Columns - The Sunday Times Economic Analysis

Economic benefits and social costs of migration

By Nimal Sanderatne

Remittances of Sri Lankans working abroad have assumed a huge importance to the Sri Lankan economy. The significance of remittances from
outmigration to Sri Lankas balance of payments and the economy is of such a magnitude that I have described the contemporary Sri Lankan
economy as a remittance-dependent economy. About 80 per cent of the huge trade deficit of US 5.2 million dollars in 2010 was offset by
remittances from abroad. In the first five months of this year till May, remittances amounted to US dollars 2,103 million and offset about two-
thirds of the ballooning trade deficit for the first five months of 2011. Remittances are far more important than many of the countrys exports
and inflows of capital. Earnings from tourism, that grew 54.5 per cent to US dollars 318 million during the first five months of the year was
only about one seventh that of remittances.

In the last decade remittances were much larger than official development assistance (ODA), foreign direct investment (FDI) or aid and even
all three taken together. It is estimated that remittances contributed 8 per cent to GDP in 2008. There is therefore no doubt of the economys
dependency on remittances. The benefits of remittances are not confined to its balance of payments support. Remittance incomes alleviate
poverty and improve living conditions of a significant population in the country. The situation in Sri Lanka is very similar to that of Bangladesh,
Nepal and Pakistan, where remittances are not only a support to the trade balance but an important way by which the countrys poverty is
alleviated. Families receiving remittances invest more in housing, education, and health care. However there are also social costs including
child abuse, school dropouts and family break-ups as a result of family separation. Therefore the effects of out-migration are mixed. A large
proportion of the outflow consists of women domestic workers who have been vulnerable in destination countries and are a cause for neglect
of children and ageing parents.

In the first three decades after independence the country was dependent on three primary products tea, rubber and coconut for its export
earnings to finance her imports. No longer is there this dependency. The diversification of the economy has meant that industrial exports
such as garments, rubber based manufactures, ceramics and a number of other industrial exports together account for most of its export
earnings. Yet these earnings are not as important as the large amount of remittances from Sri Lankan workers abroad. This is especially so as
other export earnings have high import content as well. Though some part of the remittances would also leak out, as increased incomes from
remittances would increase consumption of imported goods, this is likely to be less than the costs of inputs into manufactures that may be as
high as 60 to 75 per cent of the export value. Even tourist earnings that are rising are not as significant as the amount of worker remittances.

In-depth analysis;

A very recent book, Migration, Remittances and Development in South Asia, edited by Dr Saman Kelegama,(Reviewed in the Sunday Times
Business Times of July 24) explores the impact of migration on development in South Asian countries and makes recommendations for
benefiting more from outmigration and reducing the ill effects of it.

This book examines how migration should be brought into the mainstream of development planning and directed in a manner that migration,
just as much as other population changes, are an integral part of the development factors. Remittances have tended to be viewed as an
adjunct to issues in development despite its contribution to various facets of development.
 In its assessment of migration on Sri Lankan economy and society its
assessment of the economic benefits are that remittances have
provided significant support to the balance of payments, increased
the investment rate in the country and brought about some macro-
economic stability. At a micro and household level remittances have
mitigated poverty, improved households ability to endure external
shocks, provided credit for household enterprises and increased
investment in health and education. Although migration has reduced
unemployment, it has created a labour shortage, exposed the country
to external shocks experienced in destination countries, and resulted
in brain drain due to the migration of skilled workers. The author
notes that the impacts have been mixed in other countries as well as
in Sri Lanka. The negative effects of migration include the
disintegration of families, violations of the rights of the workers and a
lack of interest on the part of the government to create jobs
domestically.

Impacts on health and education

An important revelation in the study is the mixed effects on health and education of the migrant households. The study observes: On the
one hand, migration leads to greater investments in education and health due to increased wealth and better health knowledge. However,
the health and education outcomes of households of migrants are mixed and are dependent on both the characteristics of the migrant and
their household. Remittances on the one hand, provide better education and health opportunities to household members.

However, migration of parents can leave families of young children with inadequate guidance and an additional burden of household
responsibilities which can lead to higher school absenteeism, school drop-outs, poor nutrition and health care of children - especially younger
children, and substance abuse especially older children. A further observation of significance is that Given that Sri Lanka has a rapidly
ageing population, the breakdown of traditional family support for elderly due to migration is a concern, both for households and policy
makers.

The study finds that remittances have increased the demand for health and education services. In communities where there are high
concentrations of migrants, better investments in health have increased demand for health and education services thereby increasing
investments in high-end private sector health and education facilities. On average investments on health and education are higher for migrant
households. However, at the national level, school enrolment and morbidity were not significantly different between migrant and non
immigrant households.

