The migrant workers’ “oil”

Five hundred and fifty billion US dollars. This is how much almost two hundred million migrant workers send back to their countries of origin across the world. How much do all remittances sent to foreign countries from Europe and Italy amount to? And who has stopped sending money back home? Fabio Malagnini has charted the…

Follow the money: one in nine people on Earth is supported by a relative sending them money each month from another “rich” country in the West or in Asia.

In other words, 800 million people live on remittances sent to them from abroad via Money Transfer by about 200 million migrant workers. But they do more than just live on remittances. They are able to save and invest at least a quarter of the money they receive.

The number crunching, of what is considered to be a new Keynesian multiplier, was done a few weeks ago by Gilbert F. Houngbo – President of the International Fund for Agricultural Development (IFAD) – to mark the International Day of Family Remittances (IDFR). It shows that this year remittances amounted to a total of US$550 billion, 20 more than the previous year.

Although this is just one tenth of the funds managed by Black Rock, it is more than all the foreign direct investment going to least developed countries and three times as much as all official development assistance. And this is equivalent to a mere 15% of the migrants’ revenues as the remaining 85% is spent in the host countries between accommodation and other living expenses.

The UN counts on this trend continuing. Estimates under Agenda 2030 show that by 2030 families in low-income countries will receive up to US$8500 billion, and they will save or invest about US$2000 billion of this, creating an unprecedented multiplier effect on local economies.

Migrant workers living in Europe contribute US$109 billion each year, equivalent to a fifth of total global remittances. According to data from 2014, Russia tops the list followed by the United Kingdom, Germany, France, Italy and Spain.

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Bankitalia gathers quarterly data on Money Transfers. The data show that foreign remittances grew once more last year following the economic slump in 2011.

In 2018, remittances grew to 6.2 billion, a 20% increase from 2017. This data should provide a more comprehensive picture of the situation since compulsory reporting of Money Transfers has now been extended to further categories of brokers.

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As the graph above shows, the composition of the “cake” has changed since 2015, depending on migratory flows and the performance of different economies. If 15 years ago Chinese and Romanian workers accounted for over 50% of all remittances, today workers from eight communities, including those from India, Pakistan and Senegal, are responsible for sending at least 300 million back home each year. And remittances to Bangladesh have marginally overtaken those to Romania. While, with the Chinese economy soaring, remittances from Chinese workers to families back home – once the most significant – have almost disappeared.

Remittances are considered to be like “oil” for many low-income countries whose economies will still be bouyed by migration and workers’ mobility for many years to come. It is not surprising then that as part of Agenda 2030, the international community has committed to reducing the cost of money transfers to 3%. This is ambitious target considering that in Italy the cost is currently equivalent to about 5-6%.

In addition, towards the end of 2018, the coalition government in Italy tried to introduce a new additional tax of 1.5% on Money Transfers towards non-EU countries.

Fortunately, this was stopped by the anti-trust body thus preventing the introduction of a measure (proposed by the Lega) that would have discriminated those workers who, not having a bank account, are unable to use traditional bank transfers to send money home.

(traduzione a cura di Costanza de Toma)

(Foto Alistair Macrobert via unsplash)