As modern technology continues to increase its impact on the lives of mankind, the concept of global village is increasingly becoming a reality and inter-regional interactions are becoming more convenient and frequent with the passage of time. With the advent of modern travelling facilities, working at distant locations far from the place of origin has become a common happening. The practice of migrating from developing countries to developed countries for the sake of earning raises a lot of questions regarding the beneficial or detrimental effects of such earnings and remittances. The increasing trend of this kind of income directed the attention of researchers and economists towards the causes and effects of this increase.
Remittances from migrants have increased dramatically in the previous few decades. Developing countries with low or high per capita GDP produce smaller shares of international migrants as compared to middle-income developing countries (Adams, 2003). The increase in remittances undoubtedly provides support to the family and dependents of the migrant worker. This claim may be supported by the World Bank’s Global Economic Prospects 2006. The statistics provided by the World Bank reveals that the remittances recorded in the low and middle income states have increased by approximately USD 140 billion from USD 30 billion in 1990 to USD 170 billion in 2005. The statistics also reveal that the increase in remittances amounted to an increase in the annual growth rates of more than 10%. These positive effects of remittances on local residents and annual growth rates have strengthened the financial flows to the developing nations up to 30% of the total financial inflows (Acosta, 2007).
Alleviation of poverty and progress in education and health are the areas which have been greatly influenced by the positive effects of remittances. The living conditions of migrants themselves and their families residing in rural areas have greatly improved. As a result of migration, there has been a considerable decrease in unemployment rates thus causing a decrease in pressure on the relatively limited national employment opportunities. There is considerable evidence that rural population manages to escape poverty as a result of migration activities (United Nations, 2007)
Remittances also make way for the developing world to receive and enjoy more benefits of foreign exchange earnings. The remittance earnings of international migrants are usually invested in areas where financial rates of returns are the highest (Maimbo, 2005). The inflow of remittances has several other benefits for the recipient countries including a number of positive macroeconomic effects. Increasing remittances flows help developing a country’s status to be more creditworthy for external borrowings. As a result the increased amount of remittances flows escalates the recipient country’s access to international markets. The foreign borrowings may be utilised to start a whole new project creating new employment opportunities or may be used to continue development in an underdeveloped area in the recipient country and enhance the overall income of the country. Knowing the importance and benefits of remittance flows, it is not surprising to conclude that these incomes may strengthen the development struggles of developing nations and residents of the recipient countries. In addition, it may be observed that if the remittances flow directly towards the poorest population of the state in question, the reduction in poverty is certain. It must also be kept in view that if the needy ones consume the total remittances income and do not invest or save it, it still is beneficial as it eliminates the risks of many social issues that may otherwise arise e.g. crimes, begging, discrimination, hatred, etc.
Regardless of the extensive list of benefits provided by remittances inflow some argue that remittances cannot take place of state responsibility and social protection policy. There is a general understanding that most of the remittances are spent on ‘consumption’ instead of their utilisation on productive projects. So, the amount of remittances although huge, fails to contribute to any productive projects. There is a constant change of impact of remittances on investments and economic growth of a country. Moreover relying totally on remittances as a major source of country’s income can never be a safe option keeping in view the rapidly changing conditions of the globe. Adding to the complexity of this type of reliance on remittances are the social issues that arise as a result of migration. The migrated population faces discrimination, income inequality, problems in getting education, faces residency problems and unusual circumstances that arise from the political, social and economic conditions of the country that they work in. Moreover, the changes in social relations and wellbeing of the migrated population also affect their efficiency and freedom of choice. The state responsibility to provide justice and freedom hence requires consideration of these facts. Moreover, social protection policies are meant to provide an unbiased, just and equitable environment. Hence, the responsibility of the problems faced by the migrated labour lies on the government of their native country (De Haas, 2007).
The recent downturn in the world economy is affecting the economic conditions of all states including the developed ones. Both international migration and remittances significantly reduce the severity, level and depth of poverty in the developing world (Adams, 2005). Therefore, it is undoubtedly clear that the poorest suffer the most in such circumstances. The economic downturn has also affected the developing nations in almost every way. The credit crunch has led to a change in the living standards of the residents of these nations. Low income leads to low purchasing powers and hence low sales for the companies which in turn result in the discontinuation of businesses making the employees redundant. The effect of this economic recession is not limited to the local levels but has also affected the international markets. The effects of returning back of migrants to their native lands and in turn reduced remittances are not only felt in urban areas but also in countryside (Sharma, 2003). The redundant migrants become unsuccessful in sending sufficient remittances to the dependents in the recipient countries. Recession also increases the inflation rates and hence it becomes more difficult for the poor population to fulfill their needs in the limited resources available to them. The reduction in the remittances to developed countries has made it more difficult to meet the necessities of life for the families who rely on this type of support. First of all, these families face a great danger of reduction in their income and hence require changing their living standards along with bringing a change in their consumption habits. Secondly, they require planning to save for future due to the high uncertainty about the job losses and unemployment in such periods. The overall increase in the unemployment is probably the most serious factor that results in reduced remittances to developing countries. The families relying on this source of income hence face serious financial crises and face deficiency to arrange finance for food, shelter, health care and basic necessities.
Remittances sent across the world by migrants are a major source of income for millions of families throughout the world. This money is not only involved in supporting individual families, but its positive effects are also seen on social levels in different forms which may include improvements in health, education, sanitation and improvements in life standards. Recent deterioration of world economies has resulted in the loss of millions of jobs of migrants who were previously successfully supporting their families. As a result, the life standard of millions of dependents has also deteriorated.