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Reflections on Work Visa Regimes in Advanced Industrial Societies

16 September 2003


Reflections on Work Visa Regimes in Advanced Industrial Societies

Issue Paper No. 2 Part II

Introduction

As Europe begins to think more systematically about using migration as a strategic tool in its growth and competitiveness arsenal, work visa regimes will become an increasingly relevant policy vehicle. This essay is an effort to introduce and reflect upon some of the selection mechanisms used most often by receiving states throughout the world. It fleshes out in particular the major (im)migrant selection processes the so-called traditional countries of immigration rely upon to enhance their economic growth and international competitiveness and teases out each mechanism's strengths and weaknesses.

Labour or work/skills-based migration is a principal form of international migration. It has been the dominant form of immigration to the United States in all but the most recent (1968-present) phase; it is the foundation and principal multiplier of the post World War II migration to Northern and Western Europe; and it is the almost exclusive variant of the very large migration flows to the Gulf States since the 1970s, as well as to East Asian and certain South and Southeast Asian states since the late 1980s.

Permanent (also referred here as immigrant) visas under the labour migration stream are rather limited. In fact, with the exception of the US, Canada, Australia, New Zealand and, in some ways, South Africa, the so-called traditional countries of immigration that have a history of offering such visas as main elements of their immigration formulae, few other states offer permanent immigration status up front on the basis of one's skills, education, and/or fit with the receiver's labour market needs. As a result, these first four states roughly 300,000 such annual admissions (for principals and their immediate families) account for the vast proportion of all such visas.

On the other hand, temporary admissions of foreigners (also referred here as migrants) who enter either explicitly in order to work or gain a derivative right to do so have been growing rapidly. In fact, in addition to being the primary means for gaining entry into most advanced industrial states, temporary labour migration is increasingly the means through which ever larger proportions of permanent immigrants find their way legally into immigration countries, particularly the US and, increasingly, both Canada and key Member States of the European Union (EU).

Most visas in this admission stream are awarded to persons with education and skills and are typically dominated by young males in technology-related occupations (see below for a discussion of entries by lower-skilled foreign workers). Admission may also be based on a person's relevant experience for a particular job, even in the absence of formal skills.

While not all states play a major role in the world migration system behave in similar ways toward foreigners who ply their labour and skills in that system, most do follow more or less a few comparable routes of selection and admission. Specifically, all such states have mechanisms for admitting foreign workers for certain types of employment, both permanently and temporarily, and employ similar screening mechanisms for these admissions.

Skilled Migration: Converging Practices in Accessing the Global Labour Pool

One component of the employment- or skill-based system of labour migration is temporary admission. This is gaining in popularity across states, to the point where the procedures for most industrial states are beginning to mirror one another. The increase in convergence is in large part the result of the reality of multilateral arrangements, such as those relating to trade-in-services, that are anchored on the principle of national treatment or reciprocity, as well as of demands among economic partners to codify reciprocal access for each other's nationals in the areas of business, trade, investment, or cultural exchanges. Many of these arrangements also include either explicit employment components (such as visas for about seventy professional occupations under the North American Free Trade Agreement) or allow employment that is incidental to the visa's primary purpose (such as when a student is allowed to work part-time during the school year and full-time when school is not in session, or when a cultural exchange visitor is allowed to teach or give lectures for a fee).

There is, however, another and increasingly more consequential reason for such convergence in practices. With globalisation having advanced to the point at which speaking of national firms is increasingly anachronistic, at least in the advanced economies, competitive pressures have put a premium on cutting edge technical skills and talent wherever these may be found. With low trade barriers and with technological advances, like capital, transcending borders and nationality, individual initiative and talent may now be the most valuable global resource. In response to this realization, the developed world's immigration systems are well suited to guaranteeing access to those who have the desired attributes and are willing to put them to work for a firm wherever it may be located.

