• Australia
    • Sociology
    • The University of Sydney

    SALVATORE BABONES replied 25th Apr '13:

    Foreign workers undermine national labor markets

    While the use of foreign workers may be called for in certain special circumstances, in most cases the use of foreign workers leads to serious abuses.  In most cases, foreign workers are brought in explicitly to keep wages low, not to fill a niche skill need.  For example, US farmers make use of Latin American workers and often keep them in slave-like conditions.  Conditions for foreign construction workers in the Persian Gulf region can be just as bad.  In both cases the argument is that domestic workers are not available, but that statement must be qualified: domestic workers are not available who are willing to work under such terrible conditions for such low wages.

    Of course, for companies the use of foreign workers is a win-win situation: they get to use the infrastructure of a rich country while paying the wages of a poor country.  But what's good for companies is not necessarily good for society.  What does the host country get from the presence of abused foreign workers?  Low wages and lost jobs.  What does the labor-exporting country get?  Remittances that we know from research tend to be spent on prestige goods rather than on truly developing the local economy.

    When employers are forced to build infrastucture to support their operations in poor countries, everyone benefits (well, except the employer).  The poor country benefits from better infrastructure and more jobs.  The rich country is not inundated with hundreds of thousands of non-citizens.  Each country can develop in a more sustainable fashion.

    Look at some typical foreign worker situations.  Hong Kong imports thousands of Philippina maids.  This depresses low-end wages in Hong Kong, engenders mass sexual abuse of maids, and tears up families in the Philippines, where many children must grow up without their mothers.  What are the benefits?  Cheap labor for already-rich Hong Kong households and remittances to the Philippines.  Better the Philippines kept its working-age women and found jobs for them at home.

    The UAE imports thousands of construction workers to build buildings for thousands of western and Asian ex-pat professionals.  What do UAE nationals get out of the deal?  Very little.  Emiratis are marginalized within their own country.  Yes, very wealthy Emiratis benefit enormously, but many ordinary Emiratis end up in no-show government positions or on welfare.  Better they worked -- even in construction.

    Even for high-wage skilled professionals the analysis is the same.  Many Indian programmers work in the United States.  Americans bemoan the fact that their children don't want to study mathematics and engineering.  But why should they?  Wages are much lower for engineers in the US than for marketing executives.  Students aren't stupid.  They go into marketing and banking, where wages are not depressed, rather than engineering, where they are.  Cut off the supply of engineers, and India would develop faster (its engineers would stay at home) while American wages rise.

    Of course, there are people who benefit from international labor migration: the employers and the employees.  The employers benefit from access to cheap labor.  The employees benefit because they typically have so few options in their home countries that even an abusive foreign workplace can be attractive.  But these people should not be allowed to benefit to the detriment of society -- and often to the long-term detriment of themselves.

    Labor migration is an end-run around the real challenges of development.  It tears apart families, leads to inherently abusive working relationships, and does nothing to develop either the host or the sending country.  Yes, it's very nice for companies.  But the point of social policy should not be to make employers wealthier.  I have nothing against employers, but of all the people who need government's help, employers of foreign workers are not top of the list.

    Some people will say that not allowing foreign workers in will lead to companies moving offshore to poorer countries.  To that I say: good.  The movement of capital from richer to poorer countries is a good thing that reflects a well-functioning world-economy.  Yes, it can be painful.  But if the cost of keeping a company on-shore is that no one from the host country gets a job anyway, and on top of that wages in related industries are also depressed, I don't see the point.  Move production off-shore.

    In the end, the question (as so many questions) comes down to: what is the social good?  The individual good of foreign workers for employers is easy to see.  The social harm is more diffuse.  I am certain that the social harm far outweighs the individual good.  I admit that this is difficult to demonstrate, but I affirm that it is very clearly the case.

    Should companies refrain from hiring foreign workers?  No.  Companies should seek to make a profit.  But governments should prohibit this practice, or better make it so expensive that only those jobs for which foreign workers are truly necessary are filled by foreign workers.  For example, a doubling of the employer-paid social insurance taxes for foreign versus domestic workers would ensure that companies only fill positions with foreigners when absolutely necessary.

    We should not vilify corporations for doing what we legally permit them to do. But we should change the legal environment to make it very costly to import foreign workers.  Incentives are the key.  Economic incentive structures should always favor pro-social behaviors.  When they do, everybody wins -- well, except for the poor employer, who must now pay socially reasonable wages!


The most unfortunate thing about any transnational movement that could ever exist, whether it be of workers, money or information is the lack of transparency. Hidden agendas and conditions on which these movements are based, can destroy an individual, his family and, perhaps, a nation. With a system of openness in both exporting and importing countries, where there is robust information collection, processing and dissemination to the relevant persons, especially the prospective imported worker, the issues would work themselves out; wouldn't you say, Salvatore?

I recall a story of a wealthy male developer who advertised a vacant post for personal secretary/ assistant. It was subsequently revealed to the successful female applicant, that she would have to attend to the developer's intimate needs as well. Offended, the successful applicant turned down the job, and told one of her girlfriends about this experience, and the salary which was on offer. Attracted to the salary, and drive to use her "talents", the girlfriend successfully applied for the same job, and eventually became the wealthy wife, and now wealthy widow of this man who may have appeared exploitative. But at least, he openly laid down his terms, which, perhaps, had some prudence to them. And isn't that what business is about, prudence?

In my considered view the importation of foreign workers should be absolutely free. This must be ensured by the state authorities of the host country.It is a great sacrifice for a worker to go to another country to work. He/she therefore must be compensated handsomely and paid same wages as the worker of the host country.

Foreign workers often face xenophobia to a large extent from local societies, usually originating from the myth that they are taking jobs from locals. Yet, why do governments allow influxes of foreign workers, in some cases, unskilled foreign workers? The answer frequently lies in a shortage of labour, that to some extent may be real. Still, foreign workers are workers and should be respected as such and treated equally under local labour laws. The importation of foreign workers depends on the government's labour, immigration, trade and investment policies. It also hangs on a government's economic agreements internationally. Whether to allow a free or restricted flow of foreign labour into a country is, undoubtedly, a government's responsibility. The effective implementation of such policies, would require the establishment of proper immigration controls to regulate the entry of numbers of foreign workers according to the deemed economic and developmental needs of a country. It is still important to ensure low local unemployment rates before considering opening the floodgates to foreign labour. Nonetheless, the legal protection of labour and human rights should not be displaced for local or foreign workers. There should not be any double standards, as foreign workers also contribute to the economic enrichment of a country, by becoming consumers of goods and services in the home market, as well as participants in development of a country.
Using foreign labour merely to 'under-cut' the cost of local labour is wholly counter-productive. It creates more problems, in fact, destabilizes the economic, social and political system of the country. To balance the demand for foreign labour in face of local unemployment, wages and other employment benefits for foreign workers should be kept on par with those given to local workers. This will reduce opportunities for unfair exploitation of workers and discourage the use of cheaper foreign labour by employers that seek to cut-costs instead of finding other ways to sustain their competitiveness. The recognition of and respect for rights can really create a win-win situation for all stakeholders, including foreign workers.

I suspect local value systems per region plays a role. That is not to say that the values are positive, some are self destructive values, but it is easier to hide behind such values; than put the effort to progress towards productive cycles.

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