Labour migration and international construction

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Labour Migration and International Construction

JILL WELLS South Bank Universi~, London, UK

ABSTRACT

The recruitment and employment of foreign workers is one aspect of international construction which has received little attention to date. This paper outlines some of the major patterns and characteristics of the international migration of labour for work in the construction industry, focusing on two regions (the Middle East and the Far East) where such migration is particularly important. It highlights the relationship between international contracting and labour migration and traces the emergence and development of an international market for construction labour. The basic condition of excess supply in this small but significant market is driving down wages and conditions of work for migrant construction workers. It could also indirectly be affecting the terms and conditions of employment for construction workers throughout the world.

INTRODUCTION

International trade in construction goods and services has received much attention in recent years, in the pages of this journal and elsewhere. 1 In these studies the term 'services' is generally defined to embrace the activities of consultants and contractors, with most focusing on the latter. The role of labour migration in international contracting is rarely considered. This is a serious omission. Construction is a labour-intensive industry. An adequate supply of labour (both skilled and unskilled) is therefore essential for the smooth running of construction projects. The cost of that labour is a critical factor in international competitiveness.

The reason for the neglect of the study of labour migration in international construction is not hard to find. Research on migration is never easy. The problems involved in establishing a clear and comprehensive picture of migrant labour in the world's construction industry are formidable. In the words of the International Labour Organisation (ILO)

These problems include a paucity of comparable and reliable statistics, the self-interested reasons that lead to concealment of abuses, the difficulty of verifying one-sided accounts, the fact that much migration is illegal and hence therefore invisible, and the constantly changing patterns of migration. 2

However, recent research undertaken by the author for the ILO has uncovered a wealth of information on migration for work in the construction industry. 3 This

Correspondence to: Jill Wells, School of Construction, South Bank University, Wandsworth Road, London SW8 2JZ, UK.

295

296 Jill Wells

paper outlines some of the major patterns and characteristics of construction- related labour migration, highlighting the relationship between labour migration and international contracting. 4 The structure and functioning of the emerging international construction labour market are then described, and the wages and terms and conditions of work for migrant construction workers briefly examined. Finally some questions are raised regarding the implications of the development of an international market for construction labour.

A BRIEF SYNOPSIS OF CONSTRUCTION LABOUR MIGRATION

It is important to approach labour migration from a historical perspective. Contemporary migration for work in the construction industry has antecedents in the migrations associated with colonialism. The slave trade was one of the largest mass migrations in human history, with an estimated 15 million people forcibly transported from Africa to the Americas. 5 When the slave trade was abolished, indentured labour took its place. Indentured workers were recruited (sometimes by force) by all the major colonial powers. Between 1834 and 1941 an estimated 37 million workers (mostly from China and India) were recruited to work on plantations, mines and construction projects in 40 countries. 6

EUROPE

Millions of other people moved voluntarily during the industrial revolution in Europe, as the processes of industrialisation and agricultural change created pools of surplus labour in the countryside and generated new demands in the cities. Many who were thrown off the land migrated to the New World or to the colonies (particularly the Americas, Australia and New Zealand) in search of land or work. But migrant workers also found it easy to find work closer to home in low level jobs in manufacturing and construction. In 19th century Britain, Irish 'navvies' (a slang term derived from navigator) formed a high proportion of the workforce in the building trades, digging canals and building railways. In other European countries, notably France and Germany, foreign workers were also used to fill the gaps in labour supply that arose during the period of rapid industrial growth.

The influx of migrant workers to Europe was repeated during periods of economic growth in the 20th century, particularly after the Second World War. Between 1945 and 1959 a further 350,000 Irish migrants arrived in Britain, many of whom found work in construction; 7 as did Irish migrants to the United States. s Germany recruited building workers from Turkey and Yugoslavia. 9 France recruited from the Maghreb: in the early 1970s, half a million foreign workers (one quarter of all foreign workers in France) were working in the building industry, comprising 30% of the total workforce.10

Developments in the international oil market in 1973 triggered off a recession in Europe, followed by a period of slower growth. Unemployment, rather than labour shortage, became the overriding problem and in all European countries the door was progressively closed on new permanent immigration. However, work in construction is not highly regarded and tends to be shunned by local workers; attempts in some countries to encourage local workers back into the industry have achieved little success. A recent OECD report shows that in France the building industry is still the leading employer of foreign labour and the only sector where foreign labour is over-represented. I I Foreign workers are also heavily concentrated in the construction industry in Luxembourg, Belgium, Switzerland and Austria. In Austria, 18% of the construction workforce is

Labour Migration and International Construction 297

foreign; in Switzerland the figure is much higher. In all of these countries jobs in construction have come to be known as 'guest-worker jobs'.

