Migrants and Informal Casual Labour Markets

Many regions implicitly differentially prioritize the interests of local residents and of migrants whilst filling vacant jobs resulting in a trade-off between welfare rights and openness to migration. Migrants take into account the trade-offs of poor working conditions and unwritten and unenforceable contracts, with the higher income in the destination region, and all considered migrate. We provide a framework for understanding this socio-economic outcome. Many migrants are low-skilled workers in the informal sector where the requirements for complete contracting are severe. It is difficult ex ante to specify what constitutes a satisfactory performance of the contract (as it is difficult to record and measure performance), and accordingly, it is difficult to enforce the contract via a third party. This leads to opportunism as the employer holds up the worker by requiring further responsibilities such as longer hours of work to be undertaken that were not negotiated in the first place. We postulate a bargaining approach to unearth the role of regulation and the determination of wages and work conditions in the informal casual labour market.