How Does Emigration to the US Influence Economic Development in Mexico?

In the United States, most migration researchers tend to focus on the effects of immigration on the domestic economy and labor force. However, it is also important to understand the effects of emigration on economic development in sending countries. That is because policies can be designed to utilize emigration to promote the development of sending countries.

Such is the case for Mexico, which has been a major country of origin immigrants to the United States. Pew Research Center revealed that the US-Mexico migration corridor is the world’s largest[1]. Between 1965 and 2015, more than 16 million Mexicans migrated to the country[2], and Mexican immigrants by far are still the largest immigrant origin group. Similarly, the United States is also the major destination country for Mexican immigrants.

Demographic and Socioeconomic Characteristics of Mexican Migrants[3]

After 50 years of rapidly increasing immigration, the number of Mexican immigrants to the U.S. has stabilized. Surprisingly, however, migratory patterns from Mexico to the U.S. have changed. More Mexicans left than came to the U.S after the Great Recession. Between 2009 and 2014, around 870,000 Mexican nationals left Mexico to come to the U.S, while 1,000,000 Mexican nationals left the U.S. and went back to Mexico[4].

According to the Census Bureau’s statistics, in 2003, about 147,000 Chinese immigrants came to the U.S., compared with 129,000 Indian immigrants and 125,000 Mexican immigrants. Apparently, Mexico, overtaken by China and India, is no longer the top source of U.S. immigrants.

The decline in Mexican worker inflows is caused by the factors including but not limited to the shrinking demand for low-skill jobs in the United States after the recession, stricter border management, long-term decline in Mexico’s birth rates, and the rising Mexican economy[5].

(1) Age

The Mexican immigrant population is younger than total immigrants in the U.S. According to the U.S. Census Bureau 2014 ACS data, about 87 percent of Mexican immigrants were of working age (18 to 64), while for all immigrants, this number is about 80 percent.

(2) Education and English Proficiency

Unlike migration from elsewhere in the world, Mexican migrants to the United States originate from the less-educated and worse-off segment of the population. In 2014, only 6 percent of Mexican immigrants (aged 25 and over) had a bachelor’s degree or higher, compared to 29 percent of the total foreign-born population. In terms of English proficiency, 69 percent of Mexican immigrants (aged 5 and over) reported limited English proficiency (LEP), compared to 50 percent of all immigrants.

(3) Employment and Income

In 2014, about 69 percent of Mexican immigrants aged 16 and over were in the labor force[6]. Most Mexican immigrants work in the service industry (31%); the natural resources, construction, and maintenance industry (26%); and production, transportation, and material-moving industry (22%). Mexican immigrants had much lower income compared to total foreign population. For example, in 2014, median household income among Mexican immigrants was $37,390 while for the total immigrants, the median household income was much higher: $49,487.

Emigration Influence on Economic Development in Mexico

The emigration of Mexican immigrants into the United States would have influenced the economic development in Mexico in major two ways: 1) its labor market and 2) remittances into the country.

(1) Labor Market

According to Borjas’ negative selection hypothesis[7](2007), if migrants are not positively selected[8] from the general population, the departure leaves the general population better off with higher wages and more employment opportunities.

This, intuitively, should be the case for Mexico; from the demographic and socioeconomic information above, it can be expected that on average Mexican immigrants originate from the young, less-educated, and less wealthy segment of population in Mexico.

As a result, one may think that low-skilled workers emigration from Mexico would be an important advantage for Mexican labor market. Indeed, there is evidence for this; studies have shown that, between 1990 and 2000, migration has increased wages in Mexican labor market by 8 percent[9].

While some may argue that in recent years, there is a skilled fraction of Mexican workers that has increased and possibly more than that of the less-skilled fraction over the years, Clemens[10] (2014a) posited that the recent increase of inflows of skilled Mexican immigrants are likely temporary and cannot be perceived as future trends.

However, the migrant self-selection may not be straightforward. For example, Chiquiar and Hanson[11] (2002) found out that Mexican immigrants were actually on average more educated than nonimmigrants of Mexico and suggested that there is intermediate instead of negative selection of immigrants from Mexico. Generally speaking, the emigration effects on a sending country’s labor market are still debatable.

(2) Remittances

Mexico is the largest recipient of remittances in Latin America, with remittances totaling $22 billion in 2010[12] (about 2 percent of its GDP). This is important because remittances would eventually have a direct impact in the economy. Campos-Vazquez and Sobarzo[13] (2012) show that a percentage point increase in remittances as a share of GDP reduces inequality by around 0.08 percent and reduces poverty by 0.37 percent in Mexico. Additionally, while the impact of remittances on human capital and education is ambiguous, remittances are known to benefit those without health insurance.

The fiscal impacts of emigration are not avoidable when it comes to understanding the development in sending countries since emigration causes a reduced tax base in sending countries. Remittances also have impacts on investments and capital formation. According to Campos-Vazquez and Sobarzo[14] (2012), when remittances are taken into account, emigration is positive on both GDP growth and tax revenue in Mexico.

Yet, studies on the effects of remittances on a sending country’s economy have their own set of challenges. Clemens and David[15] (2014b) have discussed that between 2005 and 2009, there was actually a change in how remittances are measured at the national level and this might have resulted in an artificial increase in global remittances. Also, at the micro level, issues relating to survey representativeness, timeliness, and misreporting in nationally conducted surveys may have also either overstated or understated the volume of remittances. As a result, the true effects of remittances on economic development may continue to elude researchers and policymakers.

Conclusion

So, what can we say about the effects of emigration on economic development in the context of Mexico? On one hand, emigration’s influence on the Mexican labor market is not straightforward given the different sources of empirical evidence, as discussed above. Similarly, while remittances sent back to Mexico by Mexican emigrants are found to have helped alleviate poverty among nonimmigrants, studies of remittances are vulnerable to various challenges that may have influenced their accuracy.

Still, more studies like those described above are important in order for potential policies to be designed to utilize emigration to promote the development of sending countries like Mexico. As Clemens[16] (2014c) has pointed out, emigration’s influence on economic development should go beyond remittances and development research should broaden to take into account tools including increasing human capital investment, global diaspora networks, and transfer of technology and western cultural habits.

[1] http://www.pewhispanic.org/topics/migration/

[2] http://www.pewresearch.org/fact-tank/2016/02/11/mexico-and-immigration-to-us/

[3] Most numbers are from the U.S. Census Bureau (the most recent 2014 American Community Survey)

[4] http://www.pewhispanic.org/2015/11/19/more-mexicans-leaving-than-coming-to-the-u-s/

[5] http://www.migrationpolicy.org/article/mexican-immigrants-united-states

[6] http://www.migrationpolicy.org/article/frequently-requested-statistics-immigrants-and-immigration-united-states#Mexican Immigrants

[7] http://www.nber.org/chapters/c0098.pdf

[8] Positive selection here refers skilled workers emigrate out of home countries.

[9] http://www.migrationpolicy.org/research/RMSG-development-fiscal-effects-emigration-mexico

The number was mentioned in the article above.

[10] http://www.cgdev.org/publication/skilled-migration-mexico-trends-concerns-and-outlook

[11] http://www.nber.org/papers/w9242.pdf