Will the Crisis Reverse Global Migration?

Migration has been one of the more important means of greater globalintegration, and, as the economic crisis has gripped the developed world, manyhave worried about its impact on such integration, especially fallingremittances. A closer examination of the nature of migrant workers’ role inthe economy suggests more complex outcomes, with somewhat less of an impact thanfeared.

The UN estimates that the global stock of migrants is now more than 200million, even excluding temporary, irregular and illegal migrants. Most of thesemigrants hail from developing countries: in the developed world (excluding theformer USSR) the share of migrants in total population more than doubled between1960 and 2005, from four percent to nearly ten percent, while it has declined inless developed countries. As the crisis unfolded, there was fear thatinternational migration and associated remittances would be among the firstcasualties.

It is true that most of this migration has been driven by economic forces andhas given rise to rapidly expanding remittance flows, which have become the mostimportant source of foreign exchange for many developing countries. The IMFestimates total remittance flows to developing countries to be nearly $300billion in 2009, significantly more than all forms of capital flows puttogether. This has provided crucial foreign exchange and been a majorcontributor to balance of payments stability for countries as far apart as thePhilippines and Guatemala, and even for large countries like India and China,where remittances have played a significant role in domestic consumption.

Other elements of global integration have been adversely affected by the crisis:exports have declined sharply across the world, and capital flows have "deglobalized"in that foreign direct investment, portfolio capital and bank lending todeveloping countries have almost collapsed. It is only to be expected that wheneconomic activity slows or contracts in destination countries, migrant workersare the first to be laid off and sent home. Since a lot of recent economicmigration has been explicitly short-term with respect to meeting specific labourshortages in the host economies, this is even more likely.

That is why by late 2008 it was widely predicted that remittance flows wouldquickly show signs of decline, and initial reports also bore this out. By August2008, remittances into Mexico (which are dominantly from workers based in theUS) were already down 12 percent compared to the previous year. There was alsoevidence of declining remittances from other countries that relied strongly onthem, such as Bangladesh, Lebanon, Jordan and Ethiopia.

But as the crisis unfolds, it is also becoming clear that the patterns ofmigration and remittances may be more complex than was previously imagined. Inseveral countries (such as India) remittance inflows have actually continued toincrease. To some extent, this too can be expected because even if the crisisleads to large-scale retrenchment of migrant workers who are forced to comehome, they would obviously return with their accumulated savings. In such acase, there could even be a (temporary) spike in remittances rather than acontinuous or sharp decline because of the crisis. Eventually, as the adverseconditions for overseas employment worsen further, this would then lead to adecline in remittance inflows.

However, it is not inevitable that there should be a sharp decline in migrationand remittances. One important aspect that is frequently ignored in thediscussions on migration is the gender dimension. International migration forwork is highly gendered, with male migrants finding dominant representation inmanufacturing and construction sectors, while women migrants are concentrated inthe service sectors, such as the care economy broadly defined (includingactivities such as nursing and domestic work) and "entertainment".

The different nature of work also affects remittance flows. In the first place,female migrants are far more likely to send remittances home, and typically senda greater proportion of their earnings back. Also, male migrant workers findthat incomes are much more linked to the business cycle in the host economy, sotheir employment and wages tend to vary with output behavior. Thus job losses inthe North during this crisis have been concentrated in construction, financialservices and manufacturing, all dominated by male workers.

By contrast, the care activities dominantly performed by women workers tend tobe affected by other variables such as demographic tendencies, institutionalarrangements, and the extent to which women work outside the home in the hostcountry. So employment in such activities is often unaffected by the businesscycle, or at least responds to a lesser extent. Therefore female migrantworkers’ incomes are more stable over the cycle and do not immediately rise orfall to the same extent.

This in turn means that source countries that have a disproportionately highershare of women emigrants (such as the Philippines and Sri Lanka) would tend toexperience less adverse impact in terms of falling remittances. Indeed, in thePhilippines, the most recent data indicate that remittance flows are stillincreasing slightly, at an annual rate of around two percent. This does not meanthat there will be no impact at all, but certainly the adverse effects will beless and will take longer to evolve than if the migration had been dominated bymale workers.

There are other reasons why the crisis has had limited impact on patterns ofmigration. For example, one expectation was that return migration would bedominated by the worst hit workers, who in turn were expected to be theundocumented, irregular or illegal migrants who are mostly in low-wage andlow-skilled occupations, and do not qualify for any kind of official supportsuch as welfare benefits or social security from the host country.

But the initial evidence belies this expectation because, for one, such migrantsmay be unwilling to return home to face possibly even more fragile and insecureemployment conditions in their own country. Many developing countries have beenhit worse by the financial crisis that originated in the US economy. So the pushfactors that operated to cause international migration in search of work remainas strong as ever. The unwillingness to return in such a context may be evenstronger in cases where the undocumented migrants have already developed somelocal social networks that allow them to survive for a period while they lookfor other employment.

In the host country, undocumented migrant workers may even be preferred byemployers who see in them as a cheaper source of labor than legal migrants orlocal workers. In the context of this crisis, preference for cheaper labor maybecome even sharper. This may be yet another reason why women migrants may beaffected less severely, since women migrants dominate in the undocumented andillegal category.

In any case, one of the basic pull factors still remains significant: thedemographic transition in the North that is increasing the share of the olderpopulation that requires more care from younger workers, who must therefore comefrom abroad. So the current crisis may temporarily slow down the ongoing processof international migration for work, but it is unlikely to reverse it.

Jayati Ghosh is professor of economics at the Jawaharlal Nehru University,New Delhi. Rights: © Copyright 2009 Yale Center for the Study of Globalization.YaleGlobal Online