Cost of Coercion

The Global Report on forced labour, published in 2005, provided figures to show the truly global scope of the problem, which affects virtually all countries and all kinds of economies. Some 12.3 million persons worldwide were in some form of forced labour or bondage. Of these, 9.8 million were exploited by private agents, including more than 2.4 million in forced labour as a result of human trafficking. The highest numbers have been found in Asia, some 9.4 million, followed by approximately 1.3 million in Latin America and the Caribbean, and at least 360,000 in the industrialized countries. Some 56 percent of all persons in forced labour were women and girls. The annual profits, from human trafficking alone, were at least US$32 billion.

What changes can be detected over the past four-year period?

Ideally, our 2005 global and regional estimates would have encouraged governments to carry out their own national estimates of forced labour. Although some pilot initiatives have been launched, this process has hardly begun in most countries. However, a number of qualitative surveys continue to enhance understanding of the main forms of forced labour, their causes, and the appropriate policy response. In other cases, a deliberate policy by governments to strengthen law enforcement against forced labour, including trafficking for sexual or other forms of economic exploitation, has brought to light forms of abuse that hitherto went undetected.

While an ever-growing number of agencies, organizations, pressure groups and individuals have expressed concern about forced labour, there have been some complex debates concerning what is or is not forced labour, what should be done about it, and by whom.

Measuring forced labour: The need for representative samples

Given the nature of forced labour, careful consideration has to be given to the sampling techniques. Simple techniques, such as the random selection of households in a particular region, will not
produce the required results when forced labourers are hidden or clustered. In such cases, simple random sampling is likely to miss all the persons affected, and erroneously conclude that there is no forced labour or trafficking.

Nevertheless, to ensure that sample survey results are applicable to a larger population of interest, two conditions must be met. First, every member of the population must have a non-zero probability of being selected. Second, the sample must be sufficiently large to ensure that the margins of error of the final estimates are reasonably low. In practice, however, persons in forced labour situations may not always be hidden or hard to detect. Bonded labourers in South Asia work openly in fields or informal sector enterprises, as do the indigenous peoples of Latin America, who are particularly vulnerable to forced labour.

Migrant workers in destination countries often gather in clubs on their days off. In such cases, it is perfectly feasible to use simple sampling techniques. Migrants can also be surveyed about their experiences abroad, after they return to their home countries.

Regional Study: Asia

In Asia, three issues remain of particular concern. One is the persistence of bonded labour systems, particularly in South Asia, although legislation to prohibit and punish these practices has long been in place, together with mechanisms to identify, release and rehabilitate bonded labourers. A second is the widespread incidence of traffic-king of both children and adults, for both sexual and labour exploitation. A third is the persis-tence of forced labour exacted directly by the State and official institutions, notably in Myanmar.

One feature of Asia is the extensive movement of workers from the poorer to the wealthier countries within the region, as well as from Asian countries to the Middle East, Europe and the Americas. In the larger Asian countries, such as China and India, there have been similar large-scale movements within the country, from the poorer provinces to those with significant industrial growth and a consequent demand for temporary labour, and in some cases more permanent relocation of the workforce.

Given the complex nature of Asian bonded labour, a targeted approach in particular sectors by region can be advisable. Such an approach has been taken by the Government of Punjab province in Pakistan which, with ILO support, envisages an integrated programme to combat bonded labour in brick kilns.

The ILO estimates that Latin America accounts for the second largest number of forced labou-rers in the world after Asia. Only a few countries have made syste-matic efforts to investigate and document forced labour and its incidence. However, the strong efforts made by some countries, most notably Brazil and Peru, have improved understanding of contemporary forced labour and its underlying causes.

Contract labour and recruitment

Inadequate mechanisms for the recruitment and placement of workers can result in labour exploitation, including forced labour. The link between informal labour brokering and bonded labour systems in parts of Asia and Latin America has long been acknowledged. It is also widely accepted that workers who migrate through unlawful intermediaries, often finding only clandestine employment in destination countries, are at particular risk of forced labour.

