The Poor Stay Poor Due to the Price of Sending Money Home
New America Media, Commentary, Yania Marcelino and Shannah Kurland, Posted: Jul 26, 2007
Editor’s Note: Immigration reform should take into account the economic security represented by remittances, which eclipse foreign aid. Halving the high fees required for remittance transactions would help lift millions out of poverty say Yania Marcelino and Shannah Kurland. Yania Marcelino and Shannah Kurland are organizers for the Transnational Institute for Grassroots Research and Action. Ms. Marcelino is originally from the Dominican Republic. TIGRA is a network of more than 100 immigrant organizations across the United States. IMMIGRATION MATTERS regularly features the views of the nation's leading immigrant rights advocates.
Despite the failure of the U.S. Senate's immigration bill last month, lawmakers and the public will continue to grapple with "comprehensive immigration reform." It is imperative that the national debate shift toward a real discussion of economic security, rather than remain mired in narrow discussions of border security. Remittances are a big part of economic security.
Tackling root causes of migration, including poverty and lack of economic opportunity, is where the real security debate should be anchored. People migrate to the United States because they see economic opportunity here, compared to the economic devastation they face in countries impoverished by globalization.
Unfettered trade (e.g., under the North American Free Trade Agreement, or NAFTA), privatization of state-run industry and services, and the triumph of investor rights over labor rights have not only failed to reduce poverty or create economic growth, they have made conditions worse.
Studies show that if money-transfer fees were cut in half, 33 million people could be lifted out of poverty in the developing world. |
Since these economic policies have not been working, people have resorted to a grassroots transfer of labor and capital. Workers migrate away from their families to serve as labor in rich countries and send capital in the form of remittances, or money transfers, back to their loved ones in impoverished communities around the world.
These remittances have eclipsed the amount rich countries spend on foreign aid. In 2006, migrant workers sent a total of $260 billion to their countries of origin, more than three times the amount of official development assistance. In many parts of the developing world, remittances account for 30 percent or more of the gross domestic product. Inflows from Mexicans living abroad, for example, represent the country's second largest source of foreign income behind oil exports. The Transnational Institute for Grassroots Research and Action, based in Rhode Island, has documented the sending patterns of more than 600 people in the state, who collectively send remittances of more than $1 million a year.
New organizations are working in immigrant communities to tap into the economic power represented by remittances to work towards sustainable development and to challenge harmful economic policies.
To take these individual efforts further, a coalition of migrant organizations around the world is creating a Transnational Community Reinvestment Fund that would support economic efforts in the communities that people migrate from and the places they migrate to.
But a key challenge faced by these communities is the high fees associated with remittance transactions. Being forced to spend billions in order to send money back home for food, urgent medical care and education is a major economic-security issue for immigrants. Studies show that if money-transfer fees were cut in half, 33 million people could be lifted out of poverty in the developing world. Immigrant workers spend up to a week's wages to pay these monthly fees; for families in their home countries, the fee represents almost two months’ worth of wages.
This is why immigrants have undertaken a campaign to pressure the global money-transfer giant, Western Union, to lower fees and prioritize community reinvestment in sustainable development. Such a move would make the money-transfer industry more accountable to its customer base: immigrants who often work low-paying jobs with little regulation. This scenario is grounded in economic reality; wire transactions cost less than $1 to a company that charges $20 or more. The estimated $200,000 collected by Western Union and companies like it, just from the Rhode Islanders participating in TIGRA's survey, could do a lot of good for communities in Liberia, the Dominican Republic, or even Central Falls or Olneyville.
Now that "comprehensive immigration reform" has failed in the Senate, we must return to the hard work of asking deeper questions about why people migrate. We must address root causes. Shifting focus to economic security as opposed to simply border security is necessary. We must broaden efforts that work to make migration a choice and not a necessity while strengthening the economic power of remittances. A crucial first step is to lower the cost of sending remittances.
