Global Money Transfer Monthly

US – The largest Outward Remittance Market Globally

The US is the world’s largest outward remittance market. The total amount of outward remittance was about USD42.2 billion, or 0.3% of the country’s GDP in 2006. According to UN population estimate, the US has the largest number of immigrants, at 38.4 million in 2005, accounting for 12.9% of the total population. The US emigrants constituted about 0.8% of the total population. The top ten immigrant sourcing countries for the US at the end of 2005 were Mexico, Philippines, Germany, India, China, Vietnam, Canada, Cuba, El Salvador and the UK. Majority of immigrants are from Mexico and other Latin American countries.

The declining trend in the native working population of the US, (native working population ratio fell to 65.6% in 2007 from 65.8% in 2006), has increased the demand for skilled immigrants. However, continued weakness in the US economy, depreciation in the US Dollar and tighter border controls have impacted the US immigrant market substantially in recent times.

With slowdown in the US housing sector, semi-skilled immigrants, mainly from Mexico, and other Latin American and Caribbean countries were impacted the most in terms of job opportunities and average wage level. In recent times, a significant number of people from Latin countries have started migrating to European Countries. In the near term, future of the US immigrant market would largely depend on how the US economy recovers from the slowdown caused by mortgage crisis.

Table 1: Countries receiving the largest number of migrants, 2005 (in millions)

Immigration Countries	Number of Migrants
US	38.4
Russia	12.1
Germany	10.1
Ukraine	6.8
France	6.5
Saudi Arabia	6.4
Canada	6.1
India	5.7

Sources: UN Population Division

Table 2: Countries from where most remittances were sent, 2006 (in USD billion)

Remittent Countries	Total Outward Remittance
US	42.2
Saudi Arabia	15.6
Switzerland	13.8
Germany	12.3
Russia	11.4

Sources: Development Prospects Group, World Bank

Immigration to US and Outward Remittance

According to UN population division, the US has the largest number of immigrants (38.4 million in 2005), and also the biggest remitter with outward remittance of USD42.4 billion.

The outward remittance from the US has increased substantially over the years. It rose to USD42.2 billion in 2006 from USD30.9 billion in 2005.

(See Table 3: US Inward & Outward Remittances)

Growth Drivers:

Declining native working population ratio - a major driving force for high outward remittance:

The working population of the US has reduced substantially over the years and is expected to fall further. According to the US Census Bureau, in 2002, there were 4.4 people in the working age population (25-64) for every retired person (65+); by 2025, this is predicted to drop to 2.7. In order to maintain the same proportions in 2025 as in 2002, the US would need 110 million more people in the 25-64 age group.

The declining trend of the US working population is one of the major driving forces for the large number of immigrants over the years. The percent of US working population has reduced to 66.0% in 2007 from 66.2% in 2006, while the percent of its native working population fell to 65.6% in 2007 from 65.8% in 2006. The gap in the working population is being filled by overseas workers over the years and this trend is expected to continue.

Globalisation of Economies:

In recent years, with increased globalisation of economies, opportunities for migrants have increased substantially. Companies in developed nations are looking for more skilled workers at lower costs to reduce their employee cost, a need met by the immigrant workers. The recent mortgage crisis would lay more pressure on US companies to reduce their costs, thereby leading to increased skilled labour force sourcing. Lack of jobs for a significant number of people living in several Latin American countries and sense of privilege to live in the US has also attracted large number of immigrants to the country over the years.

Table 3: US Inward & Outward Remittances

(USD million)	2000	2001	2002	2003	2004	2005	2006	2007e
Inward remittance flows	2,835	2,931	2,811	2,813	2,822	2,890	2,880*	3,000
Workers' remittances	...	...	...	...	...	...	...	...
Compensation of employees	2,835	2,879	2,811	2,813	2,822	2,890	2,880	...
Migrants' transfer	...	...	...	...	...	...	...	...
Outward remittance flows	30,961	34,592	36,126	36,545	39,347	40,635	42,222**	...
Workers' remittances	23,442	26,506	27,746	28,033	30,384	31,345	32,810	...
Compensation of employees	7,519	8,086	8,380	8,512	8,963	9,290	9,412	...
Migrants' transfer	...	...	...	...	...	...	...	...

Source: World Bank

* 0.02% of GDP in 2006. ** 0.3% of GDP in 2006. This table reports officially recorded remittances. e- forecasted figure.

