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OECD highlights temporary labor migration: Almost as many guestworkers as permanent immigrants

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The 2019 edition of the Organization for Economic Cooperation and Development’s (OECD) annual International Migration Outlook report included a new chapter, “Capturing the ephemeral: How much labour do temporary migrants contribute in OECD countries?” It’s a good question, and one that had not yet been answered.

There is a dearth of data on temporary labor migration programs (TLMP) or schemes—aka guestworker programs, where migrants are employed temporarily in a country outside their own—and it hinders the ability of policymakers to make informed decisions. The OECD declared TLMPs are “a core concern in the public debate across OECD countries” but warns that their impacts are “understudied.” This information deficit exists despite the fact that TLMPs are controversial and make up an increasing share of labor migration, and in the United States in particular have been at the center of debates about how to reform the U.S. immigration system.

Why are TLMPs controversial and at the center of public debates? First, their size. One of OECD’s key findings is that the 4.9 million temporary labor migrants that entered OECD countries in 2017 is “almost as many… as permanent migrants in all categories combined.” Ignoring temporary labor migration in the OECD means ignoring nearly half of all migration.

Many employers want larger TLMPs and fewer regulations governing their use. But there are high economic, social, and psychological costs for the migrant workers who participate in temporary programs, including frequent human rights violations suffered in both countries of origin and destination. Further, some abuses that are technically legal are facilitated by the legal frameworks of TLMPs. In most TLMPs, employers control the visa status of their temporary migrant employees or “guestworkers”—which means getting fired makes them deportable. In part, that’s why TLMPs have been called things like “The New American Slavery.”

TLMPs raise technical issues that are not easily resolved. For example: Which industries are permitted to hire migrant workers? How will appropriate numerical limits in TLMPs be determined? What rights will migrants have once they’ve been admitted into receiving country labor markets? Can they bring their families? Will migrants be tied to one employer or be allowed to change jobs and employers? How will receiving country governments ensure that migrants return after their employment contracts end, or will migrants be allowed to become permanent residents? Do citizens in receiving countries have first preference for jobs that employers want to fill with migrants? Will migrants be paid the same wages as similarly situated local workers?

Answers to these questions require honest discussions about the trade-offs that are inherent in migration policymaking, including whether labor migration is an appropriate response to employer claims of labor shortages. (Raising wages or increasing training may be a better response in many cases.) But these questions are particularly difficult—if not impossible—to answer satisfactorily without reliable data for evidence-based policy making.

The United States illustrates the problem of trying to make policy without reliable data. Comprehensive immigration reform bills adopted by the Senate in 2006 and 2013 were based on a “three-legged stool” of more enforcement, legalization for unauthorized immigrants, and more temporary labor migration. Thinking about the future impacts of temporary labor migration required analysis about existing TLMPs and predictions based on that analysis. But U.S. government-collected data on temporary work visas are inadequate, generally of poor quality, recorded in an inconsistent manner across federal agencies, and the most useful data are not published regularly or systematically. The result was a lack of reliable estimates and assumptions—instead, policymakers and the public had only claims made by advocates and employers to rely on.

The OECD “aims at closing” research gaps on labor migration “by providing the first estimates of the total employed temporary migrant population in full-year equivalent for 20 OECD countries.” This is an especially useful finding, since the United States government has no official corresponding estimate of the number of temporary migrants employed in the labor market. The U.S. Department of Homeland Security (DHS) estimates what it refers to as the “resident nonimmigrant population”—temporary migrant workers are issued “nonimmigrant” visas that authorize employment—but it does not estimate how many nonimmigrants were employed in the U.S. labor market or calculate the number of full-time equivalent (FTE) jobs, nor does it provide numerical estimates by individual TLMP or visa classification.

OECD includes in their estimates “all categories of temporary migrants who may participate in the host country labour market” such as “international students, cultural exchange programme participants, service providers such as [European Union/ European Free Trade Association-]posted workers, as well as cross-border workers.” There are hundreds of thousands of temporary labor migrants in the United States, and many more around the world, who are employed despite the fact that their visas are ostensibly for other purposes, like attending university or participating in a trainee or cultural exchange program. But while DHS’s provides a population estimate for international students and cultural exchange visitors, it does not provide an estimate on how many of each group were employed.

Before the OECD’s report, previous EPI research estimated that there were 1.4 million nonimmigrants employed in the United States during some portion of 2013, accounting for approximately 1% of the labor force. The OECD found 1.6 million FTE jobs filled by temporary labor migrants in the United States in 2017, accounting for 1.04% of the labor force.

