Global mobility of labor and economic implications

Introduction

Skilled and unskilled workers are constantly moving from place to place in search of greener pasture. While income is often the major driving force, some workers migrate because their skills are not in hot demand in their immediate environment. Still, others are in search of more stable economies where the standard of living is much better than their country of origin. No matter the reasons why workers move, there seems to be more increased number of people that take this decision to leave their nationality behind for a job-related journey abroad.

Taking a case of labor mobility in the EU in 2023, an annual report by that commission found that up to 10 million workers whose ages range between 20 and 64 moved to another European country in search of jobs. The report also tracked people that moved to another country although the stated reason was not job hunting but could be - 859,000 persons. These are stats to show that global mobility of labor is a reality. This movement has economic implications and that is what this article wishes to examine.

Labor mobility could be great for the economy

As we have seen above, more people are moving in search of work. This could be a positive thing for the new economy they are migrating to. If you have followed the tune of this discussion, you would have ascertained that we are focused on geographical mobility of labor. So why could this contribute positively to the economic growth of a place? Consider these positives:

• Filling the need for skilled workers: Labor is often not evenly distributed. The demand and supply for labor is usually imbalanced. For example, some skilled roles could be in high demand in one part of the world. Companies and organizations might struggle to get suitable workers for those positions and these might not be available or sufficient in their immediate environment. On the other hand, the same skilled labor could be existing in surplus in another part of the world. This is a big challenge that could impact economic growth and performance.

This type of issue is often solved through mobility of labor. Skilled and willing workers in areas of surplus might need to move to those places where their expertise are in high demand. Mobility of labor in this instance thus helps to balance the demand and supply of labor across the two locations where resources are not evenly distributed. It becomes a win-win for everyone involved. Companies are able to fill the roles that are vacant which adds more value to their business. The skilled worker who emigrated is able to find suitable employment too.

• Allocating resources efficiently: There has been a huge discussion about being gainfully employed. One big way for workers to be gainfully employed is to work in their sector or industry of expertise. Unfortunately, that is not happening in many places. Out of desperation caused by unemployment, many workers are employed in sectors other than where they are professionally trained. For example, an electrical engineer might be working in the education sector as a teacher. This kind of labor and employment issues could be solved by mobility of labor.

Basically, workers could move to places where their specific type of skill and expertise are in high demand. They have a much bigger chance of landing a suitable job for their area of training. For the economy, there are implications when people are working in their sectors. Its the best strategy to extract the biggest value from the worker. They are more productive in that sector where they are trained. Going back to our example above, an engineer would be more productive working in a construction company than teaching students in the classroom.

So basically, workers output and quality of production are far more greater when they are working in their own sectors. Its more of round pegs in round holes. The overall productivity and growth of such economies are enhanced. But when people work where they are not trained, their output is affected, so is the quality of service offered.

There are many other positive things that happen to the economy as a result of mobility of labor geographically. However, it is not all gains. Lets take a look at the negative aspects of such movements.

The downsides of labor mobility

The movement of workers across the globe also has a lot of challenges associated with it. If not properly finetuned, it could create more problems both of the economies the worker left behind and the new environment they are moving into. Consider the following two:

• Loss of human capital: The massive emigration of skilled workers could create big challenges for the economies they leave behind if there is no sufficient replacements. Many refer to the challenge created as brain drain. So the loss of skilled workers could lead to loss of productivity and expertise in the sector. This could create a vacuum that negatively affects the economy. Productivity is reduced as each skilled worker leaves their position.

Brain drain often happens in sectors of highly specialized skills like in medicine. Especially is this evident in developing economies. Take for instance Doctors in developing countries. Many doctors in developing economies are migrating to better economies abroad where their expertise would bring in more rewards. They have continue to move overseas because they have better employment rewards. Such highly skilled workers are hard to replace. As a result, their movement over time affects the economies they leave behind especially if they move in numbers. They are often very difficult to replace.

• Flooding the labor market: This has happened in many places where the number of workers moving in surpasses the labor demand. When this happens, it leads to a number of negative economic situations. For example, because there are many people applying for the same jobs, the wages might get lowered by employers. As a result, those that are already working might face job insecurities. If they fail to accept the lowered wages, they might loose their job.

The lowered income will definitely affect the standard of living of such workers and cause a negative growth of the economy.

Conclusion

Labor mobility is an inevitable part of every economy. It has lots of ups and downs. When properly monitored, it could contribute positively to the economies of various places.

Feel free to read more about this subject in the EU referrence below:

• Annual report on intra-EU labour mobility 2023 published

Note: Thumbnail from Pixabay

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