Large Developments Lead to Labor Influx, Often Bringing Problems

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.

What is Labor Influx?

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:

  • Direct labor influx—Nonlocal people induced to the project area by employment just before or during the construction stage and who are hired or contracted directly by the proponent or the main contractors
  • Indirect labor influx—Nonlocal people who have been induced to the project area by the prospect of employment just before or during the construction stage and who are hired by subcontractors and local businesses who provide goods and services to the main contactors or to the mobile workforce. This distinction is important because this type of migration usually does not result in acute social tensions because this group is not seen to be taking the highest value jobs with the proponent and main contractors.
  • Labor-associated influx—Nonlocal people induced to the project area just before or during the construction stage who have or are seeking association with the direct or indirect project workforce in some way. This may include workers’ families or relations; sex-trade workers; local businesses; speculative job seekers; refugees or non-economic migrants who have been forced to move by natural disasters (e.g., drought or flooding) or because of political and religious persecution, civil strife, and war; and protestors, or people coming to a project area in organized opposition movements during the exploration, development, or construction stages with the intention of halting or delaying project work and advancement.

Types of Effects

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:

  • Environment and Resource Management—Population pressure because of labor influx may lead to higher levels of unrestricted use of natural resources (e.g., forests and aquatic resources). Effects on forests may come from increased logging and collection of fuel wood or forest conversion as newcomers seek land for housing or agriculture or new business endeavors. Effects on biodiversity and wildlife may also come from increased hunting or the presence of work camps in sensitive areas. Changing land-use patterns may result in increased demand on water resources or introduction of invasive species. Changes in land and resource use may, in turn, affect local food systems and nutritional outcomes. Worker camps, without appropriate wastewater discharge, may pollute nearby water sources. And the potable water needs of worker camps can result in increased pressure on freshwater resources in the project or camp area.
  • Economic and Livelihood Strategies—Influx, when significant in relation to local community size, often results in general inflationary pressures because of increases in the demand for food, fuel, housing, and land. Price pressures on food, land, and housing may force the lowest-income earners, often the most vulnerable, out of their homes or out of the area. This may exacerbate the economic vulnerability of marginal groups (e.g., women, ethnic minorities, elderly). Pressures on land and water systems may also have economic effects for those with resource-based livelihoods (e.g., agriculture, forestry, fisheries, commercial recreation). Speculators and new businesses looking to capitalize on the needs and income of direct and indirect labor influx may create market distortions and force existing suppliers out of business. Communities, for their part, may experience boom/bust cycles associated with sharp growth during construction and eventually decline because of project closure.
  • Pressure on Infrastructure, Services, and Utilities—Population surges can stretch the capacities of social infrastructure such as housing, schools, and health care and lead to additional pressures on waste management, sanitation, water, power, and transportation. The extent of the effect will depend on the population threshold for which services are designed and existing constraints. Infrastructure pressure could cause or exacerbate service restrictions for other community members, which may, in turn, have particular effects on vulnerable groups. Work camps to house labor influx will also have site-specific needs for water, waste, fuel, and power. Labor influx can also create direct demands on social, health, and emergency services. Housing pressures, for example, may lead to overcrowding and inflationary pressures for local residents that change the cost of living or lead to effects on housing quality and availability. Lack of adequate housing may also lead to unplanned and controlled development of squatter settlements in the project area.
  • Health—The influx of mobile workers can increase local costs (e.g., housing, food), making it more difficult for low-income residents to afford both food and shelter required for good health. In some cases, labor influx results in higher rates of violence, injury, alcohol and drug consumption, and sexually transmitted diseases in the local population. Influx-related environmental effects that affect subsistence agriculture or harvesting may change nutritional choices, which, in turn, can have physical health consequences. Overcrowded or camp-based living conditions can significantly alter existing levels of communicable diseases including respiratory problems, diarrheal and vector-borne diseases, and tuberculosis, which also increases the risks of disease being introduced and spreading through host communities. This, in turn, strains public resources and affects overall service capacity for local residents’ health needs.
  • Social and Community Wellbeing—Labor influx, depending on the size of the host community, can change the demographics to the extent that the way of life or sense of cultural cohesion is affected. This can be particularly acute in smaller communities with a largely male workforce or a workforce from other regions or countries—which may result in conflicts between locals and nonlocals concerning employment opportunities, wages, and natural resources. Mobile workers can also contribute significantly to gender-based social effects and risks. For example, a mostly male workforce away from their families and normal social environment may lead to increases in unplanned pregnancies and, ultimately, to more single-parent households and changes in family structure. While crime rates may increase generally, increases in crime and violence against women and girls may be particularly acute in socioeconomic settings where there is an existing gender differentiation in terms of power and human rights, coupled with limited governance capacity. In locations with pre-existing sexual and gender-based violence (SGBV) issues, labor influx can also exacerbate SGBV risks. All these effects can lead to an increased pressure on local government resources and affect overall service capacity for local residents’ existing needs. The impacts of in-migration are also often felt in the labour-sending areas as well as within the host communities. Children from labor-sending areas, for example, may be separated from their parents for long periods of time, or in some cases permanently, as their father, mother, or caregivers migrate to look for work.

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