51793 March 2009 . Number 5 G THE FUTURE: SHAPI LO G-TERM PERSPECTIVES O PEOPLE & JOB MOBILITY FOR ME A Leila Zlaoui1 countries for work abroad. As a result, firms are increasingly tapping into the global Introduction and Objectives: This Quick Note market for services, talent, and sheer summarizes the similarly titled report released manpower, recruiting migrants and moving on February 17, 2009, which assesses global jobs around the world. labor and job mobility- that is migration and outsourcing- with a focus on Europe and The Impact of globalization on industrial MENA. The report looks at long term global and developing countries: Both industrial and demographic and labor force developments to developing countries stand to benefit from assess which parts of the world will better-organized mobility schemes, more experience aging populations and major opportunities for labor migration, and better declines in their labor force and which will see matching between skill demand and skill an expansion. supply. This is very much the case for the Middle East and North Africa (MENA) and Two pillars underpin the analysis presented in Europe, where important migration links this report. First, increasingly strong forces exist. Currently, migration is the main form of will be pulling for the migration of people and global integration for MENA countries, and is jobs across the world's regions in the future. making an important contribution to Second, countries and regions can adopt a household incomes and national economies in proactive approach to prepare for these global the region. Yet, the scope for improving changes, to seize opportunities, and to address migration outcomes is significant, and risks head on. attracting outsourced jobs is becoming an important feature of employment creation in The role of globalization in shaping labor many MENA countries. markets and job mobility: The globalization of labor markets involves both the age-old The global outlook for job mobility and phenomenon of migration by people seeking migration: The dynamics vary significantly by better opportunities across borders, and the region, with some regions, notably Europe, relatively recent phenomenon of job mobility facing the prospects of a rapid decline in through the outsourcing and off-shoring of population and labor force. In the absence of jobs to other countries. Advances in migration, and assuming that participation telecommunication, management, and rates remain unchanged, Central Asia, the organization have made the relocation of high-income countries in East Asia as well as activities both attractive and possible, China, Europe, and North America would allowing large and small firms alike to build collectively lose 216 million workers between relationships abroad to tap into technology now and 2050. The European Union alone upgrades and cost-savings. Firms look for the would experience a loss of 66 million workers; best-adapted workers for their money. a decline of almost one-third, and by 2050, Individuals look for an improved quality of there will be about two retirees per every one life--even to the point of leaving their home active person. 1 Leila Zlaoui, Adviser, MNAVP. For various reasons, potential migrants are Eastern workers have faced increased likely to be young workers - members of the competition from national and Asian workers. labor force aged 15 to 39, and may represent 570 million additional workers by 2050. This MENA migrants and global labor markets: group will be the largest in countries in Sub- MENA migrants have brought important Saharan Africa (SSA), followed by South Asia benefits to their home and host countries. (SA), and MENA. In SSA, the labor force in Remittance income is a key source of foreign the age group 15 to 39 is projected to increase exchange in the MENA sending countries: by a total of 328 million by 2050. India and the formal remittances income accounts for other South Asian countries are projected to between 5 and 20 percent of the gross national be the second-largest potential suppliers of product (GNP) in some of the main MENA migrant labor over this period with, migration countries. Jobs abroad (in the respectively, an increase of 68 million and 89 member countries of the Organization for million people in the labor force of those Economic Co-operation and Development between the ages of 15 and 39. In the MENA [OECD] and the Gulf) are equivalent to 6 Region, the increase in the labor force in the percent of total employment at home. The same age group is estimated to be on the order impact on technology flows, innovation, of 44 million people, compared with 29 education, and investment of an active million in Latin America and the Caribbean Diaspora and returning migrants is potentially (LAC), and 12 million in East Asia and the significant. Estimates suggest that migrants Pacific (EAP). have contributed considerably to economic growth in "new" receiving countries. The role migration can play to fill labor shortages over the next decades: If current Yet outcomes are still disappointing relative to migration policies and the other the potential. Irregular migration from the socioeconomic and political circumstances MENA Region currently is subjecting migrant that drive migration stay unchanged, only one workers to poor living and working in 6 workers in labor deficit regions would be conditions, substantial health and income replaced by workers from regions with risks, and social marginalization. Second- surplus labor. As this and other research generation immigrants in Europe generally do shows, the magnitude of imbalances is such much worse in labor markets than their that migration and other forms of labor national peers, and migrants are mobility such as outsourcing are likely to proportionally less likely to be employed in intensify in the future. occupations corresponding to their level of education. Social and political tension around Migration and job mobility in MENA and immigration and integration issues is rising in beyond: Migration within and out of MENA a number of countries. Last, compared with has a long history. The more recent surge took migrants from other regions, a large share of place in the 1960s, as Western and Northern MENA's educated workers leaves for foreign European countries actively recruited shores, potentially draining the sending Maghreb workers for their expanding country of its skilled workforce. economies. This recruitment continued in the 1970s as the booming oil economies in the Globalization and MENA's demographic Gulf absorbed a large pool of skilled and low- challenge: MENA's demographic bulge is skilled manpower. Over time, as formal job now fully impacting its labor markets. To opportunities diminished, migration to meet labor force growth and absorb the large Europe increasingly