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Crisis, employment, and migration

Dilip Ratha's picture

Last week I participated in the World Economic Forum Global Redesign Summit at Doha (see program ). In a brainstorming panel, the kind where you hit your head against the wall, I was asked the following question:

Photo © Yosef Hadar / World Bank
Following the economic crisis, how can countries boost the employment intensity of economic recovery? And how might win-win migration arrangements among developed and developing countries be stimulated through international cooperation?

Despite the leftist tone of this question, it is important to note that being pro-labor does not imply a bias against capitalists. My response to this question can be summarized as follows:

1) Let labor markets work
2) Let's make realistic policies but not lose the long-term perspective
3) Let's think on a global scale.

Many countries have responded to the crisis by erecting explicit or implicit barriers to foreign workers so that jobs can be protected for native workers. For example, some companies that received fiscal help from governments were also told not to hire foreign workers. Indeed, in the US, the H1-B quota for migrant workers has not been filled yet after some 9 months – in 2008 and 2009, this quota was filled in less than a week (see blog post ). Many countries are reducing immigrant worker quotas. Many countries in Europe are offering free tickets and then some free money to migrants to go home, hoping that would ease competition in the job market.

What is forgotten in the process of erecting such protections is that there is a trade-off here, between short-term recovery and long-term growth, between saving the businesses and saving native employment, between national recovery and global recovery. An employer facing weak and falling revenue needs low-cost inputs and low-cost workers. Migrant workers on average are more flexible, less expensive and more qualified than a so-called native worker. If we give the choice to an employer, he or she would probably prefer not to fire migrant workers. We should allow that choice to the employers. We need businesses to survive so that they can be the engine of recovery out of the crisis. And they must also be the engine of growth and employment generation in the long-term.

Of course in the short-term such employer-friendly policies may not prove to be politically difficult to implement. Unless we can sell the idea of migration as a win-win to the political constituents. Perhaps that is easier done in countries such as Qatar or the UAE or Singapore. But we need to do a better job of highlighting the benefits of migration to destination countries in Europe and the US. And here I would like to also include destination countries of the South – India, South Africa, Russia, Cote d’Ivoire, Malaysia. Remember – south-south migration is larger than south-north migration. We also need to highlight migration as beneficial to sending countries as well. Migrants from developing countries sent $316 billion dollars last year in remittances – that is more than 3 times the size of ODA. The flow of remittances fell only 6% during the peak of the crisis, much smaller than the 35% fall in FDI and near collapse of private debt flows to developing countries. In some cases remittances actually rose during a crisis – for example, in Haiti. Remittances provided a lifeline to the poor people and poor countries world over. The crisis has highlighted the important role played by remittances in providing a cushion for external payment imbalances. In the Philippines, they were instrumental in improving the sovereign rating by a couple of notches, which would translate to perhaps a 100 basis points in interest savings. In Nepal, remittances from India help Nepal maintain its exchange rate anchor. In Sri Lanka, the children of remittance-receiving families have higher birth weight. In Morocco, households with migrants abroad have lower fertility rates.

Migration is truly a global public good. It has implications for global development and prosperity, as we discussed. It also has implications for health, education, investments, climate change, security and demographic change. Migration is set to increase in future. We need to prepare for that now. We need to prepare potential migrants in Africa and other labor-surplus economies the risks and obligations of undertaking migration, and train them for global job markets of the future. We also need to prepare aging societies how to live with the help of strangers. And we need to understand why immigration policies – barriers in most cases – are not working, because they are not based on the root causes of migration.

Any time is a good time for investing in education and skill building. This is especially true during a crisis. It is important to ensure that poor people are also included in the education investments.

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A summary of the opening plenary can be accessed from here and  click here  for a summary of the concluding plenary.