As the economic crisis deepens, migration and remittances has become even more important for development

Today is International Migrants Day. Standing in the middle of a global crisis, worried that many countries facing harsh economic realities might make matters harsher for migrants, let me reiterate a few points that I have made before:

1. By and large, people don’t like moving, so let’s not worry that they will flood our gates.
2. Migration benefits all parties. So, if people do come through our gates, we will benefit as a result. 
3. We can do a few things to increase the benefits and reduce the costs associated with migration.

First, by and large, people don't like moving. Most people prefer to live and die where they are born. Worldwide, international migrants number about 200 million. That is only about 3% of the world's population. Migration is rather painful for the migrants and their families. Therefore, migration is more an exception than a rule.

Contrary to popular perception, most of these migrants are not living in the rich countries of the so-called “North”. Indeed nearly half of the migrants from the developing countries live in other developing countries. Such “South-South” migration is actually larger than the size of migration from developing countries to the high-income OECD countries.

Also, contrary to the perception that migrants are mostly asylum seekers or refugees, over 90% of the migrants are economic migrants. People don’t like to move; but when faced with severe poverty and unemployment, a minority of them might move to find employment in foreign countries. By moving, the migrants not only help themselves and their families back home, but also they help their employers in the country of destination.

That is my second point, that migration generates significant benefits to all concerned parties, the migrant, the origin country, and the destination country. Even small increases in international migration can generate large welfare gains for the world. Simulation exercises show that such gains are likely to be larger than the gains from full-scale trade liberalization. Migrants do not only compete with the natives for a share of the pie. On the contrary, they contribute to the efforts to increase of the size of the pie so that all parties can get a larger piece.

The benefits to the origin countries are realized mostly in the form of remittances. But migrants also provide trade networks, investments, and enable exchange of skill and transfer of technology.

Officially recorded remittances in 2008 are estimated to be $283 billion, compared to Official Development Assitance (ODA) of about $100 billion. The true size of remittances is even larger. Remittances are the largest – and the least volatile – source of foreign exchange earnings in many developing countries.  Remittances are better targeted to the needs of the recipients. They are monitored better. They come with the good will and knowledge of the migrant – they are "value-added" money. As capital flows become scarcer next year, remittances will become more important than before as a source of external financing in many developing countries.

Remittances reduce poverty. They finance education and health expenses and provide capital for small entrepreneurs. In Sri Lanka, the birth weight of children in remittance recipient households is higher than that of the children of other households. In countries such as Tajikistan, Tonga, Nepal, Honduras, and Moldova, they can be 40% of GDP or even higher. In countries affected by crisis or natural disasters, say in Somalia or Haiti, remittances provide a lifeline to the poor.

In addition to remittances, the diasporas from developing countries provide professional contacts, trade networks, technology, and capital for their countries of origin. The so-called “brain drain” associated with emigration of skilled migrants is a small-country problem. Even in some small countries that are often cited as suffering from this problem, remittances are now found to be larger than the entire education budget of the government. And even as people are contemplating ethical recruitment policies to stop migration of doctors and nurses from some of these countries, the doctors and nurses are going on strike, demanding better working conditions.

My third and final point is about what we can do to increase the benefits and reduce the costs of migration.  Migration is a very complex phenomenon. People tend to take it personally and policies are often made on the basis of personal likes and dislikes. We can deal with migration issues better if we paid more attention to facts rather than anecdotes. If I had one recommendation, I would say let’s try to know the flows, of migration, remittances, of where the migrants are. I would also urge the develop community to facilitate remittance flows and improve retail payment systems. For that, we need to: reduce remittance costs; improve competition in remittance industry; share networks; avoid overregulation of remittance industry; introduce new technology; leverage remittances for financial access for households; leverage remittances for improving access to capital markets for institutions/countries. (See my note on the international remittances agenda.)

We should help migrants acquire globally marketable skills. Also we should not forget the poor, unskilled migrants. Point-based systems to attract skilled migrants tend to ignore the unskilled poor. Ethical recruitment policies that ban the recruitment of skilled migrants may be ineffective, and unethical. We should remember that we are dealing with people while making migration policies. We should keep development in mind while making migration policies.

Take for example the way border controls are being tightened in many receiving countries to discourage immigration. The assumption is that higher walls and stronger fences will reduce immigration, that there is a strictly inverse relationship between migration and border controls. What if this relationship was nonlinear and looked like an upside-down U?  True that tighter border controls reduce the ability to migrate, but they also create developmental gaps and increase income differences over time, thus increasing the incentive to migrate. A reduction in border controls may under some circumstances lower income differences and the incentive to migrate, and result in less migration! The relationship between border controls and immigration can in such circumstances be positive. In this case, shifting funding from border controls to development assistance to origin countries can produce more effective reduction in immigration pressures.

As globalization spreads, demographic and developmental differences between the rich and the poor countries will cause migration to increase. Creating barriers to the movement of people will only slow the bridging of these differences. If the barrier becomes too strong, the developmental gap would rise and migration pressures will intensify, causing distortions to the societies on both sides of the barrier.

I am not implying that migration is a substitute for development. Let’s think about the 97% of the people who do not migrate. Migrants will not take care of them. Governments must implement development efforts at home to take care of the majority of their population who stay behind.