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How do we prevent forced labor in supply chains?

Individual corporate actions are appropriate, but then there are broader market failings.

Recently, I traveled to Kuala Lumpur for a multi-industry convening on combatting forced labor in global supply chains, organized by the Electronic Industry Citizenship Coalition (EICC). The convening featured a wide variety of viewpoints from civil society, government, business, the International Organization for Migration, the International Labour Organization, trade unions and recruitment agents on challenges related to forced labor and international labor migration.

Despite the diverse views and sectors, many shared points leapt out at me.

Transnational migration is a market, of course: labor supply (made up of migrants) fills the labor demand of employers. In a functioning marketplace, demand and supply meet and reach an agreement on price (in this case, wages, benefits and working conditions) within the guidelines of the law and other contexts, such as collective bargaining agreements.

However, this labor-migration market is failing because the basics of a market relationship are not happening. This failure has serious consequences, which can involve human trafficking, forced and bonded labor, and human rights violations.

Why is this market failing? The key to any market correctly operating is information — both buyer and seller, or employer and employee, need to understand the bargain they are striking. In this case, however, migrants all too often lack the information necessary to make informed decisions, raising the risk of exploitation.

Employers are often in the same boat, lacking information about their new hires and the recruitment processes that bring them to the employer. Information arbitrage, where the middleman exploits these gaps in knowledge, exists at many steps in the recruitment process and is often connected to graft, corruption and exploitation of the migrant.

As this market crosses borders and regulators, local actors often put their interests above broader market needs. Consequently, a well regulated, functioning market is very difficult. When this market fails, the weakest actor — the individual migrant — suffers most, as he or she bears the vast majority of the costs, in the form of debt, deportation or other consequences.

Businesses can overcome these market failings, but this requires investments that are neither easy nor free. However, leading companies are taking these steps, including instituting due diligence on and monitoring recruitment agents, conducting interviews with migrants, shifting migration costs from migrant to employer and repaying debts incurred by migrants.

These steps help avoid bonded labor, ensure successful migration experiences and protect the rights of migrants. And these steps can create significant business value, such as reputational enhancement with customers, risk mitigation and workforce retention.

Transparent information helps companies ensure their new recruits understand and are qualified for the position based on their skills, talents and aptitudes — the things that actually bring value to the employer — instead of being selected by a middleman based on their ability to pay a bribe.

These efforts are appropriate and good, but they are individual corporate actions, with each company acting on behalf of its workforce. To build cross-industry approaches to responsible labor migration, the broader market failings need to be addressed. There are four key ways that businesses can start. Companies can:

  • Influence their market peers to create a culture of "responsible labor stewardship" through organizations such as the EICC and others. When companies speak up and demonstrate their commitment to appropriate recruiting practices, it will change norms and expectations within their industry.
  • Increase transparency, connectivity and accountability with potential migrant employees, which is becoming increasingly possible with technology and the internet and will help end information arbitrage opportunities. Empowering migrants to make free, prior and informed decisions will go a long way to creating a functioning market.
  • Help migrants create local constituencies that represent their interests in the country of employment. Allowing migrants to participate in and be leaders of trade unions can make this happen.
  • Build cross-border constituencies of responsible employers, engaged unions and active migrants. This will allow for the cross-border political push to build a stronger, fairer and transparent international labor market.

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