Admitting migrant workers through supply and demand

All States regulate the legal access of migrant workers to the labour market. While each government has its own labour admission system for the selection, recruitment and integration of migrant workers, the most fundamental criteria for their access to the domestic labour market are typically based on quantity (scale/number) or quality (selection).

In a demand-driven approach, employers must demonstrate a need for migrant workers, normally based on labour market shortages determined through labour market tests. Work permits may be used to manage the entry of foreign workers. In a supply-driven system, migrants themselves launch the admissions process, often within a quota or ceiling, and can apply without necessarily having a job offer. Under this approach, governments will have tools, such as quotas and a points system, to attract foreign workers with specific workforce qualifications into sectors with persistent shortages.

Labour market management
Labour market tests, work permits and quotas

Regulating the entry of migrant workers has two goals. The first is to meet labour market needs; the second is to avoid negative impacts on the local workforce. The main mechanisms, sometimes used in combination, are labour market tests, work permits and quotas (or ceilings). In a demand-driven approach, before recruiting a foreign worker, labour market tests are administered, in which local employers must first demonstrate that certain vacancies cannot be filled by the local workforce. This ensures that hiring migrant workers will not negatively affect the employment of local workers.

Although there are different types of labour market tests, employers seeking foreign workers are usually given a period in which they must advertise a vacancy with the public employment agency. Generally, the employer must demonstrate proof that no matching workers from within the local workforce can be found within the allotted time. Employers may also be required to undertake active local recruitment efforts, such as attending job fairs or carrying out labour market research. However, such requirements may be reduced or waived when official data show significant and persistent shortages in the local workforce of a given locality or economic sector (OECD, 2014a).

Example
Labour market test in Canada and the Russian Federation
  • An employer in Canada may need to obtain a labour market impact assessment (LMIA) before hiring a temporary migrant worker. This document is required to prove that there is no Canadian or permanent resident who can fill the job. The migrant worker can only apply for a work permit once his or her employer has secured the LMIA attached to the job offer letter and work contract (Government of Canada).
  • The Russian Federation has also set up a dual system of authorization for employment. While migrant workers need to apply for work permits, employers are obliged to acquire licenses to employ migrant workers. This system is used to regulate the inflow of migrant workers into selected sectors or localities (Baruah and Cholewinski, 2006).

While labour market tests are applied to give priority to local workers, many governments are also applying other instruments to achieve the optimal balance and scale of labour migration. One example of such an instrument is the use of temporary work permits, which typically restrict the migrant to a specific employer and period of contract, requiring a new application and fulfilment of another labour market test in case of a change of employer. Some countries offer open work permits to certain categories of labour migrants, permitting the migrant to work for any employer over a prescribed period of time.

Another approach used to regulate the number of migrant workers is through placing limits on the overall influx of migrant workers by means of a quota, expressed either as an absolute value or a share of the total workforce. Quotas may be based on occupation (following labour shortage estimates), on specific bilateral agreements, or more generally on national demographic needs.

Both work permits and quotas have advantages and disadvantages from the point of view of effective labour market management. Quotas may serve as a clear reference framework while signalling government’s policy objectives. The system can also be used as a management tool, either to restrict the inflow of migrant workers into certain sectors and occupations, or to attract certain skillsets and qualifications by waiving labour market tests for migrant workers arriving as part of a quota. However, in the latter scenario, there is no assurance that the migrant worker will be employed in the defined sector or occupation. At the same time, quotas and work permits may reduce the ability to react to changes in the labour markets in a timely and flexible manner.

Good Practice
Foreign worker levy in Singapore

The levy is a pricing mechanism to regulate the number of migrant workers in Singapore. Each sector – construction, manufacturing, marine shipyard, processing and service – has different levy requirements depending on the worker’s qualifications and the number of work permit holders hired. Levy rates are adjusted regularly and subject to a dependency ratio ceiling (quota), indicating the maximum ratio of migrant workers that a company can employ in a given sector. For example, if the manufacturing sector has a quota of 60 per cent, up to 60 per cent of a manufacturing company’s total workforce may consist of migrants.

If migrant workers meet the highly skilled criteria, then the government will reduce the employer’s levy bill and extend the maximum period of employment. There are different pathways to obtain highly skilled status for each sector, but the process typical requires proof of diploma, educational credentials or test certificates.

Source

Government of Singapore, Ministry of Manpower.

Policy Approaches
Regulating the quantity of migrant workers
  • Consider the growing diversity of labour markets and develop tailor-made approaches to regulate migrants’ access to the domestic labour market.
  • Administer labour market tests to identify needs for migrant workers based on labour shortages in certain localities and specific sectors.
  • Waive or reduce market test requirements when official data demonstrate significant and persistent shortage of workers in the workforce of a given locality or economic sector.
  • Apply quotas based on explanations that are objective and evidence-based, rather than arbitrary indicators.
Assessing skills and qualifications

Destination countries are increasingly acknowledging that general access controls, such as work permits and quotas, should be accompanied by some tools for attracting migrants with specific skills or qualifications, particularly in areas with persistent labour and/or skills shortages.

