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Global Financial Crisis - Gloomy Spell for Migrant Labourers

By Arhan Sthapit

 

Amid the global financial crisis that has surged from the US economic meltdown to the rest of the world in the recent months, migrant labourers have been pushed to the receiving end of the crisis.

Labourers who have crossed the borders in search of better economic opportunities and quality of work life (QWL) have seen a gloomy spell cast by the financial slump worldwide. Such labourers particularly from poor and developing countries are likely to face at least three outcomes: loss of jobs, loss of adequately rewarding wage-compensation, and deterioration of QWL and status. They, in turn, are likely to bring in intensified poverty incidents and eventually social crisis.

‘Mobile’ labour

Labour mobility has been an essential and salient feature of socio-economic development throughout the human history. Labour migration for foreign employment has escalated more particularly after the stronger globalisation and liberalisation waves. There has been an invincibly strong trend towards migration of labour forces from countries (or places) of poor employment to those of better employment conditions. Migrant labourers from least developed countries (LDCs) like Nepal and Bangladesh, and other developing countries like India, Indonesia, the Philippines, Sri Lanka, Pakistan and even China flock every year to the Middle East and Arab nations as well as to newly industrialised countries (NICs) in the South-eastern Asian region, like Hong Kong, Singapore, South Korea and Malaysia. Europe, Australia, North America (US and Canada) and Japan also get migrant labourers from these human resource (HR) exporting nations.

In Nepal’s context also, with the fewer employment opportunities caused by sluggish real-sector industry growth, and meagre growth in other sectors, it has remained largely a labour exporting nation in the recent years. The Labour Act, 1992 (amended 1998) and Foreign Employment Act, 1992 and subsequent governments’ national Labour Policy have also facilitated migration to foreign lands for jobs.

Global economic context

The global economy, according to the report of European Central Bank (2008, Sept), has been characterised by continued inflationary pressures in three recent months. Similarly, there are also persistent strains on financial market combined with high commodity prices. The ongoing housing market adjustments in a number of advanced economies also have impacted global economy.

Of late, the US economic crisis has its repercussions on the global economic cycle. In combination with the impact of elevated energy prices, the US housing (real-estate) market has seen falling prices, which experts say are a corrective adjustment. It sent big ripples throughout the world after US investment bank Lehman Brothers—once highly rated firm—filed for bankruptcy on September 15 that was followed by many financial institutions in US and Europe. After the failure of US president's rescue plan to get through the Senate, financial markets across the world reacted with pessimism so that thousands of investors involved in trading of stocks and securities lost billions of dollars in no time. Sooner has the financial trouble blown up itself to become a global economic crisis.

Backlashes

The global economic crisis is spreading its wings to create at least three problems to the migrant labourers' work life.

1. loss of jobs,
2. loss of adequately rewarding wage-compensation and
3. deterioration of QWL and status

Earlier after the 1997 Asian financial crisis, millions of workers had lost their jobs. Similar or even more deepening impact from the current downturn is likely.

The weakening global economy will hit millions of migrant workers who are employed as domestic maids, industrial and agro labourers, and hospitality industry and dance-bar staff. According to a report of Migrant Forum in Asia (2008), more than 53 million migrant labourers from poor countries of Asian work worldwide. Now, as the economic slump has hit the business establishments, massive layoffs and retrenchments may soon result.

One interesting fact from a recent study in Singapore is that in Asian NICs, a majority of those who employ domestic maids and domestic hands from poor nations also dabble in stocks and other financial products. Since value of such products has eroded because of the slump, a majority of such domestic hands may lose their jobs.

In addition to the job loss, the migrant labourers may also suffer from loss of ‘adequate’ wages. As the turmoil squeezes market demand for goods and services, labour demand dries up against its supply. The over-supplied labourers cannot bargain, but only compromise, for their wages and perks. Hence, even those employed would be earning much lesser than before. Eventually, labourers’ status erodes, and many social problems may result.

This all means that the remittances sent home by migrant labourers to their poor families will dry up, and with it, money for food, clothing, family education and basic amenities. Nepal, an emergent ‘Remittance Economy’ may be one of those adversely affected by the new developments.

 

Nepal’s concern

Nepal’s concern also relates to the three effects of global economic slump on migrant workers as explained above.

It will suffer if the inward remittances which alone constitute a whopping share of 33.6 per cent on the nation’s current account receipts in 2005/06 dwindle. The share of remittances was 27.4 percent in 2000/01, according to the Finance Ministry statistics. Similarly, the contribution of remittances to the national economy in the recent years has remarkably increased. The remittance to GDP ratio increased from 0.5 percent in 1990/91 to about 11 percent in 2004/05 and further to 16 percent in 2005/06. This ratio is relatively high compared to India and other South Asian countries.

The incoming remittances, as per the government data, have soared from Rs. 549.7 million in 1990/91 up to Rs. 100,144.8 million in 2006/07 and to 142,682.7 million in 2007/08.

Even with the meagre economic growth and widening export-import gap and with mounting burden of debt-servicing, it appears that remittance has been saving the country from balance of payment crisis. Reduced remittance would mean slump in national economy.

Another concern for Nepal is that most of its migrant labourers are low- and semi-skilled ones who are more

prone to layoffs and retrenchments.

Another problem is the large number of migrant workers without proper documents including passports and valid visa. Ditched often by local and foreign brokers, these poor lots have to face harsher actions by the employing nations’ laws.

In recent years, the government has taken a few steps to manage the foreign employment, such as human resource development (HRD) programmes to upgrade their technical, behavioural and language skills, as well as cultural familiarisation programmes. Going ahead with dependable labour agreements with HR-importing nations like the one with South Korea is desirable.

 

Now that the global crisis is creating job problems in such labour importing nations worldwide, Nepal should push ahead with effective economic diplomacy and relationship management through its foreign missions so as to proactively avert any unwanted repercussions, and at least, to minimise the adverse effects of job losses. The government policy to provide for a labour attaché to a country where more than 5,000 Nepalis work should be expanded from the existing two to more places.

 

Hope

There is also some hope that the labour problem could relent, if the present coordinated efforts in European Union, USA (US bailout plan to buy banks with bad mortgage-backed securities) and elsewhere prevented the global financial crisis from getting worse. Capital markets in South and South-east Asia have also shown a few indications of gradual improvements.