215
10
Impact of Migration on the
Domestic Labour Market*
A Preliminary Analysis
3.1 INTRODUCTION
The return flow of emigrants could become
increasingly important in the not-too-distant future. Based on
our project ed estimates of return migration the total number
of return migrants between 1983-88 may be as high as
600,000. Even on the assumption that 40 per cent of the return
migrants return to the Middle East the total number returning
between 1983-1988 could be as much as 360,000.
Nevertheless, these estimates also show that based on growth
projections of the Middle East economies and trends in the
share of Pakistani labour in the Middle East a significant
outflow of Pakistani .labour will continue to take place. What
needs to be examined therefore are important influences that
continued out migration and return migration of workers are
likely to have on the domestic employment situation.
We start by examining the skill composition of the
outmigrants in the past and the impact on the economy
• This chapter ii the author’s contribution to the ILO/ARTEP
Report titled: Impact of Return Migration on Domestic Employ
ment in Pakistan, Chapter 3, April 1984. 216
through pressures located in the domestic labour market. On
the basis of the available data and the nature of the labour
market we propose hypotheses regarding the pattern of wage
increases in domestic industry and agriculture which took
place during this period.
In the next two sections we analyse the consequences
on the domestic economy if the earlier situation persists.
Taking into account not only the outflow of labour but also
remittances we study in Section 3.4 its impact on the sectoral
composition of the domestic economy and the choice of
technology. The long-term implications for the employment
generation capacity of the economy of these changes are also
discussed mainly to illustrate how the coincidence of output
and employment objectives may not be borne out in the
Pakistani context.
To what extent will these trends be mitigated and with
what effect If there is a slowing down in net migration
accompanied with a significant increase in return migration?
This issue is taken up in Section 3.5 based on the available
evidence on job preferences of return migrants and the likely
patterns of investment with the incomes brought back by
them. We also consider some of the conceptual issues that are
involved in analysis the return flow of migrants in the event
that the return flows become substantially more important than
the outflows. This also helps us identify areas for further
research and kind of information that needs to be generated
through field surveys for further analyses.
We wish again to emphasize that this is a preliminary
analysis. We should point out that data on return migration
and satisfactory projections regarding the magnitude and
pattern of net outflows are yet to be generated. Therefore this
chapter has focused on the analytical issues involved in
examining the entire phenomenon of out and return migration
from the perspective of the employment generation capacity of 217
the domestic economy. The scope of the discourse has of
course been determined by whatever little data or information
we have been le to generate on the principal analytical issues
raised in this report.
3.2 EFFECTS OF THE NET OUTFLOW OF
SKILLED LABOUR ON DOMESTIC INDUSTRY
AND AGRI CULTURAL SECTORS
Demand projections for Pakistani labour in the Middle
East over the decade of the 1980’s show that in spite of a
decline in the percentage share of labour in the Middle East,
the stock of Pakistani labour in the Middle East is expected to
increase. It is important to start by examining the effects of the
continuing outflow of Pakistani labour on domestic industry.
Essentially the impact of the continued outflow of labour
(especially skilled labour) would be initiated at two levels:
(1) Effects on the wage cost per unit of output.
(2) Effects on the choice of technique in the
industrial and agricultural sectors.
Let us briefly examine the implications of these two
types of impact on the basis of the evidence available.
3.2.1 EFFECTS OF NET OUTFLOW OF SKILLED
WORKERS ON WAGE COSTS IN INDUSTRY:
IMPLICATIONS
There are three sources of data at present available regarding the
skill composition of outmigrants: The Bureau of Emigration, the PLM
(PIDE) Survey, and the PIPO/PIDE Survey. All three sources of data
indicate a predominance of production workers in the outmigrants during
the 1970’s. The Bureau of Emigration estimates that production workers
Constitute 79.13 per cent of the outmigrants in the period 1972-82; the
figure in the PLM (PIDE) Survey is 81 per cent 218
for the period 1972.79, while it is 83.2 per cent in the PIPO/
PIDE data for the year 1979.
(a) Skill composition of emigrants. In order to assess
the impact of outmigration on the domestic labour market, it is
necessary to consider the outmigrants in each skill category as a
percentage of domestic employment in that category. In terms of
this criterion also, production workers are by far the most important.
The ILO/ARTEP 1983 Study estimated that In terms of the one
digit occupational classification, outmigrants as a percentage of
domestic employment in all occupations was not greater than 10 per
cent, except in the case of production workers (excluding
agricultural workers) where the figure was as high as 25 per cent’.
Although, in term of the broad classifications, the skill loss to the
domestic economy in most cases may have been negligible,
nevertheless, at a detailed occupational classification level, loss of
certain skills may have been substantial. In such cases migrants
constituted one half to double the domestic employment for
example, plumbers, carpenters and masons (see Table 1).
