The excessive waves of migrant workers in free trade era : effects and solutions

By : Fachry Frisandi Migrant workers are one of the important and contentious issue in this era. According to intergovernmental experts appointed by the Commission on Human Rights, the term ‘migrant’ should be applied to all cases where the decision to migrate is taken freely by the individual concerned, for reasons of “personal convenience”. But the term ‘migrant worker’ has different official meaning and connotations in different parts of the world. Most common definition is very broad, essentially including anyone working outside of their home country.The term can also be used to describe someone who migrates within a country, possibly their own, in order to pursue work. There are many reasons for someone to leave their homes, their country to work in other country, for example, better opportunity of work in destination country, high wages, economic pressure,etc. Nowadays, we are facing the new kind of era that is free trade era. Free trade era is a type of trade policy that allows trader to act and transact without interference from government. Under a free trade policy, prices are a reflection of true supply and demand, and are the sole determinant of resource allocation. Free trade implies the following features, such as, trade of goods without taxes or other trade barriers, trade in service without taxes, free access to market, free access to market information, the free movement of labor between and within the countries. The free movement of capital between and within countries. Although free trade implies to the free movement of labor between and within countries, it would not be a significant rate of labor movement. However, the waves of migrant worker in this free trade era, has reached significant rates and has a various influence over socioeconomic life of the country. So, there is must be the selective application of free trade agreements to some countries and tariffs on others that lead to economic inefficiency and take effect on the waves of migrant workers. For example, in United States, the waves of displaced people migrating to the US, looking for work, is increasing. And based on survey, the main motivation of that migrant workers is economic need. Most of the migrant workers in the United States comes from Mexico. Coordinator of the Binational Front of Indigenous Organizations (FIOB) sayas there are about 500.000 indigenous people from Oaxaca, one of the states in Mexico, living in the

US, 300.000 in California alone. Immigration agency of United States set up a comission for the study of International migration and Cooperative Economic development to investigate the causes of imigration to the US.It found that the main motivation for coming to the US was economic need. Economic crisis provoked by the North American Free Trade Agreement (NAFTA) and other economic reforms are uprooting and displacing Mexicans in the country’s most remote areas. Their conditions is a result from the NAFTA policy that made the price of corn so low that it was not economically possible to plant a crop anymore. When the waves of displaced people migrating to the US looking for work increased, a rising tide of anti-immigrant hysteria has increasingly demonized those migrants, leading to measure that deny them jobs, rights, or any pretense of equality with people living in the communities around them. Increasing number of migrant workers on destination country gives both good effects and bad effects for the country. The good effect for the country is increasing in productivity. With many of the migrant workers work there it will be the benefit to the producers. But, there are also exist the bad effect from the migrant workers, that sometimes found in many countries,such as, increasing in crime, unemployment, penetration of the bad culture,etc. For example, in Britain, Many people thought that migrant worker are the main cause of the increasing of unemployment. Eventhough it is debateable, what is certain about the effect of migrant worker is it pushes wages down. The Migrants works for cheaper rates, so the producer will prefer to employ migrants in order to minimize production cost. Not only for the unskilled migrant workers, it is also applicable for skilled migrant workers. Migrant workers from India and China are known for its good quality but have a lower wages. It yields the competitive environment for the job seeker to find a job in this free trade era. So, The migrant’s destination countries have to consider the way to minimize the bad effects of the migrant workers. The study from Oakland Institute had found the reason of economic problem in Mexico that led to increasing number of migrant workers in USA. It said that NAFTA became the source of pressure on Mexicans, particularly Oaxacans, to migrate. The treaty created by NAFTA force yellow corn, grown by Mexican farmers without subsidies, to compete in Mexico’s own market against subsidized corn from the U.S. producers. Agricultural exports to Mexico more than doubled during the NAFTA

years, from $4.6 to $9.8 billion. As a result of growing crisis in agriculture, Mexico had already become a corn importer. Thousands of small farmers found it impossible to sell corn or other agricultural products at prices that would cover the production cost. From that facts, it can be concluded that one of the ways to slower the waves of migration is to improve welfare on migrant sending country. It is also recommended to promote greater economic integration between the migrant sending countries and the United States through free trade. And the U.S. economy policy should promote a system of open trade. US, Canada and Mexico joined in North America Free Trade Agreement. Unlike its formal titles, NAFTA intervened the market of those countries. Its interventions include subsidies, taxes and tariffs, non-tariff barriers, such as regulatory legislation and quotas. That intervention resulting in artificial prices that do not reflect the principles of supply and demand. In order to, create a greater net benefit from the market it is important to apply the ideal free trade policy on the market. The potential benefits of free trade can be found through two analysis methods. The first one is the theory of comparative advantage by David Ricardo. Ricardo’s model demonstrated the benefits of trading via specialization. The law of comparative advantages states that each member in a group of trading partners should specialize in and produce the goods in which they possess lowest opportunity costs relative to other trading partners. Under this kind of policy of free trade , trade via specialization maximizes labor, wealth and quantity of goods produce. From this theory free trade between two or more countries give benefits to those countries involved in the free trade agreement, not only some of them. With these practice, a country can improve welfare of its people. Thus, slower the pace of migrant worker. Another method of analysis is the analysis of the impact of a tariff or import quota. A simple economic analysis using the law of supply and demand and the economic effects of a tax can be used to show the theoretical benefits of free trade.It states that there are three effects of tariff on societal welfare. Consumers are made worse off because the consumer surplus becomes smaller. Producers are better off because the producer surplus is made larger. The governmental also has additional tax revenue. However, the loss to consumer is greater than the gains by producers and the government. Removing the tariff and having free trade would be a net gain for the society.

On the migrants sending country, highly rate of unemployment is one of the main factor for migration. It is also important for the government of migrant sending country to consider various policies aimed at reducing the unemployment. One of the probable policies is to create a manpower training programs. Manpower training programs have been advocated as a means to reduce the unemployment rate since the late 1950s and early 1960s. Many economists convinced that the unemployment is a result of structural changes in the economy. When technology changes or when the composition of final demand for goods and services changes, the economy is said to be undergoing structural change. When the economy experiences structural changes, old jobs are destroyed and new ones are created. If the displaced workers are able to meet the educational and skill requirements of the new jobs and are willing to relocate if necessary, no special problems are created, except during the adjustment period. If the displaced workers cannot meet the educational or skill requirements or are unwilling to relocate, they will remain unemployed for long periods of time. So, it is important to expand manpower training programs to provide the unemployed with new job skills. And many economists believe that more education is necessary to meet the job requirements of a technologically advanced society. With the high rate of employment in migrants sending country, it is possible to reduce the flow of migrant workers. Another way to slow or halt this flow of migrant workers is to make a policy that limits the number of migrant workers that is allowed to enter a country. By this policy, the government can always maintain the number of migrant worker and decide what to do with them. The reasonable number of migrant workers can give an advantage to the migrants destination country, especially for the country in which the population is small. One of the advantages is the tax that comes from the migrant workers can be a benefit for the country.Moreover, given the longevity booms most in developed countries are seeing, the percentage of elderly people in their populations would be manifestly a crisis if migrant workers were not here to add their taxes to retirement funds and provide the care-giving aging populations demand.

So, it can be concluded that the excessive waves of migrant workers can be handled by improving the welfare on migrants sending country and lower the rate of unemployment on migrants sending country. One way to improve the welfare is to apply the ideal free trade system with the principle of specialization, with the free

trade system, many economists believe that it will give a greater net gain for the society.