From making beds in Hong Kong to building multi-star resorts in Dubai, migrant workers help underpin two economies. They provide cheap labour for the rich world and vital income for poorer countries. Remittances last year overtook foreign direct investment as the biggest source of external financing to these nations, equal to one-tenth of economic output in the Philippines and 16 per cent in Jamaica.
Then coronavirus broke out. The World Bank reckons that the pandemic will scythe one-fifth, or more than $100bn, off global remittances. Workers will send home $445bn this year. East Asia and the Pacific, the biggest recipient of remittances, face the biggest cut from overseas workers downing tools.
Broad-brush figures conceal personal hardship — remittances are a lifeline for many extended families — and local anomalies. Remittances to Mexico were up 10 per cent year on year in the six months to June at a record $19bn. Yet for the Philippines, with 9m or so workers overseas, including doctors employed by the UK’s National Health Service, remittances fell by a fifth in the year to May.
More than 200,000 Filipino workers have gone home. Government officials say the total could go as high as 700,000. An academic paper penned in April estimated that 300,000 to 400,000 may have been laid off or given pay cuts.
Cancelled or reduced monthly remittances have many impacts, apart from less income for the financial institutions that send toilers’ money around the world, often for nosebleed commissions. At the macro level, lower hard-currency income dents national balance sheets. Only falling imports have stopped the drop from punching a hole in the current account of the Philippines.
There are human costs and benefits too. Some workers will inadvertently bring home the coronavirus. Others will relish the unexpected reunion with loved ones, including nannies who normally spend more time with employers’ children than their own.
At the micro level, less money coming in means less consumption. A National Migration Survey in 2018 reckoned that about 12 per cent of all Filipino households have, or have had, a member working overseas. Without that income, families will spend less on education, construction and food. In good times, remittances illustrate the trickle-down effect with textbook precision. Coronavirus shows how quickly that can go into reverse.
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Source: Economy - ft.com
