Catalog

Migration: A win-win proposition

The increased prominence of intraregional labor migration has been a key feature of the development of international migration in Asia. Between 1995 and 2000, 40% of the 2.6 million–2.9 million Asian migrant workers went to other Asian countries to seek employment (ILO 2006). This is quite different from the situation two decades ago, when the bulk of Asian migrant workers sought employment mainly in countries outside Asia. Widening income gaps and divergent demography within Asia explain much of this.

Migration pressures arising from demographic differences within Asia are expected to become even more accentuated in the future. During the next 10–15 years, the working age populations in the NIEs, Thailand, and even PRC are expected to shrink. Meanwhile, in most South and Southeast Asian countries, the same age group will keep on growing over the next three decades (Figure 2.3.8). These divergent population trends are illustrated in Figure 2.3.9, which shows the widening gap between the shrinking share of the working age population in East Asia and the rising share of the working age population in South Asia. A similar pattern can also be found at the subregional level, such as between Thailand and Cambodia, Lao PDR, and Myanmar, as well as between Singapore and its Association of Southeast Asian Nations (ASEAN) neighbors (Figure 2.3.10). This growing imbalance in the distribution of labor resources in regional countries is likely to serve as a powerful engine for intraregional labor migration pressure over the next two decades.

The future pattern of regional economic development is also likely to fuel expanded labor migration in Asia. Despite the recent growth pickup in most South Asian countries and some Southeast Asian labor-sending countries such as the Philippines and Viet Nam, their per capita income levels remain well below the region's high-income countries. The large income disparities between labor-sending countries and labor-receiving countries are a persistent phenomenon in Asia and will spur workers to seek employment abroad over a long period. In addition, the continuing economic development and poverty reduction in some low-income regional economies will ease the constraints that poverty imposes on potential emigrants, further driving migration pressures.

The substantial potential for intraregional labor migration created by economic and demographic fundamentals offers an opportunity for Asian countries to reap the gains through efforts toward greater integration of regional labor markets. More liberalized movement of labor, combined with the region's already significant growth, has the potential to alleviate excess demand for labor, create decent and productive jobs for millions, and facilitate further economic growth. Migration promises an improvement in the welfare of both sending and recipient economies, but to achieve it, the immigration policies of host countries must be appropriately attuned.

Dimensions of immigration policy

In the last few years, three major trends have emerged in the labor migration policies of Asia's six major labor-receiving economies (Japan; Korea; Malaysia; Singapore; Taipei,China; and Thailand).

First, policies toward immigrant workers have shifted from a reaction to short-term needs to an active structural approach to meet long-term labor demands. When intraregional labor migration started booming in the early 1990s, most labor-receiving countries had no long-term strategy. Their governments either ignored migration, or introduced temporary policy measures. The underlying belief was that the employment of migrant workers would be a temporary phenomenon associated with cyclical economic booms, and that there would be no need for long-range planning (Chantavanich 2007). However, the facts have since shown otherwise and migration has persisted. International labor migration has proven deeply rooted in the structural features of countries' growth experiences that have endured over long periods. Even large economic shocks have done little to upset migration flows. For example, the Asian financial crisis set off a series of regulations in host countries that aimed to protect local workers by stemming the inflow of foreign workers and repatriating irregular migrants. Many of these restrictions, however, had limited impact, and migrant workers again poured in during the postcrisis years.

Singapore is the first regional country to establish a conscious and explicit policy toward foreign workers. It manages migrant workers through an industry-specific quota system and the imposition of a levy on employers for the hiring of less-skilled foreign workers, with the objective of spurring economic growth but limiting dependence on unskilled migrants. Taipei,China has followed Singapore's example in building formal institutional arrangements for labor migration, but it remains at an early stage of implementation. Recently, Korea has introduced a more formal employment permit scheme to replace its industrial trainee program, in an effort to manage foreign workers more effectively. Malaysia and Thailand are moving toward a more formal policy and legislative framework for migration management, but the effects have so far been limited because of a large presence of undocumented migrant workers. Their governments have tried to bring more foreign workers into the official management system through both amnesties for and crackdowns on irregular migrants (Chantavanich 2007, Kanapathy 2006).

