The Brutal Economics of Migrant Labour

This is Qatar, a small country in the Persian Gulf with immense domestic wealth thanks in large part to its fossil fuel reserves. It has recently been widely mooted for hosting the 2022 World Cup, but Qatar has many more reasons to be the talk of the town, esp. For economists it is one of the richest countries on the planet in terms of GDP per capita: the average Qatari resident will produce 61,000 inhabitants in 2021 and, despite its small geographical size, its population skyrocketed in the 21st century from around From 650,000 inhabitants in 2000 to more than 2.7 million inhabitants in 2022, this massive increase was due to the large influx of

migrant

workers, mostly young men, from India, Nepal, Bangladesh, the Philippines, Indonesia and a number of from other developing or undeveloped economies.

This situation of

migrant

workers in Qatar has been widely covered by the media around the world before and during the World Cup, countless articles explain the plight of young people who went to work in Qatar. Qatar and thousands of them tragically never returned home. The terrible conditions these workers are forced to endure. to the other side of the world from their homes means that there must be a very strong force forcing them to keep returning to the desert. The money these workers can earn, while insignificant to many of us in advanced countries, can have enormous impacts on the way their families live. life at home even Beyond this, the collective purchasing power of these workers can change the entire economies of their home countries, but not always in a good way from an economist perspective.

Qatar offers us an excellent case study to analyze the reasons for migrant labor, as well as the ramifications for countries of origin and host countries. This is a much bigger problem than you might think. Immigrants already make up about five percent of the global workforce today, and as the world becomes more connected, that number will only increase, so there is a good chance that your home country will also be affected. affected in one way or another. Labor migration is not a new phenomenon, it can be observed throughout human history, but with almost 90 percent of its population being non-citizens, the guitar is in a league of its own, so what are they?

The positive aspects that migrant labor can bring to the workers' host and origin countries. What are the economic disadvantages that these countries must take into account? Is there a way to manage this process to avoid these problems and improve conditions for the people actually doing the work? The work in this episode of Economics Explained was presented by Guardio. Guardio is like his online bodyguard that will keep him safe from scams, malware, and phishing attempts. His browser extension actually detects threats before they can cause harm, such as installing viruses that track what he does. Even stealing your identity, our browsers store our most sensitive information such as credentials, wallet information and more, making it a goldmine for scammers and that's why a dedicated product like this is a must, everything you need to do is add the guard extension from Chrome or Edge. store once you have installed it you can get a free security scan and this is the surprising moment when you find out if your information has already been compromised or if there is any threat on your browser after completing the scan you can proceed get a seven day free trial and remove those threats and also enable real-time protection and that is what makes it amazing because unlike other programs it stops all threats before they can enter your computer, its monitoring features of identity on all platforms, so if you register through your mobile phone, you will also get low words in real time, so get cardio now and protect your online browsing and information.

One guard account covers five family members at no additional cost, so it's a great deal if you want to clean up and secure a browsing experience go to guard.io EE, the link is in the description and check out their affordable Premium plan for total protection. Qatar has the highest rate of migrant labor in the world, this is simply due to limitations in its factors of production and its desire to build infrastructure to accommodate businesses and tourism long after its finite oil reserves are depleted. Qatar has the capital but not the workforce to build large-scale infrastructure.

This fact became even more evident when the country was selected to host the World Cup, meaning seven stadiums had still not been built in the remaining 12 years, recruiting workers from abroad was the only way to achieve such a huge effort. . Construction workers are not the only type of migrant workers in Qatar's hotels, restaurants and public facilities, they all also need staff right now. We must also remember that Qatar is also home to so-called highly skilled expatriate professionals who work in all types of jobs such as accounting, human resources, IT and marketing for various Qatari or international companies, so we must differentiate between the highly skilled and the unskilled. qualified. skilled immigrants, as they have very different effects on host countries, one factor to consider is whether immigrants replace or complement the skills of existing workers in some countries.

Micro workers are substitutes for existing workers, which creates competition and leads to higher unemployment to provide more Concrete example: if many doctors come from abroad to a new country, the supply of doctors will increase, this reduces salaries, since that some clinics have more doctors to choose from when hiring, plus if the number of positions does not increase, local doctors could lose their jobs. Newcomers now this is what usually worries people when it comes to immigration, but assuming this process is managed correctly, skilled migration is rarely a problem because governments tend to offer skilled visas only to people with the skills that their economy lacks.

Qatar, this is not a problem, labor demand is high, therefore expats do not threaten employment opportunities for locals, plus immigrants often create new jobs. Immigrants mean more residents in a country, which in turn requires additional doctors to be recruited in Qatar. among workers created a need for housing and other essential services, which in turn created even more demand for expatriate labor. This effect can become a benefit for the local workforce due to the subsequent growth of the economy. An entire nation is better off if it increases the The pie that leaves more for everyone. Whether immigrant workers are a net positive or negative effect on the wages of the native population depends on the magnitude of these competing factors.

Qatar's native population has very few low-skilled workers, so the complementary component is likely to dominate. More migrant construction workers mean more demand for administrative managers and engineers to also work on the projects, although the system may be good for the economy as a whole, the situation for the migrant workers themselves, reportedly the conditions for Immigrant workers are defiant Witnesses describe poor working conditions, overcrowded housing, broken promises on wages and backbreaking work, and heat exceeding 50 degrees Celsius, 125 degrees Fahrenheit for Americans, given the harsh conditions, why would anyone be willing to work in Qatar? The obvious answer is money, money or The promise of a better future for the family is a strong motivator.

