International contract labour migration from Bangladesh: A poverty reduction strategy
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International contract labour migration from Bangladesh: A
poverty reduction strategy
Md. Lutfur Rahman
Human resources are an inextricable component of the economy of Bangladesh and
are especially prospective, opening a window of opportunity for the nation to
achieve its overarching development goal – poverty alleviation. Poverty has been
defined in the country as a situation where people are unable to meet the cost of
basic needs, particularly food, clothes, education, health treatment and shelter
(BBS, 2011). As many countries experience a shortage of unskilled and low-skilled
labour, Bangladesh is in the advantageous position to offer such much needed short-
term workers on a contractual basis, a type of migration known as international
contract labour migration (Hossain, Hoque, & Barkat, 2014). By offering its
surplus labour forces to the international labour market, Bangladesh has been
earning significant migrant remittances: money sent home by migrants to family
and friends (Hossain et al., 2014). Migrant remittances have been increasingly
considered the major catalyst in poverty alleviation in Bangladesh since the 1990s.
In recent times, this sector has been incorporated into the development agenda of
the country and thus international contract labour migration is promoted as a
government strategy for poverty-reduction.
This essay argues that international contract labour migration from Bangladesh and
associated remittances are effectively contributing to the poverty-reduction of the
country, both at household and national levels respectively, by raising household
income and by having a multiplier effect on the national economy. The following
section highlights the demographic background of Bangladesh, its levels of poverty
and the significance of migration. Then the essay outlines the academic debates on
the migration and poverty-reduction nexus, signposting two contrasting views:
pessimistic and optimistic. After that, it discusses how Bangladesh is utilising the
opportunity of international contract labour migration as a strategy for poverty-
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reduction. Finally, the essay presents a case study to strengthen the argument that
international contract labour migration from Bangladesh contributes to the
alleviation of poverty, both at micro level of household and macro level of national
economy.
Understanding the demographic context of the country at the very outset will help
to better understand the rationale and motives of labour migration from the country.
Being a small deltaic country in South Asia covering an area of 147,570 square
kilometres, Bangladesh has a population of nearly 160 million, being the eighth
largest in the world (GoB, 2014). The population density per square kilometre of
1015 people is one of the highest (GoB, 2014). Catastrophic realities such as floods,
droughts and cyclones are regular occurrences in the country, as is political turmoil.
After a few years of independence from 1971, the country experienced authoritarian
rule under the control of the military. However, after the re-establishment of
democracy in 1991, the country started to experience economic growth and positive
social changes in terms of improvements in per capita gross domestic product
(GDP), literacy and employment opportunities.
Nonetheless, Bangladesh is still one of the least developed countries of the world.
The growth in the labour force in the country has outpaced growth in its
employment (Saleh, 2014). Although the official unemployment rate is 4.5% (BBS,
2011), the rate of underemployment is more than 20% (Saleh, 2014). Almost one
third of its population (31.5%) are still living below the poverty line (BBS, 2011).
A significant portion of this population live in extreme poverty, a situation where
people are unable to afford adequate food to support their daily required calorie-
intake (Akash, 2014). The incidence of poverty is higher among women, who are
the poorest of the poor in every respect, ranging from health and nutrition to
education and income (Siddiqui, 2003).
Bangladesh has been a major source of semi-skilled and low-skilled workers for
many countries, especially in the Middle East. Currently, the number of male and
female Bangladeshi migrants working overseas is more than 8 million, a significant
statistical reality, representing more than 5% of the total population (Barkat,
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Osman, & Gupta, 2014). In 2012, migrants remittances sent through lawful
channels alone was equivalent to USD14.46 billion, ranking Bangladesh sixth
among the top-ten remittance-receiving countries, whereas if remittances through
the informal channels are added, the total amount is estimated to rise to around
USD20 billion (Barkat et al., 2014). It is interesting to note that the amount of
foreign aid received by the country in the same period was only 2.80 billion.
Realising the size and importance of the sector, the government has focussed on the
development of the sector for poverty reduction. The Ministry of Expatriates’
Welfare and Overseas Employment is in charge of the international migration sector
and solely focuses on two strategic areas: creating international employment
opportunities and ensuring the welfare of expatriates by addressing any problems
they encounter (GoB, 2015). The strategic objective of the ministry is to contribute
to the country’s broader development goal of poverty reduction by increasing the
flow of remittances from expatriate workers (GoB, 2015). In doing so, the ministry
has been promoting male and female international contract labour migration as a
strategy for poverty alleviation after completely withdrawing the ban on female
labour migration since 2007.
