Financing for Development

Leveraging Migration, Remittances and Diaspora Contributions for Financing Sustainable Development

Opening Remarks by Stephen Pursey, Director, ILO Multilateral Cooperation Department, at the GMG-OECD Side Event to the Third International Conference on Financing for Development.

Statement | 14 July 2015
The theme of the panel is an issue of enormous importance to the ILO. One of the foundations of the ILO was agreement that international coordinated action was needed to realize the principle that “labour is not a commodity and that poverty anywhere constitutes a danger to prosperity everywhere”.

This very simple statement can help us think about how fair labour migration can become an equally important foundation for the sustainable development agenda that will be adopted in September and a solid international agreement here in Addis on how adequate financing for development is to be achieved.

I would like to make two brief opening points to help contextualize today’s conversation and then focus on a third major issue – the unfair burden of the costs of labour migration carried by often very low paid working women and men. I will suggest four essential steps that need to be taken to increase the earnings of migrant workers so that the flow of migrant workers’ remittances into the development process can grow still more.

First, the scale of the global jobs challenge up to 2030 is daunting but the prospect of not accelerating the generation of decent work opportunities would call into question the whole sustainable development agenda as well as exacerbating already very worrying political tensions.

Just to keep pace with the growth of the global labour force and reduce unemployment to pre-crisis levels requires over 600 million new jobs by 2030 – that’s around 40 million year. Narrowing the participation gap between women and men by say 25 per cent by 2030 requires another 200 million new jobs. And 780 million women and men are working, often long and hard, and still not able to lift themselves and their families out of $2 a-day poverty.

This means generating every year for fifteen years 40-50 million decent new jobs and improving another 40-50 million poverty jobs mainly for young women and men. The global jobs challenge to 2030 is predominantly a youth employment question, and is particularly acute in South Asia and Africa.

Second, savings and tax payments out of earnings from work are the driver of flows of finance for investment in development. Furthermore, the expectation of rising consumption by households made possible by rising labour incomes drives private sector investment. It is the working families of the developing world who will both supply the finance for development and whose rising consumer power will stimulate the investment needed to lift the productivity of their employment.

And of course many of those working families now have members working in other countries. Making it easier and cheaper to remit savings back to families in the country of origin has huge potential for financing development.

The ILO fully supports the drive to reduce costs of remittances.

However, I would like to broaden the discussion to look at a how we can lower the costs of labour migration to the migrant workers and thus substantially increase their earnings and thus the savings they can remit.

So my third point is that very many migrant women and men are not receiving the wage incomes which they have a right to expect. There are four main reasons all of which can be tackled by a combination of cooperative action by host and origin countries.

First, they often have to pay recruitment agencies a substantial sum. In many cases this is in the form of loan against future earnings with interest rates so high that it becomes virtually unpayable.

For example, in the corridor from Asia to the Middle East, 80 per cent of migrant workers use private intermediaries and/or recruitment agencies paying from USD 1,000-5,000 – which may be more than a year’s salary. Enormous savings can be made by reducing or eliminating these fees paid by workers. ILO research found that payment of recruitment fees to a third party intermediary increases the risk of migrant workers ending up in forced labour.

If recruitment fees paid by workers are eliminated altogether, in accordance with ILO standards, the savings could be 8 times the amount of savings generated through the reduction of remittance transfer costs.

Second, ILO research shows that there are significant wage gaps between migrant workers and nationals both at the high and low end of the skill spectrum. In Europe there is an average gap of 17.5 per cent, 11.3% of which cannot be explained because of education, experience, or skills. If we were to close such discriminatory wage gaps, migrants in Europe would have over 17 per cent more income and that much more to remit home – literally billions of dollars more in development potential. Wage gaps range from 15-34 per cent in some of the countries analysed and it seems very likely that such gaps are equally large in other countries.

Ending wage and other forms of discrimination against migrants is another big win for financing for development and an even bigger win for social justice.

A third area of discrimination that if remedied can augment remittances is ensuring that migrant workers are able to receive social security benefits to which they are entitled in their country of origin. Pensions must be portable.

Fourth, many migrants are not able to use the skills they bring with them because they are not recognized in the receiving country. Mutual recognition of qualifications would also enable migrants to reach their full earning power.

To conclude chair, let’s reduce the cost of remitting savings out of the earnings of working migrant women and men. But let’s also focus our energies on making sure that they get the earnings to which they are entitled in the first place. Making sure it is employers’ who pay recruitment fees, not workers is a top priority. Rights of migrant workers are stressed in the proposed target 8.8 of the SDGs so we have every opportunity to pursue this key issue vigorously.

The bulk of migrant workers remittances flow back to families in the poorest parts of the developing world. Why? Because that is where the prospects of a finding and keeping a decent job are lowest. There is a very strong correlation between the incidence of working poverty and the outflow of young women and men in search of a job.

So it is very important at the same time as strengthening respect for migrant workers’ rights and lowering remittance costs to also increase decent work opportunities in developing countries especially those facing the biggest youth employment and working poverty challenges.

It is encouraging that the drafts for the outcome documents of both the Addis conference and the General Assembly Summit on the SDGs recognize that migrant workers’ rights are an important part of sustainable development. The Global Migration Group is building itself up to be an extremely useful mechanism for supporting member states on an agenda that just cannot be ignored. The ILO will continue to work energetically with our partners.