Transcript Labor, education and human capital

9. Human capital and labor
mobility
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Two huge issues
 Labor mobility and the gains from globalization
 Internal migration
 International migration
 Promoting the growth of human capital
 Why are these “huge” for development?
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Why does labor move?
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Poverty impact of growth depends on labor
mobility
 Why does labor migrate?
 What happens in each economy when it moves between
them?
 Gains/losses in GDP and GNI
 Wages in each economy
 Labor mobility need not be between national economies
 China’s experience of internal migration restrictions
 Hukou acts like a tax on rural labor
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Migration and wages: standard model
w1
VMPL1
VMPL2
w2
a
w1
0
w*
d
b
e
c
01
w*
w 20
02
LA
L*
• VMPL = marginal product of labor (demand), with K fixed in each sector
• Outmig. area reads from right, L importer from left
• Migration = flow equal to qty LAL* equalizes w. Notice w1 must fall to
achieve this-- unless VMPL2 rises for some reason
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Labor effects of FDI with segmentation
w1
VMPL2
VMPL1
w2
a
w 10
c
01
LF
w 20
02
• No migration – labor fixed at LF, wages do not equalize
• FDI raises L demand in sector 1, what happens to wages in
1? To wages in 2? To poverty, assuming that’s in sector 2?
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Labor effects of FDI with integration
w11
VMPL2
VMPL1
a
w 10
w1
w 22
2
c
01
w2
LF
w 20
L*
02
• No migration – labor fixed at LF, wages do not equalize
• FDI raises L demand in sector 1, what happens to wages in
1? To wages in 2? To poverty, assuming that’s in sector 2?
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Globalization produces unbalanced growth
• Pursuit of comparative advantage implies uneven
distribution of industry gains and losses
• Most industries are clustered by location
• Adjustment to globally-linked economy requires factor
mobility, especially for labor
 Logic of industry locations (mines, ports, etc…)
 Limits on factor mobility constrain capacity to gain from
globalization
 “If globalization is the engine of growth, labor immobility
throws sand in its gears”
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Vietnam: spatial concentration of activity
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Inter-provincial migration, by region
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What would poverty changes have been without
migration?
Poverty 1993
Poverty 1998
Change (%)
Red River Delta
62.7
29.3
-53
North East
86.1
62
-28
North West
81
73.4
-9
N. Central Coast
74.5
48.1
-35
S. Central Coast
47.2
34.5
-27
Central Highlands
70
52.4
-25
South East & HCMC
37
12.2
-67
Mekong Delta
47.1
36.9
-22
VIETNAM
58.1
37.4
-36
Region
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Poverty impact of FDI depends on labor
mobility
 Analysis: (i) effects of FDI on labor demand; (ii) response
of the labor market (e.g. rural-urban migration)
 Poverty is most widespread in rural areas
 Labor market may be “segmented”
 How will gains of FDI-led growth be distributed?
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Labor exports and cross-border migration
 Since 1970s: big extra-regional flows:
 SE Asian workers in resource-extracting economies of Middle East
 Filipinos in high-income industrialized economies (US, EU, HK,
Australia, etc)
 SE Asian workers in high-income industrializing East Asia (Korea,
Taiwan, Japan)
= “South-North” migration
 Post-Plaza: ASEAN income divergence, big intra-regional flows:
 Indonesia to Malaysia and Singapore
 Burma, Laos and Cambodia to Thailand
 Vietnam to Malaysia. Thailand
 Philippines to Hong Kong, Singapore and everywhere
= “South-South” migration
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Manning & Bhatnagar. Numbers are in thousands. Thai figures are grossly underestimat
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Case studies
 South-North: Filipino emigration and labor export
 9-11m Filipino workers abroad (~10% population; nearly 20%
of potential labor force)
 South-South: Burmese labor export to Thailand
 1.5 – 2m Burmese workers in Thailand (~12% labor force?)
