How Do Remittances Affect Disparities?

How do remittances affect disparities?

Remittances are flows of money between individuals living in different countries, most typically a foreign worker sending money back to his or her home country. In the last few years’ remittances have risen significantly throughout the world as a result of increased migration flows, as well as reduced sending costs. Laborers are assembling to countries in larger numbers than ever before. For example, the Philippines, with a tenth of the country’s population of 85 million works overseas, it is the third-largest migrant-sending country in the world, after Mexico and India. They send over 3000 workers overseas everyday- and the number is increasing. The remittances that they send home to their family and friends totaled $11.6 billion in 2005, which in that year alone was 10% of the country’s gross domestic product.

These migrations for remittances improve business profitability and reduce the costs of production. The host countries, in turn, depend on the flows of remittances that result from the migration of labor. Therefore we can say that remittances largely affect disparities around the world, disparities are when there is a difference in the way people are treated or paid or there is a difference in the amount of money and possessions they own. Throughout this written assessment the negative political and socio-economic disparity changes will be discussed but also the enormous benefits of decreasing economic and political disparities throughout the world.

Remittances have several downside and increase of disparities globally. The promotion of remittance will directly affect and promote migration (internal and international). This has several impacts and downfalls and an increase of disparities.  In order to explain this further I will closely look into Sub-Saharan Africa. Firstly, there is a large removal of the younger and working population but also population, which is educated. According to Williamson study in 1988 up to 12% of the educated population in West Africa will seek a working opportunity internationally. This shows us that a very large amount of young educated men want to leave their countries to seek new career causing what is called a brain drain, where all educated men leave the country increasing the disparities of the certain country. Another negative outcome of remittances is the decline in local market; reduce workforce and closure of local services. This largely affects the country of origin due to the socio-political decrease of working and able population. Many argue that this would lead up to a depending population since the majority of the population is leaving the country. Also the pull country will experience several environmental problems as their environmental footprint will largely increase as more immigrants come in the country.

Another large downside of remittances, which affects the disparities, is the simple fact that remittances are expensive. In Africa alone the costs can be as high as 25 per cent of the sum. This is a huge disadvantage as the workers lose a large part of their remittances to the banks. According to Adepoju (1997) African migrants often remit up to 60% of their income but if 25% of that is taken away this means that only 35% of their income ends in to their families hands. This is a large economic disadvantage but the fact that there are only 17 Banks or Transfer Centers in West Africa which means that numerous people have to travel long before they can send their remittances back home. An interesting fact is that the number of payout locations across the entire African continent is the same as Mexico, which has only a tenth of Africa’s population.