The Least Among Us

Last Wednesday night, when South Carolina Rep. Joe Wilson shouted "You lie!" when U.S. President Barack Obama said that his health-care plan would not extend to undocumented immigrants, he revived a controversial political issue that, though always simmering in the background, has recently been overshadowed by debates over the state of the economy and Obama’s response to the recession. One hopes that the president will use this ugly incident as one of his famous "teachable moments," for if any group has suffered disproportionately during this economic crisis, it’s the millions of migrants who do tend to American laws, serve American food, and care for American children. And governments in their home countries and the United States must do more to protect them.

The unemployment rate for foreign-born Latinos in the United States has risen more sharply than that of any other ethnic group, to 12 percent last month. The impact of this group’s labor loss is significant because foreign-born Latinos are a vital source of low-cost workers for companies in the United States and Canada and because people across the Americas rely on them for family remittances. Although scapegoated for problems during the recession, these workers are in actuality among its worst victims. Indeed, their extended families have lost as much as $7 billion as the Great Recession has decimated their ability to make ends meet.

The brutal labor market has not just depressed earnings in migrant groups. It has also generated uncertainty and insecurity. In a nationwide survey I carried out in June, nearly a quarter of migrants in the United States said fear of losing one’s job represented the worst part of the economic crisis.

Migrants are vulnerable and politically weaker than most social groups. They also suffer from poor health and limited economic resources. Not only do they face difficulties in staying employed and caring for their families, but they also face anti-immigrant sentiment — as evidenced so clearly by the response to Obama’s speech in Congress last Wednesday night. The threat of deportation is a daily reminder of their vulnerability. Being blamed for the recession only adds to their insecurity.

Worse, migrants now have a diminished ability to keep up with their obligations to their families. Among working migrants in the United States, 40 percent are sending back less money than in 2008. The average size of each remittance has declined nearly 11 percent over the past year. Migrants have dipped into their savings to keep sending money south to their families, gradually depleting them. On average, a migrant in the United States holds $1,000 less in savings than he or she did a year ago.

These hardships translate into massive aggregate drops in remittances. The value of transfers to Latin America and the Caribbean will be about $62 billion this year — down from $69 billion in 2008. One-million households in the region will no longer receive remittances; nearly 5 million families will receive 10 percent less. In countries including El Salvador, Honduras, Haiti, and Nicaragua — very poor countries, with the highest proportion of labor immigrants — at least 50,000 households will not receive money from their relatives.

The implications are profound. Before this crisis, international labor mobility had contributed to an increase in money transfers to families. Remittances became a key source of foreign revenue and poverty reduction to many families and countries, representing more than foreign direct investment, foreign aid, and even trade in many cases.

But in the past year, day-to-day consumption has dropped in recipient countries: People are buying less food, clothing, medical care, and utilities. Families are saving less or no money at all, meaning the chance of falling into dire poverty increases. The loss of a remittance, on average, means the loss of two-thirds of a household’s income. This affects the most vulnerable — children and the elderly, who cannot work and require expensive school funds and medications, respectively.

These realities require that countries — whether those that depend on migrant labor, or home countries whose people depend on remittances — take the issue seriously. Policymakers and politicians in developing countries need to have a deeper understanding of migration flows and migrants’ economic impact both in countries of origin and destination.

Latin American policymakers in particular need to recognize the flow of human capital leaving their countries and consider how to support those families made vulnerable by drops in remittances. As many as 20 percent of migrants, feeling the pressure of the crisis, say they would like to return home. But Latin American governments are by no means prepared to absorb this labor force, nor are they prepared to provide emergency aid and social services to families who lose this vitally important income source.

And politicians in countries like the United States and Canada should recognize the economic contribution that more than 20 million Latin American and Caribbean migrants make. Integrating migrants (and their families) into local communities has significant economic and social benefits, particularly if migrants have access to financial and banking services. Despite their low wages, migrants and their families in home countries often hold thousands of dollars of savings. But because of their lack of access to checking and savings accounts, these are informal and kept in cash. It would be of great benefit for migrants and families receiving remittances to gain access to the banking infrastructure — a boon for businesses and governments in both origin and destination countries. Financial access ensures that people have better management of their resources, and thus contributes to mitigating crisis during bad times.

Now, for the bad news: Demand for labor tends to lag behind economic recovery. As migrants use up their savings, rough times still lie ahead for millions. Governments should take action now to ensure that this valuable, but vulnerable class of human capital remains safe and economically afloat.