Why remittances are up, despite the coronavirus pandemic : The Indicator from Planet Money In 2019, migrants sent a record $500 billion back to their countries of origin. Then COVID hit, and the World Bank predicted a 20 percent drop in that flow of cash. But now the data is in, and it turns out remittances have held steady.
NPR logo

The Great Remittance Mystery

  • Download
  • <iframe src="https://www.npr.org/player/embed/927249563/927252301" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
The Great Remittance Mystery

The Great Remittance Mystery

  • Download
  • <iframe src="https://www.npr.org/player/embed/927249563/927252301" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

UNIDENTIFIED PERSON, BYLINE: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

STACEY VANEK SMITH, HOST:

This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.

PADDY HIRSCH, HOST:

And I'm Paddy Hirsch. Remittances are the money that migrants - people living and working abroad - send to their countries of origin. And there are as many as 270 million people around the world in that situation, sending money back to their families. Because of that, remittances have become a vital source of financing for many developing countries.

VANEK SMITH: The sums of money are huge. In fact, the amount of money sent in remittances is greater than the sum of all investments made by foreign companies in developing countries combined. And it is more than triple the amount of aid that governments provide those countries.

HIRSCH: So when the coronavirus pandemic took hold and economies went into lockdown, no one was surprised when the World Bank predicted a 20% drop in remittances for this year. The lockdowns, after all, meant massive layoffs, particularly in the U.S., which has the largest number of migrants. And the World Bank warned of dire consequences for some developing economies that rely heavily on the cash that those workers sent back home.

VANEK SMITH: But nearly eight months in, that correction has not happened. Remittances this year have been steady, and in some cases, they have actually risen. Remittances to Mexico, for example, jumped 9.4% in the first eight months of the year.

HIRSCH: It is a mystery.

VANEK SMITH: It is a mystery. We love mysteries at THE INDICATOR (laughter).

HIRSCH: So after the break, how it is that remittances are flying high even though global growth is circling the drain.

VANEK SMITH: Paddy Hirsch cracks the case.

HIRSCH: With a little help.

(SOUNDBITE OF MUSIC)

HIRSCH: Laura Caron is a specialist in development economics and a consultant at the World Bank. She's also reading for a doctorate in economics at Columbia University.

Welcome, Laura.

LAURA CARON: Thank you so much for having me.

HIRSCH: It's our pleasure. And I should say that I came across your research in a story in one of my favorite daily emails, The Conversation, and you cited this staggering number. In 2019, migrants sent a record $554 billion back to their countries of origin. And that's up 20% in three years compared to 2016. So what's behind that jump?

CARON: There's a couple of factors that are behind that. So one of them is that in the last few years, we've seen healthy growth in popular destination countries. So part of it can be attributed to growth in the United States and also increasing flows coming from the Gulf Cooperation Council countries and from Russia as well.

HIRSCH: So what you're saying is that because these economies are doing very well or had - did do very well during that period, it means that there's more money being paid to these migrant workers or more migrant workers earning money, which means they're able to send more money home.

CARON: Exactly. And another big push that's causing this increase in remittances - and I'm speculating a little bit here - but let me draw from some of my other research, which has highlighted the boom in the use of mobile money and online or digital finance providers. So it's getting easier and easier to send money home digitally.

HIRSCH: And one of the reasons for this is the penetration of smartphones. Am I right about that?

CARON: Exactly right. Smartphones or even, you know, feature phones are getting more and more common around the world and are unlocking these digital and online finance solutions, which are making it cheaper and easier than ever before to send money across countries and back home to migrant worker families.

HIRSCH: How would families have done that? How would migrant workers have got that money back in the past, then, before we had the digital technology?

CARON: There's a lot of different ways - traditional wire transfers but as well informal channels. So, for example, a migrant worker might take cash home when they visit home for a holiday or to see their family. And those are really hard to measure, so it's not until recently that we've gotten a good idea of how big these flows really are. Some of these things are starting to come to light.

