Determining Remittance Caps

The importance of the baseline remittance cap cannot be underestimated. A cap that’s too high will lead to fewer immigrants considering it in their work-life decisions and render any system of regulation ineffective and pointless. Conversely, if the remittance cap is too low, it could lead to significantly reduced capital flows to many underdeveloped countries. As many families use remittance income to afford food, education, housing, or healthcare, any large-scale effort to reduce these flows could have tremendously negative effects on those already struggling around the world. To accurately assess the most humane yet binding baseline remittance cap requires a better understanding of individual American immigrants’ decisions about how much to send in remittances.

Remittance cap minimums and maximums should also be established. If there were areas where immigrants simply weren’t allowed to remit any part of their income, that would be unnecessarily cruel, as well as a major impediment to immigration to that region. It thus undercutting the goal of spreading immigrant populations more equally across the country. Similarly, establishing a remittance maximum is very important, since a high cap will weaken the system in its task of accomplishing its policy goals.

Remittance regulation baselines, maximums, and minimums are all mutable; they can be changed through legislative action, executive adjustment, bureaucratic calculation, or any other method as designated through official policy. But in times of economic recession or depression, in order to revitalize aggregate demand and return the economy to producing at its full capacity, the total allowable amount of remittances should be lowered for a period of time. To take such drastic action, policy deciders would have to weigh the good of the resultant new consumer spending with the rights and needs of immigrants themselves, especially for those who remit. For example, remittances tend to be a more consistent source of external financing for many countries, help smooth aggregate consumption over time, facilitate access to credit, and help those in the underdeveloped world gain access to education by letting them offset any lost labor income with remittance income (Beaton et al. 2017, pg. 28-33). Foreign aid flows are often discussed as an important method of assisting underdeveloped world, yet are dwarfed by remittance flows; for example, Guatemala received about 300 million dollars in foreign aid allotments from the United States (USAID 2018), while also benefiting from over 6.5 billion dollars in remittances, nearly 10 percent of the nation’s GDP (Wormald 2018). There is a greater degree of reliability with a financial flow based on individual, microeconomic decisions rooted in family connections, rather than a financial flow determined through political forces and influences unbound by those social factors. All that said, caution must define remittance regulation given how much is on the line for immigrants and their communities.

Lowering the baseline, the maximum, and the minimum all have separate effects. The lowering of the maximum could have the effect of further increasing immigrants response to remittance caps. For example, immigrants who wish to remit the largest amount of their income would need to become even more attuned to local considerations, and thus even more sharply maximize social good and minimize social ill in a well-constructed system. Not all immigrants aim to remit as much, and so its effects could be relatively paltry. A reduction in the minimum might have little actual effect, since many immigrants living in such low-remit regions may simply not remit any income, or so little that it does not factor into their work-life decisions. Lowering the baseline could have large-scale effects on immigrant work-life decisions, and at least until immigrants responded to such changes, could result in significantly fewer total remittance flows.

Furthermore, such a system could prioritize any factor proposed, such as placing the well-being of unskilled laborers first and using that score of the region to determine a great part of the remittance cap. Alternatively, diversity considerations may also be worthy of the most interest, or local capacity utilization if many localities are facing major internal migrations. As aforementioned, to propose a remittance regulation system is akin to asking what immigration’s impacts and consequences are for the immigrant’s resident country; as such if the phenomenon is shown to have more negative effects (or positive ones for that matter), more factors could included. Such a framework allows for a variety of differing policy priorities, and the addition of other factors would be welcome as long as they assist in the goals of maximizing social good and minimizing social ill.