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Temporary Foreign Worker or Guest Worker Programs

November 27, 2018

Circular or temporary labor migration programs (TLMPs), also known as "guestworker" programs, aim to add workers temporarily to a country's labor force without adding permanent immigrants to its population. Many countries richer than their neighbors operate TLMPs. Some have multiple programs, including programs for seasonal workers, youth and students, and skilled workers and professionals.

There are three major lessons from TLMPs: larger and longer, ever-easier employer access, and more vulnerable workers. First, the adage that there is nothing more permanent than temporary workers captures that fact most guest worker programs get larger and last longer than anticipated. For example, the Mexico-US Bracero program was begun in 1942 to fill jobs vacated by Americans called to wartime service. The number of Braceros admitted was a peak 62,000 in 1944, but reached over 400,000 a decade later. Germany's Gastarbeiter program began with a few hundred migrant workers in the early 1960s, but the almost three million guest workers in the early 1970s were over 10 percent of all workers in Germany.

Second, most countries have a local-workers first policy, requiring employers to try and fail to recruit local workers before receiving permission to hire especially low-skilled foreign workers. Less government labor-market data, the usual employer failure to find local workers when required to try by regulation, and employer complaints of too much bureaucracy between them and the migrant workers who take jobs local workers shun obscure the fact that over 90 percent of jobs that employers want to fill with foreign workers are in fact filled by guest workers. Employers have normally identified the foreign workers they want to hire before searching for local workers, and do not want to hire local workers who respond to their required recruitment because they may not show up as promised, leave for better jobs, or complain about wages and working conditions.

Third, job-by-job certification of the need for guest workers means that most migrants are tied to the employer who recruited them, so that being fired means losing the right to be in the country. Many guest workers pay for foreign jobs, so they arrive in debt and work hard in order to satisfy employers to keep their jobs and to ensure they are invited to return next year. There are many efforts to reduce worker vulnerability, ranging from orientations about worker rights after arrival to allowing guest workers to change employers, but none has proven to be a panacea for vulnerability.

The net effect of these trends is to ensure that guest worker programs are easier to start than to stop. As guest worker programs take on a life of their own, governments often extend more control over the number and conditions of guest workers to employers. Labor market inspection systems depend on complaints, and guest workers make few complaints.

Rationales

There are many government rationales for creating and expanding guest worker programs. The table below begins with the major reason: admit guest workers to fill vacant jobs, and reviews some of the other rationales for guest workers.

Table 1. Rationale for Guest Worker Programs
Rationale Typical Origin/Goal Examples
1. Fill vacant jobs Labor supply shrinks faster than demand or demand rises faster than supply Local workers may find better jobs quicker than farmers mechanize harvests, leading to vacant seasonal jobs. Demand for IT or health care workers can rise faster than supply because of required training
2. Cross-border commuting Allow workers to participate in labor markets divided by borders. Malaysia-Singapore, border commuters from France to Geneva and between Canada, Mexico, and the US.
3. Student and youth exchanges Allow foreign students to work while they study; allow youth to work and learn as part of cultural exchange Most foreign students may work part-time while they study and full-time during breaks; most countries allow graduates to stay if local employers hire them. Youth exchange or Working Holiday Maker programs allow youth to enter, work, and vacation in the country
4. Intra-corporate transferees (ICT) and investors Permit multinationals to move key employees between subsidiaries; allow investors to monitor their investments WTO's General Agreement on Trade in Services (GATS) includes commitments to allow intra-company transfers between countries; most countries give work and residence permits to foreign investors
6. Free-trade agreements EU allows full freedom of movement for all types of workers, as does Australia-New Zealand. Other FTAs allow limited free-movement of professionals EU freedom to work and provide services has sometimes been controversial, as when credentials and licenses not recognized in destinations; the movement of service providers from low-to-high wage member states may be controversial due to differences in payroll taxes. FTA professional free-movement involves small numbers
7. Promote development; reward cooperation on migration control Host governments aim to fill jobs and promote change in sending countries ANZ allow farmers to hire Pacific Islanders to fill jobs and hope that remittances will speed development on Pacific Islands. EU member states sign mobility partnerships with migrant-sending countries that open slots for students and workers in exchange for accepting deported citizens and preventing unauthorized migration

There are many reasons why jobs may be vacant, including when the supply of workers decreases faster than the demand for them. For example, a booming economy may make fewer local workers available to fill seasonal farm jobs, but farmers with orchards and vineyards still want seasonal workers. If governments make it easy for farmers and other employers unable to attract local workers to hire guest workers, the share of migrants may rise over time, and farm work, domestic work, and other occupations can become "jobs for foreigners" as ever-fewer local workers seek such jobs. The availability of guest workers may slow labor-saving mechanization and retard imports.

The demand for labor can rise faster than supply, as when there is a high-tech boom and time is required to train more engineers. If employers find engineers abroad, governments can may it easy for them to fill jobs until more local workers are trained. However, instead of a short-term demand for foreign professionals, new industries such as outsourcing may emerge and the number of foreign guest workers may rise even as more trained local workers seek jobs, as in the UK and US.

The demand for health care workers is rising in many countries with affluence and aging. In most health care systems, governments influence both the demand for and the supply of health care. Governments help to determine the demand for health care via direct provision and subsidies, and influence the supply of health care workers via training institutions and the wages paid to tax-supported institutions. Because taxes often pay all or some of health worker salaries, wages may be kept low to keep taxes low, which can make it hard to attract and retain local workers.