In some countries, proper guest worker schemes still operate, with foreign labour recruited on temporary contracts and sent home when no longer required. 12 However, many of the 'foreign' workers in the European construction industries today are from settled immigrant communities, who remain heavily concentrated in construction and other low-wage sectors, even when they have gained full labour market rights. Although there is some evidence of intergenerational job mobility, the children of migrants tend to work in the same types of job as their parents. Enduring patterns of labour market segmentation mean that migrants cannot easily be replaced by local workers, even when unemployment among the latter is high.

THE MIDDLE EAST

The rapid rise in oil prices in 1973 which marked the end of the period of continuous economic expansion in Europe had many other repercussions for the global economy, and for international construction, which are still being played out. The immediate and most obvious effect was a very rapid increase in revenues accruing to the oil-producing states. This sparked off a process of industrialisation and social change in these countries, characterised by massive investments in buildings and infrastructure. The subsequent expansion of construction activity was on a scale and at a pace that were unprecedented. Between 1974 and 1979, half of Saudi Arabia's greatly expanded national budget was spent on infrastructure projects. 13

As most of the oil-rich countries of the Middle East have very small populations, the construction boom of the 1970s and early 1980s not only created a huge market for foreign consultants and contractors, 14 it also generated an enormous demand for foreign labour. The imbalance between oil resource and population was particularly marked in the six countries which make up the Gulf Cooperat ion Council (GCC) - - Saudi Arabia, Kuwait, Bahrain, Oman, United Arab Emirate and Qatar - - which between them had fewer than 7 million inhabitants in 1975.

In the early years construction workers came to the Gulf mainly from other Middle East states - - Egypt, Yemen, Syria, Jordan. But from the mid-1970s Arab workers came to be outnumbered by migrants from Asia. ~5 There were a number of reasons for the replacement of Arab with non-Arab labour. A significant factor was the marked change in the size and distribution of construction contracts. In the early 1970s, most contracts were small and many of them were won by Arab firms, mostly Egyptian. But the size of contracts increased dramatically after 1973. During the 1980s, 70% of construction work was packaged in projects worth over US$200 million.16 Most of these huge contracts were let to firms from Europe and the US, and it was these firms who were instrumental in bringing in Asian labour.

Originally the main sources of Asian labour were India, Pakistan, Bangladesh and Sri Lanka, the countries of South Asia which were close-by and had long ties with the Gulf countries. But at the end of the 1970s, US contractors began to recruit labour from selected countries in East and South-East Asia, notably Korea, the Philippines and Thailand. Labour contractors from these countries had previously supplied workers to US contractors working on military related projects in these countries, as well as in Vietnam and Guam. When the US firms shifted their operations to the Gulf they turned to the same labour contractors for their workers.

Some of these labour contractors, who had learned their skills from the

298 Jill Wells

Americans, were to become contractors in their own right. It is now legendary how Korean construction firms broke into the Middle East contracting market, undercutting the established European and American firms by as much as 50%. In 1983 they captured 11% of the total recorded value of all contracts awarded to overseas contractors around the world. 17 The competitive advantage of Korean contractors was based on their ability to supply large quantities of low-cost labour and to manage that labour efficiently with the minimum of impact upon the host country. Initially they employed only Korean workers. But eventually fast growth in the Korean economy caused wages to rise and forced Korean contractors to employ workers from third countries on projects overseas. The achievement of Korean firms was echoed on a smaller scale by Turkish contractors, who captured 3.6% of the international market in 1983. Like the Koreans, Turkish contractors took their own labour overseas, and in fact they still do so. 18

Most other countries which became significant exporters of construction labour tried to emulate Korea and Turkey and provide labour as part of a full contracting service, hence adding value to their exports. Although there is some evidence of contractors from the Philippines, Thailand, India, China and Egypt winning contracts (or more frequently subcontracts) in the Middle East, few have succeeded on any significant scale. Unlike the Koreans who had strong support from their government, contractors from other countries have generally failed due to lack of government support in the critical areas of financial services, risk cover and client guarantees. 19

Governments have generally been more active in the labour export business than in supporting their contractors. Labour is recruited for the Gulf on limited contract terms and workers are not allowed to take their families. Remittances from migrant workers to their families back home soon came to be recognised as an important source of foreign exchange. Supply networks widened as more and more countries, with government encouragement, became exporters of construction labour.

However in the mid-1980s, the level of construction activity in the Gulf dropped, in line with oil prices. As the market contracted and competition amongst contractors increased, contractors' profit margins were squeezed. This was a significant factor driving down wages. It also had an impact on the source of labour supply. By the 1990s Thais and Filipinos were considered too expensive by most contractors, and the labour market was again dominated by the South Asians (India, Pakistan and Bangladesh). Some contractors are now bringing in even cheaper labour, notably from China.

