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Poverty fell in Pakistan in 2001-08 partly because of remittances - Migrants can help in reconstruction after devastating floods

Sanket Mohapatra's picture

A World Bank report released on July 30 finds that poverty in Pakistan fell by an impressive 17.3 percentage points between 2001 and 2008 (from 34.5 percent in 2001-02 to 17.2 percent in 2007-08). Three out of Pakistan’s four major provinces – Khyber Pakhtunkhwa (formerly NWFP), Punjab, and Sindh – saw significant declines in poverty during this period. The largest fall in poverty was in Khyber Pakhtunkhwa (KP). According to the Bank report “high level of remittances, both foreign and domestic, seem to have facilitated” the decline in poverty in KP.

     UN Photo/WFP/Amjad Jamal
Pakistan saw migrant remittances reach a record $ 8.9 billion in fiscal year 2010, an increase of 14 percent compared to the 2009 fiscal year despite the global economic crisis (Pakistan’s fiscal year runs from July to June). The World Bank report says “Continued strong growth in worker’s remittances in the past few years has also contributed to improvements in the external current account balance” and “have facilitated improvement in the country’s external position”. 

What are the consequences of the best and brightest emigrating?

David McKenzie's picture

The very name “brain drain” suggests that high-skilled migration can be nothing but bad for developing countries. Indeed, the prospect of a harmful effect of brain drain is often one of the first concerns raised in policy discussions around migration, and every day the news is filled with statements such as “the Philippines is suffering a crippling brain drain”, “brain drain still a big concern” in India;  and that Bangladesh “must stop brain drain to take the country forward”.

However, recently there has been a surge of more optimistic views of highly skilled migration, ranging from theories of “brain gain” in which the prospect of migration in the future induces people (including those who end up not migrating) to get more education; the idea of “brain circulation”, in which migrants are meant to do wonders for their home countries once they return with knowledge and ideas from abroad; and the “create-your-own Silicon Valley” view of diaspora as a source of trade, investment funds, and inspiration.

The Other Indian

Dilip Ratha's picture

“Name’s John. Hi!” he said.

“Thanks. Glad to meet you. My name is Dilip,” I replied as I put my carry-on bag on the seat and moved aside the pillow and the blanket to make space for myself. After a hectic week at Dakar, I was hoping the seat next to me would be empty. But it wasn’t.

John, my co-traveler, was short, brown, and middle-aged. There was a nondescript baseball hat on his head through which his pony tail hung behind him, long, more pepper than salt. He was wearing brown jeans and blue shirt. He had taken off his shoes and was wearing socks from the travel kit provided by the airline.

“You going to DC?” I asked.

“Yes. And from Washington DC, to New Mexico.” He said he lived in the Navajo Nation just south of Colorado.

“Are you returning from the game in South Africa?” I asked.

“Yeah. The first time I saw a soccer game in my life. It was great. I’m a coal miner, in New Mexico. My company sent me to watch the World Cup. We were 150 of us from all over the world. We were there for 5 days.”

I opened the overhead locker to put my bag in before the take-off. “Is that your vuvuzela?” I asked.

“No. Probably belongs to the lady over there.”

“Football, or soccer, is the number one game in the world,” I said.

Migrant remittances and private capital flows - Which is what?

Sanket Mohapatra's picture

The Uganda Daily Monitor reported recently that according to the World Bank’s latest Global Economic Prospects report, “remittances to developing countries is forecasted [sic] to recover modestly from $454 billion in 2009 to $771 billion by 2012, which still stands below the 2007 $1.2 trillion.” Since we produce the global remittances data and estimates (which incidentally show that remittance flows to developing countries

Photo © Curt Carnemark /  World Bank
reached $316 billion in 2009 and are forecast to grow by 6.2 percent to $335 billion in 2010 (see Migration and Development brief 12), the numbers in the Uganda Monitor made little or no sense to us. Until our colleague Andrew Burns, the lead author of the GEP 2010, pointed out that the Uganda Monitor has likely mistaken overall private capital flows to developing countries as remittances.

The issue of migrant remittances being confused with private capital flows (and even aid flows) is not new. Central banks all around the world have been struggling with this issue for several years now. A global survey of central banks that we conducted during 2008-09 suggests that central banks find it challenging to separate migrant remittances from other small-value transfers such as trade payments, small investments, and even transfers by/to non-governmental organizations and embassies.

Crisis, employment, and migration

Dilip Ratha's picture

Last week I participated in the World Economic Forum Global Redesign Summit at Doha (see program ). In a brainstorming panel, the kind where you hit your head against the wall, I was asked the following question:

Photo © Yosef Hadar / World Bank
Following the economic crisis, how can countries boost the employment intensity of economic recovery? And how might win-win migration arrangements among developed and developing countries be stimulated through international cooperation?

Despite the leftist tone of this question, it is important to note that being pro-labor does not imply a bias against capitalists. My response to this question can be summarized as follows:

1) Let labor markets work
2) Let's make realistic policies but not lose the long-term perspective
3) Let's think on a global scale.

