Rethinking the economics of migrant’s remittances

Despite the sluggishness in the global economy, officially recorded remittances to developing countries have been growing and the number of international migrants was expected to surpass 250 million in 2015. Among the migration corridors, Mexico-United States accounted for 13 million migrants in 2013. Russia-Ukraine was the second largest, followed by Bangladesh-India, and Ukraine-Russia.

Remittance flows to developing countries are currently higher than three times the amount of flows related to official development assistance. Accordingly the World Bank’s Migration and Development Unit report, officially recorded remittances to developing countries reached almost $534 billion in 2012 and $601 billion in 2015. As remittance flows include unrecorded flows through formal and informal channels, the actual amount of money that is transferred cross-border to family members might be significantly higher.

In 2014, diaspora members living in the United States sent more money in remittances than diaspora members based in any other country, with an estimated $56 billion in outward flows. The United States was followed by Saudi Arabia ($37 billion), and Russia ($33 billion). In 2015, India was the largest remittance receiving country. Accordingly the World Bank, diaspora members sent almost $72 billion in remittances to India and $64 billion to China in 2015. The Philippines and Mexico received almost $50 billion in officially recorded remittances, in 2015.

High unemployment rates in Europe have impacted outward remittance flows. An analysis of the labour markets shows that migrant unemployment rates are higher than those native-born in France, Greece, Italy, Spain and the UK. This trend has dampened the level of remittance outflows from major remittance senders in Europe, such as the UK, Spain, and Italy. As a result, Eastern Europe and Central Asian countries have received weak remittance inflows. For example, Poland, Romania, Bosnia and Herzegovina – major recipients of remittances from Western European countries – have also received shrinking remittances. Besides, countries of MENA (Middle East and North Africa region) have also been affected by weak remittance outflows from Europe.

A striking contrast to weak remittance outflows from Western Europe has been the outflows from Russia, a country that benefited from elevated oil prices until the last few years. In 2012, the main beneficiaries of growing remittance outflows from Russia have been migrants from Armenia, Georgia, Kyrgyz Republic, Moldova, and Tajikistan, for example.

Remittances that migrants send home to their families have certainly a major impact on households. Remittances increase disposable income and are generally spent on consumption—of food, clothing, medicine, shelter, and durable goods. Consequently, remittances contribute to lift people out of extreme and moderate poverty by enabling them to maintain a higher level of consumption, also during economic adversity.

Although many factors could affect migration around the world, the concern in relation to the economics curriculum is about the need to deeply study the underlying mechanisms of inequality and current patterns of social exclusion where the flow of remittances supports survival strategies  to those people who lack employment opportunities.

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