International contract labour migration from Bangladesh: A poverty reduction strategy

1

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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