Many developing countries face such severe poverty that there is simply a lack of options for people. Technopore, for example, one of the countries with the most workers in Qatar, Nepal has struggled for decades to provide meaningful opportunities to large sections of its population, particularly those living in the countryside trapped in poverty, hundreds of thousands of those Citizens now seek work abroad each year, the Nepalese government estimates they are part of an ongoing exodus that has seen more than 25 percent of Nepal's population migrate to work abroad since related records began to be collected. with such work in 1994.

Many workers send remittances home, which World Bank notes can help alleviate poverty in low- and middle-income countries. Remember that this has been growing rapidly in recent years and now represents the largest source of foreign income for many developing economies, more than foreign direct investment or foreign aid, for this reason some of these governments encourage their citizens to work abroad, resulting, for example, in a formal work agreement between Nepal and Qatar. It is difficult to estimate the exact size of remittance flows because many take place through unofficial, officially recorded channels around the world. International migrant remittances are projected to reach US$630 billion to low- and middle-income countries in 2022 for Qatar, the latest value for 2021 is US$858.7 million.

Unrecorded dollar flows through informal channels are believed to be at least 50 percent larger than recorded flows. Rubenses are especially important for low-income countries, accounting for almost four percent of their GDP on average. Cross-country analyzes generally reveal that remittances have reduced the proportion. of poor people in a country in poorer households remittances are made through basic consumer goods that support education and healthcare for children in richer households can provide capital for small businesses and entrepreneurial activities remittances have real economic implications for the sending and receiving countries, but let's focus first on It has already been mentioned that the Robinsons are a household-to-household transfer that directly benefits the poor in society and, as we have discussed on this channel many times in the past, The poor have a greater marginal propensity to consume.

This principle refers to what percentage of additional income one will spend compared to saving. Imagine that your government decides to give each citizen a direct cash transfer of US$500 to address rising energy costs. Because of the war in Ukraine, poorer households struggling to make ends meet are more likely to spend that money on their daily living expenses rather than depositing it into their savings accounts or investing in ads. The opposite has been found in the case of wealthy members of society whose daily spending needs are met in any way. An increase in domestic consumption is beneficial to the local economy as there is a high demand for goods which helps businesses. local and creates jobs.

It also increases the amount of taxes collected by the government even if the money is not spent. It's not all bad news, research finds that in countries where increased remittances are associated with increased investment rather than consumption and an even stronger positive relationship between remittances and GDP growth can be seen, Robin says it can positively impact the growth of an economy by providing access. to credit, since they can be used as collateral for loans, since remittance payments are expected to continue even in the case of negative shocks for borrowers, they become a signal of reliability for the lender beyond the cash received by the remittances.

Labor migration can also have a beneficial effect. Impact on human capital Migrants returning from working abroad have demonstrated a greater propensity to develop their own businesses. They have been exposed to how companies are run in more developed countries and can recognize trends within their home country and create a company to take advantage of them. Opportunity economists are famous for using the phrase "it depends" when asked a question. This certainly also applies to the question of whether remittances are a net benefit to less developed nations. It depends on the circumstances and certainly has several disadvantages that are worth considering.

Labor shortages can occur particularly when highly skilled workers leave the country. Money transfers to populations remaining in the country could also undermine the recipient's incentives to work if the amount of remittances exceeds the recipient's expected labor income. This flow of external income can discourage participation in the labor force and choose voluntary unemployment and foster a culture of dependency.Another very interesting effect can occur at the macroeconomic level given that the flow of remittances is substantial compared to the size of the economy. Large inflows of foreign currency due to resource exports can cause the national currency to appreciate and exactly the same thing happens due to the inflow of remittances if the remittances are large the receiving country could face a real exchange rate appreciation which can cause its economy is less competitive internationally the country's exports are less competitive in price as goods become more expensive for other countries as the value of the national currency increases, this can shut down the domestic industries of developing countries .

Let's look at a hypothetical example. Suppose migrant workers from Nepal send their earnings in Qatari rials and the Qatari currency returns to Nepal, the local agent in charge of remittances transfers the amount. Under Napoleon, to the worker's receiving family in the process, the rupees had to be purchased with reals, which increases the demand for Nepalese rupees if there is a high demand in a currency that appreciates, meaning it becomes more valuable in relationship with foreign currencies. A stronger polycurrency makes it cheaper to import goods and Nepalese citizens have more purchasing power when traveling abroad, but this also increases the prices of goods produced in Nepal.

Suppose Nepal has a huge carpet industry that employs many Nepalese workers and contributes to the public in Due to the type of taxes, the buyers of those carpets are mainly located abroad due to the increase in the value of Nepalese rupees. These rugs will suddenly be more expensive for international customers and will become less competitive as rugs from Bangladesh and Myanmar are suddenly cheaper. Customers will prefer to buy them before the Nepalese industry ceases to exist, which will reduce employment opportunities and industrial production in the country. In this country, this slowdown of the domestic industry will only contribute to impoverishing the country and ultimately , to make it more dependent on the money its workers earn abroad, in the case of the guitar, given the small size of its native population, importing large numbers of migrant workers is the only option they have.

They had to expand their labor restriction and diversify their economy away from oil and gas. Qatar's economy is much larger today than it would have otherwise been due to migrant labor. The large project was built with the help of migrant workers. It also creates opportunities for native workers to develop their skills and experience helping to develop their human capital; However, this economic boom has had an enormous human cost and will continue to do so until such time as working in terrible conditions on the other side of the world is not the best opportunity these people have.

Unfortunately, to escape poverty, the more people in a country rely on working abroad, the more they will end up relying on working abroad, which will only perpetuate this cycle. Thanks for watching, friend, bye.