Construction output revived again in the late 1980s. Although the level of construction activity in the Middle East will probably not again reach the dizzy heights of the late 1970s and early 1980s, new construction together with the maintenance and repair of existing structures continues to demand a substantial labour force. In Saudi Arabia, 95% of the construction workforce is still foreign; in Kuwait the figure is 99%. 20 While the local population is growing fast and unemployment has become an issue, only in Bahrain (among the Gulf countries) do local Arabs undertake manual work on construction sites. In all of the other countries, local people are still reluctant to work in the private sector, let alone the construction industry, and manual work is out of the question. The drive towards 'localisation' of the workforce clearly cannot be ignored, 2~ but it seems probable that the construction sector will be the last to be localised.

Hence the number of foreign construction workers in the Gulf as a whole has not significantly declined and is likely to increase in the future. However, the size and distribution of construction contracts has again changed. With an increasing share of maintenance and repair work, there are again many more small contracts. Most of these small jobs are undertaken by local or other Arabs,


mostly Egyptians and Yemenis. A survey of Egyptian workers returning from Kuwait during the Gulf War found a significant number of construction workers, most of whom went back to Kuwait after the end of hostilities. A 1994 survey found that the largest number of construction workers in Kuwait (52,739) were Asians; but a further 36,000 were from within the region, most of them from Suhaj city in Egypt. 22 There are also believed to be many Egyptians working in small construction firms in Libya. 23 Yemenis were working in a similar capacity in Saudi Arabia, prior to 1990 when they were expelled. A survey of returning Yemenis found 60,000 had been working in construction, some 5,000 of whom described themselves as 'contractors'. 24 They were largely replaced by Pakistanis. The ethnic mix of construction workers in the Middle East clearly fluctuates in line with the vicissitudes of political and economic developments, as well as the changing composition of the workload.

THE FAR EAST

In the 1990s the Middle East is fast being overtaken by the Far East as the most important destination for migrant construction workers, as well as for international consultants and contractors. 25

A number of countries in South-East Asia have been dependent on foreign construction workers for the past two decades. Brunei is one such country. With significant oil deposits and few people, it is reminiscent of the smaller Gulf States and similarly dependent on migrant workers to implement its large construction programmes. International contractors undertake the larger projects in Brunei, employing foreign workers from neighbouring Malaysia or Thailand. Small-scale projects are undertaken by the local Chinese population, most of whom have been denied citizenship and access to government jobs.

Singapore, with its small human resource base, has also been dependent on foreign workers for the past two decades. Thirty years ago Singapore was what was then called an 'under-developed' country. But continuous and sustained economic growth has dramatically raised income levels and opened up new opportunities for the local population. Singaporeans have shunned work in the construction industry since the mid 1970s. 26 Over 70% of the construction workforce is currently from overseas. Somewhat surprisingly the same is true of Malaysia, where local workers were reluctant to take jobs in construction, even when other jobs were scarce. 27

The traditional construction labour importing countries of the region have, since the late 1980s, been joined by a number of others. Fast economic growth, accompanied by a sharp decline in fertility, has caused labour shortages to emerge in the other 'tiger' economies (Hong Kong, Korea and Taiwan), as well as some of the 'second tier' economies, notably Malaysia and Thailand. Labour shortages are particularly severe in the construction sector, which in all of these countries is experiencing very dynamic growth. 28 Even in the 'mature' economy of Japan, there is a serious shortage of construction labour. Efforts to improve the image of the industry (for example, in Singapore) have generally failed, as they have in Europe. It seems probable that the rising aspirations of the local workforce means that construction jobs will be increasingly shunned by the younger generation. In many countries the local construction labour force is ageing and not being replaced.

Singapore and Brunei have for long recognised their dependence on migrant labour (if reluctantly so) and have evolved policies to ensure that the demands are met through the controlled entry of workers on short-term permits (similar to Europe's 'guest-worker' schemes). Recently, Hong Kong and Taiwan have also developed schemes to allow entry to a limited number of unskilled workers on a

300 Jill Wells

strictly controlled basis. And a similar scheme has been introduced in Malaysia, where the government is trying to bring under control the very substantial, and largely illegal, inflow of Indonesian construction workers upon which the Malaysian construction industry now depends.