 ~ 6-7% of Thai labor force; maybe 20% or more of unskilled
workers
Filipino workers are their country’s main export
Source: UST Social Research Centre
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Who leaves the Philippines? Everybody
Source: UST Social Research Centre
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South-North migrants do the best
Source: UST Social Research Centre 18
Burma-Thai divergence: rough comparisons
Indicator
Burma
Thailand
T/B
Ratio
Source
Per cap. inc. 1956 (Rs, COL adj)
300
400
1.33
Myrdal 1967
Per cap. inc 1978 ($, OER)
150
490
3.27
World Dev. Rep. 1980
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Why do Burmese move to Thailand?
 economic motives
 incomes and opportunities
 unemployment and forced labor
 inflation, shortages, rationing
 political motives
 Risk of persecution, human rights abuses, political and ethnic
repression
 Internal violence and armed conflict
 There are estimated to be as many internally displaced people
within Burma as there are exiles and outmigrants
How many Burmese workers?
 Numbers
 About 600,000 registered Burmese “temporary migrant workers”
workers in Thailand (2006)
 Perhaps 1.5m more unregistered workers
 Trends
 Numbers of Burmese workers in Thailand have increased steadily,
with a small decline only after 1997 (Asian crisis)
 Comparisons
 Burmese labor force estimated to be 27m workers
 Burmese in Thailand are 80-90% of Burmese workers abroad
 Burmese account for 80-90% of foreign workers in Thailand
 Comparable to % undocumented workers in the EU, US
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What do migrants experience in Thailand?
 Occupations
 Dirty, difficult (degrading) and dangerous. Fisheries, farming, construction,
personal services; factory work
 Among registered workers: 24% in fisheries; 18% in farming; 14% in domestic
services; others in mfg, mining, quarrying, construction
 Unregistered workers in these occptns and also market/trade; hotels,
restaurants, prostitution
 Wages and conditions; job security
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Wages frequently reported as ~/23 - 3/4 Thai equivalents
In real terms, monthly wages constant (~$60 in 2003 prices) since 1980s
No measurable wage premium for registered workers
Few rights; none for unregistered workers (but in Burma, rights violations for all
are the norm, not the exception)
 Regulatory and legal environment
 Thailand introduced permit system 1996
 Registration and legal status (Registration costs equiv to 2 mo. income)
 Labor rights; human rights; access to social services
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Impact of migrants on Thai prodn and trade
 Sector-specificity of occupations taken by most migrants
 Jobs in fisheries, agriculture, construction and personal services
sectors cannot be outsourced
 Trade benefits
 Ag & fisheries contribute 18% of Thai exports by value
 Movement of Thai garment producers to the western provinces:
migrant workers delay the ‘sunset’ for these labor-intensive industries
(13% of exports)
 Fewer migrants --> lower prodn in these sectors
 Anecdotal evidence: 1999 deportation of 30,000 B. workers in Tak
province --> closure of 30 garment and canning factories,
unharvested vegetable, flower and other hort. crops
 Less than 6,000 Thai workers sought to fill vacated jobs
 Factor market complementarities:
 Migrants promote foreign direct investment inflows
 In longer term, may raise returns to skilled labor (and thus to
educational investments)
 How???
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Impact of migrants on the Burmese economy
 Wages and conditions in Thailand are vastly superior to equivalent
occupations in Burma
 Agriculture (>>50% Burmese labor force) has been subject to price controls
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and mandatory sales to the state; reducing returns on land and labor
Forced labor in infrastructure projects (est. 3% GDP)
Instability and destruction through internal warfare
Average income less than $1/day
Child labor rate estimated at 24%
==> Remittances (if any) from overseas workers should be highly
influential to households that can receive and use them
 If Mexico-US migration is a guide, benefits are concentrated along the
border and dissipate with distance
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Human capital and education
 Adding human capital (H) into Solow:
Y = Aƒ(K, H, L)
 Increases in stock of human capital are like augmentation of
total labor force
 More H raises the marginal productivity of K, L
 Putting it all together:
Y = Aƒ(K, H, L)*N
where
K = Kdom + KFDI
 Openness and human capital accumulation are usually
complementary
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Past education investment in SE Asia
 NE Asia: famous for education “ahead of demand”
 What about SE Asia? (Booth 2003)
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Past and projected years of schooling
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12
10
Indonesia
Malaysia
8
Singapore
Thailand
6
China
India
4
Vietnam
2
0
1970
1980
1990
2000
2010
Source: Goujon & Samir 2006, Table 12
2020
2030
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Education and labor productivity
 Labor productivity is raised by increases in capital stock…
 …and by improvements in labor quality (education, etc…)
 Returns to education are higher in economies that innovate
and move up product ladder
 Therefore, in more open economies – other things equal
 What about countervailing forces? Is there a downside to
globalization? Could more openness actually reduce L
productivity? Incentives for education?