Example
Qualitative labour shortages in Europe and the United Kingdom
  • The European Parliament produced a list of “bottleneck occupations” in which employers had particular problems in recruiting workers. These included welders and metal workers, carpenters, plumbers, cooks, waiters or sales assistants, due to unattractive working conditions. Shortages in medical specialists and nurses were due primarily to insufficient labour mobility, while difficulties hiring scientists, engineers and IT professionals were caused by the lack of highly skilled migrant workers. The list, analysed through vacancy data across the region, demonstrated the fact that some sectors were less capable of achieving labour equilibrium, or at least that job vacancies took longer to fill, despite the ample supply of workers in quantitative terms. The European example demonstrates that labour market tests should be complemented by more targeted programmes (Martin et al., 2015).
  • The Migration Advisory Committee (MAC), which provides independent, evidence-based advice on migration issues to the Government of the United Kingdom, has been commissioned to produce the Shortage Occupation List (SOL). The Committee found care workers and nursing assistants to be among those medium-skilled occupations facing a shortage of suitable labour that can be supplemented with migrant workers. However, if made more attractive to United Kingdom workers – by increasing salaries, for instance – such occupations might not need to rely on overseas workers. Other occupations in the list also include butchers, bricklayers and welders. Minor review of SOL takes place annually, with a major review every three years (Migration Advisory Committee, 2020).

A points-based system evaluates the suitability of candidates by assigning scores for skills, academic and professional qualifications, language proficiency and in some cases financial resources for the initial period. Such composite criteria were originally developed with a purpose of locating permanent immigrants with a specific set of skills who could be successfully integrated into the national labour market. In most cases, points-based systems do not require a job offer prior to application. This allows countries to react faster to the volatile labour market, as often the points are based on occupational demand. For instance, in a case of undersupply, countries can easily tap into a reserve pool of pre-approved applicants. In a case of oversupply, countries can also undergo a second-tier selection by adding further criteria (such as having a job offer) or conducting interviews.

However, many points-based migrants end up taking on jobs that do not necessarily correspond to their skills. Points-based systems are mostly limited to highly skilled migrant workers, including practices from Canada, New Zealand and Australia, as explained below.

Good Practice
Points-based system
  • Canada was the first country to introduce a points-based system in 1967, and since then maintains a high per capita rate of permanent labour migration. The country launched a comprehensive express entry system in 2015, under which applicants can express an interest to work in Canada by setting up an online profile. This profile is then analysed in terms of core competencies, including level of qualifications, work experience and language proficiency (OECD, 2016a). Those who make it to the pool of candidates are then ranked according to the specific needs of Canada’s provinces. This system proved to reduce hiring time from two years to six months, and is more responsive to specific market needs (OECD, 2016a).
  • New Zealand and Australia started using two-tier points-based systems in 2003 and 2012, respectively, to automatically process a relatively large number of preliminary applications through an expression of interest procedure. Those scoring above a mark or meeting specific qualifications for a given skill category are invited to apply for a residence permit and undergo a thorough verification process. Those who scored below the mark are subsequently rescreened to assess their employability potential. As many as 60 per cent of all skilled migrants in New Zealand and 57.7 per cent of skill/business category migrants in Australia were admitted and employed through this scheme (OECD, 2014a).
Policy Approaches
Meeting the needs for skills
  • Offer incentives to attract specific workers into sectors with persistent shortages.
  • Consider instituting points-based systems based on your country’s specific labour needs, so that employers can reduce hiring time, remain competitive and more responsive to the market.
  • Consider providing a pathway to permanent residence as an incentive for temporary migrant workers of all skill levels
Addressing issues in labour market integration

Early integration measures help migrant workers to successfully enter the labour market. Such measures begin at pre-departure. Informing migrants about the destination country, and specifically about their rights and duties as workers, is one such measure (see Alignment between pre-departure and post-arrival support for integration).

In most countries, general labour market support measures are unfortunately only accessible to migrants who are permanent residents. Moreover, training, apprenticeship and unemployment programmes designed for mainstream society typically do not consider the specific needs of migrants, such as language barriers, clear and accurate information about cultural norms and the informal mechanisms of job seeking. Migrant women face additional challenges and barriers, including a higher risk of deskilling. Specific steps should be taken to raise their employability and labour participation (see Gender and labour migration).