From the viewpoint of the efficiency and growth of
domestic industry, what gives cause for concern is not only the large
share of production workers in the outmigrants, but the tendency for
this share to increase since 1977. For example, the Bureau of
Emigration data show that the percentage of production and related
workers in total emigrants in the period 1971-77 was 68.1 per cent,
but increased to 80.5 per cent in the period 1971-82.1
(b) Skill Shortages. In order to assess the impact of
outmigration during the seventies and early eighties on the labour
shortages of certain occupations and hence on wages, the domestic
supply and demand situation for each skill category needs to be
compared. This can be done on the basis of a projection
exercise for demand and supply of labour by skill, conducted
in connection with the Fifth 219
TABLE 1
Estimated Domestic Employment for Major Migrating Occupations and Migrants
As a Percentage in 20 Major Occupations
Manpower Migrants
Division
Estimates
1977/78
(Numbers)
Bureau Data
(All)
PIPO/PIDE
Data
(Middle East)
(Percentages)
PROFESSIONAL &
MANAGERIAL WORKERS
Engineersa 39,470a
(Exact.
Technicians)
31.92 84.29
Accountants & Auditors 12295 43.92 55.74
Managers/ Executives 155978b 2.31 -
Teachers 423822c 6.9 1.03
Doctors 13172d 54.54.77 17.1
Nurses 4300e 209.3 58.0
Computer Programmers/
Operators 1208f - 25.7
PRODUCTION WORKERS
Masons 114691 105.2 66.1
Carpenters 142271 94.9 54.6
Electric Fitters/
Electricians 125728g 31.5 33.1
Plumbers & Pipe Fitters 29048 62.0 56.6
Cable jointers/ Electric
Linemen 36773 19.6
Mechanics 241340h 25.4 12.6
Drivers (motor vehicles) 249590 - 39.1
Tailors 117235 - 50.2
Machine Tool Operators/ Setters 85846 - 32.2
Blacksmiths 88201 - 1.7
Watchmakers 5735 - 15.2
Painters 119.230 18.1 16.4
Foremen/ Supervisors 690948 41.2 16.4
Note: (a) Includes civil engineers, electrical and electronics engineers., mechanical
engineers including marine and aeronautical engineers and engineers n.e. c.
(b) Excludes managers, working proprietors, sales supervisors/ representatives shown
under Sales Workers (37,539)
(c) All teachers including primary educations teachers (135, 745).
(d) Only doctors and surgeons, i.e. excludes medical assistants, dentists, veterinarians.
(e) Professional nurses,
(f) Computing machine operators, card and tap punching machine Operators.
(g) Includes electrical fitters, electronics fitters, electrical and electronic equipment
assemblers and electrician / wireman.
(h) Machine fitters, machine assemblers, motor and other vehicle mechanics.
SOURCE: ILO / ARTEP, 1983, OP. CIT. 220
Table 2
Projected imbalances for Selected Occupational Groups
Affected by Emigration (in ‘000) 1982/83
Demand Supply Emigration + = Surplus
- =Shortages
PROFESSIONAL, TECHNICAL
& RELATED WORKERS
Civil Engineers
Electrical and Electronics Engineers
Mechanical Engineers incl. Marine
and Aeronautical Engineers
Engineers n.e.c.
Surveyors
Civil Engineers Technicians
Electrical & Electronics
Engineering Technicians
Mechanical Engineering
Technicians
Engineering & Related Technicians
Medical Doctors & Surgeons
17
11
10
8
5
41
42
22
21
25
19
12
11
9
6
46
47
25
24
25
4
4
3
3
4
6
7
6
5
2
-2
-2
-2
-2
-3
-2
-2
-3
-2
-2
PRODUCTION AND RELATED
WORKERS, EQUIPMENT
OPERATORS AND LABOURERS
Bricklyers, Stone masons and Till
Servers
Well-drillers, Borers, & Related
Workers
Machine Tool Setters
Machine Tool Operators
Reinforced Concreters Cemen:
Finishers verrazzo workers
Roofers
Carpenters, Jointers and parquetry
workers
Radio & Television Repairmen,
Electrical and Related Electrical &
Electronics Workers n.e.c.
Plumbers and Pipe Fitters
Welders and Flame Cutters
Crane hoist operators, earth moving
and related machinery operators.
97
4
53
46
21
16
76
9
34
115
22
99
4
56
47
22
17
77
10
35
117
23
28
2
6
5
10
5
34
5
23
25
11
-26
-2
-3
-4
-9
-4
-33
-4
-22
-23
-10
Source: Government of Pakistan (Manpower Division), 1981, Occupational and
Educational Manpower Requirements and Supply of the Fifth Five Year
Plan (1978-83), Islamabad). 221
Five Year Plan (1978.83).2 This exercise suggests that
production workers were the only skill category in wshich a
shortage could be expected at the level of a broad skill
classification: the projected shortage of production workers in
1982 being 8.1 per cent of their domestic employment, and
49.4 per cent of the production workers abroad. However,
analysis of the Fifth Five Year Plan projection exercise at a
more disaggregated level (Table 2) suggests that there would
also be shortages in such skill categories as engineers,
surveyors and medical doctors. The shortage of all engineers
as a percentage of domestic demand was expected to be 16.2
per cent, while in the case of surveyors it was as high as 60 per
cent. Most of the serious shortages were, however, expected in
various categories of production workers. It would also clearly
appear from Table 2 that the construction and manufacturing
industry can be expected to be amongst the worst hit by the
skill shortages because it employs to a substantial degree most
of the skill categories which were e to have a serious supply
shortage.