However, in Korea, current immigration law does not allow entry to unskilled foreign labour, except as trainees. Hence, most foreign construction workers are working illegally. 29 This is also the case in Japan, where the new Immigration Control and Refugee Recognition Act of 1990 makes it easier for some categories of foreigners to work in Japan, but still specifically bans the importation of unskilled labour. The only exception are the descendants of Japanese (up to third generation) living overseas. Consequently the main legal source of foreign workers for the construction industry in Japan is Brazilians of Japanese descent. Other legal sources of foreign labour are trainees, and college and 'pre-college' students who are allowed to engage in part time work for up to 4 hours per day. 30 However, the majority of foreign workers in the construction industry are 'illegal overstayers'.

The total number of foreign construction workers in Japan has been conservatively estimated at 128,000 in 1992. 31 This is only a tiny percentage of the six million construction labour force. But the number is almost certain to grow. The national shortage of construction workers has been estimated by one employer as between 300,000 and 400,000. 32 It should be noted that it is the smaller firms that have the greatest difficulty in attracting Japanese workers. 33 These are also the firms where foreign workers are most easily absorbed and hidden from official view. In these circumstances it seems unlikely that foreign labour can be excluded, whether or not it is officially sanctioned.

This is particularly so in view of the fact that there now exists in the region a labour force mobilised for work in the Middle East and constantly searching for new opportunities. There is evidence that this organised and highly mobile labour force is taking full advantage of the new opportunities opening up in Japan, Taiwan and Korea. Foreigners found working illegally in Japan's construction industry are from Korea, Malaysia, Thailand, the Philippines and Bangladesh. 34 They are also finding new opportunities in the countries which have been dependent on foreign labour for many years - - Brunei, Malaysia and Singapore. In these countries the foreign construction workforce was traditionally drawn from neighbouring countries, sometimes with a common language and ethnicity. Hence foreign construction workers in Singapore (and Brunei) were from neighbouring Malaysia. While in Malaysia, they came from adjacent parts of Indonesia. However, these countries are now increasingly turning to new sources of supply. In the past few years Singapore has widened its source of construction labour by recruiting from Thailand, Bangladesh and other traditional labour suppliers in the region, as well as from new suppliers such as China. 35 Malaysia, meanwhile, is reducing its dependence on Indonesian workers by Government to Government agreements with a number of new suppliers, principally Bangladesh. 36

Much of the initiative for widening the source of labour supply comes from Governments. There seem to be a variety of motivating factors - - to reduce cost, correct or maintain particular ethnic mixes, or reduce over dependence on one particular source. Sometime all three factors (economic, social and political) may be at work. Governments often act in response to pressures from employers (domestic and international). But there are also instances where international contractors have played a more direct role. An Indian contractor was responsible for introducing Indian and Bangladeshi labour into Brunei, where construction labour was traditionally from Malaysia and Thailand. The motivation in this case was clearly cost. In March 1995, Indians were found to be working in


Brunei for one-half to two-thirds of the wages of Thai workers undertaking the same jobs. 37

Another example is that of Japanese construction firms, who seem to have had an eye on the future potential of the Chinese contracting market when bringing in Chinese 'trainees' to work as labourers on their construction sites in Japan. The expectation is that these Chinese workers, having been trained in Japan, could subsequently provide a core of skills for future construction projects which the firm might win in China. 3s There is evidence of Indonesian firms behaving in a similar fashion. The Jakarta Post of 23 February 1993 described how a local Indonesian specialist contractor was planning to employ skilled Chinese construction workers on 2-year contracts in Indonesia, so that they could serve as a bridge for the entry of the Indonesian firm into China.

Recently, China has become a major factor in the labour export business in many other countries, as well as an overseas contractor in its own right. A press announcement in October 1993 revealed that the Chinese Government had signed 41,200 contracts for construction projects and labour services abroad, with a total value of around US$29 billion. 39 The role of Korean contractors in the 1980s in exporting labour as part of a total construction package may be repeated in the 1990s by Chinese state-owned construction companies.

It will be seen from the above that there are a number of countries in Asia that both import and export construction workers. Most notable is Malaysia. Malaysians have long migrated across the borders to Singapore and Brunei. They also now form the biggest group of construction workers in Taiwan and a number are working in the construction industry of Japan. Meanwhile, the domestic construction workforce is comprised largely of Indonesians. With some half a million Indonesians working in the Malaysian construction industry, compared with an estimated maximum of 150,000 Malaysian construction workers overseas, Malaysia is clearly now a net importer of labour. 4° The same is true of Korea and Taiwan, both of which also export construction workers to Japan.

