Reducing Poverty Through Migration in Bangladesh

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SEATTLE — Promoting both external and internal migration in Bangladesh is alleviating poverty for those who stay behind in two distinct ways. External migration, particularly short-term, promotes economic development through remittance flows, while internal migration, especially rural to urban, encourages economic self-sufficiency for farmers who remain at home by raising agricultural wages.

Thus, reducing poverty through migration in Bangladesh is not just the purview of those who temporarily immigrate to another country. Similarly to international migrants, internal migrants who leave the countryside for the city are contributing to wage growth in their home villages.

Moving abroad for better opportunities has been a reliable source of income for Bangladeshi migrants and their families for decades. Recent surveys have shown that short-term international migrant (STIM) households have higher living standards than those of non-migrants. In 2013, non-migrant households living below the poverty line in Bangladesh was 27 percent higher than international migrant households.

Until recently, remittances have been on a steady rise. In the last 15 years, remittances have risen from roughly $2 billion in 2001 to more than $15 billion in 2015.

The number of Bangladeshi workers heading abroad for employment has also grown substantially over a similar period. More than 750,000 workers from Bangladesh migrated overseas in search of more consistent, better-paid work in 2016. That represents a 36 percent rise in international migration for Bangladeshi workers from the previous year.

Although remittances were down substantially in 2017, money sent home from Bangladeshi workers, those from the Gulf States in particular, still remains a fundamental source for reducing poverty through migration. In 2013, an average STIM household received more than $3,100 from external migrant remittances.

International remittances however also have an indirect effect on the migrant’s native economy. Even non-migrant households in areas of extensive migration tend to see increased local demand from the inflow of remittances. External remittances, therefore, create an opportunity for workers in the form of employment and rising wages.

Falling for a second consecutive year, however, remittances to developing countries have been on a downward trend as of late. If this recent decline in remittances were to continue, these indirect employment and wage benefits might diminish as well. Although likely to pick up again in 2017, the temporary drop in money sent home has given rise to new ideas on tackling rural poverty.

One recent approach to raising the standard of living in Bangladesh focuses on encouraging working males to move from rural villages to cities in search of work. In the northern district of Rangpur, farmers suffer during the interim period between sowing and harvesting crops. Work is scarce for villagers during this time unless they decide to migrate to a nearby city.

There are ample opportunities for farmers willing to travel during this seasonal agricultural slowdown, but convincing rural Bangladeshis to make the journey to the city and leave their families behind requires certain incentives. One method aimed at overcoming farmers’ trepidation about such a move has been offering cash payments in return for migration. Led by Mushfiq Mubarak of Yale University, the grant program has shown encouraging signs in alleviating seasonal sources of scarcity in the countryside.

The number of migrant workers moving from poor villages to cities was reflected in the number of poor households being offered the cash incentive. The more households that were offered the stimulus of a ৳1,000 ($12) grant, the greater migration of male villagers. At least 140,000 villagers were relocated in 2017.

This direct effect of reducing poverty through migration—by providing longer hours and greater pay in the city for those seeking temporary employment—should not overshadow the indirect benefits to the farmers who stay behind. Aimed primarily at raising the standard of living for poor farmers who make the move to cities, the grant program is proving to be a surprisingly effective way of pushing up agricultural wages back in the villages.

Households who lose a worker to internal migration also decrease the available labor in their village as a whole. Basic economic theory states that upward pressure on wages should result. Indeed, rising agricultural earnings have been most prominent in the rural areas where the grant program affected the greatest redeployment of the workforce.

Another upside to reducing poverty through migration within Bangladesh is that the indirect benefit of wage growth is not beholden to unnecessary taxation. In 2017, international migrants were required to pay an average rate of 7 percent on remittances to family members in developing countries. Unlike remittance flows, larger paychecks for farmers in rural villages would not be eroded by a similar levy.

At least in Bangladesh, this novel approach to poverty reduction is giving the remaining farmers benefits akin to those moving to the city for work. The complementary nature of external migration is widely known, and based on this Bangladeshi grant program a direct and indirect benefit might be apparent for internal migration as well. A similar grant program could be replicated in other developing countries, with small cash payments serving as encouragement for short-term internal migration.

International remittances still remain a crucial factor in lifting poor households out of poverty in the developing world. However, even if levels of remittance flows recovers soon—as is expected by the World Bank—having another approach to reducing poverty through migration would serve as a fillip to Bangladesh and other developing countries if future downturns in remittances occur.

– Nathan Ghelli

Photo: Flickr

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