Study: Migrants’ Financial Picture Has Improved, But Many Remain Vulnerable

(The Miami Herald/MCT) -

Latin American and Caribbean migrants have modestly improved their economic situations since the 2008-2009 recession and the remittances they send to their homelands have increased by 12 percent, according to a new study.

But 1 in 3 of these migrants remains in a “vulnerable” financial position, according to the study released last week by the Inter-American Dialogue and the Multilateral Investment Fund of the Inter-American Development Bank Group, which commissioned the research.

And their remittances — economic lifelines to families in many Latin American and Caribbean countries and significant contributors to their economies — still don’t approach the levels of peak years from 2003 to 2007.

“Four years after the recession, the material circumstances of migrants is modest — they aren’t great, but they aren’t bad,” said Manuel Orozco, senior Inter-American Dialogue fellow and the main author of the study, “Economic Status and Remittance Behavior Among Latin American and Caribbean Migrants in the Post-Recession Period.”

Only 20 percent of migrants, for example, said they felt “confident” they could come up with $2,000 for an unexpected expense.

For the 2013 study, Dialogue researchers surveyed 2,000 migrants from eight countries — Colombia, the Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica and Mexico — in five major U.S. metropolitan areas to understand how they have sent remittances and how their economic situations have changed since the recession.

Approximately 1 in 3 Latin American households has a family member living abroad, and about 70 percent of all migrants from Latin America and the Caribbean send money home. Collectively, those remittances added up to more than $61 billion in 2012.

As the U.S. economy improves, migrants have generally been able to regain jobs, and those from Colombia, Guatemala, Honduras, Mexico and El Salvador all had lower unemployment rates in 2012 than they did in 2009.

But that hasn’t been the pattern for Caribbean migrants. The unemployment rates for Dominican, Jamaican and Haitian migrants remained higher in 2012 than they were in 2009.

Of the groups surveyed, Haitians had the highest unemployment rate at 10.6 percent in 2012, but the study points out that may be a result of an influx of migrants. The working-age Haitian population in Florida, for example, grew 16 percent from 2009-2012, according to the American Community Survey.

That partially overlaps with the period when Haiti was still feeling the economic after-effects of the 2010 earthquake and many displaced Haitians came to Florida.

In general, however, migrants have been able to increase their earnings, savings and capacity to send remittances since the 2008-2009 recession, when 12 percent of migrants lost their jobs.

Between 2009 and 2013, for example, the percentage of those earning less than $20,000 annually fell 6 percentage points to 46 percent, and there was a 1-percentage-point increase in those earning more than $25,000. But their earning levels are still below the U.S. average.

That increase in earnings translated into slightly higher — 12 percent above 2008-2009 levels — and more frequent remittances, according to the study. Another surprising finding was that remittances by women are rising while those sent by men have remained stable, said Nancy Lee, general manager of the Multilateral Investment Fund.

Sixty-seven percent of the migrants reported they saved money in some way, compared to 42 percent in 2009. But of those savers, just 26 percent said they had a formal savings account in the past 12 months.

The average savings of all migrants surveyed, including those who say they don’t save at all, was $3,447. Haitians, at 57 percent, topped the list of those who said they weren’t actively saving, followed by Colombian non-savers (42 percent) and Dominican non-savers (37 percent).

“Although migrants are saving more, a lot of it is outside the banking system,” Lee said during the Thursday launch of the study in Washington, D.C. And on the receiving end of remittance flows, she said, even fewer people banked.

“I would like to see the channeling of more remittances flows into savings accounts,” Lee said. MIF is working with remittance senders and recipients to encourage saving in “formal accounts so that they can invest in education, housing, business creation and other needs.”

It matters, said Orozco, because having a bank account is “a baseline for wealth accumulation,” and those who use banks have better access to credit, protection for their money, interest-earning potential and the ability to leverage their bank account into other financial activity.

But he said many do a cost-benefit analysis and figure the cost of getting an immigrant into a bank is high. “They don’t see an incentive to get them into the system,” Orozco said.

Almost half of those migrants without bank accounts said their legal status was one reason they avoided banks, and a quarter said they didn’t need an account — a frequent response among low-income groups living in cash-based societies.

Another factor that cuts into asset-building is the deportation of 300,000 to 400,000 unauthorized immigrants a year, Orozco said. In many cases, he said, the unbanked lose their savings in the process.

The financial vulnerability of migrants can be mitigated by increased access to financial products and higher savings levels, the study concluded.

Among its recommendations: more migrant-oriented financial products and services — including those with lower fee structures; further development of internet-based money transfer services, making it easier for migrants to open bank accounts in their home countries while they live abroad; and improving financial literacy among migrants and those who receive their remittances.

“The impact of financial education on asset-building is quite strong,” Orozco said.