There are about 200 million people working abroad, which is a stable 3% of the world’s population. The money that these people send home is called remittances. Remittances can be viewed as a kind of development aid and is a very important bonus for the families that stayed behind in often impoverished countries. In fact, the total amount of remittances exceeds the value of official development aid (see a graph here).
However, remittances aren’t entirely positive, generally speaking. They are of course beneficial for those receiving them, but one shouldn’t overestimate their effectiveness in the fight against global poverty.
Disadvantages of remittances
- Most of the remittances do not go to the most needy. Poland and Mexico receive large chunks of total remittances; African countries much less.
- Even the remittances that are sent to the poorest countries don’t necessarily benefit the poorest people in those countries. You need money to emigrate, hence migrants tend not to come from the poorest families.
- It’s impossible to target remittances towards development priorities.
- The emigration that is presupposed by remittances is often a brain drain, although not necessarily. Some groups of immigrants are above average in education, some are below.
Advantages of remittances
- The money goes directly and almost completely to the beneficiaries (minus the commission taken for the international payment by remittance agencies). This is not the case with official development aid where there’s always a margin taken by the overhead of aid agencies or NGOs.
- Similarly, there’s no part of the money deviated by corrupt officials, also contrary to official development aid which is often easier to steal.
All in all, remittances are a powerful, if not very accurate weapon in the fight against poverty. There is therefore a strong case in favor of allowing more migration and lowering the restrictions on the free movement of labor (see here). Migration can of course create problems (especially when it leads to cultural friction), but it is also a solution. The migrants themselves often have a better life. Around 75% of them go to countries with a higher score on the Human Development Index. Their families at home obviously benefit as well. And if we believe in trickle down economics (which we should to a limited extent) then we can assume that when these families have more money, the economy around them also benefits to some degree.
But there’s not only the money. There are also knowledge transfers, and we can reasonably hope that migration promotes intercultural understanding. It’s often easier to fear and hate what you don’t know. The countries of origin, which are often less free and democratic than the countries of destination, may also learn the benefits of freedom.