The migration of workers from relatively developed and fast growing economies that are themselves short of labour can only be explained in terms of wage differentials. Average construction wages in a number of countries of the region

China

Sri Lanka

Indonesia

Bangladesh*

Philippines

Thailand

Malaysia

Singapore

South Korea

New Zealand

Australia

Japan

(US$)

25

29

37

78

[ ] 86

BB 122

215

66o

809

982

1526

500 1000 1500 2000

* Skilled labour only

Source: ILO data, 1994

Fig. 1. Monthly construction wages in Asia and the Pacific.

2500

2594

3000

302 Jill Wells

have been compiled from ILO data and are shown in Fig. 1. The wage differential between Singapore and Malaysia is 3:1; and between Japan and Malaysia it is 12:1. Even between Japan and Korea, where construction wages have risen rapidly in recent years, the differential is still 3:1. There is a clearly a siphoning effect in operation in the Asian region, with construction workers moving in a steady stream towards higher wage economies. The vacuum they leave behind is filled by other workers from less-developed economies who are also moving up the ladder in search of higher wages. With an estimated 260 million Chinese unemployed, and Myanmar and Vietnam also entering the construction labour export business, there is no shortage of construction workers at the bottom end of the international economic hierarchy.

THE INTERNATIONAL CONSTRUCTION LABOUR MARKET

The above account has pointed to the emergence of an international market for construction labour. Some of the characteristics of this market are now examined.

The vast majority of migrant construction workers are recruited for work through the mediation of recruiting agents. Such agents exist in both labour sending and labour receiving countries. Very often there is a long chain of agents linking the prospective migrants in their home village to the ultimate employer in the receiving country. In the early days of recruitment to the Middle East, when there were plenty of jobs and some difficulty in finding sufficient applicants, employers (contractors) bore all expenses of recruitment and travel for the migrant, including the recruiting agents' fees. However, as the catchment area widened and the number of recruiting agents proliferated, the number of applicants soon outstripped the jobs available. When the market temporarily contracted in the mid-1980s employers and agents in labour receiving countries were able to shift the cost of recruitment, travel and other expenses onto the agents in the labour sending countries, who in turn have passed these costs onto the migrant workers themselves.

International labour recruitment is now big business; it is also very corrupt. There is substantial evidence from many countries to show that migrant workers are also generally obliged to pay a substantial fee, over and above legitimate costs, for employment opportunities overseas. 4~ Whilst recruiting agents in the labour sending countries are usually the ones accused of corrupt practices, there is reason to believe that corruption actually starts at the top, with some contractors charging substantial sums of money for jobs, and visas being auctioned by high ranking officials in labour receiving countries. The charges are invariably passed on down the line and added to by each participant in the migration chain. All costs and charges are eventually met by the migrant workers themselves. In addition to overcharging, many agents and employers have been guilty of other abuses. The most frequent reported abuse by agents is fraud (taking payment for non-existent jobs); by contractors it is non-payment of wages.

The drop in construction output in the Gulf in the mid-1980s, and the increasing number of recruiting agents and potential migrants, also created strong downward pressure on wages. Construction wages fell by 30% or more in Bahrain in 1989, a pattern which seems to have been echoed throughout the Gulf. Recruiting agents interviewed by the author in the Philippines in November 1994 confirmed the pattern of falling wages. In the late 1970s a Filipino carpenter in Saudi Arabia was earning US$370-420 a month. In 1986 the overseas employer asked for a reduction to US$300. Two years later there was a further reduction. Although the level of construction output (and hence the demand for labour) has subsequently risen again, wages and other benefits have not returned to


their former level. In real terms, and sometimes even in nominal terms, they have continued to fall. The basic salary of a Filipino carpenter is now US$240. This is little different from the wage he would get in the Philippines.

However, the basic salary of a Bangladeshi is much lower. Contracts for Bangadeshi labourers recruited for work in Saudi Arabia in 1994 show basic wages of US$100 per month for a 6-day week and 8-hour day - - although this could be doubled with payment for overtime, which is compulsory. The wages of Chinese labourers are even lower. Korean contractors are reported to consider the cost of Chinese workers to be so low that it is worthwhile employing them, even though they are unskilled. 42 Level of skill can account for some difference in wages, but large wage differentials also exist between workers of different nationality with similar skills. Clearly the market for construction labour in the Middle East is highly segmented, with workers from different countries having (or being perceived to have) different characteristics, and being willing to work for different wages. According to contractors, standards of living and wages in the home country are the most important factors influencing the level of wages paid. Not surprisingly, the local Arabs working on construction sites in Bahrain were being paid four times the wages of Indian labour doing the same job. A contractor in Oman reported that local Omani labour costs around 130% more than Asian labour.