OECD reported that 1.8 million temporary residence visas were issued in the United States in 2017, accounting for a third of all temporary residence visas issued across all 20 OECD countries. Next on the list were Australia, Japan, Canada, New Zealand, France, and South Korea. While most of the visas counted in this estimate permit employment, not all of them do, and across the OECD, one-quarter of the visas issued were renewals rather than newly issued visas. OECD also found that in the United States, less than half of temporary visas were issued to migrants in traditional TLMPs; over 20% went to accompanying family members, one-quarter to international students, and 6% to exchange visitors.

The OECD charted the distribution of the maximum allowed duration of stay of temporary visa holders, finding that 14.5% allowed a stay of over five years and 13.7% had no maximum duration, while just over one-fifth allowed a stay of 13–24 months and one-third allowed a stay of two to five years. Only 12.1% authorized a stay of less than 12 months.

These findings raise questions about what “temporary” means and whether the jobs migrant workers fill are truly temporary: If nearly nine in 10 temporary visas authorize a stay longer than one year, are migrants really filling temporary jobs? Can a job that lasts more than one year be considered temporary? Many of these jobs may be permanent jobs that have been misclassified as temporary—perhaps because employers prefer precarious workers over whom they can exert more control if they hold job-contingent temporary visas. Shouldn’t governments instead consider issuing permanent immigrant visas that lead to citizenship for migrants who are filling de facto permanent jobs?

The OECD has spotlighted an important gap in migration research—one we have tried to call attention to in the past—that leads to important questions about the current trend in labor migration governance toward more temporary workers instead of permanent immigrants who have equal rights in destination countries. We hope that the OECD’s new findings revealing the importance and size of temporary labor migration will spur improved data collection by governments and more research on TLMPs.



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Economy

Bonus Quotation of the Day…

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… is from page 426 of the late Jan Tumlir’s January 1984 speech at the Cato Institute – a speech titled “Economic Policy for a Stable World Order” – as this speech is reprinted in Dollars, Deficits, & Trade (James A. Dorn and William A. Niskanen, eds., 1989):

Indeed the difficulty for the economist may now lie in explaining why the world economy still functions at all, however dissatisfied we may be with its functioning. The answer is, of course, that there is a lot of ruin in any economy with a modicum of freedom. I am sometimes unsure whether it is actually an advantage of the capitalist system that it can take such an enormous amount of beating. If it were in the habit of collapsing more frequently, we would perhaps govern ourselves more prudently (and more cheaply to boot).

DBx: Indeed.

I’ve long argued that the economist’s standard assertion that government intervenes into the economy first and foremost to correct market failures fails spectacularly as a positive theory of government intervention into the economy. It’s far closer to the truth to say that government intervention into the economy is fueled not by market failures (as understood by economists) but, rather by the market’s astonishing success and robustness.

The market’s success at raising people’s standards of living creates the expectation that wealth creation is easy and normal while poverty is out of the ordinary. But of course historically poverty is the norm – and poverty so deep, unrelenting, and overwhelming that few Americans today can begin to imagine a condition so crushing. Because the market makes wealth so abundant and its production appear to be normal and easy to the point of being practically automatic – and because nearly all of the massive number of details of the intricate processes at work at every moment to create wealth are hidden from view – the market’s ‘failure’ to create heaven on earth is believed by many to be an unanswerable indictment of the market.

On top of this ‘problem’ is the market’s mighty robustness: tax it, saddle it with diktats, poison it with easy money, accuse it of being run by and for demons and devils, and the market keeps motoring along, improving the lives even of those who most hate it and who do the most to harass it. The market works less well than it would absent these intrusions, of course, but it still works surprisingly well. As long as, and insofar as, prices and wages are allowed to adjust according to the forces of supply and demand, the market’s robustness is Herculean. (The market is not, however, indestructible. Harass it too much and it will quit working.)

If the market truly collapsed completely more often, giving people a taste of what life is like without it, the world would have in it not only far fewer communists and socialists, but also far fewer “Progressives” and “conservative nationalists.”

The market’s true failure, in short, lies is its incredible capacity to succeed and to keep on keeping on. The market fails to prevent people from taking it for granted.

The post Bonus Quotation of the Day… appeared first on Cafe Hayek.