However, debates continue among scholars, policy-makers and practitioners in
development, as there is no consensus view as to whether migration contributes to
poverty-reduction. The literature on migration is clearly divided into two
contrasting views: pessimistic and optimistic (more recent). While one extreme
associates migration and migrant remittances with a vicious circle of aggravating
poverty (Reichert, 1981), the other extreme promotes them as the ‘new mantra’ for
alleviating poverty (Kapur, 2003). Each extreme has their own set of assumptions
in regard to migration and its impact on poverty-reduction. The reality might lie
somewhere between the two extremes of the spectrum depending on the specific
context and nature of migration.
One extreme can be characterized as the perspective that Reichert (1981) has called
the ‘migrant syndrome’ or the vicious cycle of poverty that ensues through the
process of migration. This perspective argues that migration promotes
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underdevelopment and poverty because international migration channels valuable
labour from the developing countries to the more developed ones, which hampers
local production of tradable goods (Binford, 2003). This extreme position views
migration as a self-perpetuating process that creates more migration (Massey,
Arango, Hugo, Kouaouci, & Pellegrino, 1999). This migrant syndrome is termed
‘brawn-drain’ (Penninx, 1982, p. 793) in that it represents the large-scale departure
of the most active and dynamic work-force from an economy (Lewis, 1986;
Papademetriou, 1985). This ‘lost labour’ effect is linked to decreased production in
developing countries, which, in turn, reinforces the ‘poverty-trap’ (Lipton, 1980;
Myrdal, 1957; Rubenstein, 1992).
In addition to this lost labour effect, the pessimistic perspective holds the view that
remittances are mostly used for consumption purposes instead of investment. A
number of studies demonstrate that remittances undermine local production by
favouring imported consumer goods and other non-productive areas such as land
purchase (Appleyard, 1989; Entzinger, 1985; Lipton, 1980; Russell, 1992). The
increased expenditure on consumption and land purchase leads to price-escalation,
which reduces the purchasing capacity of other, poorer non-migrants (Appleyard,
1989; Russell, 1992). Such inflationary pressure on economies that is induced by
remittances, also known as ‘Dutch disease’, not only further marginalizes the
poorest people but also weakens the competitiveness of other exports from the
developing countries (Acosta, Lartey, & Mandelman, 2009).
Nevertheless, despite some persuasive arguments from those who hold the
pessimistic view, this perspective can be questioned on the basis that evidence
increasingly suggests that the pessimistic perspective is based on weak analytical
and empirical foundations. This undue pessimism about migration is partly due to
the methodological weaknesses of studies influenced by this perspective and their
a narrow perception of development (Stark, 1991; Taylor et al., 1996a). Recent
research from the developing countries demonstrates that remittances support
migrants and their family members through raising their income levels and allowing
them to invest in cultivation and other productive enterprises and economic
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activities, rather than creating an indirect dependency on migrant remittances
(Taylor et al., 1996c). Therefore, compared to non-migrant households, migrant
households instead show a higher tendency to invest in agriculture and other private
enterprises (Giuliano & Ruiz-Arranz, 2009; Haas, 2005; Zarate‐Hoyos, 2004).
The recent optimism in remittances and their potential of investment and raising
household income can be called the ‘developmentalist’ perspective, which is
associated with the new economics of labour migration (NELM) that emerged in
the 1980s and became more dominant in the 1990s (Massey et al., 1993). The
NELM model argues that migration does not occur solely on the basis of individual
decisions and their mere economic incentives (Stark & Bloom, 1985). Rather,
migration decisions are jointly made as a household strategy of raising income and
accumulating funds to finance new activities that will generate further income as
well as insuring against any risks associated with these new activities (Taylor,
1999). Therefore, by diminishing the production and investment related constraints
commonly faced by poor households in developing countries, migrant remittances
“set in motion a development dynamic” (Taylor, 1999, p. 64).
The new economics of labour migration introduces a paradigm shift in thinking
about the way the nexus between migration and poverty-reduction is hypothesized.
Previous studies were mainly based on neoclassical migration theory (Harris &
Todaro, 1970; Todaro, 1969), which viewed migrants as “utility maximising
individuals” (Haas, 2010, p. 231) and thus failed to consider other motives for
migration as well as the wider implications of migrants being part of families,
households and communities. In contrast, in the new economics of labour migration
theory, the motives behind migration such as increasing household income and
decreasing household risks of new investment seek a strong outcome of poverty
reduction both at household and country levels (Taylor, 1999). This new
conceptualisation of migration and poverty-reduction leads to hypotheses that were
beyond the purview of conventional migration theories and other empirical studies.
Therefore, inspired by this new economics of migration, a body of literature
focusses on a whole of household-farm survey that considers all aspects of
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household-farm production and income in order to capture the development link
overlooked by traditional models (Taylor & Adelman, 1996).