ILO has conducted research on private agencies and recruitment systems in areas and countries including Central Asia, the Caucasus and the Russian Federation. Studies were also commissioned in Bangladesh, India and Pakistan, mainly examining the experience of
temporary contract workers from these countries in the Gulf States. Some findings were presented at a Gulf Forum on Temporary Contractual Labour, held in Abu Dhabi in early 2008. Second, extensive capacity building has been provided for government officials including labour inspectors, as well as employers and trade unions.

ILO research with returned migrants from the Gulf States, conducted in 2007 in Bangladesh and Pakistan, while concluding that the experience of most migrants had been positive, also found that the high costs of migration were making it less financially profitable for the workers. In Bangladesh, where the average costs were around US$1,400 for men and half that amount for women, the total cost of migration had risen by more than 130 percent over the 2000-07 period and had generally not been balanced by a rise in incomes. In Pakistan, the average total cost for persons employed overseas was US$1,000, more than 12 times the ceiling set by the Government of Pakistan. Most Pakistani migrants paid all fees in advance, with approximately half financing migration costs from their own savings.

The economics of forced labour: Measuring the costs of coercion

Our last Global Report estimated at US$31.7 billion the total illicit profits produced in one year by trafficked forced labourers. Further ILO research at that time indicated that, worldwide, total illegal profits made from the 8.1 million forced labourers in economic exploitation, outside the sex industry, reached US$10.4 billion.

It is equally important to address this question from a different angle. What, in addition to human suffering, are the financial costs of coercion to the people who work in forced labour situations? In other words, how much money is “stolen” from people in forced labour? Answering these questions requires some estimate of the”opportunity cost” of being in forced labour, namely the income lost through being in forced labour rather than in a free employment relationship.

ILO research over the past few years suggests that the loss of income associated with coercion can be traced to two main sources. The first is the underpayment of wages. Indeed, it can be argued that economic exploitation is the main reason why some employers use coercion. In most cases, people in forced labour receive wages lower than the market rate, in some cases less than the subsistence minimum.

People in forced labour often receive wages net of some artificial deductions imposed in a discretionary way by their employer. For example, victims may be overcharged for the cost of their accommodation a cost which is often directly deducted from the victims’ nominal wage.

Underpayment of wages includes forced overtime and other forms of “excessive work” which are not adequately remunerated. Forced labourers typically work longer days and longer weeks than free workers, sometimes up to 16 hours a day for seven days a week.

The second source of lost income, which arises mainly in cases of human trafficking, is the financial costs associated with the recruitment process. Migrant workers trafficked into forced labour often
incur a series of costs linked to their recruitment, including payments to a recruitment agency or a broker, funding a particular type of training necessary for being eligible for admission to the destination country, acquiring language skills, or payment for the visa and transportation.

Can the global cost of coercion be estimated?

At present, the data are still relatively scarce and much more research is needed in this area to obtain a precise and robust idea of the magnitude of the cost of coercion. Some benchmark figures can nevertheless be calculated, excluding victims of forced commercial sexual exploitation but covering the other economic sectors where the incidence of forced labour has been most widely documented. On the basis of available information, we estimate that the total amount of unpaid wages to people in forced labour amounts to approximately US$19.6 billion. The regional breakdown is shown in the table below. The figures are obtained by multiplying the total number of victims by the estimated average underpayment of wages in different sectors (agriculture, manufacturing, construction and services). The latter, in turn, is estimated as the difference between the actual wage payments made to forced labourers and an estimate of what they should have been paid in light of figures of labour productivity in those sectors.

In addition, trafficked victims have been observed to pay recruitment costs which vary from US$150 in poor regions to an average of more than US$5,000 for securing a job in industrial countries (while in extreme cases the payments can be more than ten times this amount). When multiplied by the number of trafficking victims in each region, this represents a global sum of more than US$1.4 billion. When added to the lost income due to unpaid wages, we estimate that the total cost of coercion to workers amounts to a benchmark figure of about US$21 billion.