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Economy

Market Talk – December 12, 2019

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ASIA:

According to reports from Reuters, China is trying to propose a plan to promote Macau to be its next “Hong Kong” by building it into a world-leading financial center. China unveiled plans of creating a yuan-denominated stock exchange, as well as allocating extra land to Macau for it to grow. The region was a former Portuguese colony and will target companies from Portuguese speaking countries such as Brazil in order to avoid direct competition with China and the mainland.

Indian Parliament passed Citizenship Amendment Bill on 11-Dec-2019, which proposes to accord citizenship to illegal Hindu, Sikh, Buddhist, Jains, Parsis and Christian migrants from Pakistan, Bangladesh and Afghanistan. It, naturally, implies that migrants, who identify themselves with any group or community other than those mentioned above, from these countries won’t be eligible for citizenship. The bill also relaxes the provisions for “Citizenship by naturalization.” The proposed law reduces the duration of residency from the existing 11 years to just five years for people belonging to the same six religions and three countries. The bill covers six communities namely Hindu, Sikh, Buddhists, Jains, Parsis and Christian migrants from Pakistan, Bangladesh and Afghanistan.

The Indian government has prohibited gift imports through e-commerce portals except life-saving drugs and rakhi. The import of goods was earlier free and not subject to customs duties. The move will impact Chinese e-commerce web sites like Club Factory, Ali Express and Shein who are the largest users of this route.

The US reprimanded Pakistan Air Force chief for misusing F-16 fighter jets by undermining their shared security platforms and infrastructures months after the Indian Air Force shot down an F-16 jet of Pakistan Air Force during an aerial combat over Kashmir. Andrea Thompson, the then-undersecretary of State for Arms Control and International Security Affairs, wrote a letter to Pakistani Air Force Chief Air Chief Marshal Mujahid Anwar Khan in August over the matter.

The major Asian stock markets had a mixed day today:

  • Shanghai decreased 8.72 points or -0.30% to 2,915.70
  • Kospi increased 31.73 points or 1.51% to 2,137.35
  • ASX 200 decreased 43.80 points or -0.65% to 6,708.80
  • NIKKEI 225 increased 32.95 points or 0.14% to 23,424.81
  • Hang Seng increased 348.71 points or 1.31% to 26,994.14
  • SENSEX increased 169.14 points or 0.42% to 40,581.71

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00241 or 0.35% to 0.68931
  • NZDUSD increased 0.00003 or 0.00% to 0.65823
  • USDJPY increased 0.5860 or 0.54% to 109.1310
  • USDCNY decreased 0.04597 or -0.65% to 6.98293

Precious Metals:

  • Gold decreased 5.54 USD/t oz. or -0.38% to 1,470.81
  • Silver increased 0.013 USD/t. oz or 0.08%% to 16.9207

Some economic news from last night:

Singapore:

Unemployment Rate (Q3) remain the same at 2.3%

Japan:

Core Machinery Orders (MoM) (Oct) decreased from -2.9% to -6.0%

Core Machinery Orders (YoY) (Oct) decreased from 5.1% to -6.1%

Foreign Bonds Buying increased from -511.1B to 235.8B

Foreign Investments in Japanese Stocks decreased from 394.0B to -200.4B

Australia:

MI Inflation Expectations remain the same at 4.0%

New Zealand:

External Migration & Visitors (Oct) decreased from 1.40% to 0.10%

FPI (MoM) (Nov) decreased from -0.3% to -0.7%

Permanent/Long-Term Migration (Oct) decreased from 4,290 to 4,120

Visitor Arrivals (MoM) increased from -0.1% to 0.0%

Some economic news from today:

Singapore:

Retail Sales (MoM) (Oct) decreased from 2.0% to -2.2%

Retail Sales (YoY) (Oct) decreased from -2.1% to -4.3%

India:

CPI (YoY) (Nov) increased from 4.62% to 5.54%

Cumulative Industrial Production (Oct) decreased from 1.30% to 0.50%

Industrial Production (YoY) (Oct) increased from -4.3% to -3.8%

Manufacturing Output (MoM) (Oct) increased from -4.0% to -2.1%

EUROPE/EMEA:

UK elections went underway today, with still the outcome being unpredictable. The election results will be counted out in the morning. Yesterday, both Labour and Conservatives gave their final pitches with PM Boris Johnson saying his side was the only side who can bring Brexit forward.

France is gearing up for another round of strikes tomorrow over the proposed reforms of the pension plan and age of retirement.

