The Impact of Migration on the Reduction of Poverty

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The Impact of Migration on the Reduction of Poverty

Chapter I: Introduction:

 With the advent of globalisation and flexible exchange control mechanisms, the geographical and monetary boundaries have shrunk over a period of time. Among the many developments, which have resulted from the movement of people and resources around the globe in search of economic advantage, the role the remittances play in improving the standard of living of the people in the recipient countries by reducing the incidence of poverty cannot be under estimated. Though in a larger context, transfer of skills and technologies including the critical ones relating to security etc fall within the migratory domain, yet from the day today living of the masses especially in the rural areas, migratory employment assumes critical importance. It has immediate relevance in uplifting the affected people from the levels of poverty and long-term consequences in the positive aspects of building the domestic economy. These things are made realisable through the remittances the migrants send back to the home country. While from an economic fit, it has a host of advantages to offer, yet, it has to be noted that migration also has negative consequences.

In this Paper, we propose to investigate the cause and effect relationship between migration and the reduction in the poverty via the channel of remittances, which is the quantifiable denominator in conducting such an investigation. In the process, this Research Study would also identify reliable data sources that throw light on the impact of the remittances of migratory workers on their families, communities and on the overall reduction of poverty in the developing countries. The International Bank for Reconstruction and Development (IBRD) had observed that most of the data available at present is “poor and inconsistent”. The problems with counting international migrants and measuring workers’ remittances are notoriously difficult. Official estimates are known to contain very large errors in both overstating and understating actual stocks and flows. Such problems are exasperated by the prevalence of undocumented migration (p.19).  Besides, because of their availability only in a generalized manner, there is a need for a much more systematic approach for assessing their impact on the reduction of poverty In spite of these limitations, existing research shows that remittances play a crucial role in the reduction of the poverty levels in the recipient economies. For instance,  Adam & Page  found that in a number of developing countries, after accounting for a wide variety of international and national economic factors, every increase in remittance brings about a a reduction in the poverty. In the same manner, Kalim et al (2009) in a case study with reference to Pakistan found a positive relationship between increases in remittances and reduction in poverty levels in a macro context. At a micro level, Adams (2006) with reference to Ghana found the additions in the incomes accruing to households by way of remittances positively influence their standard of living. It is also documented that remittances have been found to be used both for consumption and for investments in many countries as Mexico (Woodruff et al, 2007).  The study also would address the issues relating to the dearth of data the lack of which has not brought into the fore the benefit the remittances have been conferring on the migrator’s family, the community and the beneficiary country as a whole. The study follows a case study methodology to analyse the data and interpret the results. However, to the extent possible, it would also try to compare the results with atleast one another similarly faced country, which however would not be dealt at length.

Poverty can be viewed both from micro and macro levels. In order to address the impact of remittances in mitigating the levels  of poverty and to that extent acting as a security cover by preventing the domestic households falling into the clutches of poverty, the study would first concentrate on a major level at the micro impact and in a minimal level the macro impact. With a view to  adopt a balanced view of the subject, the Paper also mentions some of the negative effects of migration from mainly a sociological perspective though a brief mention would also be made of the economic negative effects.

1.1. Research Question:

From the above, it is clear that we have a fit research question in ‘to what extent remittances provide security against vulnerability and the answer would be provided by taking ‘Mexico’ for the case study. The reason for choosing Mexico is the availability of extensive data to draw substantive conclusions. In the process, the Paper would also draw lessons of their applicability to the global economy through a generalised discussion of the migration practices and influence of the remittances in the global context.

1.2. The Objectives of the Research Study therefore are:

1. Define remittances in the context of poverty reduction and economic development. To assess the extent to which remittances provide security in mitigating poverty.

2. To identify relevant data sources and aggregate them to establish the connections between remittances and reduction in levels of poverty with reference to Mexico at micro and macro levels. In the process, the difference in approaches of existing research and the conflicting results they have generated would be highlighted.

3.  To suggest areas for further study this could broaden the scope of application to ascertain such relationships in a global context.

1.3. Scope of the Project:

The scope of the Project is to find answers to the research question and objectives by taking up Mexico for case study. The reasons for Choosing Mexico are (a) the availability of robust data in the form of household surveys aimed at determining the important role played by remittances in improving the standard of living of the people, (b) development of quantitative indicators to measure such impacts in a comprehensive manner.  In the process, we would also deal with the possibility of application of such data in a generalised manner to other developing countries.

1.4. Methodology

Qualitative research method is adopted in this dissertation. The study would identify data from existing sources that assess the impact of remittances on families, communities and developing countries.  Firstly, it would review the literature of existing findings. Secondly, through a qualitative approach, the data would be collected from statistics published by   International Agencies the Mexican Government, Household Surveys, comparison of the indicators reflecting the relationship between remittances and reduction in poverty. In order to find answer to the question as to whether remittances do play a role in serving as a cover for security against poverty, we would compare the trend obtained in Mexico with other developing countries. To make such an exercise meaningful, a standard measurement of the concept of poverty would be adopted. The micro level analysis would be done with the help of published survey results.

1.5. Limitations

The major limitation of the research is that it solely relies on secondary data for analysis and interpretation of the question posed in the research. The quality of such data, the biases it may contain would reflect on the validity of the conclusions. More over, the researches on which we would relying for drawing conclusions relate to the time period when Mexico was experiencing buoyancy in remittances and with the global melt down that started in 2008 there has been perceptible decline in such remittances . It would be premature to speculate on the long-term impact of such decreases on the poverty levels.

