they high? Recruitment Costs Fees charged by intermediaries connecting migrants to jobs abroad Borrowing Costs Fees charged by lenders to migrants who borrow money to go abroad Recruitment costs higher than 1 month earnings in Gulf destinations and Malaysia for (in months of earnings in destination) low-skilled migrants (by migration corridor) 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Pakistan Ethiopia India Philippines Nepal Bangladesh India Sri Lanka Pakistan Bulgaria Ecuador Morocco Indonesia Thailand Vietnam Vietnam Saudi Arabia Qatar Kuwait UAE Spain Korea Malaysia Source: Staff estimates based on KNOMAD survey data. Note: all surveyed Sri Lankan workers in Kuwait were females engaged in the domestic work segment. 13
What can be done about high migration costs? Better monitoring of intermediaries Identify existing regulation gaps Learning from best practice systems. Eg. The Case of Philippines: First labor sending country to come up with comprehensive framework for migration Migrant Workers and Overseas Filipinos Act of 1995 Imposing stiff penalties for illegal recruiters Free legal assistance and witness protection program for victims of illegal recruitment Migrant Workers and Overseas Filipinos Resource Centers in countries where there are many Filipinos Office of the Undersecretary of Migrant Workers Affairs and the Legal Assistance Fund Lower borrowing costs Better financing mechanism for migrants No Lean Season and BRAC work on migrant loans Remittance Costs What are they? Fees paid by migrants while sending money back home from abroad Why are they high? Underdeveloped financial infrastructure Limited competition Scarce transparency Regulatory obstacles Lack of access to banking sector for remittance senders/receivers Difficulty in obtaining necessary documentation to access formal services. 14
Wide variation across corridors in APEC Source: The World Bank, Remittance Prices Worldwide, available at http://remittanceprices.worldbank.org Costs due to lack of portable benefits What are they? Cost borne by migrants and their families due to lack of social security benefits such as health insurance, life insurance or pensions Why is it important? In the absence of portable benefits such as pensions and health insurance, migrants and their families could potentially suffer devastating financial losses Predominantly North-North migrants who enjoy access to and portability of social security benefits 15
Evidence gaps exist 23% of international migrants profit from BSSAs and their functioning has been little analyzed and even less assessed (Holzmann, 2016) Better understanding is needed Why don t workers claim benefits in some cases despite BSSAs? Is it due to information failure? Burdensome bureaucracy? Could a two-pronged approach work to expand coverage? High Skill Migrants More sophisticated products such as the one catering to North-North migrants Better integration in host countries social security systems Low Skill Migrants Use of migrant worker welfare funds to channel money towards emergency situations, health insurance, and pensions Ratification of human rights conventions and legal remedies against exploitation Recommendations from the WBG four corridor study on BSSAs Broaden the information base: To cover South-North and North-North migrants Conduct in-depth empirical analysis Of the current health care corridors and their financing and reimbursement mechanisms Provide conceptual and empirical deepening of fiscal fairness Particularly for pension and health care programs Create a better analytical framework To determine which benefits should get priority in BSSAs across corridors and which should be dropped 16
Questions for discussion Migration costs Is the model of no cost recruitment feasible to achieve across all corridors? Are there discrepancies between national and international frameworks that unintentionally lead to misguided approaches and create opportunities for rent-seeking? How can we build a regional approach to gather more evidence around migration cost across corridors? What are some challenges in doing this? Remittance costs What innovations in the last decade have been able to reduce costs and how are they applicable to low volume corridors? How do we get more competition in low volume corridors? Are costs just about volume? Does geography matter? Costs due to lack of portable benefits What are relevant social security instruments for mobile workers? Can they be achieved through BSSAs? What are some good practices to follow from across the globe? 17