(b) The impact of outmigration on wage Increases:
some implications for the domestic economy
Wage increases may occur in industries that experience
supply shortage of skilled labour and may result in increased
wage costs per unit of output. This may happen if (i) wage
increases occur faster than the growth of productivity, and (ii)
employers are unable, due to time and/or financial constraints,
to bring about rapid increases in capital labour 1 arid
improvement in management techniques to bring productivity
growth in line with the growth rate in wages.
That the above prediction represented the nature of the
I between the mechanics of the labour market and
entrepreneurial behaviour in Pakistan can be supported by
Circumstantial evidence of wage increases in the 1970s. 222
Table 3 gives real wages rate data for selected industries for
the period 1971-72 to 1982-83. They show that till 1978-79, a
period of very high rate of inflation and consider able slowing
down in overall manufacturing sector growth, real wages
declined only marginally. However, in the, subsequent period
1978-79 to 1982-83 real wages increased by over 24 per cent
and this coincides with a period of rapid outmigration.
To the extent that in formal institutions the balance of
bargaining power might be in favour of the management,
market demand and supply forces for labour may be better
indicated by the wage changes in the informal sector. Here we
have the interesting evidence that real wage increase during
the 1970’s was higher in the informal than in the formal
sector. Informal sector construction workers experienced a
substantial increase in real wages. For example, the real wages
of masons and carpenters increased during the decade of the
1970’s by 41 per cent and 41 per cent respectively and those
of unskilled workers by as much as 57 per cent (Table 4).
Similarly the little evidence that is available on
earnings of agricultural/landless labour also suggests that there
were substantial increases in real wages especially after 1977.
(Table 5). A part of this increase was of course due to the high
growth rate of the agricultural sector mainly after 1979, but
here is little doubt that labour shortages especially during the
peak harvest and sowing seasons were also responsible for the
increases that took place. High levels of outmigration was
certainly a factor in accentuating these shortages in the rural
areas.
3.3 MIGRATION IN THE EIGHTIES AND ITS
IMPLICA TIONS FOR CHOICE OF
TECHNIQUE AND INCOME DISTRIBUTION.
If the outflow of labour to the Middle East continues 223
TABLE 3
Real Wages and Salaries including non-cash Benefits of a Production Worker in the Punjab
(inconstant 1969-70 purchasing power)
(Rupee/month)
Year Cotton
Textiles
Vegetable
Ghee
Sugar Cigarettes Cement Fertilize
rs
Aggregate
6 Industries
1971-72 131 178 181 270 218 424 147
1972-73 131 188 160 239 214 385 144
1973-74 125 162 163 237 207 425 138
1974-75 128 170 183 207 236 287 142
1975-76 132 218 154 221 244 279 146
1976-77 126 232 146 225 243 378 142
1977-78 120 239 154 222 299 379 139
1978-79 118 245 151 247 318 425 140
1979-80 137 253 149 273 370 427 158
1980-81 138 253 145 311 344 448 159
1981-82 138 266 149 290 374 479 163
1982-83 141 298 151 287 416 530 173
Sources: Based on Monthly Survey of Industrial Production and
Employment, Bureau of Statistics, Lahore. (Various Issues)
in Meekal Ahmed. Et al. ‘Recent Trends of Real Wages in the
Industrial Sector’, (Rineo, 1984) 224
from the skill categories where a labour shortage already
exists, real wages in these sectors may well continue to
increase dui the next five years. There may also be a tendency
for\the coat per unit of output in skill-short industries to
increase. This would be due partly to wages rising faster than
pr and partly due to increased maintenance costs resulting
from the poor skill level of remaining workers. The
phenomenon could also have a significant effect on
inflationary pressures on the economy.
The pattern of growth of wages during the 1980’s may
follow a rising step-ladder formation. With the high turnover of
skilled labour, as fresh entrants are hired, wages tend to fall or
remain constant due to the fact that the new workers are in effect
undergoing on-the-job training. However, as soon as the current
crop of fresh entrants has learned enough to go abroad, the
employer is obliged to raise wages of the workers to induce them
to extend their stay in the firm, at least for some time. In interviews
with manufacturing firms’ we were told that the management had
to increase the wages of skilled workers by 70 per cent to 100 per
cent, six months after they were hired. Although the increased
wage still much less than the wage the workers could get in the
Middle East, this “device” delayed the flight of the now- trained
workers to the Middle East.
