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Bureau for research and economic Analysis of Development, Working Paper No. 286, November, John Gibson and David McKenzie (2010)

This study finds that New Zealand’s Recognised Seasonal Employer program had a very positive impact on migrant-sending communities in Tonga and Vanuatu and recommends the scheme as a best practice model for other countries.

Migrant labour programs can potentially improve the welfare of migrants, sending communities, and receiving communities.  Gibson and McKenzie report that despite its controversial status, “International migration is probably the most effective mechanism we know to rapidly increase the incomes of poor people” (2). 

Temporary migrant programs have gained ground as a way to sidestep the political controversy while retaining the development benefits.  Such programs have been supported by organizations including as the United Nations and World Bank as well as academics including Dani Rodrik, Lant Pritchett, and Alan Winters.

Gibson and McKenzie enter this discussion with the claim that “Lacking from this debate is credible evidence as to what the development impact is of international seasonal worker programs” (2).  In particular, “The few existing studies are based on ex-post surveys of migrants, and lack credible counterfactuals of what would have happened to households in the absence of migration” (2-3).

The authors provide some of the first empirical evidence on this topic in their study of New Zealand’s Recognised Seasonal Employer program inaugurated in 2007. 

The RSE aimed to address horticulture and viticulture labour shortages in New Zealand and promote Pacific Islands development.  It permitted 5,000 workers (preferentially selected from Kiribati, Samoa, Tonga, Tuvalu, and Vanuatu) to work for up to seven out of every eleven months in New Zealand.  The majority of migrants came from Vanuatu and Tonga (3,590 and 1,971 respectively).  

The RSE explicitly drew upon the successes and failures of existing guest worker programs in an attempt to discourage exploitation, overstaying, and native displacement.  “Pastoral care” provisions required employers to pay market wages, provide accommodation, transportation, and banking access, observe health and safety regulations, and permit religious observation and recreation.  Recruitment fees were banned and a minimum payment was guaranteed.  Workers were allowed to be re-hired in subsequent years, decreasing their incentive to overstay. 

Employers were required to pay the relocation costs of those who had overstayed, decreasing their incentive to turn a blind eye to the practice.  A “New Zealanders first” policy required employers to look for local employees before hiring migrants.

Rapid recruitment was facilitated by contacts between the labour ministries in New Zealand, Tonga, and Vanuatu.  Employers could hire directly, through agents, or from a “work-ready” pool selected by the ministry.

The program also had a clear development orientation from the start.  The development potential was obvious, with semi-annual Tongan per capita income and consumption totalling US$432, “less than a RSE worker could earn in a good week in New Zealand” (12-13).  At the approval of the RSE program, New Zealand Minister of Foreign Affairs Winston Peters stated that “First and foremost it will help alleviate poverty directly by providing jobs for rural and outer island workers who often lack income-generating work.  The earnings they send home will support families, help pay for education and health, and sometimes provide capital for those wanting to start a small business” (2). 

Methodologically, the authors administered baseline household surveys in Tonga and Vanuatu before migrants departed.  They re-surveyed these households after 6, 12, and 24 months.  They then used propensity-score matching to identify suitable comparison group households and evaluated the comparison and treatment groups with panel difference-in-differences and fixed effects methods.  This allowed the authors to estimate the impact of the program on household income, consumption, assets, subjective well-being, and the larger community.

The authors find that the program had a strong positive impact on Tonga and Vanuatu.  Migrant household per capita income increased by over 30 percent and subjective welfare by nearly half a standard deviation compared to the control group.  Migrant household purchases of DVD players, radios, ovens, and boats increased.  Migrant households also opened more bank accounts.  Communities received “modest” monetary donations from workers, and community leaders “overwhelmingly” deemed the program to have an “overall positive impact” (20).  In Tonga, school attendance rates for 16-18 year olds rose by 20 percentage points. 

In light of these impressive findings the authors conclude that “these results show that the seasonal worker program has been a powerful development intervention for the participating households, and that the RSE policy appears to have succeeded in its development objectives in the short run” (4).

In addition to its impact on economic development in the Pacific Rim, the program was well received in New Zealand.  The authors report that “The policy is found to have provided employers in the horticulture and viticulture industries with access to a reliable and stable workforce, with productivity gains starting to emerge as workers return for another season. The main concerns raised about temporary labor programs have been mitigated: the evaluation finds little displacement of New Zealand workers; almost all workers have returned, with overstay rates of about 1 percent in the first season and less than 1 percent in the second; and concerns about worker exploitation have at most arisen in a couple of isolated cases” (6).

Though these findings suggest that New Zealand’s Recognised Seasonal Employer program has been overwhelmingly successful, the authors note several caveats. 

First, the long-term effects of the program remain unknown.  These might include “positive effects such as greater asset-building, investments and skill development if workers return for many seasons, as well as potential longer-term negative effects of continual absence of family members on family and community relations” (21).  Secondly, seasonal migration is a poor substitute for permanent migration when household gains are the metric.  Thirdly, they caution that all national contexts are different, and though the New Zealand program has been successful, it should be tailored to the conditions of other countries before adoption.