How Blockchain could stop migrant worker exploitation
By Clarke Robertson
Migration from one country to another to seek out a better, more dignified life for oneself, or one’s family is one of the most prevalent human pursuits of our time. The world is experiencing a dramatic increase in legal overseas migration for work, and there are currently 250 million migrant workers coming from developing countries to work in developed ones. Annual cross-border remittances have risen to more than US$600 billion.
Migrant workers are not only the breadwinners of their families back home, but also in the case of many developing countries, the cash they send home makes up a significant percentage of annual GDP. For example, in the Philippines, over 10% of the GDP (about US$30 billion) comes from overseas workers. Such a globalized, macroeconomic phenomenon is unprecedented in human history.
Worker migration is high stakes for the global economy. But, ironically, the existing recruitment systems in host countries with the largest migrant worker populations are inefficient and open to abuse, entailing many exclusively paper-based steps.
Third-party agencies, and other middlemen easily tamper with paper documents and also with the centralized databases governments use to approve entry of workers. Their goal is often to extort money from migrants, and even physically abuse or enslave them.
The less skilled the migrant worker, the more likely that corruption will have a role in their recruitment to work abroad.
For example, workers on construction sites face exploitation from recruitment agencies demanding bribes to get the chance to work abroad. In order to pay the agents, migrants will usually sell off all their belongings, including their ancestral land, or take out a bank loan before they even start earning. Once they start working, if they fall ill, are injured or if their company lays them off, they are left with nothing but debts.
Exploitation also begins with employment contract substitution from employers, where a migrant worker will sign one contract in their home country, but find a different one when they arrive at their place of work. The employment contracts these workers are sometimes forced to sign are illegal, and lack consideration for their basic human rights.
The situation today is untenable and many nations recognize the need to do things differently. After all, if governments of countries which rely heavily on migrant workers do not eliminate illegal practices, it will ultimately be more costly once the workers are exploited, abused or end up in jail and become a financial burden on their host country.
How could blockchain technology solve these problems?
A technological solution is at hand — the blockchain. This tamper-proof ledger essentially automates trust, which is precisely what is required here.
Trust is lacking between host government agencies and migrant worker source governments. It is lacking between recruitment agents and employers, and between almost all of the participants in the legal migration process.
The current migrant worker recruitment system attempts to solve this manually by using human labour, or third-party agents to verify identities and transactions. These agents are the nodes where corruption and exploitative practices infiltrate the system.
Instead, by using peer-to-peer verification on the blockchain, information is shared in real-time — meaning that no single participant can ever have a different version of the ledger. This removes any chance of collusion or fraudulent activity.
Nodes on the distributed ledger would include government agencies of both source and host countries, employment candidates, employers, recruitment agencies and non-governmental human rights organizations. Each step in recruitment would be updated on the ledger only when each party signs and verifies the transaction.
Another important step is storage and verification of the identities of all parties to the employment contract. An encrypted profile of each worker would be stored on the ledger including their work history and economic identity.
Many migrant workers would not have had the opportunity to build their credit or employment history, and such data profiles are important for their future lives.
Employers would also be profiled with reviews and feedback from workers, as well as results from formal assessments and audits. Recruitment agencies would also be enabled to access the data on registered candidates with required skills and experience.
Streamlining salary transfer
The next step would be to integrate employment contracts and workers’ identities with salary payments, in order to ensure that salaries are paid by employers as per the contractually agreed terms, and that illegal deductions are not made.
Money transfer of salaries back home is another pain point. Here too, blockchain technology could make it far cheaper, efficient and faster for migrant workers to send money to their families. Integrating the recruitment platform with salary payments would enable partnerships with blockchain-based solution providers in the money transfer space.
Fintech companies in Asia are actively developing low-cost blockchain-based money transfer systems. One such fintech company is the Noah Project streamlining remittances initially from Japan to the Philippines, based on its own token.
With blockchain, both a sender and a recipient would be able to track the money and know exactly whether the funds have reached their destination or not.