As we have suggested earlier, in the skill- short
industries, wages may rise faster than productivity in the near
future, thereby raising wage coat per unit of output. We
proposed that this may happen if employers are unable to
substitute labour with capital fast enough. There is in fact
some evidence to suggest that in the construction industry,
which more than any other industry is subject to skill shortages,
there has been an increase during the 1970’s both in the capitallabour
ratio and in the wage cost per unit of output.6
It is also important to emphasize that even though some 225
TABLE 4
Index of Real Wages for Certain Skills and Unskilled Workers
Year Carpenters Masons Unskilled
1971-72 100 100 100
1972-73 595 93 101
1973-74 107 105 82
1974-75 107 104 107
1975-76 119 116 147
1976-77 128 136 161
1977-78 141 147 157
Source: a) Data for money wages for carpenters,
masons and unskilled labour-are for the
construction industry for Lahore only. Date
colleted by the Statistics Division and
reproduced in Gilani et.al. 1981op.cit.
b) Money wages were deflated by the
Consumer Price Index for Industrial Workers
obtained form Pakistan Economic Survey
1982-83 op.cit. 226
TABLE 5
Earnings per day of Male Agricultural/ Landless Labour
(also includes the value of payments made in Kind)
Year Rupees /
Day
Index of
Money
Wages
General
Consumer
Price Index
1975=100
Index of
Real
Wages
1975 7.53 100 100 100
1976 7.69 102 107 95
1977 9.06 120 118 102
1978 10.00 133 126 106
1979 11.31 150 138 109
1980 13.30 177 154 115
1981 19.53 259 175 148
Source: Compiled from ILO, ‘Year Book of Labours
Statistics’
(Various issues), Geneva. 227
projections might predict an accelerating return flow of
migrants in the second half of the eighties and an easing of the
labour supply situation domestically entrepreneurs will tend to
react to the situation as it presently exists as they cannot be
expected to have a long-term horizon. This is especially so in
a situation of considerable uncertainty and the absence of any
reliable study on the probabilities of return flow of migrants
for each skill category.
Two sectors where there is already considerable
evidence of increasing mechanization are the agricultural and
construction sectors. In the case of the agricultural sector not
only has there been a rapid increase in tractors imported
especially after 1975-76 (see Table 6) but increasing use of
threshers and more recently cutters and binders to n labour
short ages felt by the larger farmers especially during the peak
harvesting and sowing seasons. Similarly there is evidence
that mechanization is already occurring in the construction
industry where skill shortages have been most manifest due to
the large outflow of construction workers.
3.4 THE RELATIONSHIP BETWEEN REMITTANCES,
STRUCTURAL CHANGE, AND CHOICE OF TECH
NIQUE: SOME IMPLICATIONS FOR LABOUR
ABSORPTION.
(a) Remittances, Structural Change and Labour Absorption
Remittances to Pakistan by Pakistani workers in the Middle East
have increased at a remarkable pace: from $178 million in 1974 to
$2,224 million in 1981-82 (at current prices), according to official
estimates.8
This is likely to be an underestimate since it does not
include unofficial remittances and remittances in kind, some of
which are converted into cash on receipt within Pakistan. The
particular goods and services on which this remitted amount is
spent within Pakistan would affect the labour absorptive
capacity of the economy at two levels. 228
TABLE 6
Tractor Imported in Pakistan
Year Numbers Year Numbers
1970-71 3879 1976-77 15554
1971-72 4224 1977-78 11902
1972-73 1847 1978-79 15178
1973-74 5216 1979-80 19313
1974-75 7190 1980-81 16137
1975-76 10,809 1981-82
1982-83
(Provisional)
18858
20000
Source: Government of Pakistan, Finance Davison, Pakistan
Economic Survey 1982-83, Islamabad, 1983,
Statistical Annexure,P.35. 229
(i) The composition of demand generated by the
remittances could influence the relative rates of growth of
sectors (such as agriculture, manufacturing industry,
construction, services and trade, etc.). To the extent that, the
employment coefficient of value added varies across sectors,
the overall employment generation in the economy for given
growth rates of GNP could e. affected by the remittances.
(ii) Since the expenditure of remittances tends to be
weighted in favour of relatively expensive goods and services,
remittances could al change tile, composition of demand
within each sec To the extent that. high-valued items involve
more capital-intensive production techniques, or involve a
higher import, component the employment generation capacity
of particular sectors could also be adversely influenced by
remittances.
Since remittances are projected to continue to increase
over the next decade, albeit at a slower rate than before, the
above-mentioned consequences for employment generation
need to be examined closely. During the period of the 1970’s
there is some evidence to show that both the above- mentioned
phenomena appear to have occurred.