took the form of pool of unemployed, the region needs to permanent migration for the purposes of create nearly 4 million jobs per year. At the family reunification and formation, as well as moment, job creation is barely keeping up undocumented migration and has been with the growing labor force, and although directed to Southern European countries. In unemployment rates are falling, they remain the Gulf countries, in particular, Middle excessively high, especially among the young and educated. March 2009 Number 5 2 Migration is not a panacea for sluggish job Investments towards enhancing MENA's creation in MENA countries or for an aging opportunities in a globalizing labor market: European population, but it could form part of The focus needs to be on education and the policy approach to address these women's inclusion. To seize the challenges. Outsourcing and off-shoring offer opportunities from global developments in additional opportunities for tapping into the terms of in-sourcing and address the risks that global jobs market. The international excessive skilled labor migration pose for migration of jobs to China and India shows MENA's own labor market needs in the long the important potential for job creation from term, MENA countries need to make strong the in-sourcing of jobs. Off-shoring to third and concrete efforts to significantly increase parties is accelerating, and developing their labor force participation rates and to countries are increasing their stake. improve educational achievements. For example, under the assumption that Europe In the right circumstances, MENA could wants to replenish its diminishing workforce achieve significant job creation, especially in in order to preserve the current age and skill business services, from abroad. The region's structure, the demand for replacement strengths include its geographic, cultural, and workers in European countries will reach a linguistic ties to Europe; its stable investment peak in the 2020s and will primarily affect climate, despite weaknesses in the business mid-level skills. Based on current educational environment; and its wage advantages in a outcomes, MENA countries will provide a few sectors. However, from a knowledge poor match due to the fact that most of its perspective--the education level and potential migrants (those ages 15­39) will specialization of the workforce, private sector have at most completed primary education. research and development (R&D), information However, if women's participation rates and and communication technology (ICT) skills-- overall educational levels significantly the region may, on average, have less to offer. improve over time (to reach the current levels of the Southern European countries); MENA's Is migration a solution to MENA's matching prospects will be greatly enhanced. unemployment problems? Migration cannot solve MENA's unemployment problem. Based Labor markets and an inclusive and on the analysis, migration would need to take sustainable globalization: Both labor on unrealistic proportions to replace the abundant and labor deficit countries need to demographic deficit in Europe and elsewhere. adopt a proactive stand to meet the long-term But many of the policy actions and challenges of sustainable job creation and institutional reforms that will be needed to growth. Migration carries benefits as well as stimulate global labor and job mobility-- costs for the countries of origin, the host enhanced education, overall investment countries, and the migrants themselves; and it climate, financial system, public sector--are in has a wide-ranging impact on tune with those needed to foster private sector competitiveness, social welfare, and cultural job creation and labor productivity growth at identity. High levels of irregular migration, home. problems of integration, and the issue of "brain drain" mask migrants' contributions to In fact, some of the features that block economic growth, globalization, and cultural economic growth and domestic job creation as diversity. well as in-sourcing options may also hamper the potential for higher migration benefits in Today, although migration has a prominent the sending countries. These features include, place on the international policy agenda, the in particular, high illiteracy rates, as well as focus remains mainly on high-skilled unreformed education systems favoring social migration, integration policies, and security sciences over physical sciences, technical and concerns. Effectively preparing for the future engineering skills, or business services. will require-- additionally and especially-- wide-ranging changes in education, social protection, labor markets and migration March 2009 Number 5 3 policies in both labor deficit and labor If the investment to expand, in both number abundant countries. Moreover, successfully and quality, the global pool of medium and addressing the challenges ahead will also high-skilled workers is not undertaken today, require significant collaboration among a the large number of skilled workers migrating variety of actors including governments, the to higher-income areas will create skill business community, donors, private shortages in sending countries. Furthermore, foundations, and NGOs. in the absence of a large pool of competences and expertise, competition between labor The urgency of starting global action now: deficit countries would increase the Skill development is a long process, and remuneration of scarce labor without avoiding clearly the sooner steps are taken in this shortages in light of the inelastic character of direction, the better. It takes 15 to 20 years or the supply. more to train a skilled worker from childhood to adulthood, making the supply of skilled Contact MNA K&L: workers inelastic in the short term. Today's Nadir Mohammed, Director, MNA Operational children will make up the labor force of 2030, Core Services Unit and the labor force of 2040 to 2050 will be born David Steel, Manager, MNA Development Effectiveness Unit and educated in the next 10 to 20 years. Many of the labor abundant countries do not have Regional Quick Notes Team: the resources and/or the know-how to Omer Karasapan, Dina El-Naggar, Roby Fields, successfully address the tremendous challenge Najat Yamouri, and Aliya Jalloh of full access to education and the quality of Tel #: (202) 473 8177 skills needed for global markets. The MNA Quick Notes are intended to summarize A collaborative approach to the challenges lessons learned from MNA and other Bank Knowledge and Learning activities. The Notes do not ahead is required and would bring important necessarily reflect the views of the World Bank, its gains to both labor abundant and labor deficit board or its member countries. countries. Similarly, non-collaboration would equally hurt both sides. March 2009 Number 5 4