Economic development — practice question

Many low-income countries have very large shares of their people living below the World Bank’s absolute poverty line of $2.15 per day (United States dollars, 2022). One way these countries try to cut poverty is through workers moving to richer countries. These migrants send part of their earnings, called remittances, back to support their families at home. In this way, overseas workers create a link between migration and development. The amount of remittance money sent is greater than the foreign direct investment and official development aid received by middle-income and low-income countries. In 2022, total remittances received by those countries came to $650 billion, and 45% ($293 billion) was received by only five countries. Around 50% of migrants from low-income countries went to high-income countries. Migrants can see their incomes rise sharply. A nurse may earn seven times more in Australia than in the Philippines, after adjusting for purchasing power parity (PPP). Unlike official aid, remittances go straight to the recipients and provide a steady source of income. They may be used to buy extra food and can also give the recipient savings. In disadvantaged families, they may reduce child labour and allow more spending on education through higher enrolments and more years of completed schooling. Migration can lower unemployment and push wages up in home countries. It may also bring larger gains for the home country by raising the rates of return on human capital because better, more productive, and higher paying jobs are created. When migrants move to a host country with an ageing population, the average age may fall. This can increase the size of the labour force, reduce the age dependency ratio and make a positive tax contribution. Migrants increase demand for output in the host country and may use housing in less popular areas. Those with a high level of education make an even greater contribution to economic output.