In the period of the 1970’s the growth rate in value
added in the tertiary sectors such as construction, transported
services appears to have been faster than the manufacturing
sector. A similar pattern is observed with respect to the
sectoral composition of investment. Thus, for example, there
was a decline in the percentage share of manufacturing c1ustry
in total private investment, while there was an increase in the
percentage share of construction and agriculture sectors. 9230
The possibility that there may be a tendency for the
technology to become more capital-intensive within the
rapidly growing sectors is• also indicated by the evidence. For
example, it is precisely in the rapidly growing sector (tertiary
Sector which includes ‘construction and services) that the
elasticity of employment with respect to value added has
declined during the 1970’s. In spite of the Increased capital
intensity In the tertiary sector, there was a net increase in
employment in this sector, for the percentage share of the
tertiary sector in total employment increased over the period.’
°. The changes in the labour ab6orptive capacity of each’
sector (in terms of the employment coefficient with respect to
value added) appear to have been influenced by the
composition of expenditure of remittances. A Study of PIDE
suggests, for example, that 62 per cent of the remittances went
into current consumption 22 per cent went into real estate
purchases the remaining 13 per’ cent went into investment. I
The figures on sectoral growth rates, changes in the
employment coefficients, and shares of employment by sector,
‘and the composition of expenditure of remittances indicate
‘that there ‘Is at least circumstantial evidence to suggest the’
following hypothesis:
The composition of expenditure of remittances in Pakistan
is such that it could adversely affect the labour absorptive capacity
of the economy. This could occur through the influence of such
expenditure on the sectoral composition of aggregate growth on
the one hand, and the choice of increasingly capital-intensive
techniques within particular sectors on the other.
(b) Choice of Technique and the Conflict between output
and Employment Objectives.
In section 3.2 we have indicated that if the net outflow 231
of migrants continues then the heavy weightage of this
outflow towards skilled production workers is likely to set up
supply side pressures to induce increasing capital intensity of
technology choice in Pakistan. In the last section we have
suggested that there is circumstantial evidence for the
hypothesis that the particular form in which remittances are
being spent may set up demand 8ide pressures towards a
growing capital intensity of technology through their effect on
the ‘product-mix’ over the next five years. If an increasing
capital intensity does occur during the next decade, it is ironic
that such a technology selection will have long-term
consequences for employment and income distribution. Yet
the pressures in response to which the technology choice is
being made (the outflow of migrants to the Middle East) may
be a temporary phenomenon, restricted to a decade or so.
The question we intend to examine in this section is, If
in fact increasing capital intensity of technology selection does
occur over the next five years, what will be its longer term
implications for employment generation over, say, the next
two decades? If we examine the issue in terms of the standard
choice of technique models, it has been shown that under
special circumstances there may not be a long term conflict
between output and employment objectives, if the capitalintensive
technique is se1ected.12 In these models, the choice
of the capital-intensive technique (rather than the labourintensive
technique), over time, generates both more output
and more employment compared to the labour- intensive
technique. This is because the larger investable surplus
afforded by the capital-intensive technique generates a higher
growth rate of output than that afforded by the labourintensive
technique. Let us see the conditions under which this
predication may not prove correct, and why Under the
conditions induced by the net outflow of migrants from
Pakistan, there may in fact emerge a long-term conflict
between output and employment objectives. 232
The essential assumption of these models is that the
reinvestment of the surplus in every round occurs within the
same technique, i.e., it is assumed that there is no technical
change during the growth process and the choice of technique
exist only at a single point of time. If, however, the selection
of the capital-intensive technique in an under-developed
country like Pakistan locks the country into continuing
technology imports from the advanced capitalist countries
where techniques are becoming increasingly capital-intensive,
then the conclusion regarding the 4 of output and employment
objectives may not hold. As reinvestment takes place in
increasingly capital- intensive techniques, the output growth
path of the capital-intensive technique may be much faster
than that of the labour-intensive technique.
There is reason to suggest that the high turnover of
skilled labour in Pakistan’s industry due to the Middle East
factor, and the recurrent fluctuations in the competence level
of domestic workers associated with the turnover process (see
Section 3.1), may induce Pakistanis industrialists to go for
increasingly capital-intensive techniques. This could well
become a continuing phenomenon if shortages of skilled
production workers continue over this period.
3.5 IMPACT OF RETURN MIGRATION AND
GOVERNMENT SKILL DEVELOPMENT
PROGRAMMES ON THE DOMESTIC ECONOMY:
SOME PRELIMINARY OBSERVATIONS.
The discussion in the previous sections has analysed the
consequences on the domestic economy if the trends of substantial
outmigration of skilled workers as witnessed in the seventies and
early eighties continued into the second half of the eighties. Two
factors could have an important influence on this situation. The first is
the policies of the government especially the programmes for skill
development, to meet both domestic shortages as well as external 233
demand. The second is the growing possibilities, of significant
increases in return migration resulting in a substantial slowing
down in net migration during this period. In this section we
analyse the impact of these two factors.
The important point to grasp is that the overall process of
migration (both out and Inflows) is occurring simultaneously
with the process of investment and rapid growth of the
domestic economy. Therefore changes in the demand for
labour induced by the level and capital intensity of investment
activity will interact with changes in the labour market
induced by out and inflows.
