A smaller percentage of Mexican immigrants in the United States sent money back to their homeland than in 2006, according to new data from the Inter-American Development Bank’s Multilateral Investment Fund (MIF). The drop in remittances was steepest in states where immigration most recent — in so-called “new destination” states including Georgia, North Carolina, and Pennsylvania, remittances plunged from 80% in 2006 to just 56% in 2007. The data come from a survey of 900 Mexican and Central American immigrants, both legal and undocumented.
These reports are consistent with data from the Mexican central bank, which reports that remittances to Mexcio were essentially flat during the first half of 2007 as compared to the same period last year. In contrast, remittances to El Salvador, Guatemala and Honduras rose by an average 11% during the first half of 2007, compared with the same period last year. The explanation for the difference, suggests the MIF, is that Mexicans are far more likely to live in “new destination” states than are Central American immigrants.
The New York Times picks up the story from the political angle, suggesting that the uncertaintly regarding immigration laws in the United States has spurred immigrants to save. 83% of the immigrants survey said that they felt discrimination against Latino immigrants in the United States was growing. Nearly half of all immigrants surveyed in “new destination states” said they expected to be living in the United States in five years.
Mark Thoma at the Economist’s View points out that the “I might go home” story is only one of several that might explain the dip in remittances. Remittance rates can go down because immigrants decide to save more in anticipation of a return-trip to Mexico. But they can also go down because immigrants have less money to send. An unstable economy, unemployment, and the soft housing market are all good reasons to think that the immigrants in MIF’s survey may simply not have the cash to send home that they did last year.
These two hypotheses — call them the “I might go home” story versus the “I have no cash” story — are testable, presuming the data is available. And, of course, the two stories are probably intimately related, i.e. “I might go home” because “I have no cash.” In addition to citing increased discrimination, the immigrants surveyed by the MIF stated that finding a good-paying job this year was harder than it was last year. Heightened discrimination against Latinos was amongst the reasons they cited for *why* finding a good job was harder today. If I’m having trouble making ends meet in the United States, it’s probably a combination of heightened discrimination and the economic squeeze effecting all Americans. And if I’m having trouble making ends meet here in the U.S., I’m unlikely to be able to send much home. I might even start planning to head back to Mexico myself, which means I need to save, which means even less money to send home.
Why should we care? Remittances to Mexico from the United States totalled $23 billion in 2006, making them the country’s second-largest source of foreign income after oil. About 2 million Mexicans depend on remittances as a major source of their incomes, according to Donald Terry, manager of the MIF, and the slowing of remittances represents a lost “vital lifeline.”