In most advanced economies, there is strong popular demand for controlling migration. This is perhaps the main lesson from the UK referendum on Brexit and is true elsewhere, as shown by polls and the surge in popularity of right-wing parties throughout Europe.1 In response to these concerns, governments have reinforced border controls over the past decades and imposed quotas on visas. However, these policies do not effectively hinder undocumented migration but rather fuel the market for smugglers.
Strong restrictions on labour mobility force many seeking to migrate to arrange their migration with the help of intermediaries. The intermediaries organise air, sea, or ground transportation and provide candidates with forged documents, clothes, food, and accommodation during the trip, and often with bonded jobs in destination countries to pay back the fees (Friebel and Guriev 2006).
While smuggling markets appear to be in the hands of many small providers, the smuggling market for long-haul migration is more concentrated. It involves sophisticated operations and requires larger and broader networks to illegally transport people over long distances. Prices are also higher for long-distance migration. This makes human smuggling a lucrative business, which every year brings billions in revenue to powerful networks.2
Over the years, human smuggling has merged with other types of illegal transnational activities such as drug shipping and prostitution. These activities weaken legal institutions everywhere – whether in origin, transit, or destination countries. In some countries, such as Mexico, they pose a real threat to the rule of law. They are also used as weapons against our democracies and the EU, as recently demonstrated in Belarus.
The very large disparities in economic prospects between low- and high-income countries provide huge incentives to migrate irregularly (Clemens et al. 2019). Many irregular migrants work in undocumented labour markets, which are a common feature of most OECD countries, although with varying size. These workers have either crossed borders irregularly or have overstayed their temporary visas to remain in a high-wage economy. And there is a strong demand for them in some sectors of the economy, where they can complement the labour of native workers or meet labour market needs (Peri et al. 2013, Butcher et al. 2022). These sectors – such as agriculture, restaurants, accommodation, caregiving, and construction – are characterised by difficult working conditions and low pay.
From an economic perspective, the current restrictive migration policies are not efficient. They ignore the labour market needs for low-skilled foreign workers, generate a missing market in work permits (Lokhsin and Ravallion 2019), and favour criminal activities. The heavy social costs they entail (loss of human life, loss of fiscal revenue, corruption, money laundering, violence, terrorism, slavery) are never internalised. Instead, policymakers simply assume such policies will work, leaving the police to deal separately with the associated criminality. Yet, internalising these costs can weaken the human smuggling market.
Is there a better way to meet the labour market needs in high-wage economies than using the services of smugglers?
In a new paper (Auriol et al. 2021), we discuss the extent to which implementing a market for temporary foreign work permits can help reduce human smuggling and control economic migration.
Extending the work of Auriol and Mesnard (2012, 2016), we model the decision of potential migrants – to either cross borders illegally or migrate through a temporary visa scheme – accounting for the response of smugglers, who react to migration policies by adjusting their fees to maximise profits. Candidates are workers of different skill levels who are willing to migrate from low-wage to high-wage countries. Under the status quo, there is no legal channel to migrate for low-skilled workers, who therefore turn to the smugglers’ services. This leads to an equilibrium in which smugglers share the illegal market profits. Introducing temporary foreign work permits provides candidates with legal channels to migrate, to which smugglers strategically react by pushing down their fees.
Could such policies drive smugglers out of business? If the price of visas is low enough, at an eviction level, smugglers can no longer make positive profits when they compete with low-cost services.
We find that a policy mix combining enforcement of internal and external controls with a market for economic visas allows this eviction price to reach pre-determined migration targets. By modelling how smugglers interact with candidates for economic migration and respond to policies, we show that the trade-off between undermining human smuggling and controlling migration flows can be overcome with carefully designed temporary visa schemes.
Such schemes are in line with current legal frameworks underlying temporary foreign work permits in place in many OECD countries. We show that they are more likely to be feasible if wage differentials between origin and destination countries are not too large. Otherwise, pricing temporary foreign work permits and ensuring the timely return of temporary workers is delicate.
Large wage differentials involve higher stakes for potential irregular overstayers. Their decisions are therefore more sensitive to the risk of the irregular border crossing failing, which varies over time and routes and is difficult to estimate precisely. This implies more volatile eviction prices and makes pricing temporary foreign work permits at eviction price a difficult task, as illustrated by our calibrations on the route from Senegal to Europe. If, as is the case in most European countries, the risk of deportation is low3 and the wage differential with origin countries is large, temporary foreign workers are disincentivised from returning to their home country. Even free visas do not necessarily guarantee the undercutting of smuggling markets: workers may have to be subsidised, sometimes with high amounts, to return to their home country.
