Migrant Money: A Peek at How Migrant Labor Impacts Development

Gambia_Standard_Chartered_Bank.jpgThe NY Times ran an article about Dilip Ratha, who works at the World Bank and is an expert on migration, that raises some hard questions about the law and globalization. Mr. Ratha’s work has shown that the amount of money migrant workers send to their families in home countries is significant. His work was the first to document the amounts. They are significant: $300 billion. “His tallies, first published in 2003, showed that remittances, once dismissed as the equivalent of a rounding error, were nearly three times greater than the world’s combined foreign aid.” To give one example, Egypt apparently receives more money from remittances than from operating the Suez Canal. Of course, this finding has moved the issue to the forefront of development agendas. Mr. Ratha has recently been working on reducing the fees for such transactions and has sought to improve the way the money is used.

Not everyone thinks the money is well spent. According to the Times some are skeptical because “if migration brought development, Mexico would be Switzerland.” One professor, Devesh Kapur of the University of Pennsylvania, said “If I ask can you name a single country that has developed through remittances, the answer is no — there’s none,” he said. Others noted that this money rests on migrant exploitation and hides the impact on the families left behind.

Mr. Ratha acknowledges the justice and family issues. His point, however, is that the fact of migrant labor and the amounts of money involved are important and that given this reality something should be done to aid local development.

It seems that this view addressed the straw man of no country has developed through remittances. There seems to be a need to use that money to fuel productive growth in these countries. As Mr. Ratha notes for one thing the money is going right to people rather than bureaucracies and/or possibly corrupt government officials. Still some note that rather than sustained development projects these funds go to immediate needs such as food, clothing or less immediate things like a party.

So what is good development?


First it seems that feeding people more efficiently is a good thing. And insofar as consumption can be part of building a sustained economic system, consumption of the basic parts of living could be a good place to start. Now none of this view suggests that one should not build infrastructure. But the criticism seems to ignore what Mr. Ratha points to. There is a chance to take this money and have it work to improve situations around the world. Better local banking (the microbanking system may be an analogy here as it took time before people thought it could work), better investments, maybe even better guidelines or information about ways to direct the money’s use, could change the system in place. So someone may give money to help families afford food and the like and that may be the most they can do. Others may have the ability to give even more. A guide might show people how to microbank and teach families about simple but effective ways to use the money. It could also open ways for people to invest directly in a home town either on their own or with an NGO’s help.

The key is that the money is out there. It may be that society should ask whether the system that generates the money is bad and should be changed. If so, Mr. Ratha’s work reveals the size of the issue. But it may be that the practice will continue in some form. In that case, trying to find better ways for the money to be used well is just a good idea.

Image: WikiCommons

Author: Atamari

License: Creative Commons Attribution ShareAlike 2.5 License

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5 Responses

  1. Patrick S. O'Donnell says:

    Deven,

    Thanks for posting on this important topic.

    At the Poverty Law Prof Blog the bright and compassionate young scholar Ezra Rosser has posted notice of his paper, “Remittance,” available at SSRN http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1107485 [And I hope everyone reads another recent paper of his, ‘Obligations of Privilege’ also available through SSRN]

    The abstract:

    “Remittances, the sending of money from immigrants back to their home countries, are the newest anti-poverty, development activity of the poor to be applauded by international institutions and economists. Exceeding foreign aid and private investment to many developing countries, remittances are being hailed as a new, untapped resource with powerful poverty alleviation and potentially development attributes. After presenting the poverty, developmental, and economic characteristics of this new transnational connection between immigrants and their loved ones, as well as the dangerous effects of excessive remittance regulation, this paper argues that remittances should be understood as an anti-poverty tool, but not as a route to development.”

  2. Patrick S. O'Donnell says:

    Erratum: Rosser’s paper title is “Remittances.”

  3. Deven says:

    Patrick

    Great to hear from you and thanks for the leads on good reading.

    Best

    Deven

  4. Remittances to sustain living conditions should be applauded. I also agree that it is not an effective means of stimulating the economy.

  5. Countries where energetic, hard-working people feel they have to go elsewhere to make a living would instinctively seem a poor choice in which another country should invest its development foreign aid. After all, if the citizens don’t feel their own country, led by fellow countrymen, is worth investing their time and effort why wwould outsiders conclude othewise?