4. Migration pressures: Demand-side pull factors

Turning to the demand side of the equation, a range of factors can be identified. First, while the world economy as a whole is still struggling to climb out of its prolonged recession, and while such fresh growth that has taken place in the Western developed economies has usually been of the “zero-employment” variety, the second and third generation NICs of the East and South-east Asian regions have continued to post phenomenally high growth rates almost without a break.

Alongside this, the more mature of these economies, viz., Japan, Republic of Korea, Singapore and Hong Kong, have long crossed the Lewisian turning point in the domestic labour markets. In Japan, this corner is meant to have been turned by the end of the 1950, i.e., only a little short of a century since the Meiji Restoration; in Taiwan (China) and the Republic of Korea, the turning point came a decade or so later, i.e., after six to seven decades of modern economic growth, if the starting point is dated, as it should be, from the advent of Japanese colonisation.

All three economies have subsequently reached what has been called the international migration turning point, where domestic labour supplies need to be supplemented by an inflow of foreign workers. It is worth recalling that Japan in the post-War period, and the Republic of Korea until quite recently, were net exporters of labour. This turn has come about as a result of the sustained high growth rates of the domestic economy even after the Lewisian turning point was reached. The subsequent labour market and wage cost pressures then lead on to the absorption of foreign labour in a natural progression.

The second factor which accentuates the effects of the growth effect is the relative deceleration in the expansion of domestic labour supply. This phenomenon is a regular component of the third transition being experienced by mature developed economies, viz., the demographic one. Japan’s Hypothetical Stationary Population is estimated at 108 million, or 13 per cent lower than its 1992 level; its growth rate of 1.1 per cent per annum for 1970-80, dropped to 0.5 per cent for 1980-92, and is expected to drop to 0.2 per cent for 1992-2000 (the data are from World Bank, 1994: Table 25), turning negative shortly thereafter. The Republic of Korea, with a younger population pyramid shows similar trends, though at a higher level; even here, the population growth rate for 1992-2000 is 0.8 per cent, and the labour force growth rate is expected to be 1.8 per cent per annum. In Singapore, the latter rate is expected to be 0.6 per cent.

To some extent, these effects have been mitigated by a structural tendency towards increasing capital intensity across the board, but especially in production related activities. However, the unremitting pressure of the growth process has meant that this effect has been too weak to prevent or overcome acute labour market shortages.

However, there are also several areas of economic activity which do not lend themselves readily to the absorption of highly capital intensive techniques. Furthermore, such structural, or long-term, correctives might also prove ineffective in the face of an opposing, more short-term micro-level reaction of employers confronted with the prospect of labour shortages, rising unit wage costs, and the implied loss of international competitiveness in industries which are not at the cutting edge of technological advance. The pressure to solve the immediate constraint, and postpone the decline, or demise, of competitiveness translates often into importing low-cost workers from the poorer neighbouring countries, whether through legal or other channels. Ultimately, industrial processes which do not derive their fundamental competitiveness from technological superiority remain vulnerable to supply-side cost-push pressures and, despite the success of such short-term tactics as labour importation, are prime candidates for eventual relocation; sooner, rather than later, they will be caught up by the chasing pack of would-be NICs snapping at the ankles of the leaders. Three stages can thus be identified: one, where capital intensity adjusts to absorb labour shortages and rising domestic wage costs; two, where cheap foreign labour is imported in order to prolong competitiveness; and three, where eventually the activity relocates overseas.

Not surprisingly, wage differentials are extremely wide. Table 3 provides some comparative data for the period since 1980.¹² Three sub-groups of countries may be distinguished. The first is the poor economies with near-Lewisian labour market conditions, viz., China, India and Pakistan. Here, the wage rates are the lowest, and there is little generalized evidence of a strong upward push.¹³ The second set includes Malaysia and Thailand, both of whom might have been included in the first group at the start of the period, but which show rising Republic of Korea, Hong Kong or Japan, has been experiencing labour market shortages and rising wage rates, pulling in droves of internal migrants from the hinterland provinces. trends and final levels in excess of US$ 1 per hour.¹⁴ The third group are the first generation NICs, which show strong upward pressure, and final levels ranging from US$3-US$6. Here, it is likely that the pressure and possibility of relocating in South China has dampened upward wage pressures in Hong Kong.¹⁵ The fourth cluster is the United States, Germany and Japan, the high cost economies. Here, the slow growing ones display growth rates of wages of 4.4 per cent and 4.9 per cent respectively, whereas Japan posts a rate of 12.7 per cent. In this profile, the Philippines is the odd one out: in terms of the level, it would belong naturally to the Malaysia-Thailand group, but in terms of stagnation (and decline over the 1980-91 period), it was heading in the Lewisian direction. It does imply, though, that given its far superior level of human (resource) development, as reflected in the educational, vocational, skill and linguistic capabilities of its young workforce, the Philippines would form a prime source for labour in all but the raw unskilled categories of labour.

