Measuring and Reducing
Migration Costs
Manolo Abella & Philip Martin
Decent Work for All
ASIAN DECENT WORK DECADE 2006-2015
Highlights
 Labor migration = big business:
10 million workers/year @$1,000 = $10 billion/year
 Who receives this revenue? How much do workers pay, and how can
worker-paid costs be reduced?
 Policy to lower costs : Regulate recruitment? Exclude profitmotivated intermediaries thru G-to-G? Free movement?
 Market reality : wage gaps are about 5-1, big variance in costs
 For origin country costs entailed by emigration is any loss in
productivity. Loss of skilled may entail negative externalities.
 There is much evidence that migration entails heavy pecuniary and
non-pecuniary costs to individual migrants.
 KNOMAD surveys : To measure costs to individual workers. What are
workers paying for? How much incomes foregone during job-search?
Fraud? Skills-job mismatch?
 How can the costs be reduced through policy, regulation, information,
and cooperation between origin and destination states?
Workers pay heavily for failure of
recruitment
“I was promised work on a
construction site with a pay of
800 Riyals but I had to work as
a shepherd , the pay being only
400 Riyals.” recalls Kukkala
Butchanna, Adilabad, Khanapur
mandal, India
KNOMAD Surveys of Migration Costs
 2014 Pilot Survey in Spain (workers from Bulgaria, Romania,
Poland, Ecuador, Morocco)
 2014 Pilot Survey in Rep of Korea (workers from Vietnam,
Indonesia, Thailand)
 2014 Pilot Survey in Kuwait (workers from Bangladesh, India,
Sri Lanka, Egypt)
 2015 Survey of Vietnamese workers in Malaysia
 2015 Survey of Nepali, Indian, Filipino workers returning
from Qatar
 2015 Survey of Pakistani and Ethiopian workers returning
from Saudi Arabia
 2015 Survey of Guatemalan, Salvadoran, Honduran workers
in Mexico
Preliminary findings from pilot surveys in
Spain, Kuwait and Republic of Korea
 Country of destination : large differences in worker-paid
migration costs for Spain, Korea and Kuwait. Policy and intercountry cooperation make a big difference.
 Country of origin : large differences among origin countries (
e.g. those going to Kuwait from Sri Lanka & India vs Bangladesh
and Egypt). Policy makes a difference.
 Large standard deviation from estimated averages, suggesting
governance issues (degrees of enforcement).
Most workers tripled their wages
by working abroad
Preliminary findings (Con’t)
 Age : effect not consistent across countries - older workers who
went to Kuwait paid less than younger ones, but not in Korea;
 Education’s effect on migration costs also not consistent across
countries; education reduced costs for workers going to Korea,
but no pattern among those who went to Kuwait.
 High cost of borrowing : in high cost corridors 3 out of 4
migrants borrowed money to finance migration.
Romania
163
Poland
350
To work in
Bulgaria
Worker Paid Migration Cost
in US dollars
201
Ecuador
1046
Morocco
Mean & Standard Deviation
384
Indonesia
1506
Thailand
To work in
1466
Vietnam
1582
Egypt
2979
Sri Lanka
352
To work in
India
SD
Mean
1248
Bangladesh
3136
0
500
1000
1500
2000
2500
3000
3500
How much are migration costs as
percent of expected earnings?
Percent share of expected earnings
Romania
Poland
Bulgaria
Ecuador
Morocco
Egypt
Sri Lanka
India
Bangladesh
Indonesia
Thailand
Vietnam
0
1
2
3
4
5
6
7
8
9
10
Examining components of
worker-paid costs
Which costs can be reduced?
Reducible costs
To obtain information
Work visa
International transportation
Other costs
Bangladesh
Egypt
India
$
$
$
228
699
2314
2486
344
505
204
281
Visa trading a major problem in
some migration corridors
“The agents sell the “Azad” visa for a high price as Rs. 2
lakh, which enables the purchaser to stay in a given
country for two years during which time he can search for
employment.” The Hindu, Telangana
Much lower migration costs in
free movement area
Lower costs in G-G recruitment for
Korea
Average Worker-Paid Costs for Korea, USD, 2014
Int'l trans
Visa
Welfare fund
Average Cost
Security
Medical
Passport
Language
0
50
100
150
200
250
300
350
400
Evidence from other studies consistent with
our survey findings
e.g. study by I. Rajan
Policies aimed at reducing recruitment costs for
individual workers
 Governments control entry to recruitment industry, impose
standards, regulate activities of private recruitment intermediaries.
 Competition Most governments provide free job placement services,
for local and foreign employment
 Price-fixing Most governments set ceiling on fees that may be
charged from workers = 1 month’s foreign earnings (= 4.2% of
earnings on 2-year contract, 2.8% on 3-year). Evidence from
surveys: low-skilled migrants can pay 30-35% of foreign earnings ( = 1
year of 3 years foreign earnings)
Benefits of Reducing Migration Costs
Individual:
 Increase savings and remittances, which reduces poverty & speeds
growth
 Reduced vulnerability with less pre-departure debt
Employers and governments:
 Employers get more satisfied & productive workers, less likely to take
2nd jobs, to violate contracts, abscond, etc
 Governments have fewer “problem migrants”
Recruiters & others who extract part of the wage wedge that
motivates migration stand to lose
Imposing standards
 ILO and UN Conventions – workers should not be
made to pay for their recruitment
 Origin states prohibit or set ceiling on recruitment
fees that may be charged from workers; some
destination states also prohibit such fees
 International labour market wide wage gaps
 S > D leads to perverse relationship – as workers’
skills go down, worker-paid migration costs go up
Common risks in recruitment across borders
Job matching problematic due to asymmetric information

Workers tend to overstate their skills/qualifications
 Employers tend to overstate conditions, qualification requirements
 Recruitment within borders –less asymmetry in information
 Recruitment over borders
 Excess demand for highly skilled workers - employers more willing to
absorb cost to avoid mismatch
 Excess supply of low-skilled workers - workers willing to absorb cost
 For each worker recruitment is a rare event, not repetitive event like
sending remittances
 Where “visa trading” is practiced employers tend to over-hire, lowering
productivity & wages over time
To reduce migration costs there
is a need to
Facilitate skills-job matching ( i.e. reliable system for
skills testing & certification) & allow direct hiring
Not allow recruitment fees to be charged from workers
Prohibit visa trading
To reduce migration costs (con’t)
Promote bilateral agreements for G 2 G recruitment
Use “carrots and stick” to encourage ethical
recruitment and adoption of codes of best practice
Subsidize workers, not national airlines
Establish credibility