Second, following the global trend for increased selectiveness in labor immigration policy, Asian labor-receiving countries are adopting a more open policy for professional and highly skilled foreign workers, but are attempting to limit labor migration at lower skills levels. This has been driven by increasing global competition in attracting talented people, as well as rising concern that the large influx of unskilled and low-skilled foreign workers may create social friction. Widening domestic wage inequality between skilled and unskilled labor in most regional economies in recent years may have also contributed to barriers toward lower-skilled migrants.

The governments of host countrie manage unskilled and semiskilled migrant workers through measures such as visa controls, work permit systems, and foreign worker levies, keeping them on a transient basis, subject to repatriation during periods of economic downturn. Unskilled and semiskilled foreign workers are often confined to limited sectors or occupations, with the purpose of protecting the employment of local workers. Some countries such as Malaysia and Singapore intend to reduce their dependency on low-skilled migrant workers by shifting their economies toward knowledge-based activities (Wongboonsin 2003).

Third, bilateral agreements have been increasingly used by laborreceiving countries to liberalize and regulate labor migration. Such accords provide labor-receiving countries a country-specific, tailor-made solution to labor mobility. Through them, host economies can determine the sources of migrant workers based on their political and strategic interests or historic and cultural links. For example, Taipei,China has only recruited foreign workers from a limited number of countries, such as Indonesia, Mongolia, Philippines, Thailand, and Viet Nam, and has signed with each sending country a special bilateral agreement (Lee 2006). Bilateral agreements can also serve as an important tool to secure labor-sending countries' cooperation in managing irregular migration. This is true for example of Malaysia and Thailand, which have sought bilateral agreements with large sending countries to manage such migration and try to ensure orderly labor movement. Malaysia has signed bilateral agreements with Bangladesh, PRC, Indonesia, Pakistan, Sri Lanka, Thailand, and Viet Nam. In 2003, Thailand entered into agreements with Cambodia, Lao PDR, and Myanmar for governmentto- government recruitment of migrant workers. Korea has also forged bilateral labor agreements with Indonesia, Mongolia, Philippines, Sri Lanka, Thailand, and Viet Nam under its Employment Permit System, partly motivated by the desire to reduce irregular labor migration.

Asian regional economic integration has been associated with a rise in bilateral trade agreements that cover broad objectives beyond traditional trade policies of tariff and nontariff barriers. These free trade agreements often include provisions for services liberalization and labor mobility. For example, the India-Singapore Comprehensive Economic Partnership Agreement has extensive coverage of the movement of people and the recognition of qualifications for identified occupations and categories of workers. In addition, the Japan-Philippines Economic Partnership Agreement has incorporated a commitment regarding visa allocations for the movement of health-care workers.

The impacts of liberalizing labor migration in Asia

To evaluate the potential benefits to Asia of enhanced regional labor market integration, a simulation was conducted using a global computable general equilibrium model (Box 2.3.2). The simulation posits that labor immigration restrictions in Japan; Korea; Singapore; and Taipei,China are eased so as to raise the number of both skilled and unskilled workers in these four economies by 3% through increased numbers of migrants during the period 2007–2012. Additional migrant workers are supplied by the less-developed Asian economies in proportion to their share of the host countries' migrant population. In the baseline for the time horizon between 2001 (the model's base year) and 2012, the status quo is maintained and the share of migrant workers in the host population is fixed at the base-year level.

The simulation results show that over a 6-year period the liberalization of labor migration in high-income Asian economies leads to an increase in intraregional migrant workers by 3.2 million (Table 2.3.3). Japan receives the largest portion (62.9%) of the additional migrant workers. The vast majority of the additional migrant workers are unskilled, accounting for nearly three fourths of totals. But there are some cross-country variations. Nearly 40% of the additional immigrant workers to Singapore are skilled, while the equivalent share in Taipei,China is only 12%. In terms of the sources of these increased migrant workers, the PRC and Korea are the two largest suppliers. Yet despite a 771,000 increase in immigrant workers in Korea due to its liberalization, its emigrants increase by almost the same amount due to its large migrant stocks in Japan. The Philippines, Thailand, and the rest of East Asia are also the primary suppliers of these additional migrants, with more modest contributions from India and other South Asian countries.