Policy Approaches
Facilitating labour market integration
  • Provide integration services as soon as possible for migrant workers, including language and civic knowledge courses.
  • In situations where unemployment programmes, such as training or apprenticeships are available only or mostly to citizens and permanent residents, increase incentives to broaden the scope of such programmes for migrants as well.
  • Identify the needs and strengths of migrant workers at individual levels to be able to provide relevant support tools (such as language courses, social orientation programmes and skill tests).
To Go Further
Recognizing skills and qualifications

When a person applies for a job in another country, an employer can assess that person’s educational or training credentials (ILO, 2020b). However, in many cases, skills and qualifications are uncertified or cannot be proven. This can put individuals at a disadvantage when applying for jobs (Ibid.). Lack of recognition can make it harder for migrant workers to find work that matches their qualifications and past work experience in other countries. These situations are also lost opportunities for the receiving community and its labour market. Migrant workers frequently have no other choice than to settle for a job at a much lower qualifications level, often unsafe, with low pay and long hours (Ibid.).

Such circumstance often results in deskilling, or the loss of a migrant’s skills and knowledge after a significant time of unemployment or underemployment in a new country. In European Union countries, for instance, around 40 per cent of the highly educated third-country nationals work below their qualifications level. The international community has provided further guidance for the recognition of foreign qualifications (see International instruments, initiatives and dialogues). However, some national standards for the recognition of skills and foreign qualifications may not be consistent with those established at the international level, creating further gaps in quality assurance and accreditation systems (Liebig, 2015).

Good Practice
Recognition of migrant workers’ skills and qualifications
  • A growing number of Zanzibar locals are migrating to the Middle East in search of employment opportunities. However, they are finding it challenging to secure decent jobs abroad without formal qualifications. To address this issue, the Vocational Training Authority (VTA) worked closely with the international community to develop Recognition of Prior Learning (RPL), a process to identify, document, assess and certify formal, informal and non-formal learning outcomes against standards in education and training. Through RPL, Zanzibar VTA authorities selected six priority occupations, including masonry, mechanics and welding, which typically have a large portion of the labour force training and working in the informal sectors. Thousands of Zanzibar workers were then awarded with an official certification of their skills and qualifications (ILO, 2019b).
  • The Association of Southeast Asian Nations (ASEAN) Qualifications Reference Framework (AQRF) is an instrument for recognizing skills and labour mobility in ASEAN countries. Eight levels of competency were designed under the framework and these levels have been agreed among all ASEAN Member States. The AQRF is voluntary and consists of two labour mobility tools: mutual recognition arrangements, which facilitate the mobility of skilled professionals within ASEAN States; and mutual recognition of skills, which focuses on technical/vocational skills.
  • In light of the increased shortage of skilled workers, the German Federal Ministry of Labour and Social Affairs promotes measures to achieve sustainable integration of migrants into the labour markets. The ESF-Qualification in the Context of the Federal Recognition Law offers a recognition structure and support services for migrants, the Integration through Qualification Programme, to help them get their foreign qualifications recognized and ultimately pursue their careers as skilled migrant workers.
Policy Approaches
Promoting labour market integration through the recognition of skills and qualifications
  • Put in place effective processes for the development, matching and recognition of skills, in order to prevent deskilling, especially among low- and medium-skilled workers.
  • Determine migrant workers’ skills by assessing not only their formal credentials but also previous work experience in origin countries and elsewhere.
  • Follow international standards when developing a national framework for the recognition of skills and foreign qualifications. This ensures mutual recognition while preventing further gaps and inconsistencies in accreditation systems.
  • Establish professional boards to help create licensing and certification schemes and to facilitate accreditation processes for certain occupations in the country.
  • Strengthen the transparency and overall capacity of national institutions that deal with recognizing migrant workers’ skills and foreign qualifications, in order to increase quality control and compliance.
  • Consider offering skills trainings in parallel with initiatives to facilitate the recognition of skills and qualifications. This could be a way to integrate migrants into the labour market while providing them with new skills and opportunities in destination countries.
Key messages
  • The most fundamental criteria for regulating and facilitating migrant workers’ access to the domestic labour market are quantitative or qualitative labour and/or skills shortages.
  • Labour market tests are often administered to demonstrate that certain vacancies cannot be filled from the local workforce alone.
  • Quotas place limits on the overall influx of migrant workers into popular sectors, but quotas should always be subject to constant revisions and adjustments, depending on the labour market.
  • Countries may consider using a supply-driven approach to attract specific migrant workers into sectors with persistent qualitative shortages. An example of this is the points-based system.
  • To facilitate and boost the incorporation of foreign workers into labour markets, early labour market integration measures are desirable.
  • When migrant workers’ skills are unrecognized, they may have to settle for a job at a much lower qualification level, often resulting in deskilling. In this regard, transparent processes for recognizing the skills and credentials of migrant workers are crucial.
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