However, this optimism about the relationship between migration and poverty
reduction poses a danger and can be linked to neoliberal political philosophy. This
ideology is associated with the idea of the minimal state, also known as the ‘third
way’ approach, where practically everything, other than armed forces and law
enforcement, are left to the free dealings of the citizens (Thorsen, 2010). Similarly,
on a critical note, when Kapur (2003) perceives migrants’ remittances in terms of a
principle of self-help in which migrants, not the government, are the biggest
provider of foreign aid, he deliberately points to a communitarian ‘third way’
approach. Such optimism poses a real danger of ignoring the previous empirical
and theoretical understanding that the relationship between migration and poverty
reduction is essentially of a non-linear nature due to their contingency on broader
development conditions and structures.
Public policies are fundamentally important for crafting favourable circumstances
for alleviating poverty and particularly for motivating migrants to engage in
productive investments. Public policies adopted by the government increase the
effectiveness of social, economic and political institutions in order to facilitate the
equitable access of the general population to basic amenities and markets (Haas,
2010). The optimistic agenda celebrating migration and remittances as a principle
of self-help development not only swings attention away from structural constraints
but also the inadequate capabilities of ordinary people to overcome these. This
optimist framework overlooks the important role of the state in shaping a fertile
ground for growth and poverty alleviation.
Having reviewed the theoretical debates on the nexus between labour migration and
poverty alleviation, it is time to look more specifically at this nexus in the context
of Bangladesh. The lost labour effect or the ‘brawn-drain’ as argued by the
pessimistic school of thought is not applicable in the case of international contract
labour migration from Bangladesh. This is because Bangladesh is a labour-surplus
country with huge unemployment and underemployment and, therefore, this loss of
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labour has zero opportunity cost for Bangladesh (Lewis, 1954). As a result,
Bangladesh can sacrifice its surplus workers to migration without hampering local
production. Instead of a loss in local production, such labour migration actually
contributes to financing of the income generating activities of the remaining
members in the household by sending remittances (Stark & Bloom, 1985).
Migrant remittances are a direct positive impact of migration, especially in the case
of labour migration from Bangladesh. Due to social, cultural and religious norms,
people in Bangladesh commonly believe in familism, which represents a
subordination of individual needs to the family and sense of belonging to the family
by supporting other members in the family in order to achieve family goals and
maintain family continuity (Uddin, 2008). In this context, migration decisions are
made as a household strategy to raise and sustain household income, which is the
fundamental argument of the new economics of labour migration theory.
Consequently, a migrant member of the household earns money overseas to provide
support in the form of remittances for household goals and other family members
left behind.
In the context of Bangladesh, migrant remittances contribute to raising household
income and stimulating production. Such remittances enable other members in the
family to become economic agents by overcoming their production constraints; for
example, shortage of capital and associated risks (Stark, 1980, 1982). Thus, they
actively engage in economic activities such as agriculture, small enterprises and
other income generating activities. Moreover, by promising to send further
remittances if needed, migrants serve as insurance against any risks associated with
production activities. Therefore, migrant remittances directly and indirectly
contribute to poverty alleviation in Bangladesh by increasing family income, as
illustrated in a number of micro-level studies that offer empirical evidence to
support this new economics of labour migration (Barkat et al., 2014; Hossain et al.,
2014; Mahmud, 1989; Taylor, 1999).
Having established this positive link between labour migration and poverty-
reduction at the micro-level in Bangladesh, it now becomes easier to understand the
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impact at the macro-level. As migrant remittances increase individual and
household incomes, they also have a multiplier effect on national incomes,
production and employment (Taylor, 1999). This is because households and firms
are linked together through markets and, therefore, the linkage of expenditure
diffuses the benefits of migration from migrant to non-migrant households and
broader production enterprises in the wider economy (Adelman & Taylor, 1990;
Stahl & Habib, 1986). It is interesting to note that when migrant remittances flow
to poor households, their consumption and expenditure behaviour favours locally
produced goods, which contrasts with wealthier households whose consumption
behaviour mostly favours imported goods (Habib, 1985; Mahmud, 1989). In this
way, labour migration associated with poor households supports local production
and employment and thus indirectly contributes to poverty alleviation at the
national level in Bangladesh (Ali, 1981).
The sixth five-year plan (2011-2015), which is one of the top-level planning
documents of the government of Bangladesh, accordingly acknowledges the
significance of labour migration and migrant remittances in poverty alleviation
(GoB, 2011). The plan correctly identifies the influx of such remittances as the
single most important safety net programme that supports poverty-reduction in the
country since the 1990s. According to the plan, the government keeps endeavouring
to widen the opportunities for short term labour migration across the globe, while
supporting such migration through skills development training and financing of
migration in the northern and the north-western parts of the country, where the
conditions of poverty are most entrenched. Furthermore, the sixth five-year plan
ensures that efforts will also continue not only to reduce the transaction costs of
migration and remittances through direct government intervention of eliminating
middlemen in the migration process and improving banking support to migrants but
also to ensure that male and female migrant workers can enjoy their human rights
and are treated with dignity (GoB, 2011). While endeavours will continue to
increase remittances through promoting short term labour migration, government
will continue to create opportunities for productive use of remittances through
support programs for micro and small enterprises (GoB, 2011).