Most labor-receiving countries gain in terms of real GDP as a result of the labor migration liberalization (Table 2.3.4). Korea is the only exception in which the negative impact of the emigration of its own workers due to the liberalization of migration by other countries is large enough to offset the real GDP gains due to its own liberalization. Indeed, on balance, Korea receives 57,000 additional unskilled workers, but loses 24,000 skilled workers (Table 2.3.3). All the exclusively migrant-sending economies experience negative changes in real GDP. The magnitude of the real GDP declines depends on the extent to which the fall in labor reduces the endowment of skilled and unskilled labor at home. Those countries with low migration stocks relative to their home populations (PRC, India, and Indonesia) experience lower losses in real GDP, while those sending high proportions of their labor forces experience larger losses.

The story is different for changes in GDP per capita. As shown in Table 2.3.4, in per capita terms, the labor-sending countries' GDP rises as a result of their smaller resident population and higher marginal productivity of labor inputs. The labor-receiving economies experience relative losses in per capita GDP because the migrant workers are assumed less productive than local workers.

Labor-sending economies gain in real income from the liberalization of labor movement into high-income Asia due to the increase in remittances sent home by new migrants and the rise in real wages of skilled and unskilled workers at home. The real income gains for the rest of East Asia and the Philippines are most significant, representing 1.6% and 4.3% of their GDP, respectively, mainly due to their relatively large migration flows to the four recipient economies. These gains are typically larger than those they may reap from Asia-wide regional trade liberalization.² For other labor-sending countries, the income gains range from 0.1% to 0.6% of GDP. Given the relatively small scale of the liberalization, which is limited to only four regional high-income economies, the simulation indeed confirms that easing restrictions on labor movement can bring a large boost to regional economies.

Real incomes for permanent residents also rise in three of the recipient economies. While liberalization of unskilled migrants yield the greatest real income gains for Japan and Taipei,China, for Korea real income increases because of remittances. Singapore experiences falling real incomes due to the pressures that inward migration create on skilled and unskilled wage income, relative to increasing income from capital.

Table 2.3.5 presents the impacts of migration on real wages by skills level, and decomposes them into changes caused by liberalization of skilled labor migration only, by unskilled labor migration only, and by both skilled and unskilled labor migration. It shows that the real wages of skilled and unskilled workers in Japan; Singapore; and Taipei,China fall as a result of the increase in supply of skilled and unskilled migrant labor. Though migration retards real wages, slow labor force growth would still imply rapid wage growth in these countries. Migration pares back gains, it does not eliminate them.

As others (Shi and Tyers 2005, for example) have concluded, it is unlikely that migration will be able to solve the problems associated with declining population growth rates in many of the industrial economies, although it can be used to alleviate some of the pressures. In laborsending countries, real wages of both skilled and unskilled workers rise as expected, with the largest increase occurring in the Rest of East Asia and the Philippines. The wage impacts of liberalization of labor migration are, generally, more notable in recipient countries than in source countries.

The analysis suggests that intraregional policies can offer an important alternative mechanism by which Asian economies can reap some of the gains from liberalizing migration, particularly given the likelihood that the US and Europe will continue to strictly limit numbers of immigrants. The scenario of opening up labor migration in highincome Asian economies has shown that the economic benefits to laborrecipient economies (from liberalizing the movement of both skilled and unskilled workers) outweigh the economic costs. And, although labor-sending countries may suffer from lower economic growth in the short run due to the decreased labor supply, they clearly gain in terms of higher real income when they send migrants abroad and receive more remittances. Growth in labor-sending countries might even accelerate in the long run if they reinvested a significant share of remittance income.