¹² Obviously the figures need to be read only as orders of magnitude, since any operationally comparison would have to be far more specific with regard to the kind of worker, and the other non-wage costs incurred by employers.

¹³ Clearly, these are broad generalizations, and carry fair validity at that level. But they hide very volatile intra- economic labour market conditions. For instance, coastal China, while still far cheaper than the neighbouring

¹⁴ In terms of its rising trend, though not its low levels, Indonesia might be included in this group, though it is probably still better placed in the first group for some time yet.

¹⁵ See for instance, “Blue Collar Blues”, Asiaweek, 1994b:44, which refers to the labour disciplining role of the threat to relocate in China.

Table 3. Labour costs in selected countries (US$ per hour)

Country	1980	1984	1988	1991	1994
United States	6.4	8.6	9.4	10.3
Germany	10.2	7.5	14.7	17.3
Japan	4.4	6.3	14.9	16.4
Taiwan (China)	1.3	1.6	2.9	5.0	5.76
Rep. of Korea	0.8	1.9	2.3	3.6	3.85
Hongkong	1.9	1.7	2.2	3.4	3.56
Singapore
Malaysia			0.8	1.0	1.50
Thailand	0.3	0.6	0.7	0.9	1.04
Philippines			0.6	0.7	0.78
Indonesia			0.2	0.3	0.43
China		0.3	0.3	0.3
India	0.6	0.7	0.8	0.6	0.56
Pakistan	0.3	0.5	0.4	0.4

Sources:	For 1980-91, Orbeta, Jr. and Sanchez 1995: Table 38.
	For 1994, Asiaweek, 1994b: 41; citing “The World Competitiveness Report 1994” by Asiaweek Research

Usually, emigration pressures felt by would-be migrants are directly attributed to the vast differentials in per capita incomes between the importing and exporting countries. Indeed, this differential was cited earlier as a necessary, though far from sufficient, explanatory supply-side factor. But it should not be overlooked that this push is often connected to this pull force exercised by certain categories of employers in the importing countries; the differentials relevant here are in terms of wage costs per hour, and can be as alluring as the per capita income inequalities which are held to motivate the migrants. There is thus a symbiotic relationship between the push and the pull factors, between the migrant seeking a higher wage, and the employer wishing to offer a lower one. This relationship of mutual convenience often places the potential employer at odds with other sections of the host population, or with popular public sentiment. The Japanese case illustrates this well. To some extent, and for a limited period of time, a “solution” was found to give preference to the absorption of foreign workers of Japanese origin; under this policy, a significant number of Japanese Brazilians have entered relatively low wage employment in industrial production activities. There is evidence to confirm this conflict of interest between employers and other groups in Japan; similar situations exist in other countries as well.

With regard to services, it needs noting that most advanced economies are experiencing or are in transition to the stage of mature de-industrialisation, where the share of the industrial sector in the total output stabilizes, and sometimes even declines to a lower stable level, while the services sector rapidly overtakes it and continues to grow at its expense. Underlying this is a high elasticity of this sector with respect to aggregate expansion. Beyond this, however, the services sector does not lend itself to ready generalisation. Typically it displays a high degree of internal diversity, arising from the specific client-determined nature of most service activities. Though far from being non-tradeable as a category, many of them tend to be rather location-specific, since they cater to a resident population, and since most services are inherently produced and consumed simultaneously. It is useful to distinguish between a few categories of special Filipino interest, since they are likely to involve different client groups and thus face varied market demand conditions.

First, the kaleidoscopic process of relocation of industrial production activities within the regional, if not global, economy is also affecting the booming services sector. Several specific categories of services have successfully shifted base outwards from the core. For instance, various multinational companies, including some major airlines, have relocated their accounting and book-keeping, or other data management, or cargo handling systems to India, taking advantage of the cheap high-quality skilled labour available there. The computer software industry is another case of Indian success. Both are areas where the Philippines would also have a strong comparative advantage in relation to other countries in the region. These types of services are subject to the standard rules of the relocation game.

Second, there are the various non-stigmatized non-footloose services, e.g. transport, security, clerical, maintenance and lower level management services in hotels, restaurants, airports, etc. These are the more stable and standard services. Demand pulls here have been strong, but are unlikely to convert into dramatic opportunities,¹⁶ unless it is wildly hypothesized that local employees might be displaced en masse by imported workers.

