Labor Migration & Welfare Mgt

Migration of people from one country to another in search of employment is not a new phenomenon. The only new development in recent years is the change in perception about the identity and dignity of migrant workers.

SOUTH ASIAN SCENARIO

In South Asia, labor migration has changed structurally with regards to its magnitude, direction and character. Study shows international migration has enormous implications for growth and welfare in both origin and destination countries. It indicates a positive relationship between migration and remittance. The World Bank forecasts the fall in remittance earnings in developing countries from an estimated US$305 billion in 2008 to US$290 billion in 2009.

A typical low-paid worker normally sends US$100-US$200 per transaction by paying a minimum of US$16. Since banks offer cheaper remittance services than “Hundi”, arrangements to encourage account-to-account transfer needs to be expedited.

In Bangladesh, remittance contributes 11 percent to GDP. In 2008, it was equivalent to 56.1 percent of total export earnings, nine times of FDI flows and four times more than total foreign aid. There, remittance could finance 36.6 percent of total imports. Study showed remittance reduced poverty by 6 percent in fiscal year 2006.

In India, for a long time, the volume of migration was miniscule compared to the total size of population; therefore, migration was never considered an important demographic issue. At present the scenario is different. It was estimated that in 2008, US$40 billion was remitted by non-resident Indians. During many previous years, remittance had financed merchandise trade deficits and kept current account deficits under control.

In general, some estimates show that an increase of about 10 percent in per capita remittance leads to a 3.5 per cent decline in the share of poor people. This reiterates the relationship between migration and remittance.

There were basically two important reasons why migration occurred in India – first, the rise in the number of jobless due to an absence of acceleration in the growth rate and, second, regional imbalances. In case of the former, data shows unemployment on a Current Daily Status basis rose from 6 percent in 1993-94 to 7.3 percent in 1999-2000 resulting in an additional 27 million job seekers. In addition, there was a decline in employment elasticity (e.g. increase in employment for every unit rise in GDP) in almost all the major productive sectors. To elaborate the second reason i.e. regional imbalances, what we should understand is that migration occurs when the region of origin lacks opportunities compared to the destination.

In Pakistan, domestic manpower demand both in the public and private sectors is low compared to a 3.5 percent growth of the labor force. Since 1971, Pakistan has sent approximately 4.2 million laborers to more than 50 countries across the world. The flow of foreign remittance during 2006/07 remained at US$ 4,450 million (Ministry of Labor Manpower and Overseas Pakistanis, Government of Pakistan). Major advantages realized by Pakistanis from such remittance were poverty reduction, economic development and transfer of knowledge and skill to and from the country.

Remittance in Sri Lanka proved to be larger and less volatile than foreign direct investment. In 2007, it amounted to US$2,502 million, more than double the earnings of tea exports. It was much larger than the earnings from exports, foreign aid, tourism and other capital inflows. The estimated number of Sri Lankan migrant workers is 1.6 million with an annual outflow of 200,000. The inflows are expected to reach US$3 billion in 2009. It is believed remittance have increased consumption and investment and the country’s stability.

Sri Lanka has some lessons to offer to Nepal. There is a welfare fund (funded by a mandatory US$25 membership fee by departing workers), which is used for the welfare activities of migrant workers. At home, Sri Lankan workers receive vocational training, which is coordinated by the Ministry of Employment and Labor with the ministry of Vocational Training and other relevant institutions. These workers are granted loans for meeting departure expenses.

NEPAL

Nepal Rastra Bank’s Household Budget Survey 2008 shows that Nepalis have worked in 38 countries ranging from India to Nigeria. The share of remittance in total foreign exchange earnings has increased from 36.6 percent in 2003/04 to 46.7 percent in 2005/06. Despite 16 percent trade deficit to GDP, remittance have resulted in Nepal’s current account surpluses. There has been a significant rise in the contribution by remittance to the GDP from 11.5 percent in 2000-01 to 16.8 percent in 2005-06. It has now reached to almost 18 percent.

The average growth rate of remittance to Nepal from India between 1991/92 to 2005/06 remains at 23.67 percent. In FY 2005/06, total remittance from India was US$157.14 million of which only 0.8 per cent came through financial institutions. It indicates that actual receipt should be much more than recorded officially.

Many South Asian nations face difficulties in generating emigration and immigration data to precisely estimate the size of flows. Whatever data is collected are “legal” or regular migration inflows. The common problem is the unavailability of data on regular return flow, which limits the estimates on actual magnitude of return. Given the delayed recovery in global economy, there is a great possibility that workers will be sent back home before their contract period is over. The bilateral arrangement to compensate the loss is virtually non-existent. Therefore, efforts should be made to track the expenditure behavior of the returnees for future policy decisions on expenditure management and developing schemes to utilize skills gained by the workers in receiving countries.

High cost of transferring money through banking channels have worked as disincentives to send more money home and has decreased disposable income. It is said a typical low-paid worker normally sends US$100-US$200 per transaction by paying a minimum of US$16. Since banks offer cheaper remittance services than “Hundi”, arrangements to encourage account-to-account transfer needs to be expedited.

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