As the epicenter of the COVID-19 pandemic shifts towards the West and the global economy heads for a recession, the Mexican population residing in the United States (11.1 million according to the last U.S. Census) will be quickly exposed to its effects. The economic downturn will have long-lasting effects on their health and economic situation, affecting their ability to remit. The drop in the amount and frequency of remittances will likely take a toll on Mexico’s economy and increase the pressure on recipients, primarily the most vulnerable households.

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The COVID-19 crisis will have severe economic implications for Mexican migrants in the U.S, affecting the flow of remittances.

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The health consequences of the COVID-19 outbreak for the Mexican population in the U.S. remain unclear. Migrant populations are usually healthier than the native born. This might be explained by the self-selection of healthier individuals into migration, but also by the under-reporting of illnesses which leads to fewer diagnoses.[i] Moreover, statistics show that some of the risk factors associated with COVID-19 are less present among Mexican migrants. In terms of age, 86 percent of Mexicans in the U.S. are less than 62 years old.[ii] Data from the National Health Interview Survey also shows that the Hispanic population presents lower rates of asthma and heart diseases compared to non-Hispanics, but higher prevalence of obesity and diabetes.

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Yet, Mexican migrants are particularly vulnerable due to their lack of health insurance. In 2018, 37% of them were uninsured compared to only 9% of the native population, which not only aggravates the economic implications of getting sick, but lowers the probability of seeking medical treatment in the first place. The COVID-19 outbreak in the States also coincided with the implementation of a public rule that penalizes green card applicants for using Medicaid, effectively dissuading non-citizens from seeking out medical care.[iii] Anecdotal evidence and early reports from New York City show that socio-economic inequalities and lack of access to health insurance leads to a disproportionate rate of infection and mortality among the Hispanic population.[iv]

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Meanwhile, Mexican migrants, as most migrant workers in the global economy, are prone to be disproportionately affected by the economic crisis. As the pandemic continues to unfold, unemployment rates have already soared among all major workers’ groups but the rise has been particularly severe for the Hispanic population: between February and March 2020, the Hispanic unemployment rate increased by 1.6 percentage points compared to 0.9 percentage points for the entire population[v] (Figure 1, Panel A). Furthermore, the sectors of the U.S. economy that have, thus far, registered the highest numbers of job losses are the ones that employ the largest shares of the Mexican workforce (Figure 1, Panel B).

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Moreover, almost half of the Mexican population in the U.S. (43%) is undocumented, which raises their vulnerability to unemployment but also bars them from economic relief packages. Although undocumented migrants are estimated to pay USD 11.7 billion in taxes annually,[vi] they usually do so through Individual Taxpayer Identification Numbers instead of Social Security numbers, which makes them ineligible for the stimulus bill signed by President Trump. In the face of economic hardship, many migrants might choose to keep working, even if it increases their likelihood of getting infected.

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The implications on the Mexican economy and the poorest households will be severe.

The flow of remittances from the U.S. to Mexico will be severely affected, inducing long-lasting impacts for the Mexican economy. The country is expected to undergo one of the deepest recessions in the region with early estimates showcasing a GDP contraction of 4.5% compared to 1.6% in Latin America.[vii] Meanwhile, in 2019, the Mexican migrants in the U.S. sent 36 billion dollars in remittances to Mexico, 2.7% of the country’s GDP.[viii] Remittances are set to contract by around 20% and may take between 3 to 8 years to recover,[ix] which will likely worsen the outlook.

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In addition, Mexico’s high dependency to US-originated remittances will aggravate the situation. Usually, remittances tend to be stable and even countercyclical relative to the recipient economy. For instance, during the Tequila Crisis of the 1990s, remittances soared, softening the economic downturn at home. However, global crises like the 2008-09 recession hit both source and recipient countries, affecting remittance flows and depriving recipient economies from an important buffer. Remittances to Mexico in 2009 declined by 15% compared to the previous year.[x] Given that more than 90% of the remittances received by Mexico come from the U.S., the Mexican economy might suffer a disproportionate blow from which it will take years to recover. 

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At the microeconomic level, vulnerable and poor households in Mexico will suffer the most. In 2018, remittances represented 22% of the total income of the 2.1 million recipient households.[xi] Remittances often constitute a lifeline for the poor: close to 8% of the households from the bottom 40% receive remittances, accounting for 30% of their income (Figure 2). Poorest households are the most dependent and therefore critically exposed to a contraction in these flows. Further, in 2016, remittance-receiving households operated around half a million micro-businesses, primarily involved in activities related to grocery, food, and beverage stores, food establishments, and food processing.[xii] These sectors are likely to be hit the hardest by confinement measures, depriving these households from vital streams of income.

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An opportunity for better protection mechanisms for vulnerable migrant workers.

In sum, although remittances represent a small percentage of Mexico’s GDP compared to other countries, it constitutes the third largest global inflow.[xiii] Many of Mexico's poorest households rely on these transfers for their day-to-day life. Crises like the COVID-19 highlight the precarity of remittances senders and shed light on the vulnerabilities of recipient economies and households to a decline in these inflows. The crisis might offer an opportunity to call for social and economic protection mechanisms targeting migrant vulnerable workers in developed economies. This will not only benefit recipient economies, but also host-countries and communities, which rely on their essential work.

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References

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[i] Fernando Riosmena, Randall Kuhn and Warren Jochem, “Explaining the Immigrant Health Advantage: Self-selection and Protection in Health-Related Factors Among Five Major National-Origin Immigrant Groups in the United States”, Demography 54(2017), pp. 175-200.

[ii] Tabulation of data from the U.S. Census Bureau 2018 (American Community Survey).

[iii] Miriam Jordan, “’We’re Petrified’: Immigrants Afraid to Seek Medical Care for Coronavirus”, The New York Times, March 18, 2020.

[iv] Jeffrey Mays and Andy Newman, “Virus Is Twice as Deadly for Black and Latino People Than Whites in N.Y.C.”, The New York Times, April 8, 2020.

[v] U.S. Department of Labor (Bureau of Labor Statistics), “The Employment Situation -March 2020”, News Release, April 3, 2020.

[vi] Lisa Christensen, Undocumented Immigrants’ State and Local Tax Contributions, Washington DC, Institute on Taxation and Economic Policy, March 2017.

[vii] Michael O’Boyle, Samy Adghirni and Patrick Gillespie, “Latin America Isn’t Ready for the Virus Onslaught Headed its Way”, Bloomberg, March 20, 2020.

[viii] Data from the Central Bank of Mexico.

[ix] Juan José Li Ng and Carlos Serrano, “Las remesas a México podrían caer 17% en 2020 y recuperarse entre 2023 y 2028 debido a la crisis económica por Covid-19”, Observatorio Migración México, April 1, 2020.

[x] Data from the Central Bank of Mexico.

[xi] INEGI, Encuesta Nacional de Ingresos y Gastos de los Hogares 2018, available at: www.inegi.org.mx/programas/enigh/nc/2018/ (accessed on April 9, 2020).

[xii] BBVA, Anuario de Migración y Remesas 2018, Mexico, BBVA/Secretaría de Gobernación/Consejo Nacional de Población y Vivienda, July 2018.

[xiii] The World Bank, “Record High Remittances Sent Globally in 2018”, Washington DC, Press Release, April 8, 2019.

Social Science Perspectives