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UK Migrant Workers and the Cost of Money Transfers

During the past few months news about migrants in the UK and elsewhere has dominated the headlines. Many of the articles stress the need for a “fix” to the migrant problems. Some point out that the issue of migrants is in part responsible for why the UK is considering leaving the European Union.  The issues surrounding migrants are complex and at times confusing.

In any discussion on migrants it is important to differentiate between economic migrants and asylum seekers.  Economic migrants have arrived in the UK in search of work to improve the standard of living they and their family enjoy, and often to help their families in their home countries. The motivation for asylum seekers is based on political situations, which can include persecution, genocide, or dangerous living situations in their home country.  In many cases asylum seekers see migration as the only means to insure the safety and survival of their families.

Migrant workers, according to the latest report of the Oxford University migration observatory make up a large percentage of the UK’s middle-level work force.  Six countries are responsible for more than three-quarters of the UK’s EU born migrant population; Spain, Italy, Portugal, Poland, Romania and Hungary.

The key drivers behind this type of migration include high unemployment in southern Europe, specifically Spain, and low wages in Eastern Europe.  Observers say that some of these factors, such as Spain’s high unemployment numbers, may well be temporary.  Others, such as the relatively low wages in Romania, are like to persist. Changes in the economy in their home countries may well result in many migrant workers returning home.

One of the economic aspects that does not receive a great deal of news coverage relates to remittances. Remittances are money that migrant workers send home in order to help their family members. Economic analysts state that remittances make up a large percentage of the EU’s Gross Domestic Product (GDP).

According to the World Bank, remittances generate three times more money than the total global aid budget annually.  In some countries remittances exceed or equal the value of the countries’ leading exports.

However high fees are severally reducing the impact and power of these remittances.  In effect the remittance market is a duopoly of Money Gram and Western Union.  Transfer fees between countries with can be as high as 29%.

The World Bank report noted that “Forcing migrant workers to pay as much as $50 to send $200 is wrong, especially when they are sending salaries they have earned in the hope of supporting their families back home. Two-hundred dollars often is a very significant sum for migrants’ family income.”

Migration Worldbank Report

 

These high fees continue to be a matter of course, even though the G8 countries pledged to reduce the world’s mean remittance fee to 5%.

MoneyGram and Western Union executives defend the fees as necessary to ensure the safety of the transfers, to comply with compliance polices, and to fund technological infrastructure.

Third party remittance companies, such as TransferGo, are at the forefront of changing the nature of remittances.

Daumantas Dvilinskas, CEO and co-founder of TransferGo said: “This money that people send home is the difference between barely making ends meet and entering a middle-class lifestyle. Only a couple of years after our journey began, blue-collar migrants can now save more than 90 percent on their transfer costs and can deliver money to their families on the same business day, which is a huge step forward.”

The World Bank says that a reduction in money transfer fees will save poorer nations as much as $16 billion per year. These savings can equal significant changes in the standard of living in those countries where remittances are often vital.  While the G8 countries and the MoneyGram/Western Union duopoly have done little to lower the costs of money transfers, TransferGo has proven that making money transfers can be secure, easy and inexpensive.

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