Page 1 of 1
|
User Comments
ManNamedDan on Aug 11, 2007 at 11:34:23 said:
Wow, gauging from the various responses here (then again its a cross section of this articles readership) it seems that the problem addressed is not going away anytime soon. Americans are still too wrapped up in the ideas of Nationalistic pride and fat over bloated entitlement to really think about helping their fellow man stand on even ground with them. If we just gave half a shit and let the poor from just one other country- lets say oh how bout Mexico, -a break and helped them (yes HELP means giving and we CAN afford to , hell we cant afford NOT to) reach economic parity in the work force(instead of raping them with NAFTA), our investment would turn around and benefit us as well, with more money flowing into our country instead of out! Yes its true Mexico's government corruption is the source of that country's economic woes, but that doesn't mean we wash our hands of the evil done to those poor people in our so called just society. If we could just get passed the idea that these people who need our help are an evil burden bent on trying to rip us off and use up our resources and land (they would rather be in their own country making a living if they could), then we could see that they are actually a valuable resource of ready honest hardworking labor, I say turn them all into taxpayers! If every illegal immigrant were suddenly paying taxes we would no longer have a Social Security crises! We could just quicken our immigration access to guest workers and get them on the books, I'm sure they would rather be here without fear of being hunted and persecuted for just trying to work! The attitude that we don't owe anybody anything makes me sick! I am disgusted with the amount of apathy for our fellow brothers and sisters from such a righteous and supposedly God fearing Nation.
My message is this;... We can all give a little bit if we truly want the problem to end for EVERYONE involved otherwise,.... Just wash your fat hands and keep trying to make your ignorant hollow lives more comfortable while we ride the world into an apathetic smoldering decline.
tj on Aug 10, 2007 at 21:53:55 said:
I'm sorry, but the authors, however well-intentioned they may be, just have it wrong.
First, the price for sending money to Mexico at any bodega or corner store in US latino neighborhoods is eight dollars to send up to one thousand dollars, with a foreign exchange rate that is often as good as interbank (meaning minimal fx overhead). Sending money to the rest of Latin America costs anywhere from four dollars flat or 2% of the amount sent on the low end to ten dollars up to $1000 at the absolute high end. Colombia is more expensive at (4% fees), but often with a foreign exchange rate that actually is so good that it refunds a portion of the fee back to the customer (in other words, the remittance networks take a loss). The plain truth of the matter is that prices have gone way down in the past five years because of competition. The companies that offer these prices might not include Western Union, but are companies that are well known by migrants: Ria, MoneyGram (at Walmart), Prono Envios, Giromex, Girosol, UniTeller, Dolex.
Most people send once or twice a month, and usually no more than one thousand at a time, which means that they are probably spending eight to sixteen dollars a month to send the money (and may be suffering anywhere from a zero to a four dollar disadvantage in foreign exchange vs. interbank, which is better than any non-bank will ever find).
Sure, if you don't have much money any amount of savings can make life a little easier, even the four to eight dollars that would be saved a month by remittance senders if prices were cut in half. But four to eight dollars saved a month is not enough to lift anyone out of poverty. Just do the math.
"Studies show that if money-transfer fees were cut in half, 33 million people could be lifted out of poverty in the developing world." What studies say that? The fact is that there are no studies that say that, because to say that 12x$8=$96 in savings a year (or even double that) is going to bring even the poorest of the poor "out of poverty" is laughable.
Furthermore, it must be understood that about half of the fee paid by the consumer is kept as commission by the bodega or corner store that accepts the cash, which the store uses to pay for rent, clerk's salaries, overhead, and often the fees that banks now charge small businesses that need to deposit lots of cash (up to 1% of the deposit amount in some cases). About one quarter of the fee ($2 on average, up to $4.00 in some cases) is what the paying institution (like HSBC or Banamex/Citibank in Mexico) charges the money transfer network to pay out the cash. The money transfer network (i.e. Western Union or MoneyGram) might earn as little as $2 for many transactions, which pays for intrest on loans, customer service, computer infrastructure that operates 24/7/365 with no interruption, regulatory fees for licensing, bonding/insurance and examinations, and (so important since 9-11) anti-money laundering compliance programs and systems. To imply that the fee charged to and paid by the customer ends up as the remittance company's profit (which can then be distributed to third-world development projects or discounted from the fees) is misleading and incorrect. If the fees could go down any farther, competion would already have driven them down farther.