Table 4: Employment Status of Foreign-born and Native-born population, 2006-07 annual averages (all figures in, ‘ 0 00)

	2006					2007
	Total Population	Working Population	% of Working Population	Employed	% of Employment	Total Population	Working Population	% of Working Population	Employed	% of Employment
US (Total)	228,815	151,428	66.2%	144,427	95.4%	231,867	153,124	66.0%	146,047	95.4%
Native	195,082	128,280	65.8%	122,202	95.3%	196,850	129,130	65.6%	123,079	95.3%
Foreign born	33,733	23,148	68.6%	22,225	96.0%	35,017	23,994	68.5%	22,967	95.7%

Falling Average Remittance Costs:

The average remittance cost fell considerably in recent years with the advent of new technologies and increased number of players in money transfer business. The average remittance costs in the US-Mexico corridor, one of the largest remittance corridors, fell dramatically by nearly 55% between 1999 and 2004. Although remittance market has witnessed a significant reduction in transaction costs, there still exists significant scope for further reductions in the coming years, with more participation from banks, other financial institutions and by making more favourable laws in remittance receiving countries. (See Chart 2: Average Remittance Costs in US-Mexico Corridor)

Trends in Employment of Foreign-born Wage and Salary Workers in the US

The share of wage and salary workers who were foreign-born increased to 15.4% in 2006 from 10.6% in 1996. During the same period, the share of foreign-born in the total US civilian labour force increased to 15.3% (23.15 million) from 10.8% (14.30 million) and the same in total US population increased from 9.3% (24.56 million) to 12.1% (35.67 million).

(See Chart 3: Trend of Foreign-born Workers in US Labour Force)

From 2003 to 2006, the percentages of foreign-born among wage and salary workers have increased across all industrial sectors. Sectors such as construction (increased to 26.9% from 21.5%), other services (increased to 20.2% from 18.9%) and agriculture-related industries (increased to 34.5% from 32.7%) witnessed major growth.

(See Chart 4: Growth of Foreign born Workers across Industry Verticals)

Mexico-US is the largest migration corridor globally. In 2006, more than 11.5 million Mexican immigrants resided in the US, accounting for 30.7% of the total US immigrants and one-tenth of the entire population. Majority of the Mexicans are employed in construction, extraction or transportation occupations, largely due to low education level (three in five Mexican immigrants have no high school degree). A large number of illegal immigrants in the US are Mexicans. The Office of Immigration Statistics (OIS) has estimated that there were about 11.5 million unauthorized migrants in 2006, of which 6.6 million or 57.0% were born in Mexico.

(See Table 5: Global Migration Corridors)
(See Table 6: Total and Mexican Foreign-Born Population, 1960 to 2006)

Table 5: Global Migration Corridors

Migration Corridors	Number of migrants (in millions)
Mexico–US	10.3
Bangladesh–India	3.5
Turkey–Germany	2.7
India-United Arab Emirates (UAE)	2.2
Philippines–US	1.6
Afghanistan–Iran	1.6
Germany–US	1.4
Algeria-France	1.4
India-Saudi Arabia	1.3

Sources: UN Population Division

Concerns:

Slowing US Economy:

The US economic growth has declined significantly recently. The annual GDP growth rate has dropped to 2.2% in 2007 from 3.6% recorded in 2004 and is expected to fall sharply to 0.5% in 2008, according to IMF estimates. The weakening of the US economy has resulted in lesser job opportunities, a factor expected to affect immigration substantially. (See Table 7: Key US Economic Data) The ongoing mortgage crisis has hit the US housing sector badly. US Existing Home Sales fell 12.8% to 5652,000 in 2007 from 6,478,000 in 2006, while total value of residential construction fell 17% to USD473 billion in 2007 from USD570 billion in 2006. The crisis in the US housing sector has impacted the migrants significantly, as it has reduced job opportunities. About 40% of Mexican-born men were employed in construction, extraction or transportation occupations in the US; hence, the impact of housing slowdown is more prominent on Mexican immigrants. The recovery in the housing sector is not expected in the near term amid a negative overall economic sentiment.

(Table 8: Trend in the US Housing Sector)

Table 6: Total and Mexican Foreign-Born Population, 1960 to 2006

			Mexican-born
Year	Foreign-born	Rank*	Share of all Foreign-born	Number
1960	9,738,091	7	5.9%	575,902
1970	9,619,302	4	7.9%	759,711
1980	14,079,906	1	15.6%	2,199,221
1990	19,767,316	1	21.7%	4,298,014
2000	31,107,889	1	29.5%	9,177,487
2006	37,547,315	1	30.7%	11,541,404

Sources: Gibson, Campbell and Emily Lennon, US Census Bureau, Working Paper No. 29, Historical Census Statistics on the Foreign-born Population of the US: 1850 to 1990, US Government Printing Office, Washington, DC, 1999. Available here - Data for 2000 and 2006 are from US Bureau's Census 2000 and American Community Survey 2006, respectively

Note: *Rank refers to the position of the Mexican-born relative to other immigrant groups in terms of size of the population residing in the US in a given census year

