In recent years, immigration has been a topic that has been widely discussed globally, from the U.S. to the EU to the International Monetary Fund and the World Bank. There are other aspects of immigration that are often not considered that tend to slip through the cracks of the political quagmire, and those aspects can influence the global economy and can be far-reaching. One such aspect is remittance, which is the transfer of money from a worker in a foreign country back to individuals back in their home country, typically family members and friends.
To put in perspective the scale of immigration, almost 216 million people or 3.15% of the world’s population live outside their countries. The annual flow of remittances has nearly tripled since 2000 and now exceeds $500 billion, and according to the Pew Research analysis of World Bank data, the rise in the number of emigrants from middle-income countries has been accompanied by a simultaneous increase in the flows of remittances back to middle- income countries. Remittances account for 8% of the gross domestic product in low-income nations, 2% in middle-income nations and less than 1% in high-income nations, according to analysis of World Bank data.
Recently, the World Bank has called for the removal of barriers in the flows of remittances, stating that they are more stable than other forms of capital flow, and have been more stable during times of financial volatility. In the past when the economy faltered and other forms of capital flow fell, remittances tended to have a stabilizing effect where the flow of remittances increased, as they tend to be counter-cyclical. The amount of remittances has increased during times of economic downturns and natural disasters, and can provide a stabilizing buffer for the country’s citizens and be a tool to help alleviate poverty. The World Bank estimated that in Haiti remittances represented about 12 percent of GDP in 2011, and in 2006, remittances accounted for more than 70 percent of GDP in some parts of Somalia. In 2013, India ranked in top for receiving remittances ($70 billion), followed by other large recipients, which included China, the Philippines, Mexico, Nigeria and Egypt.
On the flip side, there are a number of potential negative effects that come with remittances. Countries or regions where people are migrating from lose a part of the labor supply, which could further hurt growth if those emigrating workers are highly skilled. Another negative effect of remittances is that the possible dependency on remittances can reduce the recipient’s incentive to work, which could hamper economic growth. On the more global scale, if the value of remittances is large enough, the recipient country could face a possible increase in the real exchange rate, which could cause devaluation in its currency.
While Immigration could be a boon for the global economy, the benefits depend on a country's ability to harness the movement's energy and turn it into a form of growth that the global economy can benefit from. Immigration has both long and short term effects in the economy, and it is time to start thinking beyond the political aspects to the long-term implications of immigration and its role in the global economy. Let us know what you think about immigration and is implications below in the comments section!