Worker-paid recruitment costs - World...

Worker-paid recruitment costs

Ganesh Seshan

Senior Economist

Jobs and Migration Core Course, May

2018

Sustainable Development Goal 10.7

• SDG 10.7: Facilitate safe, orderly and responsible

migration through planned and well-managed

migration policies

• SDG indicator 10.7.1: Recruitment cost borne by

employees as a % of yearly income earned in the

destination country

$4,000

$4 Billionfor every 1 million migrants

Reduce recruitment costs

$0

What are worker’s paid recruitment costs?• Definition: Monetary costs involved in each step of securing

regular employment by a migrant worker

• Components:

o Recruitment service fees paid to recruitment

agent/agency/broker

o Document cost: Passport, visa, medical certificate,

security clearance, language test

o Transportation cost

o Informal payments

Recruitment cost indicator (RCI)

Bilateral RCI for each origin-destination (OD) country corridor is a function of recruitment costs paid as a multiple of monthly foreign earnings received (on arrival)

Bilateral RCI: 𝑅𝐶𝐼𝑂𝐷 = 𝑓𝑐𝑖

𝑦𝑖

𝑐𝑖 : the total recruitment costs paid by worker 𝑖

𝑦𝑖 : monthly foreign wage, including overtime, after deducting

taxes and social-security contributions

Various functional forms, 𝑓: mean, median, 4th quintile

Can be calculated for sub-categories such as employment sector, or year of arrival

5

Survey waves and migration corridors

2015Ethiopia-KSAIndia-QatarNepal-QatarPhilippines-QatarVietnam-Malaysia Pakistan

To: Saudi Arabia, UAEMexico From: El Salvador, Guatemala, Honduras

2016India-Saudi ArabiaPhilippines-Saudi ArabiaNepal

To: Saudi Arabia, Malaysia, QatarItaly (2016)

From: Egypt, Senegal, West Africa CFA, West Africa

Russia

From: Kyrgyzstan, Tajikistan, Uzbekistan

2014 (pilots)Kuwait

From: Bangladesh, India, Sri Lanka, Egypt

South KoreaFrom: Vietnam, Thailand, Indonesia

SpainFrom: Morocco, Ecuador, Bulgaria, Poland, Romania

KNOMAD-ILO Migration Costs Surveys

Covers 19 bilateral corridors with a total of 5,603 interviewed migrants in 2015 and 2016

2016 dataset:India to Saudi Arabia; Philippines to Saudi Arabia

Nepal to Malaysia, Qatar and Saudi Arabia

Kyrgyzstan, Tajikistan, Uzbekistan to Russia (non-recruited workers)

West African countries to Italy (non-recruited workers)

2015 dataset:Pakistan to Saudi Arabia and United Arab Emirates; Ethiopia to Saudi Arabia

India to Qatar; Nepal to Qatar; Philippines to Qatar

Vietnam to Malaysia

Guatemala, Honduras and El-Salvador to Mexico (non-recruited workers)

Publicly available at www.knomad.org

Pop Quiz!!

Which bilateral-corridor has the most expensive recruitment costs paid by workers (2015-2016)?

A. India to Kingdom of Saudi Arabia

B. Pakistan to Saudi Arabia

C. Philippines to Saudi Arabia

D. Ethiopia to Saudi Arabia

Pop Quiz!!

Which bilateral-corridor has the most expensive recruitment costs paid by workers (2015-2016)?

A. India to Kingdom of Saudi Arabia: $1507

B. Pakistan to Saudi Arabia: $5637

C. Philippines to Saudi Arabia: $372

D. Ethiopia to Saudi Arabia: $1068

Recruitment cost in various corridors

0

2

4

6

8

10

12

0

1000

2000

3000

4000

5000

6000

Number of months2016$, 4th quintile

Costs (2016 $) (left axis) RCI - costs in months of foreign earnings (right axis)

Source: KNOMAD-ILO Migration Cost Surveys

Recruitment costs can be highly regressive

0

5

10

15

20

25

30

35

0 200 400 600 800 1000 1200

REC

RU

ITM

ENT

CO

ST IN

DIC

ATO

R (

RC

I)

PAKISTAN-KSA: AVERAGE MONTHLY FOREIGN EARNINGS (CONSTANT 2016 $)

206

819467 592 463

257176 256

167

3545

344

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Itemized Costs in 2016 USD: Corridors with KSA as a destination countryPolice/security clearance

Others

Language training

Informal payments

Exit clearance from the home government

Contract approval from the home government

Overseas migrant welfare fund

Visa/Work permit

Skills certificates/testing

Health/life insurance/social security

Pre-departue training/briefing

Passport

Domestic transportation

Medical exam

International transportation

Fees for brokers/recruitment and manpower agencies


The components of recruitment costs varies considerably by corridors

Recruitment costs may vary over time in response to destination country policies

2011

2014

2011

20142011

2016

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

0 50,000 100,000 150,000 200,000 250,000 300,000

Lagged annual emigration outflows

Pakistan-Saudi Arabia Pakistan-U.A.E.

Nepal-Qatar Linear (Pakistan-Saudi Arabia)

Linear (Pakistan-U.A.E.) Linear (Nepal-Qatar)

Recruitment costs (2016 $, 4th quintile)


18%

15%

18%

10% 10%

3%2%

3% 3% 3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

100

200

300

400

500

600

700

800

900

N=32 N=14 N=27 N=52 N=56 N=257 N=108 N=118 N=76 N=59

PAK-SAU PAK-UAE ETH-SAU PHL-SAU PHL-QAT NPL-QAT IND-SAU NPL-MYS IND-QAT(2016)

NPL-SAU

Loan cost Annualized interest rate

Adding loan costs would further increase the costs to workers in some corridors


What factors are associated with recruitment costs

Females tend to pay less (about 40% lower)

Workers who use brokers and agencies tend to pay more (28 to 37 % higher)

Workers who are promised higher earnings tend to pay more

All else equal, we see a 2% increase in costs for every 10% in promised monthly earnings

A double penalty? Higher costs are associated with poorer working conditions abroad

0

500

1000

1500

2000

2500

Yes No

recr

uit

men

t co

sts

(USD

)

Paid promised salary

0

500

1000

1500

2000

2500

Yes No

recr

uit

me

nt

cost

s (U

SD)

Paid regularly


How can worker-paid costs be reduced?

Bilateral labor agreements/ public recruitment services

Korea’s EPS: From $3700 (under ITS) to $1100

Address information asymmetries/gapsPublish itemized data on migrant costs

Publish ranking of reputable recruitment agencies (Singapore, Indonesia)

Tap in migrant networks: Kerala example

In Kerala (India), migration cost are lower in localities with high prevalence of overseas migration

Source: Kerala Migration Surveys, various waves

Worker-paid recruitment costs - World...

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