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Labour Migration and Manufacturing Employment in the South

Date
Time (GMT +01) 00:00 23:59

Speakers:

Christian Dustmann, University College London

Adama Konseiga, University of Pretoria/ ZEF, Bonn

Kunal Sen, University of East Anglia

Francis Teal, University of Oxford

Chairs:

Dirk Willem te Velde, Overseas Development Institute

Oliver Morrissey, University of Nottingham


Two speakers addressed the topic of international labour migration. Adama Konseiga (University of Pretoria/ ZEF, Bonn) presented on regional integration beyond the traditional trade benefits - labour mobility impacts between countries of different level of development in West Africa. His study looked into the case of Burkina Faso and Côte d’Ivoire (his presentation is divided into two parts* part I and part II). Adama emphasised migration as a driving force for regional integration, more so than trade in goods. While the issues of migration were somewhat neglected in the WTO framework, the labour force in Burkina Faso accounted for 30% of the export earnings similar to the contribution of cotton to the economy. While Cote d’Ivoire, the regional polar economy, largely benefited from trade in goods, the picture of very unequal distribution of benefits changed if migration was included, Adama Konseiga explained. In the study he presented, Adama Konseiga looked into income sources of households in several districts in Burkina Faso and Cote d’Ivoire. Migration showed as main source of income for nearly 22% of households. Even though agriculture was the main economic activity, it only provided for the main income source in 0.4% of the surveyed households. Migration also proved important in terms of technology adoption. On the downside effects, the intra-regional brain drain had negative effects on economic growth – a trend that was not true for migration to developed countries (mostly France in the case of Burkina Faso). As a policy recommendation, Adama Konseiga emphasised the importance of free movement of labour within the West African Economic and Monetary Union (WAEMU). Policy makers should be encouraged to identify alternative destinations for migrants, develop the local labour market and address issues of brain drain.

Points raised in the discussion addressed the effects of currency fluctuations in the broader region of West Africa, outlining the impact it had e.g. on migration from Ghana to Nigeria. Other points raised were pull-factors for migration and issues of how to measure expected income.

Christian Dustmann of University College London presented his work on remittances, home investments, and return options of migrant workers. In his presentation, Christian Dustmann argued that decision-making of migrants was based on their own perception of the duration. The discussion from a host country perspective could be differentiated between permanent and temporary migration. We could distinguish between contract migration (for a fixed period) and return migration, the latter depending on decision of migrants to return to their home country. Apparently, more than 20% of non-OECD migrants and 50% of OECD migrants in the UK return home after 4 years. The prospect of returning home has potentially large impact on work efforts, consumption, savings, and human capital investments. Decisions, Dustmann emphasised, were largely individual and also influenced by the situation in the host. For temporary migrants, the situation in the home country is of high importance in their considerations on investments, savings etc., as they are likely to postpone consumption into the future (unlike permanent migrants). Christian Dustmann illustrated his point on investment in human capital based on the example of language proficiency of migrants in Germany. The investment, he argued, was highly dependent on the prospect of staying or returning, as German language proficiency for the second generation was only a rational investment if a future in the German language area was envisaged.

Subsequent discussion on Dustmann’s presentation focused on the definition of ‘temporary’ vs. ‘permanent’ and the management of migration. Even though return migration could be assumed to be substantial, there was a scarcity of data on the issue. Data collection was a general difficulty in the topic of migration; it obviously only included recorded migration. The decisions on investments, savings, etc. of illegal migrants can be assumed to follow the lines of temporary migrants, as they had to include the risk of being sent back. The ‘guestworker’ phenomenon was addressed, which had been intended to be temporary and thus had effects on second generation migrants. Refugee migrants, on the other hand, could be expected to invest more in human capital (as data from the US census showed), because the return option was blocked for political reasons in the home country. Other issues discussed were:
• the effect of migration on sending countries: What would be benefits of an ability to move around?
• the likely effect of outsourcing on migration flows: limiting migration?
• the phenomenon of seasonal migration and its distinctness from considerations of temporary/ permanent migration.
• Perception was an important point in decision-making, not the actual duration of migrants in the host country.

