The world needs a migrant labour cartel

In September 1960, delegates from Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela met in Baghdad to form the Organisation of Petroleum Exporting Countries. As the world’s dependence on oil increased, so did Opec’s power.

Today, with many developing countries serving as some of the world’s main labour exporters, might it be time to consider the formation of an Opec-like cartel for migrant workers?

Opec succeeded in protecting its members’ shared interests that they could not protect individually. When a market has structural distortions, political tools and collective action of the sort that Opec embodied can be more effective than public policy.

Rich labour-importing countries and poor labour-exporting countries have a mutually dependent relationship, but labour importers can unilaterally tighten or loosen immigration or labour-market regulations, leaving exporters in a constant state of uncertainty.

This imbalance can have serious costs for labour exporters. Remittances by expatriate workers are an essential lifeline for many developing countries. When we think about migrant labour, we think of low-skill work in agriculture, construction, services, and domestic work. But countries such as Jordan and Lebanon (among others) are now educating workers to compete as high-skilled expatriates, too.

Labour exporters now need to protect their investments in human capital, and a cartel-like political body is the most effective way to do this. If China, Mexico, India, and other major labour exporters were to join together, they would be holding most of the chips in a collective negotiation about wages, visa terms, and other conditions.

Labour importers would have to vie for access to a collective market rather than individual national markets, and countries that gained access would have a significant comparative advantage over those that did not.
A cartel would prevent labour-exporting countries from cannibalising their own interests, as currently happens with bilateral arrangements.

SET MINIMUM WAGE RATES

With a cartel, governments would instead set minimum-wage rates for different professions and trades as well as skill levels. As exporters trained their migrant workforces, demand for their labour would grow and spark competition among vendors rather than suppliers, thus fuelling a cycle of higher wages and even more skills training.

And, because this would all happen on global markets, the prices of certain skills would become more transparent to training institutions, students, employees, and employers alike.

In this system, importing countries would collect taxes and remittances would remain untaxed. In this sense, the cartel would double as an international workers’ union, lending bargaining power to employees in countries where unions are weak or not permitted at all.

A labour-exporting cartel would have far-reaching effects on the current system. Cartel members would be empowered to reward and penalise third parties acting in bad faith.

And, most important, the workers themselves would be empowered to reclaim their dignity in a system that has long stripped them of it. Indeed, we could expect xenophobia to wane worldwide as access to foreign workers became more privileged.

A cartel could advance the cause of comprehensive immigration and expat labour reform in many countries. Under a newly negotiated arrangement, labour-exporting countries would likely have an incentive to curb free riders and illegal emigration and labour-importing countries would likely have an incentive to legalise and manage the status of illegal immigrants already within their borders.

One likely objection to this proposal is that low-skilled labour would cost more, which could accelerate automation. But the jobs automation displaced from the production sector would simply move to the leisure sector because demand for domestic workers, waiters, gardeners, and the like would increase.

All told, a labour-exporting cartel would bring order to an industry that has long been mired in controversy. It would change the dynamics of labour supply and demand to the benefit of both workers — who would have new protections — and importing countries, which would have access to trained labourers to respond to rapid changes in economic conditions.

Dr Mahroum, director of the Innovation and Policy Initiative at Insead, is the author of Black Swan Start-ups: Understanding the Rise of Successful Technology Business in Unlikely Places. Copyright: Project Syndicate/Mohammed Bin Rashid Global Initiatives, 2016.