Why Workers’ Remittances Matter

Why is it that, with half the world in chronic debt, the volumes of money transfers are still so strong?

remittancesMoney transfers, in particular remittances, are generated by a sector that works harder than any other: migrants. Even in 2012, a year of recession for many, remittances showed positive growth in line with a trend that spans more than 20 years. The latest estimates from the World Bank put remittances at almost $500 billion.

To put this in perspective, this figure is eight times the US’s annual budget for the military, international cooperation and development aid combined. It’s a clear sign that immigration is not, as it is often described, a source of “trouble.” Nor is it only about hardship, misery and poverty. Rather, as Hein de Hass, one of the leading experts in the field, describes: “Immigration on a large-scale can be a panacea for both countries of origin and hosts.”

If you look at it more closely, immigration is like a business. And more to the point, a profitable one, which pays dividends to a vast and diverse range of shareholders. So who are these “shareholders in migration?”

Starting with the less well-known beneficiaries of migration: the host countries.

Countries that host migrants derive substantial benefits from remittances

Remittances fill the gaps and, in some cases, even substitute the failed development programs funded by industrialized countries, which have been reduced to a trickle. This confirms that immigration is today the biggest and most efficient mechanism for redressing the balance between rich and poor. This point was, again, made by Hein de Hass: “Immigration contributes to the development of developing states.”

Then there are the money transfer agencies, which have operated in this billion-dollar business for years. There is no question that there are huge profits in this business. Agencies are even driving down commission fees on money transfers to attract more clients. This is an absolute novelty, seeing as until some years ago they preferred to fix prices, rather than enter into competition with each other.

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Last, but not least, are the families of immigrants. Just as Italian families received income from their relatives abroad not more than a few decades ago, even with the smallest of monthly amounts, immigrants are able to support their families in a living standard far superior to the average in their country.

But what matters most is that remittances do not only have an economic value. Dividends paid to shareholders are also sociocultural. This is because, through the money that immigrants send to their families, they are also sending what Peggy Levitt has called “social remittances,” or “habits and customs of the host country.” This occurs not only when the immigrant returns to his homeland but more simply through, according to Levitt, “the exchange of letters, e-mails and phone calls” with friends and family.

It is as if, attached to the banknotes sent back home, there are the traces of the habits, norms and practices of the adoptive country. So the flow of money also comes with real challenges: to the status of women, to schooling or to the electoral system, with all the implicit consequences. Whether this is a positive influence or not depends, to quote Toynbee, on the way one particular civilization reacts to the “radioactive power” of another.

Giuseppe Terranova is deputy editor of the online newspaper West. He has a PhD in politics and comparative law of the euro-Mediterranean region, from Università Kore in Enna, Italy. As an expert on immigration policies, he is a member of the European Centre for International Affairs in Brussels and assistant professor at the department for sustainable development (working with Prof. A Giordano) at Luiss University of Rome. Read other articles by Giuseppe.