According to the WSJ, Saudi Arabia is seeking to defuse the situation with Iran, with the Pakistani FM acting as a mediator between the two.

The US senate comittee has now officially signed off a bill which places sanctions on Turkey over thier recent purchase of the S-400 missile defense system.

The major Europe stock markets had a green day today:

  • CAC 40 increased 23.39 points or 0.40% to 5,884.26
  • FTSE 100 increased 57.22 points, or 0.79% to 7,273.47
  • DAX 30 increased 74.90 points or 0.57% to 13,221.64

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.00204 or -0.18% to 1.11126
  • GBPUSD decreased 0.00821 or -0.62% to 1.31169
  • USDCHF increased 0.00346 or 0.35% to 0.98606

Some economic news from Europe today:

UK:

Thomson Reuters IPSOS PCSI (Dec) increased from 47.8 to 48.5

RICS House Price Balance (Nov) decreased from -6% to -12%

Germany:

Germany Thomson Reuters IPSOS PCSI (Dec) decreased from 53.55 to 53.43

German CPI (YoY) (Nov) remain the same at 1.1%

German CPI (MoM) (Nov) decreased from 0.1% to -0.8%

German HICP (YoY) (Nov) increased from 0.9% to 1.2%

German HICP (MoM) (Nov) decreased from 0.1% to -0.8%

Swiss:

SNB Interest Rate Decision remain the same at -0.75%

PPI (YoY) (Nov) decreased from -2.4% to -2.5%

PPI (MoM) (Nov) decreased from -0.2% to -0.4%

France:

France Thomson Reuters IPSOS PCSI (Dec) decreased from 43.69 to 42.49

French CPI (YoY) increased from 0.8% to 1.0%

French CPI (MoM) (Nov) decreased from 0.0% to -0.1%

French HICP (YoY) (Nov) increased from 0.9% to 1.2%

French HICP (MoM) (Nov) increased from -0.1% to 0.1%

Italy:

Italian Quarterly Unemployment Rate decreased from 9.9% to 9.8%

Italy Thomson Reuters IPSOS PCSI (Dec) increased from 38.88 to 40.11

Euro Zone:

Industrial Production (YoY) (Oct) decreased from -1.8% to -2.2%

Industrial Production (MoM) (Oct) decreased from -0.1% to -0.5%

Deposit Facility Rate (Dec) remain the same at -0.50%

ECB Marginal Lending Facility remain the same at 0.25%

ECB Interest Rate Decision (Dec) remain the same at 0.00%

US/AMERICAS:

The US-China trade deal is close to completion, according to President Trump. “Getting VERY close to a BIG DEAL with China. They want it, and so do we!” he posted this Thursday. CNBC reported that US negotiators are ready to cancel the new tariffs and cut existing tariffs by 50% ($360 billion). With only three days left before the US imposes an additional $156 billion on Chinese goods, time is of the essence.

Bank of Canada Governor Stephen Poloz sees Canada’s economy expanding in the new year at a steady. Last week, the central bank voted to maintain the target rate at 1.75% where it has remained for over a year. Growing government debt, not just in Canada, is one of Poloz’s main concerns. “Experience shows that high debt levels can amplify the impact of a shock on the economy,” the governor stated. Poloz expressed concerns over global trade as well, stating that companies are dismantling supply chains in favor of cheaper, less effective, options.

Canada’s Conservative Party Leader Andrew Scheer resigned this Thursday. Scheer’s resignation comes after it was revealed that he used Conservative Party funds to pay for his children to attend private school. Dustin van Vugt, executive director of the party, may be forced to resign as well for similar reasons.

Brazil’s central bank voted in favor of dropping the target rate to 4.5%. “Essential conditions for sustained growth were laid down in 2019. Brazil is ready for a new development cycle,” stated Waldery Rodrigues, special secretary to Brazil’s Economy Ministry. Brazil certainly amped up efforts to build business, attract foreign and domestic capital, lower the debt ceiling, and solve the ongoing pension crisis. However, the pension dilemma is ongoing as are domestic conflicts such as the Amazon wildfires. Unemployment remains high at 11.6%, but is expected to decline in the new year. The government cited optimism about continued economic growth and predicts GDP to rise to 2.3% in 2020.