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In light of the above, the promotion of international contract labour migration as a
strategy for poverty alleviation in Bangladesh has been effective in terms of several
indicators of poverty reduction. While migrant remittances have contributed
directly to gross national income (GNI), they have also contributed indirectly to
real growth in gross domestic product (GDP) (Adams & Page, 2005; Barkat et al.,
2014; Chowdhury, Hamid, Chatterjee, Hamid, & Chatterjee, 2010). For example,
migrant remittances constituted more than 11% of GDP and about 51% of total
exports in 2012 (Barkat et al., 2014). In addition, whereas 31.5% of households in
the country were classified as poor in 2011, only 10% of the migrants’ households
were classified as poor in the same year (BBS, 2011). Other indicators such as
average household income and expenditure on food, education, health and arable
lands have also increased in migrant households compared to national data (Table
1). According to a United Nations (2013) report, Bangladesh, supported by a
sustained influx of migrant remittances, maintained solid levels of investment and
consumption in 2012.
Indicators National Data Migrant
Household Data
Poverty (households under
poverty line)
31.5% 9.9%
Annual average household
income
BDT 0.181 million BDT 0.230 million
Annual average food expenditure BDT 0.952 million BDT 1.224 million
Annual education expenditure BDT 0.009 million BDT 0.012 million
Annual healthcare expenditure BDT 0.010 million BDT 0.016
Hygienic toilet facilities 51.5% 73.7%
Average ownership of
agricultural lands
64.1 decimals 124.1 decimals
Table 1: Comparison of different indicators of migrant household data against
national data in Bangladesh, based on Barkat et al. (2014), BBS (2010), BBS (2011)
and IOM (2010).
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The migration experience of Alim Mia, which was documented in a case study used
in the study of Migrant Forum in Asia (MFA, 2012), is beneficial for understanding
the impact of international contract labour migration on poverty-reduction at the
micro and macro levels. Alim Mia, from a remote village in the northern region of
Bangladesh, was a seasonally unemployed man in his mid-thirties who used to work
in others’ agricultural fields during harvesting. With his small income from this
seasonal employment, he could not maintain his family of six, which included four
children. He was desperately looking for employment that would provide a
sustained income and finally went to Saudi Arabia as a short-term international
contract labour migrant to work as a gardener.
Alim Mia was able to remit enough money that the family could not only survive
but also utilize excess money for further investment. The family could now afford
the daily calorie-intake required and were able to send the four children to school,
which is a long term profitable investment. With the additional money, his wife
started a poultry firm that was also profitable, yielding further income for the family
and also contributing to the national economy. After returning from Saudi Arabia,
Alim Mia further invested in the poultry firm to make it bigger and also bought
some cultivable lands. Alim Mia and his family, who previously lived in extreme
poverty, had now become very well off economically and socially due to his
undertaking international contract labour migration (MFA, 2012).
Although migration and remittance economics sometimes exacerbates poverty in
developing countries depending on the nature of and motivation for migration,
international contract labour migration from Bangladesh and associated remittances
are playing a significant role in achieving the broader development goal of poverty
alleviation in the country. This is mainly because Bangladesh is a small country
with a very large population, in which a significant proportion of people are
unemployed or underemployed but who are able, when they have the opportunity
to migrate on a short term basis, to earn money and raise the household income to
levels that enable them to invest in productive activities such as agriculture and
small enterprises. The government of Bangladesh is actively promoting this type of
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migration as a strategy for poverty alleviation by enabling unemployed or
underemployed poor people to migrate through financing their migration and
providing skills development training.
While debates about the impact of migration on poverty reduction continue, policy-
makers and academics are increasingly forming a consensus view that, in the
context of Bangladesh, international short term labour migration brings benefits for
the country in terms of poverty reduction at both the household and national levels.
However, poor people face some practical challenges in regard to migration; for
example, financing their migration and the high transaction costs that are involved.
The government of Bangladesh remains active through its institutional mechanisms
to empower the poor to overcome these problems and, in addition, to create an
investment environment in which remittances can be fully utilised for productive
purposes. Therefore, if the government can continue its current focus of promoting
this sector of development activity, international contract labour migration from
Bangladesh can more rigorously contribute to the achievement of the broader
development goal of poverty alleviation.
Word Count: 3279
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