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June 13, 2016
The Hague Process on Refugees and Migration

The return on investment on migration: What’s in it for business?

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Migration plays a vital role in today’s global economy. With 3.3% of the total world population comprising migrants, they constitute a key demographic with great appeal to businesses, both as a potential talent pool, as well as a customer base. This means migration is no longer an issue solely for the attention of government, but also a topic that directly concerns business. With the right investment in place, firms can gain direct benefits for company performance and their core business, while also influencing positive change toward migrants’ socio-economic integration.

In order for businesses to capitalize on the potential impact of migrants in their organizations, they must have better information on their costs, benefits, and impacts. A recent study by The Hague Process on Refugees and Migration (THP), in collaboration with the Turkish Chair of the Global Forum on Migration and Development (GFMD), sheds light onto this business opportunity.

The study shows that the key to benefitting from migrants in different areas of business activity is to leverage a well-integrated migrant workforce by tapping into their diverse perspectives, cultural norms, and innovative thinking to generate new ideas and solutions. This requires implementing programs and initiatives that allow an organization to do just that. Areas of business activity of relevance include: recruitment and retention, government engagement, corporate social responsibility, product and service innovation, market expansion, and job creation. It is also essential to track the impact of migrants in the organization. One way for businesses to determine the effect of migration on organizational performance is to measure the returns on investment (ROI). ROI is an economic metric that compares the costs and benefits of investing in programs, projects, and initiatives that support a company’s policy or strategy. The ROIs measured in the study range from -20% to 706%. For example, an ROI of 40% means that for every US$100 invested, the company profits by $40.

However appealing the results, the broad range of ROI says little in terms of the overall effects of migration on business as ROI cannot be interpreted on its own. Understanding its meaning requires an understanding of the mechanisms that led to a particular ROI, as well as the contextual factors. Contextual factors may include important market and industry developments, the size and diversity of the local talent in the labor market, the ease of legal and social integration into the country of residence, market and business environment pressures (or niche opportunities) to localize products and services, and whether or not the business is owned by a migrant, among others.

Understanding contextual factors and their potential influence on a business’ ROI for migration is essential, as often both the company itself and outside stakeholders such as governments are in a position to influence them, boosting or lowering the returns. THP offers three recommendations for governments:

  • Improve communication of the positive benefits of migration to businesses. A shift in mentality relating to migration is needed in order to create more opportunities for businesses to benefit from migration.
  • Governments will see more private-sector engagement if they provide programs for businesses to better leverage migrants for positive outcomes. Governments are in a privileged position to influence the contextual factors involved in achieving a positive ROI, including access to a migrant workforce, as well as favorable policies.
  • Governments will see more businesses engage with migration if they facilitate the short-term returns and benefits of migration. This is of particular relevance for small businesses, as their cost burden is particularly problematic.

The complete study “The return on investment on migration: What is in it for business?” and a number of case studies are available here.

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We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.