The Rewards and Risks of Record Migration
A record-breaking surge in migration to rich countries has buoyed businesses. But there are risks stored up in the benefits.
Zain Ali | 29 November 2024
More people are migrating to the rich world than ever before.
The Organisation for Economic Co-operation and Development (OECD), an intergovernmental organisation made up of 38 of the world’s richer states, has released the latest edition of its annual International Migration Outlook report, which processes the data for the previous year. The new report shows that 6.5 million people permanently migrated to its member countries in 2023.
Crunching the Numbers
The results bear witness to a startling new normal.
Consecutive record-busting
2023’s figures mark a 10% rise on 2022’s total, which was itself a record-breaking year.
This secular peak is mirrored unevenly in the outcomes for individual member states. While a third of OECD countries reported record inward flows, another third recorded a drop in migration numbers.
All forms of migration are rising
All types of migration trended up in 2023, but for different reasons. Permanent migration has hit new highs due to foreign workers bringing their families with them to the UK, and foreign family members joining US citizens.
Temporary labour migration grew 16% year-on-year, seasonal work migration increased by 5%, international student numbers rose 6.7% on 2022 and refugee resettlement reached its highest level since 2016.
The favoured destinations for migrant workers
Some countries stand out as magnets.
Of the 1.2 million permanent-type workers who migrated to OECD countries, almost a quarter (282,000) went to the United Kingdom via the Health and Care visa route.
Elsewhere in the top four, Canada welcomed 145,000 such workers, Japan 90,000, the United States 82,000 and Germany 93,000 and France 59,000.
2.4 million temporary foreign workers came to OECD countries in 2023, with a third going to the United States. Another 33% were shared between Australia, Japan and Canada. South Korea was the fifth-highest recipient of temporary labourers, seeing a 76% rise on pre-Covid levels.
80% of the 2.1 million international students to OECD countries made their way to just five member states – the United Kingdom, USA, Canada, Australia and Japan.
A Boon for Business
This surge in migration has not happened by accident. Covid pandemic set labour markets out of joint, and these distortions created acute workforce shortages in rich countries as the global economy reopened. Major economies like the UK and US relaxed their visa regimes at this point, aiming to entire residents of the developing world to fill these gaps. Those workers heeded the call.
The ensuing wave has helped the private sector recover from the degradations of the pandemic and the 2022 energy shock.
An employment jamboree
High migration has almost certainly kept whole sectors solvent by filling their workforce gaps. The OECD report puts migrant employment rates at 71.8%, the highest they’ve ever been.
In both the US and UK, the health and care sector is the primary beneficiary of this surge. 18.2% of all immigrants in the American workforce are employed in either health and education. The Health & Social Care visa route accounts for much of the UK’s migration story since 2022. Construction and hospitality are other hot fields.
This has occurred against a backdrop of stagnant or even negative employment growth in domestic-born populations. Analysis by Goldman Sachs shows that immigration accounted for almost all new employment in the UK, New Zealand, Canada, Norway, Sweden and Germany. The investment bank also credits high levels of migration with boosting the US’s growth potential.
Entrepreneurship
Migrants don’t just join companies, they start them too. This year’s OECD report reveals that, between 2011 and 2021, migrants created nearly four million jobs across 25 OECD states.
On average, self-employed migrants’ companies spend slightly higher on investment and R&D than firms started by the native-born. Elevated migration levels have, in all likelihood, injected much-needed innovation into flatlining Western economies. The benefits should be felt across the business ecosystem.
The Risks of Dependency
Migration sceptics often accuse the private sector of an addiction to foreign workers who will accept lower wages than the native-born population. While this is often over-egged for political reasons, in some cases there is a germ of truth.
Consider the agricultural sector. Undocumented immigrants account for 75% of agricultural workers in the state of California.
Or health and social care. 42% of UK care workers and 40% of nurses are of foreign origin.