Table 7: Key US Economic Data

Subject Descriptor	2002	2003	2004	2005	2006	2007	2007
Gross domestic product, constant prices (USD billion)	10,048.9	10,301.1	10,675.7	11,003.5	11,319.4	11,567.2	11,627.0
Gross domestic product, constant prices (Annual % Change)	1.6%	2.5%	3.6%	3.1%	2.9%	2.2%	0.5%
Inflation, average consumer prices (Index, 2000=100)	104.5	106.9	109.7	113.4	117.1	120.4	124.0
Inflation, average consumer prices (Annual % Change)	1.6%	2.3%	2.7%	3.4%	3.2%	2.9%	3.0%
Unemployment rate (% of total labor force)	5.8	6.0	5.5	5.1	4.6	4.6	5.4
Current account balance (USD billion)	-459.6	-522.1	-640.2	-754.9	-811.5	-738.6	-614.7
Current account balance (% of GDP)	-4.4%	-4.8%	-5.5%	-6.1%	-6.2%	-5.3%	-4.3%

Table 8: Trend in the US Housing Sector

	2006	2007	2008e	2009e
Existing home sales*	6,478	5652	5385	5,742
Existing home sales (% change-Year Ago)	-8.5%	-12.8%	-4.7%	6.6%
Residential construction**	570	473	379	369
Existing home prices (in USD, 000)	221.9	218.9	215.8	223.8
Existing home prices (% change-Year Ago)	1.0%	-1.4%	-1.4%	3.7%

Sources: National Association of Realtors

* Existing home sales of single-family homes and condo/coops; ** billion dollars

Table 9: US Economic Indicator

Annual Growth Rate	2006	2007	2008e	2009e
Non-farm Payroll Employment	1.8%	1.1%	0.2%	1.1%
Consumer Prices	3.2%	2.9%	3.4%	2.2%
Real Disposable Income	3.1%	3.1%	1.2%	3.0%

Sources: National Association of Realtors

The rising consumer prices amid declining real disposable income have impacted US consumer confidence. The growth rate in non-farm payroll employment has dropped significantly to 1.1% in 2007 from 1.8% in 2006, and the worst is yet to be witnessed with expected growth rate of 0.2% for 2008. The declining trend of non-farm payroll employment will largely impact the job opportunities of immigrants, as the native population is expected to ask for more job security in the current weakening economic environment.

(See Table 9: US Economic Indicator)

Depreciating USD:

The depreciation in the USD in the past few years against currencies of emigration countries such as Mexico, Brazil, China, Indian and Philippines has impacted remittance receipts in these countries adversely. Some of these currencies have however started depreciating in the past few months.

(Chart 5: Trend of USD vs Currencies of Major Emigrant Countries)

Recent Slowdown in Remittance Flows in the US-Latin America Corridors:

Although remittances to Mexico, Latin America and the Caribbean region continued to increase in 2007, their rate of growth has slowed noticeably. Remittances received by Mexico grew only 1.4% year-on-year during the first nine months of 2007, compared to over 20% annual growth during 2002-2006.

The slowdown in remittance for Mexico is partly due to the weak job market in the US, especially in the construction sector. The slowdown may also be attributed to tighter border controls and increased anti-immigration sentiment in the US. Apprehensions along the US-Mexico border have declined nearly 50% from the level in 2000, indicating a decline in the number of migrants trying to enter the US without proper documentation. The stock of migrants may not have changed much, but recent enforcement efforts appear to have reduced the number of seasonal migrants and their ability to send remittances, especially through formal channels. (Chart 6: Slowing Job Opportunities and Stepped-up Enforcement in the US)

The deceleration in the growth of remittances is less marked in Latin America and the Caribbean region outside Mexico. In El Salvador, flow of remittance rose 7.7% year on- year in the first ten months of 2007; in Honduras, it rose 11%; and in Guatemala by 14.4%. Better performance of El Salvador may be linked to the Temporary Protected Status (TPS) of more than 200,000 Salvadoran migrants in the US, who may feel less vulnerable to immigration enforcement. Honduras and Nicaragua also benefit to a smaller extent from TPS. While the US remains the major destination for Latin American migrants, there appears to have been a shift towards Spain and other European countries in recent years. According to recent estimates, the EU accounts for some USD4.3 billion of Latin America’s remittance inflows, with USD3 billion from Spain.

Grey Outlook:

The outlook for the US immigrant market does not seem promising at least in the near term. The slowing of the US economy, led by the housing sector crisis and the scenario of declining job opportunities is likely to affect the number of immigrants in the US. The depreciation of US currency is another grey factor that would determine future trend of immigration in the US. With decrease in the growth of non-farm payroll employment, job security concerns for native population is expected to rise, giving rise to demand for more job protection for locals, mainly in the low skilled and semi-skilled job profiles.