Remittances

Background and Magnitude

Remittances have been historically important in sojourner migration to the United States. A sojourner is a person who does not plan to stay permanently in a receiving society but, instead, hopes to send money to his or her family in the homeland. In the 19th century, Chinese men came to the United States to earn money to buy land and enter into marriage in their homeland. More recently, the 1942–1964 Bracero Program brought Mexican men to the United States as guest workers in agriculture for the purpose of sending money back home to their families. Men predominated in 19th century and early 20th century sojourner migration and were invited to work in the Bracero agricultural program. Currently, women are approximately 50% of immigrants because work opportunities and fast transit have changed the global circuits of migration.

Remittances have become the largest source of income for many developing countries, exceeding that from products sent abroad or international aid. Many developing countries receive their largest incoming income flow from remittances. The World Bank estimates that in 2006, $250 billion in U.S. dollars was sent from developed countries to developing countries. The rate of increase of remittances is approximately 30% per year. This money represents a large capital transfer to impoverished people that is less subject to graft and actually reaches them to help improve their lives.

After centuries of social exclusion, the low-income populations of developing countries are being socially included in the global circuits of capital. The World Bank is aware that this money can be used to promote economic development and is promoting plans to motivate remittance receivers to join formal financial markets, further integrating the economies of middle-income and low-income nations. Meanwhile, the ability of families and children in low- and middle-income countries to thrive has become dependent on the receipt of remittances from workers who have gone abroad to high-income countries.

To understand the role of remittances in economic development, it is necessary to distinguish between high-, middle-, and low-income countries using the World Bank classification. In 2005, high-income nations had a gross national income average of $10,726 or more per person; upper-middle income nations ranged from $10,725 to $3,466; lower-middle income ranges from $3,465 to $876; and low-income countries averaged $875 or less per person. To grasp the degree of inequality, consider that high-income country wage levels are five times that of low-income countries.

All countries not classified as high income are considered developing economies and have large impoverished populations. This income differential promotes international migration from low- and middle-to-high income countries. In addition, when remittances at an industrial country salary level are spent in developing countries, where the price of goods is lower, the economic impact is increased. The United Nations and the World Bank are increasingly aware of the positive impact of remittances on developing country economies. In many countries, particularly low-income nation-states, there is a trend toward investing the money, including in microenterprises. In this way, immigration contributes to reducing global inequality.

...