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Business actors and private companies can have many different oncerns. For global companies, with extensive supply chains and outsourcing, the main issue is likely to be supply chain management.
A number of prominent companies have seen their image badly affected by allegations of forced labour in their supply chains. And this means not only companies engaged in productive activities in those sectors commonly perceived to be at risk, such as agriculture and construction, with their high incidence of temporary work and of “dirty, difficult and dangerous jobs”.

The past four years have seen a wave of allegations affecting companies engaged in steel, electronics, footwear and textiles, and much more. Similar challenges are also faced by suppliers to global companies and small and medium-sized enterprises (SMEs) integrated into global supply chains. For them, the risk posed by forced labour entering the operations of their subcontractors can negatively affect not only their own reputation but that of their entire industry, which in turn can have a broad impact on trade relationships with global buyers and with access to global markets.

Because forced labour is a serious crime, businesses have a legal obligation to prevent and eradicate it in their company operations, failing which they can be liable to criminal prosecutions and sanctions.

But there are at least two outstanding issues of concern. First, when modern supply chains are so complex, there is the question of how far a company’s liability should extend. Second, when the jurisprudence on forced labour in the private economy is still so young, there are bound to be uncertainties and “grey areas” as to which business practices constitute the risk of forced labour. As has been seen from some of the more recent national litigation, judicial interpretations will also vary between countries.

Taken together, the forced labour concerns affecting business can be classified approximately as follows. First, there are the widespread problems affecting small industries, sometimes in remote areas, in developing countries. These are long-standing concerns of the largely informal economy, as in the brick kilns or small garment factories of such South Asian countries as India and Pakistan, which are likely to include deeply embedded practices of bonded labour.

Second, there are the industries which appear to be at risk of forced labour practices within individual developing countries, mainly because of the nature of recruitment practices. There is a very clear risk of forced labour through debt bondage, when temporary workers are recruited through informal and unlicensed intermediaries who entice their recruits through the payment of advances, and then make their profits through a series of inflated charges.

Third, there are the problems facing multinational enterprises (MNEs) which outsource their production to companies opera-ting in developing countries.

Fourth, there are the potential problems facing all companies, in developed and developing countries alike, which engage contract labour through different kinds of employment or recruitment
agencies.

An event held in 2008 brought together senior representatives from employers’ organizations and business across Asia, alongside representatives of civil society. Participants discussed the role employers’ organizations and business can play in combating forced labour in the region and set out a series of recommen-dations directed at private actors.

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Forced labour and poverty reduction in developing count-ries: A focus on prevention

Research and operational programmes have led to an enhanced understanding of the population groups at risk of forced labour, often as a result of a long-standing pattern of poverty and discrimination. They can include caste and other minorities in Asia, indigenous peoples in Latin America and, in some cases, the descendants of slaves in Africa. Experience has shown that, together with improved law enforcement and labour inspection, there is a need for better prevention strategies, including the targeting of poverty reduction programmes and development resources at the communities most in need.

Broad-based action against bonded labour systems, particularly in Asia, will continue to take place at different levels. At the policy level, persons in or at risk of bonded labour should be specially targeted through poverty reduction programmes, including microfinance initiatives.

Sensitization programmes for government agencies and officials are of key importance, identifying the various means at their disposal to address bonded labour systems and practices. At the community level, it is essential to build on the good practice learned so far, replicating this in other areas of known bonded labour incidence. The involvement of local employers’ and workers’ organizations will be a key element of future approaches. In Latin America, given the particular vulnerability of indigenous peoples to forced labour and debt bondage, the issues will be accorded due importance in programmes to address poverty through promoting the identity and rights of indigenous peoples.

Note
The report ‘Cost of Coercion’ 2009 has been printed in tbl with permission from the International Labour Organization (ILO).

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