The second part of the seminar addressed the topic of international trade and manufacturing employment in the South. Kunal Sen, University of East Anglia, presented on Trade and Labour markets - What are the policy implications? His work was based on four country case-studies: Vietnam, Bangladesh, Kenya and South Africa. With the third wave of globalisation in the 1980s and rapid expansion of North-South trade, there was concern this change manifesting itself in loss of ‘good’ jobs in the South and gains mainly in the field of ‘sweat shops’. Sen therefore addressed the issue whether trade had created or destroyed jobs. More in detail, he looked into questions on whether trade had affected the size of sectors (scale effect), altered the shares between labour intense and less labour intense sectors (composition effect), or changed the labour coefficients within sectors (process effect). The results of his four case studies showed very different results for individual countries. With regard to job creation or loss, a continental divide could be observed which could not be explained by increases in resource-based exports in the two African countries. While Bangladesh and Vietnam shifted to labour intense production, this was not true for Kenya and South Africa. The shift to labour intense sectors had a high effect on female employment in Bangladesh and Vietnam; this effect was not to be observed in Kenya. Trade resulted in a significant increase in jobs in Bangladesh and Vietnam while it had a positive effect on productivity in South Africa, leading to a displacement of jobs in that country. Effects on Kenya, on the other hand, were a fall in productivity and decreasing employment. A possible explanation was government policy and institutions.

The issues raised in discussion addressed the data situation in the case studies. Also discussed was the question of land vs. labour endowment and its impact on the size of units of production.

In his presentation, Francis Teal of Oxford University looked into the policy implications for trade and labour markets. He outlined the relevance of the topic for poverty reduction. Francis Teal presented figures on urban employment in Ghana, Tanzania, Uganda, urban Ethiopia and South Africa. Figures on Ghana, Tanzania and Uganda showed an explosion in self-employment (the informal sector), due to a failure to create new jobs. For Ethiopia and South Africa, figures showed high unemployment rates. For all countries, the figures showed an increase in the private sector employment, while the wage economy remained stable (stagnant) overall. The data for Ghana was then presented in more detail drawing on firm and labour market data. Overall the data showed no change in labour productivity over the 1990s. Larger firms showed much higher labour productivity and wages than small firms so the shift to small enterprises which had occurred implied lower average labour productivity and lower wages in the manufacturing sector. Wages, as compared to Asia, were similar, but the relationship looked more favourable in terms of competitiveness for Africa when bigger enterprises were excluded from the figures. However, larger companies were the companies that were most active in export markets, while small firms (such as garments) failed to export. Teal pointed out that wages were lower in Africa than in Asia for companies that did not enter. As a result, one would have to either raise total factor productivity or lower wages in large firms in Africa so as to gain competitiveness. Teal also argued that there was a surplus in land and labour; Ghana for instance was capable of substantially increasing its exports in cocoa in the last two years while, at the same time, employment in that sector decreased.

Subsequent discussion evolved around the causes for only big companies exporting from Africa, the causes for which were seen in institutional impediments and infrastructural problems. Low quality could also have to do with the institutional environment, as testing and certification systems could have an impact on the competitiveness of products. Other discussants pointed out the important effects of linkages (through outsourcing in Asia) rather than absolute size of companies. The importance of science and technology remained controversial, as did the claim to reduce wages for certain employment, or the role of trade policy in this situation.

Description

International trade and skill-biased technological change have been traditionally viewed as two competing explanations of the rise in wage inequality observed in the UK and the USA. In recent years, however, new theoretical work calls for a re-questioning of the assumption that skill-biased technological change is exogenous to international trade. The workshop in Nottingham will give specific attention to the relationship between trade, technology and labour markets.