___________________________________________________________________________

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

3/2/2017

1

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

3/2/2017

2

Migration AS Development - Places vs. People

Chart Reference: Samik Adhikari and Nicholas Stellitano. Data Reference: World Bank 2010, IAB 2000, AidData 2010

Total Wages Gained in Comparison to Remittances and Aid

Jobs to People and People to Jobs

Chart Reference: ILO Trends Econometric Models and UN World Population Prospects 2015

Gap Between Population Growth and Jobs Growth in Developing Countries

3/2/2017

3

Migration can have enormous benefits for sending AND receiving areas…

Chart Reference: Hamilton and Whalley 1984; Winters and others 2003. Table Reference: Pritchett 2010

104 156

39833

0

10000

20000

30000

40000

All remainingtrade

liberalization

3% increase inhost countrylabor force

Full liberalizationof labor markets

Gains from Relative Liberalization

Intervention Country PV lifetimewage increment

Weeks of US work equal to lifetime NPV

Microcredit Bangladesh 700 4

Anti sweatshop activism

Indonesia 2,700 30

Additional year of schooling

Bolivia 2,250 11

Deworming Kenya 71 0.3

Gains Compared to Other Interventions

Market Failures in International Labor Markets

1. International labor markets don‘t clear easily

reducing information asymmetries, intermediation, and preparation and selectionof workers, especially at the low skill end.

2. Cost on vulnerable workers is huge

creating legal pathways for mobility, regulating recruitment, and strengtheningprotection mechanisms for migrants.

3. Externalities

identifying policy levers to foster integration, and shifting public perceptions inhost countries.

But there are risks and challenges that need to be addressed

3/2/2017

4

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

3/2/2017

5

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

3/2/2017

6

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

3/2/2017

7

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 countries1. 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?

3/2/2017

8

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

3/2/2017

9

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”

3/2/2017

10

Better integration changes attitudes towards immigrants and vice-versa

BELDEN

FIN

FRA

GER

ICE

IRENOR

POR

SPA

SWE

SWI

US

UK

R² = 0.3144

2.5

2.7

2.9

3.1

3.3

3.5

3.7

0.6 0.65 0.7 0.75 0.8 0.85 0.9 0.95 1

Per

ceiv

ed e

con

om

ic i

mp

act

of

imm

igra

nts

Relative income immigrant/natives

Attitudes Economy and Income Integration

Sources: ISSP survey on perceptions of immigration and OECD.

How can better integration be achieved?• Housing and urban planning: • 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)

3/2/2017

11

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?

3/2/2017

12

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

3/2/2017

13

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 low-skilled migrants (by migration corridor)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Paki

stan

Eth

iopi

a

Indi

a

Phili

ppin

es

Nep

al

Ban

glad

esh

Indi

a

Sri L

anka

Paki

stan

Bul

garia

Ecu

ador

Mor

occo

Indo

nesi

a

Tha

iland

Vie

tnam

Vie

tnam

Saudi Arabia Qatar Kuwait UAE Spain Korea Malaysia

(in months of earnings in destination)

Source: Staff estimates based on KNOMAD survey data. Note: all surveyed Sri Lankan workers in Kuwait were females engaged in the domestic work

segment.

3/2/2017

14

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.

3/2/2017

15

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

3/2/2017

16

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

3/2/2017

17

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?