Page 103 - Azerbaijan State University of Economics

Fadai Mardanli Mehman, Vildan Zahidkizi Rizayeva: Do Remittances Compensate for the
Labor Market Gaps Created by Emigration?

So what are the implications of these findings for policy and research? For policy-
makers in high-emigration countries‚ the challenge is to use remittances to create more
opportunities at home so that work abroad is a choice‚ not a necessity. These may
include remittance-receiving entrepreneurship incentives (ie small business loans‚
matching investment programs)‚ place-based incentives to make the business
environment more amenable to diaspora investments‚ training for human capital
development‚ encouraging returnees‚ or increasing workplace opportunities for those
who stay behind (ie if skills shortages exist) (Guiliano & Ruiz-Arranz‚ 2009). Labor
market policies may be warranted where waiting for remittances means individuals
exit the labor force. Part-time work programs‚ or community development work
schemes widely appealing to remittance-receiving families‚ might help prevent a loss
of work culture and the use of worker skills (Guiliano & Ruiz-Arranz‚ 2009).

More fine-grained data on labor underemployment and participation would be useful:
Nepal is again a case in point that low unemployment is not always a good indicator‚
as it masked high outflows and decreasing participation rates. Another potential
avenue for further work would be to focus on the direct relationship between
remittances and labor market outcomes‚ at a more disaggregated level. Micro-level
applications (household surveys) show for instance that remittance-receiving
households tend to reduce their input into labor-intensive farming (as they can afford
not to) allowing for the scaling up of findings in the micro-level domain to gain
understanding into the national effect on labor use (Azizi‚ 2018).

To summarise‚ remittances do not replace the labor that has left a country‚ but they do
cushion the labor-migration process‚ and are associated with many positive development
factors (including reduced poverty‚ higher standards of living‚ and even macroeconomic
stability). However‚ it is often found that there are still gaps in the labor market (missing
professions or youth sitting at home‚ waiting for a chance to join those going abroad).
Emigration and remittances should create a virtuous cycle‚ whereby migrants return with
new skills and savings‚ and invest in and start up businesses in the origin country. The
home economy grows and the families of migrants build up their human capital. Even in
our countries‚ that cycle is only weakly in motion. Kyrgyzstan‚ Moldova‚ Nepal‚ and
Tajikistan have also made progress‚ but none has done so in a manner that even comes
close to replacing the labor it has sent abroad.

The answer is simple: remittances can only go so far in compensating for labor market
failures. They can act as a safety net but cannot substitute for good domestic economic
management and the creation of decent jobs in the recipient country. However‚
countries that experience labor emigration must ultimately provide stable employment

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