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May 2014, Volume 21, Number 2

Global: Migration Costs

The UN's second High-Level Dialogue (HLD) on migration and development in October 2014 called attention to the high cost of migration for many migrant workers. Every year, perhaps 10 million workers cross national borders. If they pay an average $1,000 in migration costs, moving workers over borders is a $10 billion a year global business.

Reducing migration costs may prove more difficult than reducing remittance costs. Migrants send over $400 billion a year to developing countries at an average cost of about 10 percent of the typical $300 transferred, or $30 per transaction or $40 billion a year. World leaders have pledged to reduce remittance transfer costs by five percentage points to five percent or $15 per $300 transfer between 2009 and 2014, which would reduce revenue for the money transfer industry from $40 billion a year to $20 billion a year.

Remittances have three major cost elements: the fee to send money, the exchange rate, and the fee to pick up money in local currency. There are generally no regulations that set maximum charges levied by Western Union and the banks that make most international money transfers. Instead, policy makers attempted to lower remittance charges by increasing transparency and competition between money transfer funds by requiring them to fully disclose their charges. In order to ensure competition, governments were urged to avoid exclusive agreements between, for example, post offices dispersed widely in migrant areas and one money transfer firm such as Western Union.

Can transparency and competition similarly reduce worker-paid migration costs? Many governments establish maximum worker-paid recruitment charges, making the enforcement challenge how to prevent recruiters from charging and workers from paying more than these maximums. When the supply of workers who want to work abroad exceeds the demand for them, recruiters are likely to demand excessive fees and workers are likely to pay them.

Instead of more competition between recruiters, governments sometimes take the opposite approach, negotiating G-to-G agreements that give government agencies monopolies on moving workers over borders.

Moving money and workers over borders are fundamentally different transactions. Money is a standardized commodity, transactions are frequent and allow learning by migrants, and the consequences of bad transactions are generally limited to loss of funds. Moving workers over borders, by contrast, is more personalized, as every individual is different, there are far fewer transactions, and the consequences of poor transactions can be more severe, as with workers fired from foreign job or winding up in debt servitude and slavery.

Temp Agencies. The International Confederation of Private Employment Agencies (CIETT in its French name) represents temp or staffing agencies in 47 countries. CIETT reported that 36 million workers around the world were employed by temp agencies in 2012. Temp employment represented 11.5 million FTE jobs, an average three workers per FTE job, including 82 percent in the US (29 percent of global temp revenue), Japan (17 percent), and Europe (36 percent).

In the US, temp workers are an average of two percent of wage and salary employment, compared to 1.4 percent in Japan and 1.6 percent in Europe. In China, an estimated 12 percent of workers are temps, while in South Africa temps are nine percent of average employment.

The total number of individuals employed by temp agencies sometime in 2012 was estimated to be 11.5 million in the US, 2.5 million in Japan, and 8.2 million in Europe. Within Europe, France with two million, the UK with 1.1 million, and Germany with 877,000 had the most workers employed by temp agencies sometime in 2012.

CIETT says that over 60 percent of agency workers are under 30, and that three-fourths have a secondary school education or less (a fourth did not complete secondary school). Women are a majority of temp or agency workers in the US and Japan, while men predominate in France, the UK and Germany.

About 30 percent of temp placements are for less than a month, 30 percent are from one to three months, and 40 percent are more than three months. About 60 percent of temp workers are placed in firms that have 100 or more employees.

The three largest temp agencies by sales revenue are Adecco, with 20 percent of the sector's global revenue of $415 billion in 2012, followed by Randstad, 17 percent, and Manpower, 16 percent.