The Covid-19 catastrophe is shrinking remittances from the United States and creating a looming humanitarian disaster
It has been clear for a while now that the effects of the Covid-19 pandemic are not evenly spread across US society. One particularly hard-hit group is foreign-born workers. And now, on top of all the other economic chaos wrought by the disease, the shutdowns are grinding the industries in which many of them work to a halt and draining their pockets of the remittances that usually help sustain their family members in their home countries.
According to data from Migration Data Portal, as of June, there were 653.4 reported Covid-19 cases per every 100,000 migrants in the United States. That may be somewhat lower than the overall case rate in the country, but making things worse for migrant workers is the economic devastation. At the peak in May, there had been 40 million layoffs since the start of the pandemic. According to National Migration Forum, about half of immigrant workers are employed in some of the industries most affected by the pandemic: educational and health care services; professional, scientific, management, administrative, and waste management services; arts, entertainment, recreation, accommodation, and food services; and manufacturing.
Missing paychecks are a problem both for the workers themselves and for families abroad. For decades, the United States has been the world's biggest source of remittances, accounting for nearly 20 percent of the global total in the most recent figures. In 2018, immigrants sent home about $68.5 billion in remittances, an average of nearly $3,000 per worker, which represents between 2 and 38 percent of their US earnings.
A full accounting of this year's crash in remittances is not yet available, but the experience during the 2007-2008 financial crisis is instructive. Between 2008 and 2011, outflows fell by roughly 10 percent.
This time around, the World Bank has predicted a global fall in remittances of over 20 percent. The International Monetary Fund likewise forecasts that money sent to sub-Saharan Africa will drop by 20 percent. It is hard to overstate the devastation, in 2019, remittances to the region totaled $47 billion, making up a larger source of foreign income than foreign direct investment and official development aid.
In May, the economist Michael Clemens added detail to the grim overall picture. "In the Philippines alone," he noted, "a 20 percent drop in remittances would throw about 380,000 people into extreme poverty, according to rigorous estimates by Dean Yang and Claudia Martinez." And "in Mexico, for example, a 20 percent cut in remittance income would cause roughly 800 additional deaths of children under age one each year."
There is no question the world will one day recover from the Covid-19 pandemic. The flow of remittances may quickly return to (or even exceed) pre-pandemic levels. But for many, it will be too late.
As Orla Doyle of the University College Dublin showed in a study from April, a child's first 2,000 days in the world matter significantly to their lifetime achievements. Good early childhood intervention raises the child's future prospects and the lack of it could result in the opposite. Disadvantaged households that are highly dependent on income from migrant relatives and friends will have less to invest in their children's health and development during this period.
Such shortfalls cannot be remedied by future economic recoveries. The impact of a shock to remittances on babies being born during the pandemic will last for a lifetime. In fact, as the researcher Douglas Almond found in a 2006 study, the negative effects of the 1918 pandemic were still apparent in census data from 1980; children in utero during the pandemic were worse off in terms of income, educational attainment, and socioeconomic status.
It is impossible to predict exactly when affected economies will stage a comeback. The 2007-2008 financial crisis lasted about 17 months; the Covid-19 crisis may last longer. And many—especially some immigrant workers in the United States and those who rely on remittances they send home—may never recover.
Zuhumnan Dapel, is a researcher at the Scottish Institute for Research in Economics in Edinburgh and a former IDRC fellow at the Center for Global Development.
Disclaimer: This article first appeared on Foreign Policy, and is published by special syndication arrangement