Declining wages and increasing recruitment charges have severely affected the profitability of migration to the Middle East. Evidence suggests that it may take 2 years or more for workers to recoup their initial outlay, compared with 5 months in 1989. 43 Workers in irregular employment and those cheated by recruiting agents may never do so. As many migrants have gone into debt (often to moneylenders) to finance migration costs, the inevitable consequence is continued indebtedness and dependence, an

By comparison with the Middle East, the Far East currently offers better opportunities for migrant workers. Although recruitment costs are higher, so are wages. Recruitment fees generally amount to the equivalent of only 2-3 months wages, compared with 2 years in the Middle East. The relatively high wages paid to migrant workers in the new destination countries of Asia (countries such as Singapore, Japan and Malaysia) reflect the fact that migrant workers are in a minority in these countries, working alongside local workers. Even though they are almost always paid less than the local workers, wages generally tend to reflect the general level of wages and standard of living in the country. They are, therefore, in all instances very much higher than in the Middle East. For example, the average monthly salary of a Bangladeshi construction worker in Japan in 1994 was calculated to be seven times that of a similar worker in Saudi Arabia. After allowing for higher living costs in Japan, the worker is still estimated to be four times better off. 45

However, these conditions may not be expected to last, for a number of reasons. First the attractiveness of high paid jobs in the construction industry in Japan, Singapore, or Taiwan may well serve to bid up their price, with more of the returns accruing to middle men in the recruitment process. Recruiting agents in the Philippines have reported that the practice of 'auctioning visas', which is common in the Middle East, is now being repeated in Taiwan following the opening of the labour market to foreign workers. Work permits are said to be available only through local brokers at a cost of US$1,000, which is inevitably passed on to the workers.

Secondly, there is some evidence to indicate that competition amongst suppliers of labour is now driving wages down in the newer markets of the Far East, as it did in the Middle East in the 1980s. This is particularly so where migration is illegal and employment practices unregulated by either governments or unions. For example, Chinese government sources report that

304 Jill Wells

wages of (illegal) Chinese workers in Korea have fallen in recent years, owing to competition amongst Chinese labour exporting companies. They were US$400 and are now $260. 46 Competition from labour suppliers in other countries may drive them down further. Minimum wages set by the Government of Vietnam for Vietnamese working in Korea are from $220 to $250 per month. 47 Experience in the Middle East suggests that governments of labour sending countries may, in practice, be powerless to impose even this level of wages in the face of relentless international competition for jobs.

Governments of labour receiving countries can influence the level of wages paid to foreign workers. Most governments, under pressure from the trade unions, pretend to abide by the principle of equality (equal pay for equal work) between local and foreign workers. However, the practice of taxing employers for the use of foreign labour is increasing. Although ostensibly intended as a deterrent to the use of foreign labour, and introduced to placate the trade unions and local employment lobbies, the tax is invariably passed on to the workers in the form of lower wages. The tax on foreign labour is, in practice, an ingenious device whereby governments are able to cream off some of the gain from the use of cheap labour.

Finally, on construction sites which are isolated from the local population and local trade union inspection, there is evidence that employers are able to make full use of labour from the cheapest source, paying rates similar to those paid in the Middle East. One such project is Chek Lap Kok, the new airport for Hong Kong, located on Lantau island. Several international contractors are working on this site. Wages paid vary according to nationality, with the very large number of mainland Chinese receiving on average HK$2,300 per month (around US$300). Filipinios HK$10,000 and Australians HK$40,000.48 The fact that the site is on an island with limited access seems to have facilitated the development of, not only pay differentials, but also living and working conditions reminiscent of those experienced in the Middle East. There are no local Hong Kong Chinese working there, and the Hong Kong construction trade union has specifically been denied access to the site.

CONCLUSION

The above account has provided firm evidence of the existence of an international market for construction labour. The development of this market was intimately connected to the growth of international contracting during the 'boom' years in the Middle East. The scale and speed of construction activity in the Gulf in the 1970s demanded a huge quantity of labour, which had to be sourced from overseas. The international contractors working in the Gulf were instrumental in widening the source of labour supply. The response from low-wage countries with surplus populations was rapid. The supply of both labour and of new contractors coming into the international market place greatly expanded.

Hence, while both overseas contracting and international labour migration existed before 1973, the massive construction boom in the Middle East moved both onto a higher plane. Today there is a flexible international construction industry and a highly mobile international labour force. Conditions of excess supply, particularly in the labour market, ensure that the 'international construction system' is also very competitive. 49

Both local and international contractors, small as well as large, can and do recruit labour on the international market when they have the need and the opportunity. The international system as a whole operates most freely in 'enclaves' where there are few people and little interference from local regulators. An interesting recent example of such an enclave is Chek Lap Kok


airport in Hong Kong, where construction goods, services and labour appear to be sourced from around the world. In such cases it seems not unrealistic to talk of a 'global' construction market for labour, as well as for goods and services.

