Recruitment matches workers with jobs, a process that is often complicated by asymmetric information: employers know more about the jobs they are offering than job seekers, who know more about their abilities than employers. Economists have developed a variety of models for explaining how employers screen applicants to find the workers best suited to fill the jobs they offer, and how workers signal their abilities to employers by degrees, certificates and references.

International borders complicate job matching, as differences in language, culture, and job descriptions can make it harder to match workers and jobs. When workers are in one country and jobs in another, job matching is often facilitated by intermediaries, including for-profit recruiters. These ‘merchants of labor’ can play many roles. Some receive job orders from employers and travel to recruit and screen workers, facilitate their move across borders, and interact with them while they are abroad. More often, recruiters in one country pass job offers on to recruiters in another country, relying on intermediaries they may never have met to recruit and screen workers. For-profit recruiters operate in all migration systems, but they are especially prominent in Asia, where they move several million low-skilled workers from South and Southeast Asia into Gulf Cooperation Council countries each year.

Recruiters are paid for their services. Employers generally pay some or all costs of recruitment of highly skilled workers, including managers, health care professionals, and engineers, because there are relatively few such workers and the consequences of a poor match can be costly for the business. However, there are often more low-skilled workers than jobs in occupations such as domestic service and construction laborer, making some workers willing to pay high fees in order to move to the front of the queue.

Low recruitment costs and good worker-job matches result in satisfied workers and employers, and labor migration outcomes that satisfy governments in both migrant sending and receiving countries. However, high costs can prompt workers to violate their permits by taking second jobs and overstaying. Poor worker-job matches can also lead to employers dismissing unqualified workers who are reluctant to return because they have no way to repay their recruitment debts. Workers who arrive abroad in debt are especially vulnerable to mistreatment, since all parties know that these workers are counting on higher wages abroad to repay their debts and return to their home countries with savings.

International conventions call for employers to pay all of the recruitment costs of the migrant workers they hire. However, unless there are complaints, it is often hard to detect the payment of (excessive) worker-paid fees.

Wage gaps of eight to one or more motivate labor migration. Most workers will not give this entire wage gap to recruiters, but they will pay more than the typical one month’s foreign wages that some governments specify as the maximum recruitment charge. If workers have a two-year contract, one month is equivalent to 4.2 per cent of foreign earnings; on a three-year contract, one month is 2.8 per cent. Reducing recruitment costs would yield significant benefits. A low-skilled worker who pays $2,000 in recruitment costs for a contract promising $7,200 over three years in another country may remit $5,000 of these earnings. Cutting remittance costs from 10 per cent to 5 per cent saves $250, but cutting rercruitment costs in half saves the migrant $1,000. Furthermore, lowering recruitment costs can reduce debt peonage, trafficking, and the other violations of human rights that are sometimes associated with international labor migration.

Three concrete suggestions for reducing recruitment costs are standardizing contracts, offering incentives for good recruiter behavior, and encouraging the engagement of established multinational companies as recruiters. Standardization has contributed to the decrease in remittance costs, which can be separated into sending fees, pickup fees and exchange-rate costs. Businesses can standardize each element of the remittance transaction and use technology to achieve economies of scale that lower remittance costs.

Standardizing job descriptions and contracts could help to reduce the cost of recruitment. Agreements on the skills required to be a domestic worker, laborer, technician, or driver could increase both worker and employer satisfaction by getting the right workers in the right jobs. Governments could develop worker-held skill ‘passports’ that record skills acquired at home and abroad, thereby facilitating re-employment at home or a return abroad.

Most countries regulate recruiters by penalizing those who violate regulations. However, enforcement normally depends on complaints, which may not be forthcoming if workers get the foreign jobs they seek, albeit at high costs. Instead of only sticks, offering carrots that encourage recruiters to adhere to regulations may be more effective to protect migrant workers, especially if A-rated recruiters receive faster service from government agencies or pay lower fees, helping them to attract business at the expense of lower-rated recruiters. A-rated recruiters could also be favored to receive job offers from particular foreign countries and employers.

Many recruiters today are relatively small, moving dozens or hundreds of workers annually, without the knowledge or capital to make the business transaction of matching workers with jobs over borders cheaper. The third suggestion is to encourage multinationals such as Adecco and Manpower to move low-skilled workers over borders. Multinationals could speed the development of standard job descriptions and contracts and achieve profits via economies of scale rather than overcharging workers. An alternative to multinationals would be for unions or international organizations to become recruiters, using their nonprofit status to compete with for-profit recruiters while protecting migrant workers.

Moving workers over borders to fill jobs is a complex process of great interest both to receiving governments that regulate who can enter the country and what they can do once inside, and to sending governments that aim to protect their citizens abroad. Recognizing that recruitment is a business where costs can be lowered and protections for workers improved would move policy forward on the often overlooked R-term that links migration and development.

Download PDF