Postal Remittance Services & Regulation As a Policy Tool for Immigration | Will Harmer(1), University of Massachusetts Amherst

Abstract

Remittances have grown in recent years to be a major capital flow, with American outflows more than doubling in inflation-adjusted dollars from 1990 to 2009 (CBO 2011, pg. 5). In 2016, they amounted to nearly 140 billion dollars, with even more sent through informal networks which are hard to measure and track (Wormald 2018). Currently, immigrants in America are overcharged by high fees associated with private banking remittance services, facing an average fee of over seven percent (Beaton et al. 2017, pg. 20). The current remittance market offers a variety of policy solutions to immigration policy, two of which are proposed here. The first policy proposed is for the Postal Service to assuage such overcharging by offering low-fee remittance services to documented immigrants. Additionally, placing the transfer of remittances in public hands offers the opportunity of a policy tool for immigration as a whole. The second policy proposed is to create a remittance cap as a percentage of individual immigrant’s income based on local economic factors; the purpose is to regulate remittances to leverage immigration flows to positively affect domestic social welfare.

The topic of immigration has possessed the national mind for years, the economic effects of which have held a foremost position in public anxieties. Yet, one of the most distinctive economic activities of immigrants often goes unmentioned and unconsidered: remittances. Remittances constitute “sending money...[,] making financial investments, or returning to the home country while retaining bank accounts or claims on other financial assets” when in their resident country (CBO 2011, pg. 1) Yet, there is some variety in measures of remittances, such as the World Bank defining remittances largely as the sum of employee’s compensation and personal transfers. Personal transfers comprise of in-kind transfers, while employee’s compensation defines labor income to temporary employees as remittances (“Migration and Remittances Factbook” 2016, pg. xii). The amount sent under the World Bank definition from the United States alone was 138 billion dollars, a large portion of the 581 billion dollars worldwide in 2015 (Wormald 2018). Discussed or not, remittances has swelled to enormous proportions.

The average immigrant sends ten percent of income to their home country (IDB 2006, pg. 4); however, despite the magnitude of the flows there exists no distinct regulatory framework for remittances. This has negative consequences, such as the gouging of immigrants when they send money back to their home country through formal networks. The drive for profit conflicts with immigrants’ interests, and this results in a disadvantageous economic equilibrium with high fees and uncertain services. To bring about a better stasis, the United States should offer low-fee, remittance services to legal immigrants through an institution such as the Postal Service. Thereafter, the federal government can use the new service as a policy tool by regulating the percentage of migrant’s income going to remittance expenditures as a way to incentivize the most socially beneficial immigration while discouraging the most socially costly immigration.

¹ Acknowledgements to Professor Hendrik van Den Berg, Professor Carol Heim, and Professor Ina Ganguli of the University of Massachusetts Amherst Economics Department and to Professor Ide O'Carroll of the University of Massachusetts Amherst Sociology Department for editing and feedback on drafts of this article. Their advice was invaluable, and this article would not be possible without them.