According to the Nepal Living Standards Survey 2010-11, migrant workers use 79 per cent of their earnings on daily consumption. 

 

It could be argued though that without a long-term plan for economic growth, the increase in consumption will last only as long as the inflow of remittances. Hence, the unwarranted optimism is only distracting policymakers from finding strategies for long-term economic growth. Since only two per cent of remittance is used in capital formation and almost all the rest in unproductive sectors it implies remittances may not be contributing to significant long-term growth.

 

Hisham Foad studied the impact of gulf war on countries with a large number of migrant workers. He concluded that a decrease in remittances led to an economic downturn in the sending countries. His analysis highlights importance of remittance in economic growth and this correlation exists in the current Nepali scenario, where remittances contribute to 22 per cent of the gross domestic product. If remittances are not used for capital formation, decrease in migration opportunities due to exogenous factors like changes in receiving country’s migration policy will plunge the country deeper into poverty. This possibility emphasises volatile nature of poverty reduction using remittances when it is not properly injected into the system to propel further growth.

 

The way migrant workers choose to spend their earnings, just like any other employee, is based on prioritisation of their needs. A migrant worker in the lower income quintiles spending a majority of their earnings on consumption is not surprising. However, though a majority of migrants are from the middle income quintiles, most remittance is still used for consumption and five per cent is going towards real estate.

 

Some also question whether or not it is fair to expect migrant workers to invest in productive sectors. The decision to migrate is made at an individual level and it is only fair that they have the right to use their earnings in a way they deem appropriate. One expectation from rising remittances is that a resulting increase in consumption will lead to increase in demand for goods, spurring domestic production and economic growth. How-ever, statistics show that increase in manufacturing as a result of increase in demand is not taking place in Nepal.

 

Considering other factors hindering economic growth in Nepal, such as political instability, lack of energy and road infrastructure, frequent strikes, bandhs, among others, an increase in consumption alone cannot be expected to jumpstart industrial growth.

 

Another complain in the migration scenario is that members in remittance receiving households withdraw from the labour force and opt for more leisure time. The first rebuttal for such a criticism is that if households can fulfil their needs through the remittances received, they should be allowed to make the trade-off between remaining members working more hours or taking some time out for leisure.

 

However, as younger members of remittance receiving households withdraw from agricultural sector, a smaller pool of mostly aged workers lead to relatively lower productivity. In addition, the increase in real wages and aggregate demand without an increase in domestic production can lead to higher levels of inflation.

 

As a sending country spends its resources educating individuals, the brain drain resulting from high-skilled migration is compar-able to capital flight. The temporary nature of low-skilled migration, however, leads to a greater propensity to remit money back to family members. All of these arguments suggest migration is an extremely complex and nuanced subject that requires more than just arbitrary recommendations for change. While current data demonstrates remittances have indeed led to poverty reduction when the economy was in shambles, there is equally compelling evidence suggesting our current dependence on remittances alone to lift the country out of poverty is both naïve and short-sighted. Instead of making migration a ‘do or die’ decision, policymakers need to create a favourable environment for employment generation in Nepal as well. While some migrant workers may leave the country because of a desire to work abroad, others are leaving because of limited opportunities here. But, the decision to migrate should be a choice and not a compulsion.