The Rise of the Guest Worker

By Paras Kapoor

The world is in the midst of a guest worker programs boom, a boom exemplified and defined by changes taking place in countries like China, America, and Japan. These case studies can be used to explain what this trend is, the factors fuelling this trend, and their implications on the rest of the world. Guest worker programs are defined as visas that allow foreign workers to temporarily reside and work in a host country. These workers are typically hired to perform low or semi-skilled agricultural, industrial, or domestic labor. Their primary use is to address skill shortages in various industries and help firms fill vacancies in a tight labor market.

To give you a sense of the scale of change that this trend brings about, consider America. It has in the past decade quadrupled the number of visas issued under its various guest worker programs. This has proved true even under an administration that is openly hostile to immigrants. Not only has this administration increased the number of visas issued, but also pushed through rule changes using executive action to make the process easier for employers. Japan has _ similarly enacted legislation to issue visas to some 345,000 individuals for unskilled work over the next 5 years; a radical change in a country that has, for most of its history, refused to accept any immigrants. China, though not as radical in its opening up as the previous two countries, has taken important steps in liberalizing its immigration regime. It has set up a new body called the State Immigration Administration, making it easier for foreigners to work legally in border areas as well as poorer provinces, in an attempt to easily modify the controls on immigration to meet the needs of the Chinese economy as it changes.

A common factor stimulates guest worker programs in these countries: labor shortages. Witnessing a booming economy, the United States has been unable to find enough workers to fill industry openings. This is not a surprise considering unemployment is near a 50 year low, with physically-demanding industries being hit hardest by vacancies.

Japan, with its ageing population, faces even more severe shortages. Despite its recent attempts to increase the retirement age, the government has tried to encourage female participation in the labor force and automation industry which are both confronted with a huge labor shortage. Meanwhile, China's demand for unskilled immigrants has been driven by a shrinking as well as hollowing out of the labor force in poorer areas, caused by citizens in these areas leaving to work in more prosperous provinces.

The increasing importance of guest worker programs thus leads us to question whether they are exploitative in their nature, as they place two countries in an unequal relationship? Do they contribute positively to the economies of the host and sending nation? And lastly do they compromise working conditions and undercut wages for domestic workers?

It is at the same time important to question whether such programs deprive sending-nations of valued skilled labor, and thus robs them of potential economic growth. It's easy to see why skilled workers are attracted to these opportunities, lured by higher wages and the chance to live a better life. Such programs also act to reduce the pressure on governments to improve economic conditions at home, which are responsible in the first place for such outflows. Remittances can also result in a strengthening of the local currency, rendering exports uncompetitive, preventing the kind of industrialization required to remedy the situation.

Meanwhile, host-nations get access to cheaper labor pools. Such visas are also typically linked to a_ specific employer, increasing the hold firms have on workers. Workers find it hard to protest against or complain about bad working conditions and low wages, as they are threatened with being fired which would result in deportation. This curtailment of human rights is certainly chilling. Sending-nations meanwhile find it particularly hard to advocate for their workers, fearing that they will be replaced by another country. Host-countries also tend to have extensive trading relationships — with sending-nations which they can threaten to jeopardize, to coerce sending-nations into silence.

A loosening of the labor market due to the influx of immigrants can hurt domestic workers as well. Whereas a tight labor market naturally forces wages to go up, the option of hiring foreign workers can keep wages stagnant by broadening the labor pool. Foreign workers are often preferred over domestic workers: they accept lower wages, and employers are not required to contribute to their pensions and other welfare schemes. Combining these facts with their inability to protest makes foreign workers the preferred employee. The ease with which firms can hire foreign labor under guest worker programs is also weaponized as a threat against domestic workers, and used to keep wages low. A fundamental question thus arises: is the expansion of guest worker programs driven by a genuine labor shortage, or an unwillingness by firms to pay the higher wage required to attract sufficient labor?

Furthermore, in conservative societies like Japan, the acceptance of guest workers will necessarily lead to a move away from the intense uniform culture present today to a more diverse culture in the future. It is yet to be seen how these societies will respond to such changes, and whether the resulting backlash will be severe enough to result in the end of guest worker programs altogether. We have already seen, what are traditionally considered to be, more open nations like America and Britain face a backlash in recent times over their immigration policies.

There are genuine problems posed by the recent expansion of guest worker programs. Countries will have to walk a fine line between protecting domestic workers and encouraging economic growth, and more will need to be done regarding the rights and protections offered to workers under these programs. Action must also be taken by sending-nations to fix the root cause of the current outflow, and create greater opportunities back home. Countries will also have to grapple with the culture changes such programs will naturally provoke and the resulting anger over it. At the same time, sending-nations will need to become more competitive in order to keep their own workers satisfied working in their native country.

Sources

The Economist, America’s Guest Worker Boom

New York Times, H2B Visa

Bloomberg, Japan Has a New Guest Worker Program

The Economist, A Chinese Boarder Town Officials Try a New Approach to Immigration

CFR, Temporary Foreign Worker Programs

DW, Japan's New Visa Regulation Opens A Door To Foreign Labor

White House, US Unemployment Rate Falls to a 50-Year Low