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Apr. 15 – The World Bank has issued commentary on the phenomenon of migrant workers being good for growth, and that migration rural workers to urban areas helps stimulate emerging economies.
China of course has known this for years, and has actively encouraged the domestic migration of workers in their millions to assist with the development of key cities across the nation. For other countries however, such as India, the issue can become highly politicized with some states refusing to encourage workers in to compete with local labor.
However, although these statistics can readily be absorbed into a nation’s economy, far less is known about the impact that true migrant workers have – those that leave their country and remit money from overseas, much of it through unofficial channels. It is this grey labor market that the World Bank focuses on. The trends make interesting reading. The numbers of remittances sent home by migrant workers was the highest in Southeast Asia, with India and China showing by far the highest levels of inbound remittance.
Acknowledging that in many areas, the ability to track such remittance was difficult to ascertain, the bank suggested that true levels of remittance, which it estimated based on available data to be US$305 billion for 2008, could in fact be far higher due to measurement problems with analyzing the complexities and often underground movements that are utilized to send money back. It did conclude however, that such remittance may add up to two-thirds of many emerging markets total annual FDI income, and up to 25 percent of GDP in some cases. In both China and India the impact of this is difficult to ascertain on a micro level as the amounts are totaled up and added to the nations GDP and FDI figures as a whole. Yet there is no doubt that in local towns and cities that send a large number of workers – often illegally – overseas to support the local economy, the impact can be significant.
Because remittance has become so important, development experts are studying more closely how they help people in the home countries climb out of poverty. Unlike official development aid—money that rich (donor) country governments give to the governments of poor countries—remittance go directly to families who decide how to spend the money. This has long been the case for example in Fujian province, notorious for smuggling migrant workers to Europe and the United States, who are engaged in the black, underground economy in low paid jobs, but whose remittance when received locally can have a dynamic impact. Several towns in Fujian alone have been able to climb out of poverty over the years purely on the back of this income. The same is also true across Asia, with Bangladeshi, Nepalese, Pakistani, Indian and Chinese labor all competing for unskilled labor in the Middle East and Africa. In the case of Nepal, an estimated 69 percent of all FDI is remitted through unofficial channels from Nepali workers based abroad.
World Bank estimates show that India tops the league with a total of US$45 billion remitted from overseas workers in 2008, with China second with US$34.5 billion. The Philippines was fourth (behind Mexico) with US$18.2 billion sent back, while Bangladesh was ninth (US$9 billion) and Pakistan 10th (US$7 billion).
The report, “World Development: Reshaping Economic Geography in East Asia” can be found here.
