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Economics of mobility thrives on rising demand

While the developed countries will face workforce shortages of around 40 million by 2020, developing nations will have a surplus of about 700 million workers, writes Saikat Neogi.

india Updated: May 07, 2007 23:04 IST

-The US workforce will be short of five million workers by 2011 and 36 million by 2031.

-Germany has to bring in 1.2 million immigrants annually to avoid labour shortage due to its ageing population.

- Japan will need 600,000 immigrants a year to make up for the shortfall in its workforce later this decade.

While the developed countries will face workforce shortages of around 40 million by 2020, developing nations will have a surplus of about 700 million workers. The International Organisation of Migration says this demand and supply equation will further propel legal and illegal migration from developing countries.

But restrictions imposed on migration of unskilled temporary workers, especially to the developed countries, have opened up new vistas for international criminal networks. Havocsope, estimates that human trafficking and smuggling is a $42 billion industry and growing. In the US alone, there are currently 110 lakh illegal immigrants and another 5 lakh add up every year.

Illegal immigrants represent a considerable cost to the host countries, which have to pay for everything ranging from their healthcare to deportation. And illegal immigrants have to earn enough to pay their touts or stay as bonded labour. The International Labour Organisation estimates that in 80 per cent cases, the first two years' income of illegal migrants is pocketed by touts and around 40 per cent of them are debt-bonded for life.

Is there a win-win situation for both the host and sender country? Rakesh Mohan, deputy governor of the Reserve Bank of India says legal migration would mitigate the problem of ageing in developed countries, increase productivity, and generate higher tax revenues and social security contributions.

What is the way out? In a World Bank working paper economists Mohammad Amin and Aaditya Mattoo argue that guest workers' schemes under the WTO agreement can help reduce the level of illegal migration by opening up the legal route.

Even labour surplus countries have a stake in making migration legal. The Global Commission on International Migration suggests that the sending countries must keep a check on touts and recruitment agencies and impose heavy penalties on those facilitating human trafficking.

Migrants contribute to both the host and the sender country. The World Migration Report 2005 says that migrants in UK alone contributed $4 billion more in taxes than they received in benefits, while the World Bank estimates that in 2006 developing countries received nearly $64 billion as remittances. These funds can be used to finance development projects to create productive employment as in Mexico, where they are responsible for almost 40 per cent of the capital investment in small enterprises, which employ around 80 per cent of the country's workforce.

At a time of growing resistance to migration in some receiving countries, the World Migration Report highlights the need for the socio-economic inclusion of migrants into host countries, even if this is on a temporary basis. These measures, the report says, may come with a price tag but will productively channel migrants' efforts for the benefit of both the host and home country.