Tuesday, February 20, 2007

Remittances: Money from away

There's a term in international economics used to describe a certain kind of money flow from one country to another.

That term is remittances.

The idea is a simple one: breadwinners move from one place to another and send money to their families back home. The money sent back is the remittance.

You can see from the chart on the right that international remittances are big money and some countries are heavily dependent on that cash (it's almost all cash).

Mexico, for example, sees US$25 billion a year of inflow, mainly from the US. Lebanon, on the other hand sees only US$5 billion a year but that money represents almost 26% of their GDP.

While remittances are generally defined in international terms, there are also domestic remittances. The quantity of these remittance flows is hard to precisely determine because, as far as I can tell, that research hasn't been undertaken.*

But just because we don't have precise numbers on these remittances doesn't mean we are not aware of their impact on this province.

For example, this morning CBC radio had a piece on the economy around Stephenville and how well it seems to be doing. They mentioned four factors behind this apparent success.

The first 2 were one-off cash infusions into the area: flood compensation and mill severance pay. While helpful in the short-term, the region certainly can't count on constant mill closings or floods as a tool of economic development.

The next factor was the government health line call center but that affects the income of only a few specially trained health care professionals.

The fourth factor mentioned in the report was money sent back home from people working in Alberta.

In other words, remittances.

And it's a word that government has yet to use and will likely never ever use to describe the situation. Besides the fact that government really doesn't know how much of the annual GDP is due to remittances, just the idea of remittances has an image problem that government is not keen to promote.

Remittances are usually associated with Filipino sailors and domestics working in Saudi Arabia, or Mexican fruit pickers in California, Polish plumbers in London, or Pakistani construction labourers in Kuwait.

In other words, low-skilled cheap workers from underdeveloped countries going to work in developed or developing countries. They go abroad to work and support their families because there is not sensible employment opportunities back home.

And that's probably why government is not keen to talk about remittances and prefers to talk about homing pigeons. A comparison to pigeons sounds better than being compared to a Filipino maid.

But the truth is that it's not just the lower skilled jobs that generate remittances. It's also Lebanese doctors in New York, Indian computer programmers in Massachusetts and Russian engineers in Scotland.

And now, it's also former mill workers from Stephenville working in Fort MacMurray.

Remittances are inconvenient for this government because they represent a policy failure: people who have taken the initiative and have left the province for work rather than heed empty government assurances that something will be done for them and their communities.

However inconvenient, there is nothing shameful in remittances. This province has a long history for remittances from Alberta for the past 25 years. In the pre-Confederation period it was remittances from the Boston states. Remember those old stories of barrels and crates of food, cash, clothes and other goodies arriving in NL for Christmas from relatives away? Those were remittances in another form.

But as long as government continues to deny the existence of remittances by simply ignoring them, government does us all a disservice. The idea of remittances may be incompatible with the official government view of NL pride but that's irrelevant; it feeds our families and keeps the mortgage paid and that's what counts.


* If somebody finds something, let me know.

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