By Maheshwor Shrestha
As the world faces unprecedented demographic shifts, the role of migration in balancing labor markets has never been more critical. Over the next 25 years, high- and upper-middle-income countries will see their workforce shrink by 200 million while their elderly population grows by over 400 million.
This demographic change is creating widespread labor shortages, particularly in sectors requiring a younger workforce and in elderly care. Conversely, low- and lower-middle-income countries, especially in Sub-Saharan Africa, will experience a surge in their working-age population, adding over 600 million people to the workforce. Many of these nations, especially in Sub-Saharan Africa, are already struggling to provide adequate economic opportunities for their growing youth populations. Managed migration between these regions could be a vital part of addressing the forthcoming demographic challenges.
Economic opportunities and barriers to migration
Migration also offers extraordinary economic opportunities for individuals, enabling migrants to earn 3 to 5 times more than they could in their home countries. Yet, significant natural and policy barriers prevent many from capturing these benefits, leaving trillions of dollars on the sidewalk in the form of unrealized economic gains. Overcoming these barriers is key to unlocking the full benefits of migration and its potential to address the demographic challenge in the coming decades.
A recent working paper sheds light on how relaxing barriers to migration through forming Bilateral Labor Agreements (BLAs) — international agreements between two countries designed to regulate the flow of workers — affects migration. By analyzing global datasets on migration and BLAs spanning 1960 to 2020, the study uncovers five critical insights:
- BLAs facilitate migration across multiple decades
BLAs have a profound impact on migration. We find that signing a BLA can boost migration flows from origin to destination countries by 76 percent within the first decade. Remarkably, these effects can persist for up to three decades, highlighting the long-term benefits of such agreements (Figure 1). This estimate may even be conservative, as temporary migrations between data collection periods might be underreported. For policymakers, this underscores the potential of BLAs as a tool to expand legal migration pathways and address labor shortages.
- Transformative impact in new migration corridors
Not all migration corridors experience the same effects from BLAs. In corridors with a consistent flow of migrants, migration increases by about 25%. However, in regions without pre-existing flows, particularly destinations in the Gulf Cooperation Council (GCC) countries, BLAs have a much more transformative impact. For policymakers in regions with historically limited mobility, BLAs represent a powerful mechanism to stimulate migration and meet labor demands.
- The African Puzzle: The role of institutional capacity
Surprisingly, we find little to no impact of BLAs on migration from sub-Saharan African countries (Figure 2). A deeper dive revealed that this is largely due to weak government effectiveness in many of these nations. This highlights a critical caveat: BLAs are only as effective as the institutions implementing them. Without managed migration systems, these agreements may fail to translate into tangible migration flows. Policymakers should prioritize system building and capacity strengthening alongside signing agreements to ensure that the policy achieves its intended impacts.
- Economic Gains: Millions of dollars on an agreement
The economic benefits of a BLA can be substantial due to the increase in the number of migrants as well as due to the large increase in incomes. Migrants from low and lower-middle-income countries (LLMICs) could collectively earn an additional $120 million annually due to a single BLA. This highlights the potential of BLAs not only to improve individual livelihoods but also to contribute to broader economic development in both origin as well as in destination countries. For policymakers, these findings reinforce the role of BLAs as a policy tool to harness the development potential of migration.
- Designing effective BLAs for future challenges
BLAs are well-positioned to address the growing mismatch in labor markets caused by divergent demographic trends. However, their effectiveness depends on how they are designed and implemented. Future research can explore key features that enhance BLAs—such as the types of migration they facilitate, the skill levels of workers, sector-specific demand, and worker rights provisions. Understanding these elements will be critical for maximizing the potential of BLAs to facilitate migration and improving migrant welfare.
A path forward: Unlocking the power of managed migration
BLAs present a strategic opportunity to address the growing demographic imbalances and labor market mismatches worldwide. By facilitating managed migration, BLAs can help destination countries meet their labor needs without overburdening social welfare systems, while providing sending countries with vital economic opportunities for their burgeoning youth populations. Policymakers in origin and destination countries can leverage this policy tool to create a win-win solution that addresses labor shortages, reduces economic pressures, and improves livelihoods for all.
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