Labor influx is not a new phenomenon and can occur in the context of any major project, including in oil and gas, mining, and infrastructure developments. The large-scale and often remote and transboundary nature of oil and gas projects can make such undertakings particularly vulnerable to such dynamics. A key driver of socioeconomic change in any project context can be rapid population growth or influx in response to project labor demand or perceptions of direct or indirect economic opportunity associated with the project.
Whereas labor influx can have positive effects (e.g., increased opportunities for local businesses, increased human capital), more often than not labor influx results in or contributes to adverse social, economic, and environmental effects. If not planned for and effectively managed, labor influx can lead to human-welfare risks, including gender-based violence and trauma, and negatively affect public infrastructure, housing, natural-resource management, and social dynamics in the project area and region. These effects, which often long outlast the project and investment cycle, can represent a significant risk for oil and gas projects and lead to community anger and social conflict, reputational effects, investor concerns, cost overruns, and delays and, in extreme cases, can put at risk the social license to operate.
This paper summarizes the results of a recent global portfolio review focused on labor influx and social effects commissioned by the World Bank. The study was carried out in 2017 as part of a series of actions set in motion by serious allegations of social effects related to a transport project in Uganda, which resulted in the ultimate cancellation of the investment by the World Bank. While drawing on research into infrastructure projects, the paper discusses key observations and lessons relevant to the oil and gas industry and provides recommendations for project planners and managers faced with the potential for labor influx. It concludes that influx is a strategic but often overlooked aspect of project risk management and outlines key mitigation measures that should be in every project’s social-risk-management toolkit.
Labor influx consists of the rapid migration to and settlement of workers in the project area, typically in circumstances where the labor/skills and goods and services required for a project are not available locally. In such cases, projects need to bring in the workforce (in whole or in part) from outside the project area. Projects can also attract additional people for speculative reasons (“followers”), including those hoping to find employment or businesses hoping to sell their goods and services to the temporary project workforce, as well as “associates” who often follow the first two groups to exploit opportunities for criminal or illicit behavior (e.g., prostitution, crime).
Labor influx is different from natural demographic change because of deaths, births, general migration, and wider economic forces in several ways. First, labor influx is temporary. It typically occurs during or just before construction of a project or over a finite period when significant excess labor capacity is required. In this context, “temporary” does not necessarily mean “short term,” because construction or major works can occur over a number of years. Second, labor influx often occurs rapidly, unlike natural demographic changes that typically evolve more gradually. Over a matter of weeks, a significant number of people may come to reside in a project area. Third, labor influx can scale both up and down during the course of construction, resulting in unpredictability. These factors mean that companies, governments, or local service providers often do not have sufficient time or resources to adapt in terms of service provision.
For the purposes of this paper, “labor influx” refers to people who typically do not reside in a project area who come to reside temporarily in the project area during the development or construction phase for the purpose of project-related employment, capturing economic opportunity. Project-induced labor influx may be direct, indirect, or associated as follows:
When located near an existing community, labor influx can have a positive effect on community wellbeing through supporting local businesses, volunteering, and mentoring local workers. It can also contribute to strengthening local community capacity and human capital (e.g., knowledge and skill resources held in the population). Labor influx, for example, can improve business for some local suppliers of goods and services and create new employment opportunities; and migrants’ need for transportation, accommodation, and food can stimulate the local economy and create alternate livelihood and employment opportunities for current residents. More typically, though, labor influx is associated with negative effects.
The interplay between labor influx and social effects is complex and context-specific, underlining the importance of understanding the dynamics involved and having mitigation and monitoring protocols in place. Some of the key considerations include the following:
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