Inequalities and international migration: securing benefits for all post COVID-19

By Jason Gagnon, Development economist, OECD Development Centre

Jaipur, Rajasthan, India, May 2020. Indian migrant laborers leaving the the city due to lockdown. Photo: Mukesh Kumar Jwala / Shutterstock

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The COVID-19 pandemic has turned international migration on its head. According to the United Nations, there were 272 million international migrants in the world in 2019, reflecting a steady rise over the years, reaching 3.5% of the global population. However, since the start of the crisis, migration has decreased significantly. Due to restrictions, admission of foreigners to OECD countries has fallen by 46%. In the Gulf Co-operation Council countries, and many other parts of the world, the trends point in the same direction. The general fall in migration flows is likely to continue in 2021.

There have been countless takes on the disproportionate impacts of the COVID-19 crisis on migrants. The pandemic has also exposed the extent to which many countries heavily rely on migrants as core cogs in their economic engines, their food security and in filling skills gaps. Not to mention the intangible cultural goods that societies benefit from in all parts of society, through food, festivals and art. But how will COVID-19 impact the future of international migration?

International migration, as a conduit for development, remains under pressure

In 2019, international migrants sent USD 548 billion back to their origin countries. The pandemic is directly affecting these flows, with transfers to low and middle-income countries expected to fall in 2021 to USD 470 billion. The benefits of remittances as contributors to development have been well documented, including their central role in the current pandemic in filling in for the lack of social protection systems and access to essential services in many countries. In the context of the pandemic, remittances were slated to fall off a cliff for several reasons. For one, money transfer operators were no longer operating due to lockdown rules in many countries. Some ran out of currency and others closed. Physical handovers, via buses, in several parts of the world, were no longer possible, due to border closures. One of the only routes remaining was through online transfers – but this required an online connection and the knowledge to use such services – on both sending and receiving ends.

“The call is on international actors to co-operate, beyond the traditional means, working with more actors such as the private sector, and working on issues relevant to specific corridors.” #DevMatters

Not only did the direct effects of the pandemic hit migration and remittances, but oil prices cratered in the immediate months following the first wave of the pandemic. Many countries currently heavily rely on remittances from the Gulf Cooperation Council (GCC) Countries, who produce most of the world’s oil. Consider that at USD 120 billion in 2018, the six GCC countries were the source for approximately one-quarter of the world’s remittances, compared to 13% in 2006. As several countries depend on such remittances, with high shares of remittances-to-GDP, a drop of any kind can mean a return to poverty for the receiving families.

The story of migration and remittances is not as clear-cut as it seems

While absolute totals of remittances are indeed eroding, the pace has been slower than expected, and remittances have even increased in certain bilateral country corridors. For example, in Kenya, Mexico, and Zimbabwe, remittances as of September 2020 were higher than in September 2019. One reason for this is that workers send more money when their families in their countries of origin are experiencing economic hardship. Several migrant repatriations have also contributed to the increase in remittances – as migrants have returned home with their savings. Currency fluctuations, particularly for currencies that are tied to the USD, may also have spurred remittances, as migrants took advantage of being able to send more for less.

However, there is a more subtle reason why remittances may have increased: online transfers. Many, and possibly most remittance transfers, especially between developing economies where financial systems are less developed, are done through informal channels. Amidst the lockdown, and facing dire consequences if money was not sent to their families, several remitters began sending money through formal online channels – many for the first time. In fact, there has been a rise in creation of such firms in all parts of the world. And in South Africa, for example, pre-existing online transfer firm Mukuru, saw the use of its services thrive after the pandemic hit. The rise in remittances may therefore not necessarily equate to an actual growth in remittances, but rather a shift from informal to formal flows.

International migration will be altered forever

This underscores the fact that structural changes to globalisation were already on their way before the pandemic. The world is becoming digital – potentially a game-changer for the development of financial systems and economic growth. But for the families and individuals without access, this may push them even further away from the promises of a better life. Internet penetration in Africa is estimated to be somewhere between 25% and 40% of the total population. This means that fewer than half of the population stands to benefit from a digital transition.

“We need policies to adapt recruitment and educational systems for future demand in soft and hard skills, benefiting both sending and receiving countries.” #DevMatters

A looming wedge in international migration may therefore be imminent. Remittances are going online – and several migrants and their receiving households will not ride the beneficial shift that will lower costs, increase speed, ensure reliability and secure transfers – in line with the targets of the 2030 agenda. The pandemic has also accelerated a deeper shift in the way countries view their need for migrants. Countries are becoming more selective, seeking specific skills. What these skills will be is still ill conceived, and will require analysis and planning on both sending and receiving sides. What is clear is that international migration, which has been a lightning rod for poverty reduction, better global integration and development, may become less broadly accessible. Already, those who are in manual, mostly low-wage occupations are among the worst hit workers. The latest projections estimate that nearly 800 million jobs worldwide are at risk of being automated. The typical lower-middle-class migrant household may be eschewed for wealthier rungs of society. Lower access to international migration and remittances could be disastrous for global inequality.

What are the implications for policy?

While much of the focus on remittances are, and for good reason, focused on costs, including the joint call to action in “Remittances in Crisis: How to Keep them Flowing”, policy will need to also focus on long term planning, by providing people with the skills and access for remitting services. Increasing internet access and skills should be a priority in remittance receiving countries. We need to move digital education faster, in tandem with the dramatic shift in the availability of new technologies.

We also need policies to adapt recruitment and educational systems for future demand in soft and hard skills, benefiting both sending and receiving countries. Such policy focus underscores the need for medium and long-term planning, and for national migration strategies, as well as sectoral strategies, to feed into overarching national development strategies that account for the world’s increasing interconnectedness, specifically through international migration. The call is on international actors to co-operate, beyond the traditional means, working with more actors such as the private sector, and working on issues relevant to specific corridors, as is increasingly being done in regional migration consultative processes like the Abu Dhabi Dialogue (ADD). More than ever, international migration governance will need to conjure solidarity and policy coherence.