How to make guest-worker programmes work

A number of Western countries have implemented guest-worker programs in recent decades, with mixed results. The main problem is overstaying - a share of the guest-workers failed to return to their home
country when their contract period elapsed. Is there a future for temporary migration schemes? A new IZA discussion paper by Maurice Schiff argues that:

..temporary migration programs that are suitably reformed in order to make them more attractive to host countries can play an important role as part of a sustainable migration strategy in the future, particularly ..in the case of Mode IV where migrant overstaying is less likely to take place than under the guest-worker program.

'Mode IV' migration is temporary cross-border movement of service suppliers under Mode IV of the GATS.

Schiff's paper, Optimal Immigration Policy: Permanent, Guest-Worker, or Mode IV?, examines several reforms designed to reduce overstaying, and concludes:

This paper contributes to the debate by examining these migration regimes in a model in which the host country maximizes an objective function with respect to i) the size of the migration program, and – in the case of temporary migration – ii) the value of a bond employers must buy and iii) the share of migrants’ income whose payment is deferred. The maximization also takes into account the impact of the policy on source country cooperation on illegal immigration, migrants’ incentives and their preference for overstaying. The model solves for the policy measures, the overstaying probability, and the level of illegal migration. The paper concludes that the optimal policy is a combination of Mode IV-type and permanent migration.

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