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Labor productivity growth in East Asia
Labor productivity ($USD/worker)
12000
10000
1960s
8000
1970s
6000
1980s
4000
1990s
2000
2000-08
0
Source: Computed from data in WDI Online
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L. prod’y growth – a closer look
Labor productivity ($USD/worker)
3000
2500
2000
1960s
1970s
1500
1980s
1990s
1000
2000-08
500
0
Vietnam
Indonesia
China
Thailand
Malaysia
Source: Computed from data in WDI Online
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Labor productivity growth
Real labor productivity growth, 1984=100
600.0
500.0
400.0
China
Indonesia
300.0
Malaysia
Singapore
200.0
Thailand
Vietnam
100.0
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0.0
Source: Computed from WDI Online
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Homework questions….
 (1) What do you think are the main determinants or constraints to increased H
supply?
 (2) What do you think are the main drivers of increased H demand?
Remember that as with all production factors, demand for H is “derived” (not
direct). It is determined by demand for the product in which the factors are
used (just as the demand for agricultural land is “derived” from agricultural
product markets and food prices).
 (3) Think about a country that is moving up the product ladder – to exports
dominated by fragmented component production for the China assembly
industry. What do you expect to happen to returns to H as it moves up the
ladder? Will they increase, decline, or not sure?
 (4) Now think about a country that has a mix of industry and natural resource
wealth. What do you think could happen to returns to H as it experiences a
boom in natural resource exports? Will they increase, decline, or not sure?
 (5) If you were to offer any policy advice to the resource-rich country, what
would it be? In your answer, be brief and be as specific as you can.
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Educational investments and returns
 E Asian Miracle: primary education investments yield
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highest % contribution to GDP growth
Consistent with global data on returns to education
What causes educational attainments to rise or fall?
Where is most public education investment concentrated?
How are the gains from educational investments
distributed?
Khoman (2005): Thailand case
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Educational expenditure and distribution –
evidence from Thailand
 Thailand’s education rates were low before the boom, and
didn’t rise much with it
 Opportunity cost of schooling: farm/factory earnings
 Taking account of quality and cost of education
 In 2001, 75% of rural Thai workers still have primary
education or less (Khoman:258).
 Quality of educational experience regarded as low
 Structural reasons (educational policies/infrastructure)
 Most able teachers leave for private sector (opportunity cost)
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Access to education in Thailand
 In rural areas, majority of children don’t stay in school
beyond 12-14 years old (majority of urban do)
 Financial costs exclude the most low income groups
 Rural job qualifications do not demand much education
 Only formal sector jobs (public service, large companies)
require ed. beyond primary
 If prob. of formal sector job is low, why stay at school?
 School quality & quantity is far lower in rural areas
 Public kindergartens are all urban, so is ½ municipal school
enrolment and ½ private high schools
 Low education  low incomes  inter-generational
perpetuation of low access
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Access & distribution of public expenditures
 Most public education is heavily subsidized
 Fees charged:
 Secondary: 2-22% of costs
 Vocational: 4-37% of costs
 Universities: 7-14%
 What do low fees do to structure of demand? Who
benefits from this?
 Most demand for higher education (and even secondary)
comes from more wealthy households…
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Distribution of benefits from pub exp on ed
Hhold group
Benefits (Baht m)
Distribution (%)
Poorest 10%
8.913
7.6
2nd 10%
9,210
7.9
3rd 10%
9,346
8.0
4th 10%
8,938
7.7
5th 10%
8,925
7.7
6th 10%
9,567
8.2
7th 10%
10,223
8.8
8th 10%
12,236
10.5
9th 10%
16,515
14.2
Richest 10%
22,838
19.6
Total
116,710
100.0
Differences in opportunity to take advantage of education favor the wealthiest
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Summary
 Labor mobility is the key to spread of gains from globalizn
 National border matter less than before… international
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“fragmentation” of labor markets
Labor movements support changes in comparative
advantage, as does FDI
Human capital investments – key to sustained growth and
productivity improvement
Constraints on H supply growth: financial cost,
opportunity cost
Public policies are less than optimal  implications for
both growth and equity
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Tomorrow
 Can a developing country manage its macroeconomy? The
tradeoff between growth and stabilization in Vietnam
 Quiz #2
 Turn in research projects
 Lunch in Hanoi!
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