A short Q&A on circular migration, return migration and reintegration

Dilip Ratha's picture

Many destination countries are thinking about policies that promote circular migration or encourage return migration by existing migrants. I have written about the so-called "guest worker" programs before. Yesterday I had a short Q&A on this topic that has been published as a part of the IOM/Eurasylum interview series on the future of migration.
Please take a look if you are interested:

Immigration a major election issue on both sides of the Atlantic

Sonia Plaza's picture

Immigration reforms are the focus in the UK  elections and in the USA Senate elections for this year. Both countries are yet to come to grips with the need to develop consistent policy frameworks in which immigrants can effectively and productively utilize their skills, knowledge, and previous work experience. Both countries are trying to identify measures on how to better deal with undocumented migrants and how to devise laws for low-skilled workers and for high-skilled workers.

In the UK, prime ministerial candidates have proposed the following approaches to undocumented migrants: 1) Gordon Brown’s proposal is to ban unskilled workers from outside Europe and cut the numbers of semi-skilled and skilled workers to enter into UK; 2) David Cameron proposes that “new countries that join the European Union should have transitional controls so not everyone can come at once. Regarding immigration from outside the European Union, there needs to be a cap”; and 3) Nick Clegg puts forward a proposal for "earned citizenship" for those who have lived illegally in Britain for at least 10 years, who speak English, who want to pay taxes and who want to play by the rules. (Boris Johnson, the Mayor of London, is promoting amnesty for undocumented workers.)

Is Russia the second-largest sender of remittances? Or is it Saudi Arabia?

Ani Silwal's picture

Saudi Arabia was the second largest sender of remittances (after the United States) from 1988 to 2006. In 2007 and 2008, it was displaced by Russia as the second largest sender of remittances (figure 1). Flows from Russia have increased rapidly in recent years, reaching $26.1 billions in 2008. However, this rapid growth was interrupted in 2009, when remittance outflows fell by 29% to $18.6 billions in 2009. We don't have 2009 outflows data for Saudi Arabia yet but based on inflows data from Bangladesh, Pakistan, and the Philippines, Saudi Arabia's remittances outflows have not fallen much. Saudi Arabia was likely the second largest sender of remittances in 2009.

There are two possible explanations for why remittances from Saudi Arabia have been more stable than those from Russia (see Migration and Development Brief 12 for details). First, oil prices are more closely related to economic activity (thus, better employment prospects for migrants) in Russia than in Saudi Arabia. As major oil-exporters, both countries benefited from the surge in oil prices in the last few years. But only in Russia did remittance outflows move closely with oil prices (figure 2). This was not the case in Saudi Arabia, which has had ambitious development plans for a while and an aggressive counter-cyclical fiscal policy. Second, Russia’s borders with its neighbors are much more porous than those of Saudi Arabia, which enforces immigration quotas strictly. Russia’s porous borders have allowed migrants from neighboring countries to move in an out in response to changes in labor demand.

No takers for H1-B Visas?

Sonia Plaza's picture

The slow recovery of the US economy is affecting the hiring of high-skilled immigrants.  This lower demand is reflected in fewer applications for H1-B visas.  The current annual cap is set at 65,000, with an additional 20,000 for holders of advanced degrees. The present crisis is exhibiting similar characteristics as the 1991 downturn:  1) Lower demand for new foreign high-skilled workers. US firms are not recruiting overseas; and 2) Lower demand for foreign high-skilled graduates of US universities.

The U.S. Citizenship and Immigration Services (USCIS) put out a statement on April 08, 2010 that “it has received approximately 13,500 H-1B petitions counting toward the Congressionally-mandated 65,000 cap during the first two weeks of April 2010.” (See USCIS - USCIS Continues to Accept FY 2011 H-1B Petitions). That’s far fewer than the 42,000 requests filed during the same period last year (See post). Unlike in previous years, foreign graduates of US universities are not finding jobs in US. The applications for foreign workers with advanced degrees have only reached 5,800 applications by April 15, 2010.

This is the second year that the annual quota for H1B visas has not been filled during the first week of April. Since the recession worsened in late 2008, the annual quota has remained open longer than in the previous years (see graph below). For the US 2010 fiscal year (the fiscal year begins on October 1 and ends on September 30), it took until December 21, 2009 to fill the quota (280 days). In 2009, it closed in one day and in 2008, it closed in two days. Only in 2004, when the quota was reduced from 195,000 to 65,000, there were still visa slots available as of October 1, 2003 (323 days). It seems that for the 2011 fiscal year, the annual quota will remain open longer than last year.

Source: USCIS

When competition forces the market to serve the poorest

Dilip Ratha's picture

Poor people are not used to receiving customized services from businesses that are usually vying to serve rich customers. Every now and then, however, one comes across an example that defies convention. The example I have in mind is the story of Esterelle, a remittance agent who goes to the migrant camps in Abu Dhabi to provide remittance services to poor migrant workers from Bangladesh and the Philippines and other countries. In a story published today - Bringing it all back home - John Gravois describes how Esterelle provides not just a standard remittance service, but actually deposit and loan services customized to the needs of the poor individuals. And she does it for profit, not charity (even though the story hints at this motive). Charity is not sustainable; profit motive is.

This example is also an exception to the notion that services for the poor must rely on state subsidies and earmarks. When small numbers add up to create large profit opportunities, market competition can pressure businesses to provide customized services for the poor at market prices. Such services are likely to be more sustainable over time than those relying on public or private subsidies.