What causes special concern, as we have discussed in the f
previous section, is the strong possibility of the economic system
increasingly getting locked into a level of capital intensity as a
result of temporary shortages so that it is not flexible enough to
alter itself in a changed situation especially in the medium-term
future. In fact such a situation could become even worse if because
of special circumstances, especially job preferences of return
migrants, the problems being felt in the labour market were in fact
further accentuated rather than eased by return migration.
Before we discuss these possibilities and conditions
under which this might or might not take place, let us briefly
list some of the important factors which will influence the
impact of return flows of migrants on the domestic labour
market especially if such return flows become substantial.
(a) Supply Side Factors
Not only the absolute numbers but also the
composition of returnees with respect to location, skill and job
preferences on return will be extremely important. If the
composition of returnees by skill (assuming perfect mobility
across space), or their new job preferences do not correspond to 234
the composition of demand for labour by skill, then there will
be a higher unemployment for a given number of returning
mlgrant8. This frictional unemployment would in fact have a
cumulative effect over time on the domestic unemployment
situation by artificially keeping domestic wages for certain
skilled jobs high. The same predictions would hold, a fortiori,
if the location of returning migrant’s residence is different
from that of his new job and there are obstacles to mobility
(economic and/or sociological).
(b) Demand Side Factors
The effect of returning migrants on the demand for labour
would depend mainly on:
(i) The proportion of these migrants who are
investors (as opposed to employees), and the total amount
invested by them. The investment made by returning, migrants
would in turn depend on the facilities and inducements
available locally for investment.
(ii) The capital/labour ratios of the projects in
which the returning migrants invest.
Let us examine on the available evidence how these
factors will influence the domestic economy during the Sixth
Plan period. Projections prepared by the Manpower Division
for the Sixth Plan both for the additional annual employment
by major occupational groups and the overall position at the
end of the Sixth Plan, i.e. July, 1978, indicated that given an
estimated outmigration of 550,000 workers the only
occupational group for shortages would take .place are those
of production workers.’ For our subsequent analysis we
concentrate only on this category and within it that of skilled
workers as this is the one for which shortages would be most
strongly felt. It is of course quite possible that at a more
detailed skill composition level especially of professional, 235
technical, administrative and managerial workers shortages
would be felt in the domestic economy for given levels of
outmigration. However, because of lack of available
information at the disaggregated level for these skill
categories, both as regards domestic demand and overseas
migration, we have not been able to carry out this exercise at
this stage.
According to the Manpower Division estimates,
approximately 54,000 additional skilled workers are required
to meet the demand generated by the investment activity and
economic growth during the Sixth Plan. Supply estimates of
skilled workers through both formal and informal training
were also made and are given in Table 7. The major
arguments given for little increase during the Sixth Plan in the
informal system (the ‘ustaad-shagerd’ system) are the large
outflows of the best skilled workers and the limited training
capacity of those left behind. The most important result which
flows from these estimates is that regardless of any overseas
migration the economy would face shortages for skilled
workers. Even if we assume that the supply of the informal
system were to be substantially higher, the gap would at best
be reduced.
A continuing high level of outmigration would
substantially worsen the situation. The Manpower Division
earlier estimated the number of skilled workers migrating each
year as 60,000. In Table 8 we have also reported our results
(only for Alternative 1) for skilled workers which shows
approximately the same figure for earlier years and slightly
higher for later years. Based on our estimates of return
migration for skilled workers and on the assumption that these
workers take up jobs in the same 8ki118, the situation is
substantially altered and the pressures due to outmigration
alone are substantially reduced.
A crucial factor would therefore be the kind of skills 236
Table 7
Annual output of skilled workers in both formal and
informal sectors in Pakistan
Source Annual Output
A981-82 Projected,
1987-88
(i) Institutional Programmes
(a) Output from 37 institutions in the
National Vocational Training
Project NVTP (Twos Shift operation)
(b) Output from 7 institutions of the
Punjab Government outside the
NVTP (Twos Shift operation)
(c) Output from the 6 reorganized
Training institutions of the Overseas
Pakistan Foundation (Two Shit operation).
4,670
2,800
20,000
1,250
3,200
(ii) Apprenticeship Programmes
(500 establishments)
(iii) Programmes of Establishments
Outside the Apprenticeship Programme
(Viz. Pakistan Steel, Ali Institute, Railways,
PIA, Shipyard, Karachi Port Trust.)