Believe me on this--I *used* to work in this industry, which gives me the double advantage of having an intimate understanding of how it works and of having absolutely no vested interest in how this issue plays out. But the facts speak for themselves.
steve on Aug 10, 2007 at 19:29:32 said:
I don't understand why any further discussion is needed regarding those who ILLEGALLY enter a sovereign nation! What would happen to an American who ILLEGALLY entered Mexico? Would there be discussions of the ILLEGAL's "rights" in Mexico once determine he/she wasn't there according to the law of the land? Would ANY country (other than the saps in the US)? Why is this discussion considered valid? It's not much different than drug dealers complaining about neighborhoods that do everything in their power to get rid of them! I'm not without compassion. There is a difference between drug dealers and people who want to support their families. But how dare they complain about treatment when they don't even belong in the country! Again....what would be my fate if I were to ILLEGALLY enter Mexico (for any reason). Would they allow me to complain about the way I was being treated? Or would they just toss me in jail?
lurker on Aug 10, 2007 at 12:34:34 said:
Maybe I'm not understanding exactly, there are cheaper ways to send money back to MX but they are not used because of the traceability, that being problems could arise if money that was accepted under the table (not taxed) is routinely moved through bank accounts or paypal, etc. So you are proposing that the US should feel obliged to provide illegal immigrants with a cheaper alternative to sending untraceable money back to MX?
Damon Hastings on Aug 09, 2007 at 14:16:13 said:
Uh... why don't they just use Paypal? It's available in Mexico (and 190 other countries), and international transfers are free if the sending account is linked to a bank account. The receiver can withdraw the money via ATM, debit card, bank transfer, etc -- and most withdrawal options are free. The debit card option is actually better than free: you get 1% cash back!
Western Union is just a scam. I don't understand why anyone would use it regularly, regardless of their social status.
james on Aug 09, 2007 at 14:13:22 said:
you know i find it funny that as a tax payer and a US citizen that 20 dollars to send money to MX does not sound to high, lets see i pay for a checking account, checks, atm fees, and HIGH US taxes just to spend my own money right here in the USA. my view is 300 bucks a year is quiet a good deal, i hear 5000 dollars is a fortune in MX. if i want to send money i expect to pay for it,nothings free even for us.
a. Johnston on Aug 09, 2007 at 13:06:40 said:
I guess if you're stupid enough to use Western Union for any money transactions so be it! There are other less expensive ways to transfer money
berkley mills on Aug 09, 2007 at 10:23:21 said:
,,i agree with harold hubbard..but would like to add what about the catholic church !!they wine and dine with those billionares/millionaires..plus the richest man in the world ,,beating gates lives in mx..sooo is he doing like gates taking all his money and sending it to africa or is he spending it in mx,,plus the last time i did mexico math ,,16,000 usa dollars,,equals 64,000 in mexico money ,,so you bitchin about 20 bucks !!??or 300 or 500,,leave ouir contry so we can get a raise ,,you increase our taxes you loweer our wages and our standard of living....sign a college graduate who cant make 16,000 american dollars ..much less convert it to 64 grand !!