However, the operation of the 'international construction system' is clearly severely proscribed. Most countries have an adequate supply of workers and of their own contractors to carry out construction projects. Even when local labour is scare, there is generally a reluctance to accept that foreign workers might be needed; and there are considerable barriers to the migration of labour (particularly manual labour), even on a temporary basis. Hence the vast bulk of construction activity is still undertaken by local construction firms and local labour. When foreign labour is required, it is still very often drawn from sources which are local and specific.

Nevertheless, it is possible to argue that the very existence of an international market for construction labour may have a significant, if indirect, effect on wages and working conditions for construction workers in many countries. The threat from an excess supply in the world's labour markets (workers waiting in the wings) may actually affect us all through downward pressure on wages throughout the world.

Acknowledgement - - The author wishes to thank the ILO for permission to publish this paper and for support received in the preparation of the report on which it is based. -~

NOTES 1. See, for example, S. Drewer, "The International Construction System", Habitat International 14,

2/3 (1990), pp. 29-35, R. Bon, "'The Future of International Construction", Habitat International 16, 3 (1992), pp. 119-128. A.R. AbduI-Aziz, "The Trend Towards Globalisation in Business: Lessons for Contractors in Developing Countries", Habitat International 17, 3 (1993), pp. 115-124. W.P. Strassmann and J. Wells, The Global Construction Industry: Strategies for Entry, Growth and Survival, World Industry Series No 7 (Unwin Hyman, London, 1988).

2. International Labour Organization, Sectoral Activities Programme, Social and Labour Issues Concerning Migrant Workers in the Construction Industry (ILO, Geneva, 1995), p. 2.

3. ILO (1995), see note 2. 4. The paper (and the report upon which it is based) focuses upon those regions where construction

labour migration is currently most significant, clearly visible and at least partially legal. This is not meant to imply that labour migration for work in the construction industry does not take place in other regions. Indeed, there is some evidence of construction-related migration in the Western hemisphere (including to the US), as well as in Africa. However, these movements are mostly illegal and hence extremely difficult to document.

5. P. Stalker, The Work of Strangers: a Survey of International Labour Migration (International Labour Office, Geneva, 1994).

6. L. Potts, The World Labour Market: a History of Migration (Zed Books, London, 1990). 7. S. Castles and M. Miller, The Age of Migration: International Population Movements in the Modern

World (Macmillan, Basingstoke, 1993). 8. M.P. Corcoran, "Informalization of Metropolitan Labour Forces: the Case of Irish Immigrants in

the New York Construction Industry", Irish Journal of Sociology 1 (1991), pp. 31-51. 9. Data from the Turkish Labour Placement Office shows that between 1965 and 1973 a total of 425,762

workers left Turkey for Germany, of whom 67,000 were skilled construction workers and 256,000 unskilled workers. Castles and Miller (1993), see note 7. OECD, Trends in International Migration, SOPEMI Annual Report (OECD, Paris, 1993). In Germany a number of new 'project bound employment schemes" have recently been introduced to offer employment to construction workers from the Eastern European countries, particularly Poland. However, there are indications that these schemes may have opened the door to significant illegal migration. They are now being curtailed as a result of pressure from the German trade unions and small employers. For further information see ILO (1995), note 2, which is based largely on an unpublished paper prepared for the ILO by Edith Gross. Potts (1990), see note 6. For a fuller account see Strassmann and Wells (1988), note 1; also A.B. Zahlan, The Arab Construction Industry (Croom Helm, London, 1984). See N. Fergany, The Role of Egyptian Labour in the Construction Industry in Kuwait, Joint Research Programme Series No. 28 (Institute of Developing Economies, Tokyo, 1991); also Zahlan (1984), see note 14. Zahlan (1984). see note 14. Strassmann and Wells (1988), see note 1. Strassmann and Wells (1988), see note i. A.B. Zahlan, The Acquisition of Technological Capabilities (Macmillan, London, 1991).

10. 11. 12.

13. 14.

15.

16. 17. 18. 19.

306 ~H We~

20. These percentages have been derived from official data from both countries. 21. Indeed, most governments have introduced a number of measures to hasten the process, including

the introduction of taxes on the employment of foreign labour; given the conditions of excess supply in the international labour market, it is most likely that these will simply be passed on to the workers in the form of further wage reductions.

22. A.R. AI-Mousa, unpublished paper prepared for the ILO, Geneva (1994). 23. A.B. Zahlan, "Construction Migration to the Middle East", unpublished paper prepared for the ILO,

Geneva (1994). 24. United Nations Economic and Social Commission for Western Asia (ESCWA), "The Absorption of

Returnees in the Republic of Yemen", in Return Migration Profiles, Impact and Absorption in Home Countries, E/ESCWA/SD/1993/12. (ESCWA, New York, 30 December 1993), cited in Zahlan (1994), see note 23.