(iv) Non-Formal System
1,270
4,000
15,000
2,000
4,000
15,000
TOTAL:- 27,740 45,450
Source: Manpower Division, “Vocational Training in Pakistan”, op. cit., pp. 25-26. 237
Table 8
Output and Return Migration of Skilled Production Workers
Alternative 1
Years Outmigration Return
Migration
Net Cut
Out Migration
(i)
If all return
migrants
return to their
jobs
(ii)
If 50% of
return migrants
return to their
jobs
1983-84 57,446 40,814 16,632 37,039
1984-85 59,553 41,829 17,724 38,639
1985-86 65,521 42,910 22,611 44,066
1986-87 72,074 44,289 27,785 49,930
1987-88 74,675 45,984 28691 51,683
Source: Based on tables 2.6 and 2.7. Production of skilled workers in total
production workers is taken as 46.83 per cent (Table 2.3) 238
return migrants would take up on their return. There is
unfortunately only limited evidence on this but what is
available is indeed revealing. A survey carried out by the
Overseas Pakistanis Foundation in 1983 asking overseas
Pakistanis what they expected to do on their return showed
that the vast majority, i.e over 60 percent intended to move
into business and trading activities. About 15 per cent wanted
to move into agricultural sector.15 Since the overwhelming
majority of those leaving are production workers these results
show that most migrants rather than go back to their original
skills would prefer to go into activities where they do not have
to do manual work. Similarly the percentage of those who
wish to go into the agricultural sector would in all probability
like to become small land-owners.
The results of the Overseas Pakistanis Foundation
Survey is reflective of future expectations and not what
returnees actually do when they permanently return. They
results of an earlier survey by the PIDE unemployment status
of returnees’ occupations is shown in Table 9. in this case
demand for skilled and unskilled jobs is substantially higher.
However, those engaged in business activities and the
agriculture sector are still substantially higher as compared to
the breakdown by skills of both out and return migrants. It is
also interesting to see that almost 60 per cent of returnees
wanting to work in skilled and semi-skilled jobs were still
looking for work. Given the prevailing domestic shortages,
this would indicate that a major factor responsible for this was
their expectation of higher wages than those presently
prevailing.
These results have important implications for the
impact of return migrants who are skilled workers on the
domestic supply/demand situation. What results is that even if
as many as 50 per cent of return migrants who are skilled
production workers return to jobs in these skills, the shortages 239
of such workers given the level of domestic and overseas
demand, will still be substantial (Table 8)
The nature of the job which migrants take up on return
will also primarily depend on the way in which t hey invest
savings on return. Also the level and pattern of investment
undertaken by them will influence demand for particular skills
in the domestic economy. It is also important to remember that
the savings that return migrants may bring with them will have
slightly different implications than the remittances that are
sent while the migrants are still abroad. The reason is that the
returning migrants may not only whish to construct a house
for themselves but may wish to invest their savings so as to
acquire a regular income. This could mean investment in
financial assets (like bonds, etc.), or investment in real estate
(to get rental income), or even investment in small-scale
industries, retail shops, or transport. The particular projects in
which the returnees invest will depend on, among other
factors, the following:
(1) The size of the savings that the returnees bring
back with them;
(2) The composition of domestic demand, and
access of the return migrants over information regarding
viable projects;
(3) Government policy package to induce the
investment into what it regards as priority projects. The policy
package could consist of a system of financial incentives/
disincentives, infrastructural facilities, streamlining of
procedures regarding the acquisition of government
permission for project investment, and facilities, streamlining
for providing supplementary finance n cases where returnees
are investing in high priority projects.
Some evidence on this is available on the basis of the 240
TABLE 9
Employment Status of Returnees by Occupation
Type of Jobs
Percenta
ge of
returnees
doing
the job
Percentage of
(3) returnees
looking for
the job
Percentage of
(2)
1 2 3 4
Professional jobs 6.2 1.4 22.5
Skilled & semiskilled
23.1 13.8 59.5
Clerical Jobs 2.4 2.9 120.8
Unskilled Jobs 6.7 2.4 36.0
Business 21.9 8.6 34.7
Agriculture 12.4 0.0 0.0
All Jobs 72.7 28.1 38.0
Source: PIDE Research Report Series, 132, reproduced in Manpower
Division, “Emigration of Pakistani Manpower to the Middle
East”, op. cit., p. 128, (Table 65). 241
survey carried out by the Overseas Pakistan Foundation in
1983. it shows that 44 percent of overseas Pakistanis show
preference for investment in business/ industry, 25 percent for
real estate and 24 per cent for liquid saving.16 while it is
difficult to draw any firm conclusions form this survey, it is
perhaps indicative of the fact that as distinct form a much
higher expenditure on consumption, compared to remittances
this share would be much lower in the case of savings that
returnees bring back with them. In our follow-up study it
would be fruitful to consider the return flow of migrant first in
terms of their direct on the labour market and then indirectly
in terms of the possible investment of returning migrants. In
the latter case the pattern of investment with respect to product
selection and choice of technique will have to be considered if
the issue of employment generation is to be adequately
analysed.
