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Workin’ for the Yankee Dollar (then and now)

4 February 2007

This is not a bad thing:

Migrants may send even more money to family members back home than previously thought – as much as US$25 billion last year – according to a new study.

The report, presented Friday by the Inter American Development Bank (IDB) also suggested that the remittances are being used less for buying basic necessities and more for savings and education.

The central bank had previously estimated 2006 remittances at a record US$23 billion – a 15 percent increase over the previous year.

But Sergio Bendixen, president of U.S. polling firm Bendixen & Associates which carried out the study for the IDB, said about 99 percent of the remittances counted by the central bank were electronic or wire transfers – while the study found that about 19 percent of remittances are mailed back home or carried in person.

What has been counted in the past were bank tranfers; no one thought about the cash being carried back and forth, so the higher than estimated number isn’t that surprising.  And, bank and wire transfer to Mexico include transfers by U.S. retirees, which is a much larger number than most people realize (something Lyn wrote about before her — hopefully temporary — retirement from this site).

Remittances have been important to home countries for a long time.  Giovanni Gozzini of the Università di Siena (Italy) reported at an international conference on the history of migration, “in 1906 they [remittances] reached a ceiling of over 800 million lire, amounting to almost a third of the total level of exports, making a decisive contribution to the stabilisation of the balance of payments of the Italian State.”

Tiny Ireland (with only three million people during the time) was still receiving an estimated €4.4 million a year between 1950 and up into the 1970s, long after most European migration had ended.

Britain, the main superpower of the 19th century, also depended on remittances, though as a colonial power, remittances included British business owners in the colonies, or well-paid administrators. And some, like Scots immigrant Andrew Carnegie, earned fortunes abroad, and invested a good chuck back at home, but whether buying a castle is considered a remittance, I don’t know.  Even so, humbler British immigrant’s remittances also had a major impact on rural and working class communities.

Money orders were invented by the British Post Office back in the 19th century to facilitate remittances.  Everyone thinks of the Irish immigrant sending a few dollars back home, but tt wasn’t only the Irish (then under British occupation, and taking advantage of the new Postal Money Orders), but 

Welsh colliers in Pennsylvania, Aberdeen granite masons in New England, and Sheffield steel workers in Pittsburgh, all of whom participated in seasonal migration to the United States, not only sent money to their dependent families but saved their wages to invest in local farming or to set themselves up in business in Britain. For such U.S.-based remitters, earning capacity was paramount (affordable remitting); funding future rounds of migration (required remitting) and accumulating assets in America were matters of secondary importance.

( Cambridge Journal.  The Global and Local:  Explaining Migrant Remittance Flows in the English-Speaking World 1880-1914.  Gary B. Magee and Andrew S. Thompson). 

Ireland, which has a lot common with Mexico (traditionally agrarian and Catholic, dominated — and a third of its territory annexed — by the English-speaking Protestant neighbor, and famous for lighter-weight boxers, too!) also depended on remittances from labors in England, who regularly returned home, as well as overseas migrants.  No one seems to have any idea of how much money came into Ireland from England in money orders before independence (anything before 1927 would not have been counted as a foreign money transfer, and until 1979 the Irish Punt and British Pound were interchangable) or in cash afterwards.  

Among the remittances to the Irish that can be counted is what was sent from the United States.  It’s estimated that between 1840 and 1960, Irish in the United States sent  £1.2 BILLION a year. 

Ireland, since joining the European Union, has gone from the poorest, to the wealthiest nation in the EU.  Not all that is due to remittances (the country still depended on them until joining the Union), but remittance-men and women laid the groundwork for their success.  The Irish recognized the importance of their remittances back in the early 1970s, and began over-investing in education.  They realized that a doctor or accountant going abroad sent back a lot more to mum than a ditchdigger or construction worker.  So… education spending went way up. 

Mexico also disproproportionatly invests in education, but perhaps not at the level it should.

And, as an added bonus… the birth rate drops in remittance countries. It makes sense. If workers are overseas, they don’t start families until they’re older. And, if the money they’re sending home pulls them — and their families — into the middle class, they’ll have fewer childen. The best birth control device is a decent income.

But don’t these remittances hurt the U.S.? Not really. U.S. Census data shows a rising number of non-workers in the economy. Over the next several years, there will be a labor shortage as the population ages, and the birth rate slowly declines (though more slowly in the United States than in the other wealthy countries).  And without workers, the U.S. would not have grown in the 19th century, nor will it grow in the future. 

Secondly, a wealthier Mexico means more purchases from the United States, and… who knows… maybe a need to import Guatamalan workers at some point. 

Let a million money-grams flow!

7 Comments leave one →
  1. 5 February 2007 9:35 am

    Interesting. I’m from Ireland and it’s certainly not something we think about when we talk about the current economic boom in our country. As you say, Ireland invested heavily in education during the 1960’s and 70’s, making secondary schooling free to all. This was a remarkable achievement given the woeful economic situation of the country at the time.

    Ireland’s current economic successes are attributed in the main to an enlightened taxation regime, and (formerly) the relatively low costs of doing business here, but the educational levels of the workforce comes up again and again.

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