Hence, to ensure workable temporary foreign work permits, some governments would have to strongly enforce their migration policies, for example through harsh deportation measures and sanctions against irregular migrants.4 Such practices are typical of authoritarian states in Southeast Asia and Gulf countries with large systems of temporary foreign work permits. They would be unsuitable in most EU countries and very costly.5
How to promote and enforce legal temporary migration channels for low-skilled workers
We show, however, that enforcing sanctions against illegal employment of undocumented workers in destination countries could offer a more promising tool to fight human smuggling. By driving down wages in the irregular labour market, this would increase the attractiveness of legal migration channels as well as disincentivise foreign workers to overstay to work illegally. Such policy tools should be carefully combined with a legal market for temporary foreign work permits to be effective against human smuggling.
In practice, governments in advanced economies could adopt different combinations of measures in the form of ‘sticks’ against employers of undocumented workers and ‘carrots’ for the workers, such as awarding points towards a more settled status in the future to workers complying with timely return or preserving future eligibility for visas, as done in Canada.
Even though the schemes we propose may encounter resistance for obvious political-economic reasons, they would support the recruitment of low-skilled workers in short supply in specific sectors of advanced economies, as highlighted during the COVID-19 crisis in France, Italy, and the UK (Kleine-Rueschkamp and Ozguzel 2020). This demand for low-skill workers is hard to meet with current policies, which are tilted towards the recruitment of high-skilled economic migrants (Fasani and Mazza 2020).
Auriol, E, and A Mesnard (2012), “Sale of visas: A smuggler’s final song?” VoxEU.org, 4 June.
Auriol, E, and A Mesnard (2016), “Sale of visas: A smuggler’s final song?” Economica 83(332): 646–78.
Auriol, E, A Mesnard and T Perrault (2021), “Controlling irregular migration: Can a market for temporary foreign work permits help?” CEPR Discussion Paper 16777.
Butcher K, K Moran and T Watson (2022), “Immigration and the care of America’s older population”, VoxEU.org, 22 February.
Clemens, M A, C E Montenegro and L Pritchett (2019), “The place premium: Bounding the price equivalent of migration barriers”, Review of Economics and Statistics 101(2): 201–13.
Djajić, S, and A Vinogradova (2015), “Overstaying guest workers and the incentives for return”, CESifo Economic Studies 61(3-4): 764–96.
Dooley, B, and H Ueno (2021), “Japan is shaken after a detainee, wasting away, dies alone in her cell”, New York Times, 10 August.
Fasani, F, and J Mazza (2020), “Immigrant key workers: Their contribution to Europe’s COVID-19 response”, IZA Discussion Paper.
Friebel, G, and S Guriev (2006), “Smuggling humans: A theory of debt-financed migration”, Journal of the European Economic Association 4(6): 1085–111.
Kleine-Rueschkamp, L, and C Ozguzel (2020), “COVID-19 and key workers: The role of migrants across regions and cities”, VoxEU.org, 9 December.
Peri G, A, Romiti and M Ross (2013), “Immigration, elderly care and labour-force participation: Can immigration help women retire later?”, VoxEU.org, 8 September.
UNDOC – United Nations Office on Drug and Crime (2018), Global Study on Smuggling of Migrants.
1 In France, for example, the far-right party obtained unprecedented scores in the last presidential elections of April 2022, with 23% of expressed votes in the first round and 41% in the second round.
2 Economic returns are estimated to be above $5.5–7 billion in 2016, with more than 2.5 million people smuggled around the world (UNODC 2018).
3 This risk is difficult to estimate and varies a lot across countries (see Eurostat Statistics here).
4 Life jail sentences have been given to irregular foreign workers in Japan, for example (Dooley and Ueno 2021).
5 Estimated overall costs of deporting a person are around $12,500 per person in the US in 2011, $11,000 per person in the UK and 50,000 Norwegian kroner ($9,000) in Norway in 2013 (Djajić and Vinogradova 2015).
6 The EVerify system, a federal database in the US that allows employers to check workers’ employment eligibility documents, is still not compulsory in most US states. When it is, the requirement often applies only to government agencies or contractors.