The United States has long been considered a country of migrants. People flock to the land of opportunity to build careers and change lives. In 2019 the US hosted a total immigrant population of 50.7 million. This constituted 15.4% of the country’s total population. Immigration to the US exceeded emigration each year for the previous five years. As a result the US population increased by nearly a million migrants annually. In 2017 foreign workers in the US collectively sent in excess of $68 billion in remittances worldwide. This made the US an undisputed leader among remittance sending countries. The US sent almost $24 billion more than the country with the second highest outgoing remittances. This speaks not only of the massive scale of the US economy, but also of the important contribution of immigrants in making it grow.
Mexico is the largest recipient of remittances from the US, and the third largest recipient of total remittances in the world. In 2017 Mexico received $31 billion in worldwide remittances, of which nearly $30 billion were sent from the US. Remittances constitute more than 2% of the national GDP of Mexico.
The second largest recipient of remittance money from the US is China. $16 billion were sent from the US to China in 2017. India ranks third in the list of remittance receivers from the US, with $11.7 billion received in 2017. The Philippines ranks a close fourth with $11 billion. As a percentage of GDP these numbers may be small. The economies of India and China are truly massive. However, to the thousands of Indian and Chinese immigrants living in the US, remittances are vital.
Remittance outflows from the US grew from $50.7 billion in 2009 to $68.4 billion in 2018. The growth was not uniform throughout. Slow growth was seen during 2009 and 2010 owing partly to the continuing effects of the financial crisis of 2008. In the six years from 2012 to 2017 there was a steady annual growth of almost 5% in remittances from the US. In 2018 the growth slowed to less than 2%, which can be attributed to multiple economic and political factors.
The growth in total remittances to India, China and Mexico from 2009 to 2018 has been spectacular, with an increase of nearly 60% for each country. However, remittances from the US as a percentage of the total reduced slightly. This could be attributed to the combined effects of expanding markets elsewhere and changes to the US immigration policy under the present administration.
The US economy has a symbiotic relationship with immigrants. US industry depends on imports of skilled professionals, particularly in certain key sectors such as IT. Immigrant professionals view US firms as attractive employers not just in terms of compensation but from the perspective of career growth. Recent changes in US immigration policies are affecting this perspective. In their quest to seek employers who would value them, skilled professionals are increasingly looking at other countries to migrate. As a result remittance outflows from the US have declined whereas remittance inflows to developing economies continue to see unabated growth.
The cost of sending money
In 2019 the average cost of sending remittances from the US was 5.7%. World Bank figures show that in 2011 the average cost of sending money to low and middle income countries (LMICs) was in excess of 9%. By 2019 this had reduced to 7%, which is still significantly higher than the Sustainable Development Goal (SDG) target of 3%. Sub-Saharan Africa consistently remained the highest cost remittance corridor where it cost as much as 9.3% to send remittances. South Asia was the cheapest, where it cost close to 5% to send money online. The most expensive country from which to send remittances was South Africa, with some channels costing as much as 23% in fees and exchange rate margins combined. Thailand was another high cost remittance sender. The World Bank also noted that money transfer operators (MTOs) and post offices were among the cheapest channels, while banks were invariably the most costly.
The dominance that the US has as a remittance sender is declining. A reversal of the prevailing immigration policies can stop this decline. Making skilled immigration easier will help the US maintain its leadership role in the world economy, and as the top remittance sending nation.