CONCLUSION
In this section we have analyzed the implications of the
continued net outflow of workers on the domestic employment
generation capability over the next two decades or so. We
examined first the pressures to use labour displacing
technology located in the tendency towards labour shortages
in certain key skills. We then indicated the pressures leading
to use of more capital-intensive technologies over time arising
out of the changing composition of goods and services
induced by the pattern of expenditure of remittances and
returnees’ income. We suggested that the confluence of these
supply side and demand side pressures for the selection of
capital-intensive technologies could create a tendency to select
such technologies not just at a point in time, but on a
continuing basis, whereby increasingly capital-intensive
technologies may be employed. Under such circumstances,
there may in fact arise a conflict between output and
employment objectives in the Pakistani conditions. 242
In examining the Supply side aspects of the domestic
labour market we suggested, on the basis of existing data and
our own Interviews of managements of firms, that there was a
high turnover of workers in firms using skills which were
prone to emigration. The turnover was associated with on-thejob
training at low wages and then a sharp wage increase until
the worker departed. So, over time, a rising step-ladder pattern
of wage increase may be induced by this labour market
peculiarity. Evidence indicated that industries suffering from
skill shortages (e.g. construction) were characterized by both
rising wage cost per unit of output and declining employment
coefficients in terms of value added. This indicated that, in
spite of increasing use of labour displacing technology, the
growth of labour productivity was not keeping pace with the
growth of wages. This implies that if the existing financial
constraints to foster mechanization might accelerate with its
cheap credit, the growth of mechanization might accelerate
with its attendant adverse consequences for employment
generation.
On the demand side we indicated that the composition
of expenditure of’ remittances appeared to be influencing a
structural change in the economy towards construction and
tertiary sectors, and within these sectors demand appeared to
be weighted in favour of items whose production involved
high capital-labour ratics. Apart from the long-term effects on
labour absorption, the tendency towards growing capital
intensity may induce long-term changes in income distribution
in favour of capital and away from labour. Such long term’
changes ironic would be the result of technology choices
induced perhaps by short-term labour shortages over the next
five years or so.
Our analysis further shows that return migration even
at a very high level will only dampen the effects that these
changes are bringing about. This is for two reasons. Firstly, as
a result of the high level of investment activity and economic 243
growth expected during the Sixth Plan the demand for skilled
workers will be substantial and based on existing supply
estimates a net shortfall may well be expected despite the
present skill development programmes launched by the
government. Also depending upon the extent of stay abroad
and savings accumulated, return migrants will have a tendency
to opt for non-manual jobs such as those in business, trade or
industry rather than to work in their original skills. What this
would mean is that return migration will not substantially
reduce the demand pressures for skilled production workers as
the supply situation will not be affected to the extent of the
return flows of such workers. The important implication for
this is that the skill development programmes being presently
initiated might well have to be further expanded and
strengthened to meet demand, unless of course return
migration assumes dimensions much greater than those
indicated by our present projections.
REFERENCES
1. ILO/ARTEP, 1983, op. cit. pp. 190-191.
2. Bureau of Emigration and Overseas Employment, Emigration
Statistics, Ministry of Labour Manpower and Overseas Pakistanis,
Islamabad.
3. Government of Pakistan, Manpower Division, A Study of the
Occupational and Education Manpower Requirements and Supply
of the Fifth Five Year Plan (1978-83), Islamabad, 1981,
4. Ibid. Table 20, p. 68. 244
5. These interviews were carried out with a well-known paper
manufacturing firm and a ballpoint pen manufacturing firm in
Lahore.
6. For details see M. Irfan, ‘Consequences of Outmigration on the
Domestic Labour Market: A Case Study of Pakistan’, ARPLA
Research Studies, Bangkok, 1983.
7. For a more detailed discussion of Increasing mechanization in the
agricultural sector see ILO/ARTEP 1983 Report, Section 3.5
8. The 1974 estimate is from Serageldin et. al. Manpower and
International Labour Migration, op. cit., 1983 and that of 1981- 82
from Manpower Division, ‘Emigration of Pakistani Manpower to
the Middle East’, op. cit. Islamabad, 1974.
9. As a share of total private gross fixed capital formation between
1969-70 and 1982-83 that of manufacturing declined from 40 to
26.8 per cent, while that of agriculture Increased from 13.6 to 21
per cent and ownership of dwellings/construction sectors almost
doubled from 16.2 to 29.1 per cent. (Calculated from Pakistan
Economic Survey, 1982-83, op. cit., Statistical Annexure, Table
4.)
10. For evidence on this see ILO/ARTEP, 1983, Report Section 1.2.
11. Gilani, et al., Labour Migration from Pakistani, op. cit., p. 143.
12. This is best illustrated by the ‘Sen Model’. See, A.K. Sen, Choice
of Techniques (3rd Edition), Basil Blackwell, Oxford, 1968.
13. Manpower Division, “Emigration of Pakistani Manpower to the
Middle East”, op. cit., Table 68, p. 142,
14. Government of Pakistan, Manpower and Overseas Pakistanis
Division, “Vocational Training in Pakistan — Costs and
Benefits”, Table 1, Islamabad, 1984, p. 22.
15. In Manpower Division, “Emigration of Pakistan Manpower to the
Middle East”, op. cit., the results of the survey are reproduced.
See Table 59, p. 120. 245
16. Results of the Survey are re-produced in Manpower Division,
“Emigration of Pakistani Manpower to the Middle East”, op. cit.,
Table 61, p. 121,
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