Open letter to APEC leaders

Subject: Labor Mobility in Asia-Pacific

EXCELLENCIES:

If there is an elephant in the room when you meet for the 17th APEC Leaders Summit in Singapore on November 14th, it may well be the issue of temporary worker migration or international labor mobility. I am aware that the issue engenders trepidation with each of you, especially at this time when you are coping with recession or fears of recession at home, and when protectionism and xenophobia are lurking outside every government house from Canberra to Washington. For you to find it on the agenda of your annual “tete-a tete” might be as difficult as finding durian in season in November in Singapore.

Your aversion to the subject is what one is led to expect because of the attitude taken by APEC Senior Officials (who shape what they think you should be talking about) when this topic was presented at a symposium upon my urging by the SOM Chair as a possible subject of discussion in this APEC year. The comments ranged from who is going to do it since APEC officials and the Secretariat are so busy to who really cares.

Yet a report commissioned by the APEC Business Advisory Council (ABAC) and carried out by the University of Southern California’s Marshall School of Business makes a convincing case that APEC Leaders – and indeed the APEC official system – ignore or sidestep the labor mobility issue at their peril. The study in fact begins with this observation:

“Few subjects make politicians, policy makers, and citizens more uncomfortable than the issue of migration, in general, and temporary workers in particular, especially in times of recession.  Fears of job losses, the lowering of local wages, and unwelcomed burdens on social services, quickly push reasoned discussions of the economic benefits of temporary workers from the public agenda.  But real shortages of skilled and unskilled workers exist in many APEC economies, even during this recessionary period. And these labor shortages are predicted to become increasingly more critical with time. Policies and programs that facilitate temporary worker movement stand to produce real economic benefits, and do so in an inclusive way.  Much is lost if protectionist tendencies prevail and the topic of international labor mobility continues to be neglected.”

(Parenthetically, it was ABAC Philippines member, Doris Magsaysay-Ho, who initiated the proposal to study this issue despite my personal misgivings as Chair of the Philippine representation. To my surprise, the ABAC membership agreed.)

The study cites statistics that project labor shortages throughout the world to increase to staggering proportions.

• The United States will require an additional 35 million workers by 2030.

• Japan will need 17 million more workers by 2050 to restore its demographic equilibrium.

• Europe will need 80 million additional workers by 2050 to simply maintain its working population size today.

• Canada is expected to face a shortage of one million workers by 2020 and the province of Ontario alone could face a shortfall of 364,000 workers by 2025.

• Russia will require an additional 25 million workers within the next two decades.

• Korea will experience a shortage of up to 4.8 million workers by 2020.

This outlook is being triggered by profound demographic changes resulting from low birth rates, particularly in developed economies. An aging population means that the labor pool is not being replenished enough to meet current requirements. So while the recent financial crisis may have caused historic levels of unemployment in many economies, the underlying forces driving global labor shortages remain essentially unchanged. In other words, labor shortages will continue to be a long-term and persistent challenge to all economies.

Such shortages entail economic costs in terms of economic growth and the quality of life. A shortage of nurses means sick people are not given the care they require. A lack of welders and construction workers will impact infrastructure development. The report quotes a finding from Global Insights that the impact of labor shortages on the Canadian economy will be at one percent of GDP by 2020, costing Canadian business billions in lost output.

The finding says: “Economists believe that the benefits of facilitated temporary labor flows far outweigh the adjustments costs. Researchers at the Development Research Centre on Migration, Globalization & Poverty estimate that a three percent rise in the labor force of developed economies resulting from the movement of skilled and unskilled workers from developing economies would actually increase the average income of domestic residents by over $200 per person. Despite fears to the contrary, economic evidence suggests that the sustainable benefits reaped by labor-receiving economies are substantially positive. The recently released UNDP Human Development Report 2009 asserts that receiving economies capture at least 20 percent of all value created.”

The report goes on to say that despite this being a widely acknowledged development – at least among economists on a macro level and to the harried meat shop owner with no butcher on Main Street – politicians have not given this the attention it deserves and they have not developed smart policies that balance economic needs with social adjustments. Businesses will do what they can to cope and hence, we now have this phenomenon of large movements of temporary workers – and Filipinos make up a significant portion of this movement – but policies governing them are either non-existent or are designed more to restrict rather than facilitate them. This leads to unsatisfactory consequences for both the worker and the employer in terms of costs and efficiency. 

 Because this is a cross-border phenomenon, labor-sending and labor-receiving economies in APEC can both benefit from a collaborative approach to the issue. Government-to-government arrangements on the movement of workers – where they exist and there are not too many – are bilateral in nature. Inevitably, the receiving economy dictates the terms and since they are conceived under different mindsets, the quality of the arrangements is uneven.  Collective thinking – even simply identifying best practices – will redound to the good of all economies whether they have labor surpluses or shortages. It is time that APEC faces up squarely to this problem that in the view of business should be top of the APEC agenda.

 APEC Senior Officials talk of “inclusive growth” but seem to ignore the fact that this elephant of a problem is a key component of that agenda. You, the APEC Leaders, and APEC officials must wake up before you have to make your own hotel room beds before coming down to your meetings or, God forbid, photocopy your own meeting documents.

I think you can start by having an active discussion at your Leaders Summit in Singapore.  I hope you will have the courage to make the right choice, rather than the most politically expedient choice, on this important issue.

Yours for a more relevant APEC,

Roberto R. Romulo