Employment and unemployment

The country has achieved a low level of unemployment. Three factors account for this: the higher level of economic activities, lower inflows
to the labour force owing to the declining population rate and the outmigration of workers. Foreign employment has been a continued source
of employment to the countrys labour force and a significant proportion of the labour force is working abroad. This has contributed to
reducing the unemployment rate of the country and also increased wages of skilled and unskilled workers.
The government actively promotes migration of skilled workers, by promoting tertiary and vocational education with the objective of meeting
global job demands. Given the limited opportunities in the countrys tertiary education sector, there is a high demand for training
programmes aimed at foreign employment. There is evidence to show that emigration of workers has helped to lower the unemployment
rate and improve wages at the lower levels. The study cautions: However, given that the Sri Lankan labour force has started to shrink,
promotion of foreign employment needs to be done with caution. On the one hand, shrinking labour resources can adversely affect the
economy. . the combined effect of a shrinking labour force and an increasing dependency ratio can reduce annual economic growth rates by
up to 1 per cent. On the other hand, despite benefits from low skilled migrations, over-reliance on foreign employment can delay reforms
needed for improving job creation within the country.

Social costs

There are also adverse social consequences arising from the migration of persons for employment abroad. There are a number of costs
associated with foreign employment. The lack of protection and welfare for workers and the social and psychological costs associated with
migration has been of concern for policy makers for long. This is of special concern to housemaids and low skilled migrants with low
education attainments. There are numerous instances where these workers have been sexually and physically abused and not properly paid
for their services. Although the government has taken several steps to improve the rights and freedom of migrant workers and the welfare of
families that are left behind, the effectiveness of these measures in improving the present conditions is yet to be seen. The recently
articulated policy on labour migrations seems to assume that migration of all types of workers abroad is beneficial as long as the worker rights
and freedom is ensured and the welfare of the families of migrant workers is looked into.

Positive and negative outcomes

The outmigrations of Sri Lankans no doubt contribute handsomely to the countrys economy. However there are both benefits and adverse
impacts of outmigration. The main positive impacts are that the remittances strengthen the balance of payments and contribute to GDP. They
have also contributed to the improvement of living conditions and livelihoods. No doubt one of the ways by which poverty has been
alleviated has been these remittances.

These have enhanced incomes of the poor especially those in rural areas. No doubt the poor have improved their living conditions owing to
remittances from migration. Unemployment in the country has been reduced by migration but availability of skilled labour has decreased and
labour costs have increased. However there are several problems encountered by the migrants in foreign countries and has led to serious
dislocation of family life and caring for children and parents left behind. Therefore national policy towards migration must consider all these
facets, both good and bad, in determining policy.

Right now, there are 215m people almost 3% of the worlds population living outside of their country of origin. Among these emigrants
are many well educated and trained professionals. The outflow of skilled people from a particular country or region to another is called brain
drain.

Its occurrence depends on a variety of factors, but broadly speaking, the term describes people trying to improve their living conditions by
leaving their homes to find better prospects elsewhere. This is especially true for developing countries, where many qualified people are
attracted by better opportunities wealthier countries have to offer, but brain drain also occurs in other areas of the world. Is this phenomenon
problematic?

Exodus of skills and knowledge. Critics say that it is yet another way that developed countries take advantage of difficult conditions in some
parts of the world; by luring away people who could otherwise be of big use in their home countries. If the number of skilled people leaving is
higher than that of people entering (the so-called brain gain), brain drain can become a challenge, especially if it hits the sensitive spots of a
nations economy in sectors such as science, health care, or technology.

Malawi, for example, faced a serious crisis in the medical sector when a huge number of trained staff left the country because of better
opportunities elsewhere. In 2005 the UNs Global Commission on International Migration stated that there were actually more Malawian
doctors working in Manchester than in all of Malawi. There have also been huge outflows of nurses to developed countries such as the UK. This
is not surprising, considering the fact that they could earn up to ten times the salary they would have earned at home. Additionally, there are all
the benefits that come along with living in a wealthy and stable country. However, with its already precarious health care situation and with
more than 10% of its population suffering from HIV/AIDS, this exodus poses a serious challenge for Malawi.

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Brain drain is not only a threat to developing countries though. In developed countries, the loss of skilled people does not only mean a poor
economic investment in their education, but also the loss of large amounts of tax those high achievers would have paid during their
professional career.

Positive side effects. There is more than one side to the brain drain phenomenon though. First, expatriates are a vital source of income for
many countries. According to the World Bank, remittances received by developing countries totaled up to US $325bn in 2010, more than
doubling the US $129bn of aid raised by the OECD countries in the same year. In many cases, money sent home by expatriates contributes
hugely to the GDP. Tajikistan is leading this statistic with more than a third of its GDP coming from remittances. On top of that, this private
development aid seems to be a comparatively stable source of income. When foreign investments dropped significantly due to the global
economic crisis in 2009, remittances remained relatively stable, only dropping by 5.5% and recovering again in 2010.

Another possibly positive aspect of global migration and the movement of skilled people is the so-called brain circulation. According to this
concept, migration makes a vivid exchange of knowledge and ideas possible, which is beneficial for everyone contributing. Considering all the
complex facts, there is no easy answer for how to judge the brain drain phenomenon. Its influence seems to depend on a variety of factors that
are not the same in all parts of the world. Keeping an eye on migration and its effects will be of major importance in the age of globalization.