US Market Closings:

  • Dow advanced 220.75 points or 0.79% to 28,132.75
  • S&P 500 advanced 26.94 points or 0.86% to 3,168.57
  • Nasdaq advanced 63.27 points or 0.73% to 8,717.32
  • Russell 2000 advanced 12.89 points or 0.79% to 1,644.81

Canada Market Closings:

  • TSX Composite advanced 7.29 points or 0.04% to 16,946.90
  • TSX 60 advanced 1.56 points or 0.15% to 1,012.93

Brazil Market Closing:

  • Bovespa advanced 1,235.87 points or 1.11% to 112,199.74

ENERGY:

The IEA report was released this week which was contrary to the OPEC optimism for demand.

The oil markets had a green day today:

  • Crude Oil increased 0.4992 USD/BBL or 0.85% to 59.3943
  • Brent increased 0.4959 USD/BBL or 0.78% to 64.3858
  • Natural gas increased 0.0381 USD/MMBtu or 1.68% to 2.3095
  • Gasoline increased 0.0032USD/GAL or 0.20% to 1.6422
  • Heating oil increased 0.0141 USD/GAL or 0.73% to 1.9477
  • Top commodity gainers: Wheat(2.16%),Steel(13.28%),Ethanol(1.90%), and Natural Gas(1.68%)
  • Top commodity losers: Cocoa(-9.37%), Oat(-5.03%), Baltic Dry (-4.93%), and Orange Juice(-0.97%)

The above data was collected around 12:40 EST on Thursday.

BONDS:

Japan -0.02%(-2bp), US 2’s 1.63% (+2bps), US 10’s 1.88%(+9bps);US 30’s 2.24%(+2bps), Bunds -0.32% (-0bp), France 0.03% (-1bp), Italy 1.34% (+2bp), Turkey 12.10% (-8bp), Greece 1.39% (-61bp), Portugal 0.41% (+5bp), Spain 0.47% (+4bp) and UK Gilts 0.82% (+5bp).

  • US 30-Year Bond Auction decreased from 2.430% to 2.307%
  • US 4-Week Bill Auction increased from 1.500% to 1.540%
  • US 8-Week Bill Auction increased from 1.520% to 1.540%

 



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Economy

Was There a Housing Bubble?, by David Henderson

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In his recent book Shut Out, Kevin Erdmann, a finance expert and visiting fellow at the Mercatus Center at George Mason University, has two main messages. The first, which is not controversial among economists, is that restrictions on residential construction in coastal California and the urban Northeast have constrained supply so much that housing in those areas is virtually unaffordable for people in the lower- and middle-income classes. His other message is more controversial, that the financial crisis last decade was not due to a housing bubble but, rather, to bad policy decisions based on the idea that there had been a bubble. Whereas I was already convinced of his first point, I, like the majority of economists, was skeptical of his second. But because of all the data and reasoning he brings to the issue, I now find myself at least 90% convinced.

Probably because his second point is the more controversial, Erdmann spends about the first half of the book making that case. At times his narrative gets bogged down and his language is often sloppy. For example, he uses the word “shortage” to refer to a situation where demand increases but supply doesn’t. Economists, however, tend to reserve that word for situations where the price fails to clear the market such that quantity demanded exceeds the quantity supplied. The good news is that he often saves the day with pithy, clever quotes that sum up his message. Also, the more than 100 graphs he uses in the book seem like overkill, but that is better than underkill.

 

Types of cities / Erdmann makes his case by looking at the diverse characteristics of U.S. cities rather than lumping them all together, and by studying changes in housing prices and rents over time. He focuses on the 20 largest U.S. metropolitan areas and divides them into four categories: Closed Access cities, Contagion cities, Open Access cities, and Uncategorized cities. The five Closed Access cities are New York City, Los Angeles, Boston, San Francisco (including San Jose), and San Diego. In those cities, local and state governments have imposed strong restrictions on construction.

Erdmann seems a little vague about when those restrictions got really tight. His narrative suggests that it was in the 1990s, but there’s no index to help one look for a clear answer; he did confirm in an email to me that he dates it to 1995. In those cities, housing starts, even in economic expansions, have been low, incomes have been high, rents have been high (and rising) even relative to incomes, and there were large rates of out-migration of households with low incomes.

The above are the opening 4 paragraphs of David R. Henderson, “Was There a Housing Bubble Last Decade?Regulation, Winter 2019/2020, pp. 63-65. Read the whole thing. [Scroll down about 60 percent of the way.]

Thanks to Jeff Hummel for improving a previous draft and to Kevin Erdmann for promptly answering the questions I emailed him.

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