Manufacturing is another case in point. About 25% of US construction jobs are held by immigrants.
So what’s the problem? After all, businesses in these sectors need the work done and the migrants need the jobs.
There is some evidence that easy access to a cheaper labour pool may disincentivise investment in productivity-raising technology. But the biggest drawback comes in becoming a hostage to political fortune.
This ramp-up in migration flows over a short time period has triggered a voter backlash in many countries. In 2024’s many global elections, politicians pledging to reduce migration have swept the board. Donald Trump’s return to the White House is only the most dramatic example. Even parties of the centre-left, like the UK’s Labour Party, were elected on platforms to reduce net migration.
As these manifesto promises are translated into policy, companies who rely on current levels of migration to keep their talent pipelines full may be in for a nasty shock. Sudden disruptions to workforce planning will push up cost pressures, which firms may struggle to pass onto customers. This could kick off a vicious circle of withering profit margins and cratering demand.
Rising anti-migrant sentiment has also elicited boycotts of companies who make use of foreign labour. When Tysoon Foods announced plans to fill its labour gaps with 42,000 asylum seekers, some customers and investors responded angrily. The effect was negligible, slightly hitting the company’s share price but leaving no long-term dent in its profitability. Yet the debacle demonstrates how workforce management is turning into dangerous terrain for PR.
A Workforce Strategy for the New Normal
Given the inescapable reality of persistent workforce gaps, most firms won’t be rushing to turn away foreign talent or reduce their migrant headcount – and nor should they. Without the resourcefulness, hard work and innovative spirit that so many new arrivals bring with them, we’d all be worse off.
But changing political realities can’t be ignored. Businesses should take a strategic, judicious view of long-term talent acquisition, using high-skilled staff from overseas where most appropriate.
Invest in local talent development
Domestic upskilling is at the top of incumbents’ policy agendas, from Trump’s America First programme to the Labour Party’s plan for UK employment. Businesses will come under mounting pressure to demonstrate their commitment to cultivating existing staff and promoting professional development in local populations.
Instituting accessible in-house training programmes is only the first step. People Ops and HR teams should work hand-in-hand with educational institutions and the third sector to design curricula that match real industry needs.
In countries from Ireland to Australia, governments are offering financial incentives to employers who launch apprenticeship schemes.
All these measures, and more, can help companies secure a steady stream of talent without developing unsustainable dependencies on foreign labour.
Invest in productivity-enhancing technology
Raising negligible rates of productivity growth is an existential question for many rich countries. The UK, Germany, Singapore and many other high-income states are committing vast sums of money for research and development funding to stimulate automation in the private sector. Subsidies, grants and tax relief are all on the table, so companies should pick them up.
Automating workflows will still require some upfront capital investment, but reduced labour costs and increases in long-term output should more than make up for it.
Use highly-skilled immigrant workers to add value
The technological frontier is travelling forward at dizzying speed. Firms in all sectors need to build internal capacity in AI, machine learning and advanced manufacturing techniques, and fast. But these systems still require humans to programme and oversee them. In many countries, people with such skills are in very scarce supply.
The digital skills gap isn’t likely to close any time soon. That’s why recruiting from abroad will remain critical in the years to come. But talent acquisition strategies should shift towards leveraging migration to build competitive advantage, rather than to maintain business as usual. That will find workers from across the globe with rarefied skill sets who can forge crucial value-adds.
Get Ready for the Future
Whatever levers world governments pull, the current migration boom is probably transitory. OECD’s head of international migration division suggests that lower migration numbers from 2025 onwards “would not be a surprise”. This should be a clear signal for companies to adapt now rather than wait for events to force their hand.
At Centuro Global, we specialise in helping forward-thinking businesses adjust to new realities. Our tech-enabled suite of compliance, HR and legal services will add precision to your workforce strategy.
Find out how we can help you hire sustainably from around the world and maintain your edge in a turbulent climate.