Not all advanced industrial democracies draw on the global talent pool with the same intensity. Moreover, not all of them are as eager to enter the human capital accretion sweepstakes as directly as the US, Canada, or Australia, by offering permanent immigration status up front to foreign workers. It is clear, however, that the high-end immigration door is opening wider and by historical standards remarkably quickly. Several EU member-states, led by France, Germany and the United Kingdom, an experienced user of highly skilled foreign nationals, are leading the way in Europe in selecting qualified workers from abroad.

This opening is likely to refuel two old political discourses. The first one focuses on the failure of the recipient country to adapt its own training and education systems to the requirements of the so-called new economy adequately enough to meet the needs of employers from within its own labour pool. The second discourse dwells on the effect (and propriety) of deeper and more systematic helpings by advanced industrial societies from the human capital pool of the developing world. With most EU Member States, Japan, other advanced economies, and increasingly, many advanced developing states poised to liberalize entry to highly qualified labour, the brain drain issue will gain increasing political (and analytical) prominence in the years ahead. In all likelihood, however, and upon further reflection, this concern is likely to give way to the reality that increasing circularity and remittances, as well as transnationalism's gains, will make conversations about brain drain in most instances more of an ideological, rather than legitimate, concern.

Screening Foreigners Entering for Work Purposes

A state or its corporate citizens choose the foreign workers they admit in three principal ways. The first emphasizes the protection of domestic workers and uses intensive labour market tests. The second seeks primarily to identify and rectify labour market shortages and skill/regional mismatches. The third stresses the long-term human capital-focused economic interests of the receiving society over all other priorities. In reality, of course, a combination of selection criteria is typically employed.

Most European systems have long emphasized domestic (and in the EU case, EU-wide) worker protection schemes, although several EU member states have moved away from that model for certain types of workers. The United States places its primary focus on rectifying labour market shortages and mismatches with an increasingly pronounced tendency toward simplifying the labour market tests it requires. Canada, Australia, and New Zealand, finally, have increasingly focused on long-term economic interests (what may be called, at least in their permanent systems, the skills'accretion formula); as a result, they eschew most labour market tests.

The principal agent in each selection scheme varies accordingly. In many EU Member States, the prospective employer plays an important role, but is typically constrained by government predispositions to micromanage the process and deny the employer's petition. In the United States, the principal agent is almost always the prospective employer, both for the permanent and the temporary employment-based systems. In Canada and Australia, the principal agent for the permanent system is the government, with the prospective employer playing a minor role in the process. Employers, however, play a larger and increasingly independent part in the fast-expanding temporary worker admissions system throughout the developed world.

Domestic Worker Protection Schemes

Domestic worker protection schemes differ in whether the controls are pre- or post-entry. The former is the dominant variant throughout the world, while the latter is a US innovation dating from 1989.

Pre-entry controls: labour certification

One way to select foreign workers is to test each admission application against the eligible pool of workers for a particular job opening at a particular place and time. Under this system, the petitioner (typically the prospective employer) must demonstrate to the government's satisfaction that no domestic or other eligible workers are available for the job in question and that the employment of the foreign national will not depress the wages of such workers in similar jobs. Both requirements have proved extremely vexing both on administrative and methodological grounds.

The complexity of the process tends to transform it into a cat-and-mouse game between employers, on the one hand, and the government, on the other. Each side matches wits against the other. As a result, one notices a slowly emerging consensus that questions the value and efficacy of processes that rely on case-by-case assessments for choosing labour-market-bound immigrants. Namely, they tend to be complex, resource-intensive, and raise the question whether the actual benefits justify the costs.

Even more problematic seems to be the pre-tests' principal goal. They are anchored in a decades-old understanding of economies that are fundamentally closed and of foreign workers as a case-by-case relief for a specific job vacancy. This concept is increasingly at odds with today's competitive realities, where firms often choose workers (domestic or foreign) because of small differences in attributes (both in the quality and in the specificity of skills) that can lead to substantial differences in the firm's ability to compete. As a result, the long-term goal of some economic immigrant selection systems are choosing foreign workers on the basis of their mix of skills, experience, education, and other characteristics that maximize the probability both of immediate and long-term labour market and economic success. (See The Points Test below).

