1995 Global Cultural Diversity Conference Proceedings, Sydney
Public Policy and Diversity - Migration Patterns and Policy
The International Movement of Labour in Asia
Continued, from part one
Future Role of Labour Migration in Economic Integration
Whatever integration of the labour markets may have taken place is still largely on account of the rapid growth of intra-regional trade rather than the physical movement of labour (Bloom and Noor, 1995). Between 1979 and 1992 the exports of east and southeast Asian countries to each other have grown at the rate of 12.2 percent a year compared to 9.4 percent to the rest of the world. As had happened in the European Community the growth of intra-regional trade became the mechanism for progressively reducing the unevenness of development and narrowing the initial differences in wages. There are nevertheless some very clear signs that the migration of labour is contributing significantly to the economic dynamism of the region.
Bloom and Noor recently estimated that "documented" labour migration already contributed over one-third of the growth of the workforce of the labour receiving countries of the region during the 1980s. If account is taken of undocumented migration, its contribution is surely much larger. The rate of growth of intra-regional labour flows has also been explosive. From a yearly flow of about 30,000 at the beginning of the 1980s the numbers are now at the level of about a quarter of a million every year.
These are but very rough indicators of the growing significance of labour migration in the economies of the region. We still know very little about the forces driving this emerging migration system. It is evident that the drive to maintain competitiveness in international trade is the reason why states are progressively opening their borders to inject new supplies of labour, especially for the small-scale manufacturing industries that are the first ones to be starved of native labour when the labour market starts to get tight. The same concerns are behind the acceptance of more foreign labour for sectors that do not produce goods for exports but are equally important in maintaining international competitiveness, such as construction, shipping, and a wide array of services (Brown, 1995).
The impact of these movements on international competitiveness is not always very evident but is nonetheless important. Singapore and Hong Kong would not have become global cities without the modern physical infrastructures that would not have been possible without importing foreign construction labour. The same may be said of the import of foreign housemaids who freed the native women from the households to join the formal economy.
It is also evident that states, especially the ones still trying to catch up with the others, are opening their borders widely to inflows of technical and professional manpower from the more advanced neighbours who can be instrumental in upgrading their industrial technologies. We still know very little about how labour migration fits into the process of global restructuring of production by trans-national corporations.
These are the high-level manpower flows which trade and foreign capital flows entail or what Bohning calls the "highly invisible" migrants those highly skilled workers, technicians, managers and professionals who are welcomed in countries of employment because they are engaged in the transfer of technology, the transfer of financial capital, or the transfer of corporate culture. In the European Community alone they are estimated to number some two million. In East Asia no estimates are available but their numbers are certainly just as large if not bigger because of the very active policies of many fast industrialising countries of the region to induce foreign investments and technology transfers.
Migration-Reducing and Migration-Enhancing Effects of Direct Foreign Investments
The massive relocations and transfers of production from Japan and now Korea, Hong Kong, and Taiwan to the neighbouring countries with cheaper labour evidently has migration-reducing as well as migration-enhancing effects. Once they are fully established and operating these relocated production facilities would have created employment in the less developed countries and, if they take place on a large enough scale, could be expected to eventually reduce emigration of labour.
But the immediate impact of the transfers may be to raise the movements of people in both directions. Engineers, technical supervisors, accountants, and others move from the headquarters or other subsidiaries of the transnational corporations towards the less developed countries, while trainees move in the opposite direction. It is easy to underestimate the scale of these movements because they are rarely recorded by immigration authorities and the movements tend to be of short duration, but the conspicuous numbers of Japanese and Korean restaurants in the region is a fair reflection of their growing importance.
Faced with rising labour costs, enterprises in these countries progressively shifted the basis of their competitive advantage in trade from labour-intensive manufactures to higher value, technology-intensive exports. As noted earlier, the Asian NIEs experienced a rapid process of technological upgrading and in a short span of two decades the composition of their manufactured exports underwent a transformation from simple non-durable consumer goods like textile products and footwear, to labour-intensive intermediate goods such as glass and wood products, and later to durable consumer goods such as household electrical equipments and automobiles.