¹⁶ The case of the sudden boom in the demand for such services in the Middle East provides an obvious exception. It is unlikely to be repeated, however, unless another desert-like area with exceptionally low human resource capabilities again encounters a windfall of similar magnitude.

The third source of demand constitutes the inferior and stigmatized so-called “3-D” jobs¹⁷ which are vacated by the native workforce at first opportunity. Even though some jobs lend themselves to improvement through labour displacing technology, the costs of the latter could be prohibitive, and for the local population, the symbolic label could not be erased in any event. As such, this source of demand is likely to remain the preserve of the poor migrant “guest” worker.

¹⁷ These refer to dangerous, dirty and demanding; the fourth “D” gives recognition to the demeaning nature of certain jobs. It has been suggested that “there is one more occupational “D”- “dull”: young Japanese do not like to work in hotels and restaurants, but what should such places do? They cannot very well use robots” (JIL, 1992:303). In Japan, the 3-Ds translate into the 3-Ks.

A particular occupation which needs a brief comment here is that of “entertainers,” as singers, bar hostesses and sex workers have come to be labelled.¹⁸ The demand for such services would appear to be insatiable in Japan, which along with a short list of other destinations, seem to account for most of the total number of OCWs in this occupational category. However, the publicity it receives is disproportionate to the relative share of this category in the total number of Filipino migrants, except to these few destinations. It appears highly improbable that there will be any substantial legal widening of this market to other destinations; indeed, all indications are to the contrary as governments at both ends of the trade have taken a negative stance. However, more than in Thailand, this remains a classic example, in its origins, of a foreign demand-induced phenomenon.

¹⁸ The euphemism was given formal status by the Japanese embassy through the introduction of a special visa category “entertainer” in 1981. A few years later, the Philippine government “elevated the status of some 20,000 rest and recreation entertainers as well as 300,000 hospitality girls, hostesses and waitresses to the category of “professionals”, as enunciated in Art. 138 of the Philippine Labour Code” (De Dios, 1989: 139).

Progressively, a new category of demand is beginning to emerge in the field of personal services, in particular those whose demand is derived from the needs of an ageing, rich population which works less, retires earlier, lives longer, spends more, and has fewer family members to look after it; health, personal care and maintenance, household management, travel and entertainment, problem-solving and back-up, personal security, financial management, are all areas of high elasticity expenditure, especially in an economic and political environment where the state is pulling back from the production and provision of such social needs, and where large-scale organized private sector services are extremely costly. To an extent, this is a natural development of the demand for cooks and maids at the earlier stages of the life cycle. In view of their qualifications, experience and advantage of prior access (even if at the lower level of nurses, maid, domestic helpers), Filipino workers and operatives could be well-placed to exploit this new market space, though proactive policies and organisational and institutional innovations would be necessary to create appropriate vehicles for the delivery of such services in overseas markets.

On the demand side, the story is rather more complex than that of supply-side pressures. The following conclusions emerge: one, the overall pace of economic growth of the major economies is crucial in keeping up the demand for external labour; two, to the extent that adjustments in domestic capital intensity cannot resolve internal labour supply constraints, the resultant pressure to import labour could in time transform itself into an irresistible pressure to relocate the activity, thereby cutting out foreign labour; third, the fastest incremental growth is likely to be in the services sector, part of which is also likely to behave like the industrial sector, thereby opening up the possibility of relocation of labour intensive service activities in poorer economies of the region which have appropriate levels of the specific human resource capabilities required; fourth, the traditional 3-D or 4-D cluster of services are likely to continue to demand foreign labour - there are few options here - but this growth might be less than spectacular since such labour displacement has largely already been achieved in the more mature economies; fifth, there are grounds to expect a boom in the sub-sector of personal services, in particular those catering to the burgeoning needs and demands of a rich but ageing population in the later stages of the life cycle.

In conceptualising demand pulls, the regional dimension has to be kept in mind. While the demand for work in the Middle East eases off, labour flows within the Asian region have intensified. But the types of flows to different Asian destinations display regular differences, depending upon the pattern of demands applicable to each particular host country. This has obvious implications for the prediction or planning of international migration flows.¹⁹ In general, though, the demand side, varied as it is, presents a distinct contrast to the supply-side pressures discussed above in the context of the Philippines. A considerable mismatch implying substantial relative excess supply is likely to persist for the foreseeable future.

¹⁹ For a useful overview of the demand prospects for Asian labour exports in the Middle-East and within Asia, see Amjad, 1992:37-44.