Ethos Perspectives

Managing Temporary Labour Migration

Introduction
Many countries with ageing populations and rapidly developing economies experience chronic scarcities of domestic labour and have to import foreign labour to sustain economic growth and development. Large scale permanent immigration is not the only option for many of these countries as it leads to many challenges such as social integration of new migrants and increased demand on public services. Hence there is a growing reliance on and interest in Temporary Foreign Worker Programmes (TFWPs) because of their perceived insulation from these challenges.

Countries adopt different approaches to manage their TFWPs, with varying degrees of success. This issue of Ethos Perspectives examines the growing significance of TFWPs and the different approaches of managing temporary migration.

Growing Significance of TFWPs
The International Labour Organisation (ILO) estimated that in 2000, there were 86 million permanent and temporary migrant workers around the world, based on limited information sources mainly from developed countries and excluding undocumented foreign workers. Temporary migration of foreign workers into high income OECD countries has been growing at an average of 4 to 5 per cent annually since 2000, pulled up by the US’ 9 per cent annual growth in temporary foreign workers since 1997.

Most governments recognise the need for temporary foreign workers. Some of the most common objectives of TFWPs are to:

However, problems arise when foreign workers are perceived to displace local workers or are blamed for lowering wages and productivity growth. Governments have to strike a balance between supplementing local labour shortages and being seen to safeguard the interests of local workers.

Temporary Foreign Labour Admission Policies
There are different admission policies each with their own advantages and disadvantages.

Quotas, Ceilings and Ratios: These are used to set targets and limit the admission of foreign workers in receiving countries, either in terms of absolute numbers, percentages of the total labour force or ratios of foreign to local workers. They can also be set for the whole economy, specific geographic regions or specific sectors. The figures depend on the judgement of administrators, who may consult stakeholders and/or rely on forecasts and project labour demand. While quotas, ceilings and ratios can assuage public concern over the inflow of foreign workers, they may not be flexible and responsive enough to address changing labour market needs.

Levies: Levies, on the other hand, are more flexible and can be calibrated according to the sector and skill level of the foreign worker. In some instances, the levies increase with the proportion of foreign workers employed by the company. By reducing the wage differentials between foreign and local workers, levies have encouraged employers to reconsider alternatives, e.g., raising capital and technology intensity, employing inactive or unemployed local workers, or offshoring. However, governments need to overcome two main challenges in order for levies to be effective. First, a government needs to recognise that managing the levy system—including setting the levy quantum and calibrating the amounts to the skills level and specific sectors, as well as reviewing them regularly as economic and labour conditions change—requires a fair degree of micro-management. It must be satisfied that the merits of doing so outweigh the costs of the intervention. Second, there has to be effective enforcement and significant penalties for employers who employ foreigners illegally and do not pay the levies.

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