HIRSCH: So it may be that the data is just skewed by the fact that there wasn't so much transparency in the past because of the informality of these transfers, whereas now there's much more transparency because it's so digital and therefore easy to track.

CARON: It's still something that is notoriously difficult to measure, but it's getting easier and easier as things move into the digital world.

HIRSCH: OK. So fast forward to earlier this year, the global reaction to the spread of COVID-19. We had lockdowns, social distancing, layoffs, plummeting growth numbers, bankruptcies, more layoffs, you know, massive declines in household income for many workers. And yet, remittances stay steady and, in some cases, even rise. I mean, that's kind of a mystery. How is that?

CARON: Right, so the first reason is that migrant workers are often essential workers in their destination countries. So they're not necessarily losing their jobs as much as we might expect. And in some countries, like in France, in Spain and in Germany, qualified migrants who were not allowed to work in certain sectors before, especially essential sectors like doctors or nurses, are now being allowed to work in those sectors as part of the pandemic response.

HIRSCH: You also mention in the story that altruism on behalf of migrant workers might have something to do with this. Can you talk a wee bit about that?

CARON: So a lot of migration research in the past has pointed out that one of the main reasons migrants move to another country to work is in search of better opportunities for themselves but also for their families and to be able to provide for their families. And it's been established in the kind of migration literature that remittances tend to rise when things are bad at home. So you would expect remittances to fall when things go badly, but instead, they rise. And that really gets to the heart of what migration is about. It's about providing for their families as best as possible, even though they're struggling in their destination countries.

HIRSCH: I presume that the government stimulus - right? - where people got, in some cases, more money than they would have otherwise earned - right? - especially in the United States with the unemployment benefit supplement - I'm assuming that that stimulus would have had some effect on this. Is that correct?

CARON: Exactly. So some migrants have been benefiting from these government stimuluses. For one example, in California, even undocumented migrants were allowed to receive stimulus checks. And some researchers have linked that to an increase in remittances, especially to their families in Mexico. So this extra stimulus spending is also being translated back home through higher remittances.

HIRSCH: So as the pandemic grinds on, many migrants must be finding it harder to find work - right? - even if they were in these insulated professions to some extent, if they're essential workers. And, you know, living in the U.S. is really expensive, so people here must be thinking about going back to their countries of origin right now. And you suggest that that might actually boost remittances. Why would that be?

CARON: Right. When they decide to move back home, they might send ahead all of the rest of their savings that they had saved up for their lives in the destination country. And that might be causing a really big boost in remittances as people are sending back the money before they leave.

HIRSCH: So they're kind of - they're almost planning ahead for their return.

CARON: Exactly, yes.

HIRSCH: Right. Well, I mean, is this going to last? I mean, given that people may be returning home, and therefore, that would - you assume that that would drop the amount of remittances. But, I mean, given the fact that it doesn't look as though this pandemic is ending anytime soon - right? - so can remittances hold out at this level? Or do you think that we will see a correction?

CARON: It's really hard to say what's coming next. Although we see that their remittances are rising and holding steady right now, this might not stay the same. As you said, we've seen a lot of migrants returning home, migrants losing jobs. And that could mean that the crash in remittances that has been forecasted by international organizations - it may still be on the way, and we may be only the calm before the storm right now. At the same time, we're seeing some countries are starting to tighten migration policies, tighten visas and residency permits. And that certainly will have an impact too.

HIRSCH: All right. Well, you'll be keeping an eye on it, so maybe we'll check back in with you in six months or so just to get a sense of what the data is.

CARON: Sure.

HIRSCH: Laura Caron, thank you for joining us today and for helping us solve this INDICATOR mystery.

CARON: Thank you so much for having me.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

VANEK SMITH: This episode of THE INDICATOR was produced by Darian Woods and fact-checked by Sean Saldana. Our editor is Paddy Hirsch, and THE INDICATOR is a production of NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

Copyright © 2020 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.