Labour shortages could cost US$10 trillion if worker flows aren't better managed

Corrupt practices surrounding migrant workers are exacting a high economic price from Asian countries that depend on international labour

PUBLISHED : Wednesday, 30 July, 2014, 11:43am
UPDATED : Thursday, 31 July, 2014, 1:16am

Severe and imminent shortages of labour across the Asia-Pacific will cost the global economy no less than US$10 trillion between now and 2030, says a Boston Consulting Group report. ( The Global Workforce Crisis: US$10 Trillion at Risk).

There are lots of reasons why these shortages are becoming acute - from ageing populations and declining birth rates to poor education and vocational training - but a key part of the solution is a widely ignored subject that needs urgent attention: the effective international management of the movement of labour to fill the gaps where skill shortages are most acute.

According to the International Labour Organisation (ILO), there are about 105 million migrant workers around the world, with about 30 million of them working across Asia.

[Migrant workers] play a critical role in keeping our economies competitive

They are looked upon by many as pariahs, but in reality they play a critical role in keeping our economies competitive.

We allow all kinds of corrupt practices to thrive around them. Immigration officials treat them with deep suspicion. As a result, these huge and critically important flows of skills to where they are urgently needed are poorly and inconsistently managed, at huge cost to our economies.

For more than a decade, business leaders in the Asia-Pacific Economic Cooperation Business Advisory Council (Abac) have battled for the issue to be addressed.

As skills shortages have got more and more acute - in particular in areas like construction, agriculture, low-level manufacturing, health care, elderly care and domestic help - Abac has been frustrated at every turn.

A large part of the problem is that proper management of the international movement of workers is so often muddled up with migration.

Abac has tried tirelessly to be clear: this is nothing to do with migration. These workers in due course return to their home economies. What we are talking about is the elimination of an opaque and corrupt process for issuing visas and exorbitant "recruitment fees" that slip into the pockets of middlemen and result in workers often taking years to pay off debts.

The ILO's Convention 181 on private employment agencies says all recruitment fees must be paid by an employer. In Asia, only one economy has signed - Japan. The result of this opacity and corruption is hardship for millions and a high economic price for the economies that depend on international labour - whether as recipients or suppliers of workers.

The scale of our dependency on these workers that smooth the skills shortages around the region is hard to overestimate. They account for 35 per cent of Singapore's workforce and 16 per cent of Malaysia's. In Thailand, with an estimated 2.5 million foreign workers, about half are "undocumented" - which means they are working illegally as a result of these opaque and corrupt management practices.

For economies like the Philippines or China, contributions from overseas workers are fundamental to balancing the books. Remittances to China amount to US$61 billion a year and to the Philippines about US$24 billion - 12.6 per cent of the country's gross domestic product.

And for those economies that think this is someone else's problem, think again.

According to the Boston Consulting study, China, with a 55 million labour surplus today, will have a deficit of more than 24 million in 2030. Severe labour shortages will emerge in Australia, Canada, Japan, Korea and even Mexico.

For Abac, a new initiative called "Earn, Learn and Return" is being presented to Apec leaders to address this problem.

It wants to see standard visa processes and Apec Worker Cards. It calls for fees to be paid by employers, not workers.

It calls for standard benefits for all workers while they are overseas, including health insurance and pension benefits.

All these things now work for seafarers on the world's merchant fleet. There is no reason why they can't work seamlessly elsewhere.

If Abac succeeds, then millions of workers will be liberated from abuse and corruption. If it fails, then Boston Consulting may be right - we will squander US$10 trillion of our GDP between now and 2030.

David Dodwell is the executive director of the Hong Kong-Apec Trade Policy Group