25. For evidence of the latter see the July surveys conducted by Engineering News Record, various years.

26. G. Ofori, Foreign Construction Workers in Singapore, Research Working Paper (International Labour Office, Sectoral Activities Branch, 1995).

27. The inflow from Indonesia began in the 1970s when Malaysia was still a labour surplus economy. There has been much debate as to whether low wages and poor working conditions in the construction industry deterred local workers, leaving the door open for Indonesians, or whether the employment of Indonesians in the industry lowered its image in the eyes of Malasyian workers. As in Europe, probably both factors were at work. For a fuller account of labour supply in the Malaysian construction industry see A.R. Abdul-Aziz, Foreign Labour in the Malaysian Construction Industry, Research Working Paper (International Labour Office, Sectoral Activities Branch, 1995).

28. This is consistent with the finding that construction output is closely related to economic growth and, in fact, expands faster than the economy as a whole as countries pass through the "middle income bulge'; for an overview of writings on this topic see G. Ofori, "Research on Construction Industry Development at the Cross Roads", Construction Management and Economics II, 3 (1993), pp. 175-185.

29. There are also substantial numbers of illegal workers in the construction industry in most of the other countries, a fact which comes to light in periodic police raids of construction sites, or when government declares an amnesty for illegal workers who report to the police.

30. H. Takisawa, "Migrant Construction Workers in Japan", unpublished paper prepared for the ILO, Geneva (1994).

31. Takisawa (1994), see note 30. 32. Y. Satomi, "The Question of Foreign Workers in Japan", International Migration XXXI, 2/3

(International Organisation for Migration, Geneva, 1993), cited in Takesawa (1994), see note 30. 33. T. Inagami, "Gastarbeiter in Japanese Small Firms", Japan Labour Bulletin (March 1992), cited in

Takisawa (1994), see note 30. 34. In the past they also came from Iran, until visa restrictions were imposed. 35. Ofori (1995), see note 26. 36. Abdul-Aziz (1995), see note 27. 37. This information was gleaned from interviews conducted by the author with contractors in Brunei. 38. See N. Oishi, Migration for Training: the Experience of Japan (ILO, Geneva, 1994) (mimeo). According

to this report, a large and increasing number of trainees and students in Japan are from China and there are strong pressures from the Chinese Government to send more. In 1993 the Government of China made an official request to the Government of Japan to accept over one million Chinese trainees.

39. China Daily (6 October 1993). 40. Abdul-Aziz (1995), see note 27. 41. These fees vary according to the country and the destination. For example, in Bangladesh in 1991

the fee was approximately US$1400 for a labouring job in Saudi Arabia, US$2,000 for a similar job in the United Arab Emirates, up to US$5,000 for jobs in Malaysia and as much as US$10,000 for a job in Europe or the US. These figures are cited in R.A. Mahmood, Employment of Bangladeshis Abroad and Use of their Remittances (Bangladesh Planning Commission, Dhaka, May 1991).

42. Y-B. Park, "Social and Labour Issues in International Construction: the Case of Contractors from the Republic of Korea", in A. Norsa, Social and Labour Issues Relating to Construction Activities: the Cases of International Contractors from Italy, the Republic of Korea and the United Kingdom, working paper No. 65 (International Labour Office, Multinational Enterprises Programme, Geneva, 1994).

43. M.I. Abella, "'Pre-Migration Costs of Contract Labourers", Asian Migrant II, 4 (1989). 44. Excellent insights into the effect of migration to the Gulf on the families in Kerala, as told by the

wives of migrant workers, are provided in L. Gulati, In the Absence of their Men: the impact of Male Migration on Women (Sage Publications, New Delhi, 1993).

45. R.A. Mahmood, "Social and Labour Issues Relating to Migrant Workers in the Construction Industry: the Experience of Bangladesh", unpublished paper prepared for the ILO, Geneva (1994).

46. Information from the Department of Foreign Economic Cooperation, Beijing. 47. Information provided by the Administration of Overseas Labour, Ministry of Labour, Invalids and

Social Affairs, Hanoi. 48. Eastern Express (Hong Kong, 11 November 1994). 49. Drewer (1990), see note 1, used the term 'international construction system" in a different sense,

to include all construction that uses modern 'international" technology whether it is carried out by local or international firms - - rather than just that portion of construction that is carried out by international contractors.

50. ILO (1995), see note 2.

Labour migration and international construction

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