Post-entry controls: attestations

Post-entry control systems expend most regulatory and enforcement energy on the terms and conditions of the foreign worker's employment. Unlike the pre-entry test, the post-entry one is entirely a US innovation. In its various forms, the attestation mechanism is the principal example of this latter type of control.

An attestation is a legally binding set of employer declarations about the terms and conditions under which a foreign worker will be engaged. It reduces up-front barriers to the entry of needed foreign workers but still seeks to protect domestic worker interests through subsequent auditing and enforcement of the terms of the attestation. These terms are designed to protect domestic workers from employer reliance on foreign workers to affect a union dispute, reduce wages, or negatively affect working conditions.

In concept, attestations have several positive attributes.

First, if implemented well, attestations can balance the need to safeguard and advance the interests of domestic workers while also offering employers willing to play by pre-agreed rules predictable access to needed foreign workers.

Second, attestations meet an important public process (or transparency) test by giving potentially affected parties an opportunity to know about and challenge the matters to which an employer attests.

Third, properly structured and executed, post-entry controls can be among the mechanisms most responsive to changing conditions in labour markets while requiring the least amount of hands-on engagement by the government in an area where both data and procedures are weakest.

Finally, attestations can also be an inducement to cooperative labour-management relations in instances where workers' representatives and management work together to obtain the best worker available for a job opening.

Attestations, as presently practiced, however, have a number of shortcomings. Some of these are similar to the problems encountered in the pre-entry control process. For example, the government is typically ill-equipped to determine the appropriate wage for any particular foreign worker. Furthermore, some of the documentation requirements of an attestation seem to be quite burdensome for employers and require the release of what employers consider proprietary information on wages. (Most of these complaints appear to be rather unsubstantiated, unless seen within the context of the typically contentious relationship between government regulators and the business sector in the United States.) Attestations could also potentially become pawns in labour-management disputes by being subject to frivolous challenge by worker representatives. Finally, limited auditing and enforcement resources can lead to abuse by unscrupulous employers.

The Points Test

If the two main selection methods identified above are flawed, the first mostly in concept and the second in execution, what might be an alternative? Some states rely systematically on a points test for selecting large pluralities of their permanent labour immigrants. (New Zealand's proportion stands at three-fifths of total immigration.) Only those foreign workers whose specified personal and quantifiable attributes add up to a pre-agreed pass mark are allowed to immigrate permanently. (Among the characteristics currently receiving the highest point totals are education, age (comparative youthfulness), language and communication skills, and experience in a professional field.) Variants of the points' system are practiced in Canada, Australia, and New Zealand. Germany has also shown interest in the system.

A points' system has several advantages over other selection mechanisms, at least when it is relied upon selectively and in conjunction with mechanisms that allow firms to choose directly some of the foreign workers they need. It inspires confidence as a policy instrument that applies universal, and ostensibly "hard" (i.e., quantitative and objective), selection criteria to economic-stream immigrants. Hence, it is less susceptible to the criticism associated with the case-by-case system's "gamesmanship" between employers and bureaucrats. It can reassure key segments of the receiving society that the selection criteria for economic-stream immigrants conform to the state's economic interests. (This makes immigration politically more defensible than the alternatives discussed earlier.) Finally, a points-like system's ability to adopt new categories of desired characteristics, discard obsolete ones, and tweak the process by changing the categories' relative weights and/or the overall pass mark can be extremely valuable because it can respond quickly to shifting economic priorities and perceptions of what is good for the receiving economy and society.

A points-like system can thus shift the focus of permanent economic-stream immigration from an almost exclusive emphasis on case-by-case determination of specific job vacancies to one that takes into greater account broader economic interests. Properly conceived and implemented, and accompanied by opportunities for firms to select key workers outside of it, a points-like system asks the government to do what it can be fairly good at (i.e., gauging the broad direction and needs of the economy over an intermediate- to long-range time horizon) rather than forcing it to do what it is least good at (i.e., case-by-case job matching).

