Profits from forced labour

Our key takeaway: It turns out there’s a lot of money to be made … from forced labour. The ILO finds that those profiting from forced labour (employers, agencies, traffickers etc.) are making nearly US$10,000 profit per victim. That’s US$236 billion of global profit generated from forced labour annually. This is money that rightfully belongs to workers for their work, but instead remains in the hands of those benefiting from forced labour. And this figure is likely under-estimated: the ILO doesn’t include profits from recruitment fees (which are estimated to be high), avoided taxes and social security contributions. Profits from forced labour are highest in industry (mining and quarrying, manufacturing, construction and utilities), and in services (wholesale and trade, accommodation and food service activities, art and entertainment, personal services, administrative and support services, education, health and social services, and transport and storage). The fact that this figure has “risen dramatically” over the past 10 years, despite significant efforts to combat forced labour in global supply chains, should be a wake up call for any company. How are you looking to ensure that money ends up in the pockets of the people who earned it? Promoting ethical recruitment; ensuring contract workers are not paying fees to employment agencies; respecting workers’ rights to collective bargaining and freedom of association; and working alongside other actors to tackle the root causes of forced labour have to be the name of the game.

The International Labour Organization (ILO) published Profits and Poverty: The Economics of Forced Labour (March 2024):

• Private sector profits from forced labour are enormous: In 2021 “there were 27.6 million people in forced labour on any given day,” a figure that increased by 2.7 million people between 2016 and 2021. Around 86% of these people are in the private sector, with 63% in labour exploitation and 23% in commercial sexual exploitation. The ILO estimates that the global profits generated from forced labour are US$236 billion annually, which is nearly US$10,000 profit per victim. This number reflects the difference in what employers are actually paying workers and what they would be paying workers in normal circumstances—“In other words, they are the wages that rightfully belong in the pockets of workers that instead remain in the hands of their exploiters as a result of their coercive practices.” This figure has “risen dramatically” over the past 10 years, from an estimated US$64 billion in 2014. But even these numbers are under-estimated: the ILO points out that their calculations do not include additional profits from recruitment fees, avoided taxes and social security contributions. Profits from recruitment fees in particular are difficult to calculate, but are similarly estimated to be significant: US$5.6 billion in annual illegal profits or 15% of total annual illegal profits from international migrants in forced labour.
  

• Profits from forced labour are highest in the industry and services sectors: Industry reflects the largest population of forced labourers (37%, or 6.3 million people). Industry includes work in mining and quarrying, manufacturing, construction and utilities. Forced labour in industry yields US$35.4 billion annually. Services has the second-largest population (32%, or 5.5 million people), working in wholesale and trade, accommodation and food service activities, art and entertainment, personal services, administrative and support services, education, health and social services, and transport and storage. Forced labour in services generates US$20.9 billion per year. This is followed by agriculture (12% of forced labourers), other work like forced begging and illicit activities (11%) and domestic work (8%). Much of the profit from forced labour is gained through underpayment of workers (although underpayment does not necessarily mean a worker is in forced labour, it is a common component of forced labour). For example, in construction or manufacturing underpayment can look like unpaid overtime, wages lower than what was agreed upon, illegal or excessive deductions and withholding of wages. And across every sector, “workers classified as seasonal and casual workers are frequently excluded from minimum wage protection granted to regular workers, leaving them especially vulnerable to underpayment.”
  

• A joint role for the public and private sectors: Government has the primary obligation to end this trend, through strong rule of law to enforce regulations against forced labour and an empowered inspectorate with a mandate to investigate and penalise cases of forced labour. But supportive actions go beyond governments alone. Companies can help by promoting fair recruitment practices and ensuring employment agencies they work with are not charging workers recruitment fees. They can also contribute by facilitating freedom of association and collective bargaining, which are key tools to help workers “build resilience to the risks of forced labour.” Companies can also partner with government and other social actors to address the root causes of forced labour.