1.6. Data Analysis:

The research method being qualitative in nature, the method of analysis is manual which is accepted as a correct form for the integration of the research analysis. However, quantitative inferences drawn in a working paper most relevant to the study is also provided.

1.7. Ethical Issues:

There is no known ethical dilemma in the carrying out this research.

1.8. Conclusions

This Chapter has dealt with various background issues relating to the Research Study we have undertaken. It has underscored the rationale for the choice of the topic, the research questions, objectives etc and the reasons for choosing Mexico as the basis for the case study.

We would carryout a Literature Review in the Second Chapter, followed by Data Analysis in the Third Chapter, Discussion and policy implications in the Fourth Chapter and Conclusions in the Fifth Chapter.

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 Chapter2: Literature Review:

The purpose of this Chapter is to provide the theoretical understanding of the concepts relating to remittances and their role in the reduction of poverty. The review comprises of comparative and methodological contents. The comparative contents have dealt with the impact of remittances across a spectrum of developing countries and the methodological contents has been deployed to identify  different ways of addressing the effects of remittance to derive accuracy in the interpretations.   In the process, it would identify from academic research the theoretical and conceptual framework relevant for the study, the gaps etc.

 2.1. Key Concepts

Migration of labour is defined as a phenomenon where both the skilled and unskilled manpower from developing countries move to the developed ones to fill in the shortage the developed countries face. It acquires more relevance in the low skilled categories of employment but does not preclude skilled work.  It has a physical connotation either in terms of spatial or geographical mobility of the population resulting in a change of residence from home country to host country. (de Walle, 1982). Its movement across the countries are   tracked by application of human  created geographical boundaries governed by respective countries’ and international laws, and the status is normally  determined by duration of stays  The status can assume innumerous forms. Persons moving permanently for good, workforce with varying levels of skills from very low to very high, illegal entrants entering though clandestine methods which is largely undocumented, refugees and asylum seekers are all bundled into the category of migration. Hence, it is necessary for us to be specific of the target group, which would cover this study, and for which purpose it is unskilled and semi-skilled workforce would be taken into account. In an economic context, migration is considered to be  mutually beneficial for both the developed and developing countries as the former lowers the cost of wages and the latter uses the opportunity to send the remittances back home out of their employment for which they get paid higher than what they would have otherwise got in the home country. This is evidenced in the work of Cholewinski (1997) who has advanced the view that large-scale migration is the consequence of the prevalence of wage differentials between the developing and developing countries. It is seen as an economic opportunity by them to hedge their services to derive the differential benefits, but this is not universally applicable. As pointed out by Kurbusi (2006), other factors as education, skills affect the employability and earning capability. It can  also be traced to the capabilities of the developed countries to raise the capital  relatively easily  for  establishment of industries wherein they could employ the migratory manpower,  whereas the   developing countries find it relatively  difficult to raise such resources and depend on the remittances sent by the migratory workforce in addition to external funding.(Adam & Page, 2003). However, on a general scale, inspite of the intangible costs the migration impose on such workforce, the relatively lower wages that are being offered for low-skill employment,  there is a significant trend of the workforce willing to migrate from a developing to developed countries.. Though reverse migrations do take place, it is infrequent in nature and generally confined to technological and management personnel for the exploration of critical resources or establishment of industries involving transfer of technologies (Kurbusi, 2006). Lack of employment opportunities in the home country coupled with the lure of earning a higher income in the developed countries are the twin factors that prompt migration. This is explained in the statistics of the United Nations Population Fund (2004) that about 175 million people constitute the migrant workforce in the world economies. Despite restrictive practices followed by respective developed countries to restrict the flow of such workforce, the World Bank does not anticipate any reduction in such a trend. On the other hand, it has forecast that by 2050 this figure would swell to a quarter of billion people.

Remittances are defined as the total value of money and goods sent back to their home countries by the migratory work force to their kiths and kins living in the home country (Adams, 1991). Normally, such remittances are construed to be  the difference between their earnings and spending which may not be at their disposal if they had chosen to work in the home country assuming wherein they would be employed. The World Bank in its 2009 report has estimated that remittances as of 2007 to be around $371 billion representing a jump of more than times from the figure $69 billion in 1990. The size of remittances in the receipts of developing countries has become so big that it is treated almost on par with other receipts as foreign aid, capital market flows and foreign direct investments (Kurbusi, 2006). According to Ratha (2005), “International migrant remittances are perhaps the largest source of external finance in developing countries”. Further, it is considered less cyclical in nature and consequently more stable imparting a certain amount of definiteness on their dependency for the guest countries to plan their development programmes.

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Defining poverty in the context of its relationship to migration is not only complex but also elusive. This is evident by the multiple definitions given by the United Nations Development Programme (UNDP, 1998). There are atleast five dimensions of poverty documented by it.  They are:

  • Human poverty, reflected through the lack of essential human capabilities as literacy or good health.
  • Income Poverty expressed in terms of not earning even minimum income that would meet basic needs,
  • Extreme poverty denoting destitution resulting in not even the food needs are met.
  • Over all poverty, which is also used, in conjunction with ...

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