james cox on Aug 09, 2007 at 09:37:51 said:
I do not disagree with any of the positions in these authors' work except for the implication that we can fix the problem from this side of the border. This is one of the few articles that properly identifies the root cause of immigration - the conditions "over there." Then, like all other articles, it continues by mentioning how circumstances here (in this case transfer fees, in other articles' cases the circumstance may be hateful laws driving the migrants undeground, whatever) are making the necessity of migration particularly difficult and if changed, then the migrants' lot would be better off. I am so frustrated that so many enlightened can trace the problem upstream in the chain of causal factors yet not opine nor propone to fix the very reasons they state as the impetus for migration. Everyone talks about how it sucks over there, we have to be realists and expect that obviously people want to come over here, then all authors go off and talk about how bad we are here for this-or-that policy, what can be done on this side to make it better, or (this one is a real kicker) how their "rights" are being abridged somehow. Why don't we all go upstream to the very root of the problem and discuss how to fix that? It sucks over there, okay, got it. Now, do we strive for regime change? Maybe support a righteous rebel movement? More foriegn aid? How knows what the exact answer is. From this side, it's simple. Secure the border, and when they're stuck on that side they'll be forced to deal with their own government and its problems, and THEY can fix their own lot. This whole thing is only our problem because we are weak on territorial fidelity and we let them in.
Shannah Kurland on Aug 02, 2007 at 09:17:19 said:
In response to Kristina - thank you for pointing out the confusion regarding how that statement is worded. The figures refer to money lost in fees over the course of a year.
For a low wage worker in the u.s., paying $20 every month works out to $240, which is as much as or even more than immigrant workers take home in a week. For someone sending every two weeks, which many folks do, it's a whopping $520. Note - these are average fees, but they do not include the money charges through lopsided exchange rates that the big corporations use.
For family members outside the u.s. where wages are dramatically lower, that same amount easily represents two months wages, and even more in some countries and regions.
Artemio Guerra on Aug 02, 2007 at 09:13:21 said:
Hi Kristina,
I am an organizer in Brooklyn New York. According a survey TIGRA conducted in our area Mexican immigrants in our community spend an average of $300 dollars a year to send money home. A 2005 study by the New York City Department of City Planning found the average wages of a Mexican immigrant in our city to be $16000 a year, or about $300 a week. The $300 Mexican immigrants spend to send money annually is equivalent to one week of their wages.
A study by the IMSS (Mexico’s Social Security Administration) in 2006 shows the average daily wage of IMSS’s 13.5 million registered workers was $197 Mexican Pesos or about $18 USD. This is higher than Mexico’s national average of $48.7 Mexican Pesos a day or about $4.45 USD. According to the IMSS figures a worker in Mexico will have to work about a month to earn $300USD –or 67 days according to the lower national average. We just wanted to compare the money lost in transaction costs and wages to make the numbers mean something to our community. I hope this helps clarify your questions.
AG
harold Hubbard on Jul 30, 2007 at 17:51:38 said:
What rock did you all crawl out from under? If you wish to help the poor, especially Mx, then why don`t you attack the
13 billionaires and 57 millionaires families that own everything,including the congress in Mx. The Mx poor are in economic slavery due to these people. They suppress education, they oppose all outside help and they control and are the purveyors of the narco trade. Why don`t you do articles in the USA newspapers about these people and not attac k Western Union. Did you think what would happen if suddenly WU refused to assist in sending the money. Why don`t you attack those people who make a great significant impact on the pobresa with their riches.
Kristina Rowe on Jul 27, 2007 at 12:47:48 said:
I find this statement totally confusing...
"Immigrant workers spend up to a week's wages to pay these monthly fees; for families in their home countries, the fee represents almost two months’ worth of wages."
I think it costs around $20 to transfer money at Western Union, and it doesn't cost anything to pick it up.
I agree that the fees could be lower, but I don't know what you are referring to that it could take a week's wages to pay for the transfer.
maria on Jul 26, 2007 at 13:19:02 said:
i read your artical, it so unteristing because always i said in my mind, if united state as power full country with a power full economie why don't create a "system" that help other poor or third world countries to boost their economie this thing will help to cut down the number of immigration wich is one of major probleme that lived the u.s.a at this moment.
-->