Other Labour Migration Schemes

This essay's focus so far has been on the formal, and individualized, selection schemes practiced most diligently by advanced industrial societies and focusing primarily on highly-skilled and educated workers. However, the largest share of labour migration includes workers with medium-to-low formal skills and occurs through the following routes:

(a) outside of formal controls;

(b) through seasonal and otherwise short-term work contracts;

(c) through a variety of training and similar schemes;

(d) through trans-border work schemes; and

(e) finally, through contracts that involve large numbers of workers, most typically tied to a particular construction or other major project.

The first form includes not only illegal migration, but also forms of migration that in many ways both predate and by-pass attempts at formal regulation. Much intra-Africa migration, for instance, fits that latter characterization, as is much of the seasonal migration discussed immediately below. Both forms together amount to a total of several million people per year.

Formal seasonal, other short-term, and industry-specific labour migration is also significant in numbers yet its size is difficult to estimate. Suffice it to say that few nationals of advanced industrial societies pick their own fruits and vegetables, tend to their agricultural holdings, staff seasonal or tourist related activities, fill undesirable, if skilled, occupations in the health- and elder-care industry, or perform domestic and other forms of menial, difficult, and poorly-compensated work. Many employers in these sectors throughout the developed and, increasingly, the more advanced countries in the developing world now rely heavily on foreign workers. The numbers of those who perform these jobs are in the millions probably as many as ten million and they hold a variety of legal statuses (the dominant one being an unauthorized one). Demand for workers in these sectors will grow incessantly as the long-term demographic changes experienced by most advanced industrial societies begin to be felt more deeply in the next decade or so.

Training and similar labour migration schemes are notable in such countries as Japan, Germany, the US and other societies that rely on them often systematically. The numbers involved are well below a million. Such schemes are typically thinly disguised efforts to circumvent a government's political stance against particular forms of entry, most typically the admission of low-skilled workers. In most instances, government agencies effectively collude with employers to admit such otherwise prescribed persons.

Transborder work schemes are typically found among neighbours. In their most formal expression, such schemes explicitly or implicitly allow employment and take the form of bilateral arrangements that in some instances predate the strict regulation of migration. The US border-crosser scheme has its roots in practices that go back to the early 20th century; several hundred thousand people have a right to participate in that scheme but not all do. Germany has developed similar arrangements with neighbours to its East, as have some other European states, more recently Spain, Italy and Greece. The total number of these additional schemes amounts to tens, rather than hundreds of thousands of work visas.

The final form of labour migration, contract labour schemes, saw their heyday in the 1970s and 1980s. At that time, hundreds of thousands of Middle Easterners (particularly Palestinians and Egyptians), as well as East-, Southeast-, and South-Asians found contract employment in often massive physical infrastructure projects, overwhelmingly in the Gulf States. The number of such workers in that region has fluctuated but has generally numbered in the neighbourhood of two to three million in the 1970s and 1980s. This number shrunk to about two-thirds that size in the 1990s'with South Asians having replaced most other nationalities.

Conclusion

Economic-stream immigration is a complex policy tool that, used smartly, can meet a receiving country's short- and long-term labour market needs with few adverse effects; conceived and implemented well, it can also manage the broader immigration gate in ways that maximize benefits for all that engage the immigration system while minimizing costs. Specifically, a well-managed regime of economic admissions:

  • provides rules that help businesses succeed and remain competitive in the global economy (in part by facilitating their access to needed foreign talent);
  • helps domestic workers by maintaining or creating both additional jobs in up- and down-stream economic activities and by making available to them greater opportunities to make continuous investments in their human capital and, hence, obtain better jobs;
  • assists immigrants to succeed by allowing them to get a fair return on their investments in their own skills and expertise; and
  • in the EU context, by helping European states manage their newest demographic transition by filling labour shortages, providing an antidote to skill mismatches, and shoring up retirement and health systems through taxes.

Only by thus incorporating and accounting for the main interests of all players, can an immigration system be truly in the national interest.

Note: EPC Issues Papers provide an outlet for EPC experts and others to contribute to fast-moving events and debates on issues of direct concern to the process of European integration. Issues Papers are concise, policy orientated, and reflect the views of the authors and not necessarily the EPC.