The UN estimates that over 105 million people are currently working outside their country of origin. These numbers are expected to keep growing in the future. For these workers, migrating to a new country offers them a plan to escape poverty, for both themselves and their family. While working abroad, the laborers send money home in the form of remittances, which hold the potential to boost the economy in their home country. The IMF warns that although remittances have benefits for developing countries, they face the problem of becoming overly connected to their host countries. In the Philippines, remittances account for approximately 10% of GDP and because of that their economy and the host country's economy become increasingly intertwined. The IMF found that for every 1% increase in GDP growth of the host country, it translated to a .5% increase in the home country. This degree of connection also works the other way; if the host country's economy is shocked, it could potentially devastate the developing countries tied to it. But is too much connection a bad thing? Peter Sutherland at the UN explains "There is no greater symbol for growing interdependence than the movement of people". The ability to transport labor has helped many countries attain the level of economic development they have now. In Malaysia for example, migrant workers make up nearly 16% of their workforce. The Malaysian companies enjoy the extra laborers because Malaysia's workforce population is small. It also helps the countries receiving remittances as well. Some argue that people leave to work elsewhere because conditions are terrible in their home countries and remittances do little to alleviate domestic problems. In Bangladesh however, only 13% of households that receive remittances are below the poverty line, while 34% of non-remittance households are. The influx of capital allows the local countries to better equip themselves and provide more opportunity for increases in infrastructure. The movement of labor has many positive qualities and has the potential to provide more in the future. The number of migrant workers are increasing, and so is the amount of remittances sent. Without regulation of these migrations, some serious problems have begun to surface.
In the most severe of cases, such as Saudi Arabia, migrant works are being exploited. By not allowing them to become citizens, to work in these countries they forfeit all forms of legal rights and labor standards. They not only face exploitation for their work, but also for their remittances. Money transfer agencies, MTA, have seized the remittance market, with big companies such as Western Union and MoneyGram. They exploit the works by charging insane amounts of fees and rates for sending money abroad. This exploitation costs both the home and host countries large amounts of capital that would have been beneficial. There is a driving need for reform to provide immigrants with civil rights and financial security. An example of a country attempting to address the issue of MTA's is the Philippines. They are attempting to lay down uniform laws for money transfers and provide a method of both bank and non-bank transfer agencies to congregate and stimulate healthy competition. In the upcoming revision of the Millennium Development Goals, those such as Michael Clemens are pushing for immigration regulations as part of the new goals. This regulation should not act as a hindrance, but rather a method to expedite the process of becoming citizens. By allowing the immigrants to become citizens, they will be able to experience same labor laws that accompany citizenship. Making the legal process has tremendous benefits. It will serve to lower the costs of everyday services, e.g. childcare, food services, lawn care. In addition, it creates a larger source of revenue through taxation. Even though immigrants pay taxes now, this system would allow them to do so while simultaneously experience the rights of being citizens. Providing this service would also deal a massive blow the the black market for labor that migrant workers are often forced into. Many countries are worried about immigration and the negative effects it can have. There is substantial evidence to suggest that immigration, if controlled correctly, holds massive benefits for all countries involved. While immigration has a negative stigma, especially here in the United States with states along the border of Mexico, it has the potential to be remedied. Immigration is going to continue increasing, whether legally or illegally, and the countries that stand to benefit the most are the ones that instill these institutions and regulations early.
I do not think that using migrants workers remittances is a sustainable development policy. I think there are several issues that could result from it such as brain drain and the possible effects that it will have on the society of the country of origin.
ReplyDeleteIn terms of the Philippines, women often migrate to the US or Italy in order to be domestic workers. These women often have a college education, but with a lack of job opportunities at home they are forced to make a living wage abroad. It is important to realize that these are not the poorest women of the Philippines, but one of the most highly educated as they are the ones that have the skills that could get them a job. These women then are in a situation in which they are working a lower skilled job than the are educated to do yet are being paid more than they would be in their host country. They are also not at home taking care of their families, which could have negative consequences on the social fabric of the country. I think that if we were to see this development strategy working that the Filipino economy would be having less of their citizens migrating for work yet that does not seem to be the case. The government is actually creating policies that are going to make things worse, by creating programs that make employees more attractive to the global market they are not creating a basis for jobs to be created domestically. The Philippines is left without the most educated part of its society. Not only do these migrant workers leave for work, but rarely do they come back. So they are contributing to the economy with their remittances, but the effects of brain drain are going to be significant as well as the effects of having generation left behind by migrant workers.
I think remittances are definitely good for the receiving countries, as they are typically untaxed, and therefor allow for more economic growth in that country. A major benefit of this is that it gives the consumers the power to change the economy rather than a corrupt government for example. If remittences were some other form of income that was taxed, it gives a portion of that to the government who, if corrupt, will tend to use the money for the wrong things. Also, as Andrew pointed out, that in Bangladesh those who benefited from remittences were almost 3 times less likely to be living below the poverty line. In essence, I believe the heart of the problem lies in leaders and governments of the developing countries. Some, not all, of these countries witness substantial corruption that leads to an inefficient and ineffective allocation of money and resources.
ReplyDeleteI believe that in most cases, remittances are beneficial for the countries that receive the aid. It seems to help both the families and the economies of these states. There is a risk of brain drain, like Kimberley pointed out. This is why it is important for governments to set up incentives or policies to get people to return home. It is going to take working with leaders of developing nations to get these policies going.
ReplyDeleteIn a globalized world where free trade is increasing , I feel like worker migration and movement of their funds , once earned , is just another form of a globalized economy. If goods and services move freely between nations then it is not so hard to imagine people doing the same.
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