University of Southern California

MBA Students Present Labor Study to World Business Leaders
Report Addresses Issue Facing 21 Asia-Pacific Economic Cooperation Economies
November 30, 2009 • by Mike Martinez

Eleven second-year MBA students traveled to Singapore to present a year-long USC Marshall study on temporary migratory labor to world business leaders in the 17th APEC Leaders' Summit held Nov. 14 - 15.

The USC Marshall report addresses one of the thorniest issues facing the 21 economies in the Asia-Pacific Economic Cooperation (APEC), which includes the United States, Mexico and Canada as well as parts of Asia and South America: the 21 economies' inability to remedy serious shortages in temporary foreign workers.

The study by the 11 students and their professor, Carl Voigt, represents the most ambitious research undertaken by USC Marshall for the APEC Business Advisory Council (ABAC) since Marshall began doing research for the group seven years ago.

APEC is regarded as a potential model for global free trade because it includes the three largest economies - U.S., Canada and Japan - and accounts for 45 percent of the world's population and 60 percent of the world's gross domestic product. ABAC serves as the private-sector advisory council to APEC.

The Marshall report was presented to 63 of the most influential business leaders in the 21 economies, including billionaire Carlos Slim of Mexico – who was expected to meet later with the 21 economies’ heads of state, including President Barack Obama.

The study's conclusions – that APEC economies could be hurt if they don't resolve deep flaws in temporary worker policies – traveled from the ears of the international business leaders to the ears of Obama and other presidents.

"We're just two degrees away from the leaders," said Chris Masefield, a second-year MBA student from Toronto, Canada. The team includes students from five of the 21 economies.

After business leaders heard the USC report and were scheduled to meet with Obama and other leaders or their delegates, the White House and other heads of state issued a statement endorsing improvements to migratory labor policies:

"We will facilitate the retraining, skills upgrading and mobility of our workers so that they can secure jobs, especially in new and growing industries," Obama and the leaders said on Nov. 15.

In a separate statement, ABAC Chair Teng Theng Dar said that improving labor mobility has emerged as “ a significant new issue” for the 21 economies.

"There is an increasing mismatch between the needs of industry and the availability of domestic workers for certain skill sets. We are therefore requesting that leaders include in the APEC agenda for next year discussions of best practices for the more rational management of flows of temporary workers," Teng said. "It will be important that this is done in a way that meets the requirements of business while minimizing any potential adverse impact on both sending and receiving economies."

Japan's Prime Minister Yukio Hatoyama also made a statement following the APEC summit saying Japan needs to ready itself to embrace more migrant workers. Japan should attempt to encourage migrants to live and work there, the prime minister said, adding: "I am not sure if I can call this 'immigration policy', but what's important is to create an environment that is friendly to people all around the world so that they voluntarily live in Japan," he said.

Over the past year, the 11 USC Marshall students spent 2,000 hours – a full work year – assembling their study, which included 157 interviews with key business executives and thought leaders in the APEC region. Through Marshall’s Pacific Rim International Management Education (PRIME), a required full-time MBA capstone course, each student visited at least one of the foreign economies. Marshall was the first MBA program to mandate experiential learning in all MBA programs.

"The project is one course worth of credit – and five courses' worth of work," said team leader Mark Wilson, who's from Lexington, Mass.

"It's been very intense," added Stephen Smoot, another MBA student, who's from San Diego.

The study bluntly assesses controversies over temporary workers, who travel often from lesser developed countries to work in the more advanced ones, such as the United States:

"Few subjects make politicians, policy makers, and citizens more uncomfortable than the issue of migration, in general, and temporary workers in particular, especially in times of recession. Fears of job losses, the lowering of local wages, and unwelcomed burdens on social services, quickly push reasoned discussions of the economic benefits of temporary workers from the public agenda.

"But real shortages of skilled and lower-skilled workers exist in many APEC economies, even during this recessionary period. And these labor shortages and imbalances of skills and jobs are predicted to become increasingly critical because of the changing demographics of aging populations. This gives business real concern as access to workers is directly correlated with business competitiveness and growth.

"A rationalized policy framework for the movement of workers will give APEC economies benefits of economic development, and do so in an inclusive way. Much is lost if protectionist tendencies prevail and the topic of international labor mobility continues to be neglected," the USC Marshall report said.

The aging populations of developed nations are creating labor shortages, such as in nursing or agricultural field workers. For example, the United States will need an estimated additional 35 million workers by 2030, and Europe will need 80 additional million workers by 2050 to maintain its working population size.

When governments restrict labor mobility, businesses in developed nations sometimes resort to the illegal immigrant pool to hire workers, and labor recruiting agencies in underdeveloped countries engage in bribery and deceptive practices in which workers end up in sweatshops or worse.

"The level of policy among the 21 economies is at best uneven and patchy," said Voigt, a Marshall associate professor of clinical management and organization. “There needs to be circular motion. And economies need to work together: I send my Peruvian shepherds to work in the U.S. Midwest as farmers, and when their time is up, they need to go home.

"The basic argument is that there has been no fundamental improvement in the standard of living in an economy without the movement of people," Voigt added.

The report recommends:

  • APEC must put labor mobility in its agenda of "progress through inclusive growth." Otherwise, parochial interests and differing perspectives will derail efforts to find solutions.
  • APEC must initiate a task force to collect data and best practices for temporary worker movement.
  • APEC should come up with a policy framework model to address such key problems as excessive placement fees; inconsistent worker training standards and certifications; high transactions costs for transportation and documentation; and repatriation difficulties.
  • The 21 economies must agree on an administrative infrastructure to oversee all the temporary worker programs and ensure their success.

Second-year MBA students who prepared the study are Margarita Flores, Lucy Melvin, Man-Ting Law, Jacob Schutz, Alexander Jochai, Pavitra Krishnaswamy, Chris Masefield, Anshu Sawhney, Tiffany Sanberg, Stephen Smoot and Mark Wilson. USC Marshall faculty advisors are Carl Voigt, Richard Drobnick, Dennis Schorr and Doug Joines and K. Ravi Kumar.

About the USC Marshall School of Business
Consistently ranked among the nation's premier schools, USC Marshall is internationally recognized for its emphasis on entrepreneurship and innovation, social responsibility and path-breaking research. Located in the heart of Los Angeles, one of the world's leading business centers and the U.S. gateway to the Pacific Rim, Marshall offers its 5,700-plus undergraduate and graduate students a unique world view and impressive global experiential opportunities. With an alumni community spanning 123 countries, USC Marshall students join a worldwide community of thought leaders who are redefining the way business works.