Some like Korea and Taiwan have reached a later stage when capital-intensive intermediate goods like chemicals and steel plates and even capital goods like office and industrial machinery have become significant in overall exports. The two countries have gradually increased their competitive edge in technology-intensive products in the recent past (Lo and Nakamura, 1991).
DFI and Transnational Corporations in the Integration of the Economies
In their efforts to develop more efficient production bases, transnational companies first from Japan and later from the Asian NIEs quickly established regional networks of subsidiaries that produced various components of commodities for export. Japanese direct foreign investments in the Asian region over the ten year period 1983 to 1992 reached almost US$60 billion compared to less than $10 billion during the previous two decades.
The revaluation of the Japanese yen following the 1985 Plaza Agreement accelerated the flows of Japanese investments abroad, and it is virtually certain that the recent revaluation of the yen will lead to another wave of overseas investments. Taiwanese and Korean investments in the region are much smaller but are likewise rising rapidly. Taiwanese firms began relocating labour-intensive industries in neighbouring low-wage countries at the turn of the 1980s. Its foreign investments climbed to about US$750 million in 1987, then jumped to over US$4.1 billion the following year, and reached a peak outflow in one year of US$7 billion in 1989.
All of these involved considerable technology upgrading which evidently would not have been possible without the movement of technical manpower. When Japanese companies were forced by rising labour costs at home to relocate production abroad, engineering and managerial know-how were passed on to subsidiaries through two-way flows of personnel. Japanese technicians were assigned to subsidiaries abroad while supervisory personnel from these subsidiaries were trained in Japan.
The same kind of exchanges were taking place when Taiwanese and Korean firms started relocating their plants abroad. Hence, the transfers of capital and knowhow has had both migration-reducing and migration-enhancing effects, the former because of the transfer of jobs overseas, and the latter because of the role that transnationals have played in the process.
At the macro level the structural adjustments made by these countries have been impressive and their success is very amply reflected in the transformation of their exports. The smoothness of the adjustments by industry owes partly to the deftness with which national authorities employed immigration policy to avoid the large-scale dislocation of small enterprises which suffered from a high turnover of employees.
Notwithstanding existing restrictions on the admission of unskilled labour, the governments of these countries tacitly allowed the employment of foreigners to fill gaps in the labour market. Their availability helped the small companies which were very important in the extensive subcontracting networks of Taiwan's export industries. The same was true in Korea where the share of the small-scale sector in employment even rose during the period from 1981 to 1991.
Technology Adaptation Difficulties of Small Industries
For small industries the possibilities for automation have been exaggerated in many of the discussions of possible solutions to the shortage. For the small enterprises which face the acute shortage, automation possibilities are often limited because of the size of investment required, the risks involved, and their lack of knowledge about how it could be applied to their present production systems. In a survey of Korean small and medium enterprises by the Korea Labor Institute it was found in most industries less than one out of every four enterprises have considered or tried it. Most have shied away from it because of the financial investments required, the risks involved, and because they thought automation technically ill-suited for their requirements. Enterprises risk going under if they make the mistake of volatility.
Cushioning the Adverse Impact of Adjustments and Restructuring
The global or regional restructuring of industries would no doubt have been faster if cheaper foreign labour were not being admitted into countries where the relative factor supplies have decidedly shifted comparative advantage to capital-intensive, high technology manufactures. In Japan, the Republic of Korea, and Taiwan there remain many small-scale manufacturing enterprises that can now only remain in operation because nationals would not accept some of the jobs they offer. However despite their relative inefficiency, many have survived the pressures to close down or relocate to offshore sites. The reasons are many and are not all economic.
The economic argument is that they provide the production flexibility that export-oriented industries need to survive in highly volatile global markets; but perhaps more important is the protection they receive to minimise the harsh adjustments that would have been forced on many older workers who would not have the skills to shift to other types of employment. In this sense the admission of foreign labour to ease shortages in labour that particularly afflict the small industry sector may be interpreted as a means for easing the harshness of structural change.
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