Outcomes of the research on the remittances to Ukraine. An Interview with Dušan Drbohlav

An interview with Dušan Drbohlav, April 2013.

The topic of remittances has been receiving more and more attention not only on the international level in the context of debates on migration and development, but also in the Czech Republic. Since the first input from a study in the year 2009, the remittance issue was the focus of research conducted by the World Bank in 2010, and extensive research was carried out by the Sociological Institute of the Czech Academy of Sciences in 2010/2011. Simultaneously, since 2010, your team GEOMIGRACE has been looking into the issue as well. What do you think accounts for this growing interest?

It is due to several factors. In the first place, there is the growth of migration from a quantitative point of view, which is related to an increase in the remittances sent by migrants. It is also linked to a shift in reality, which is reflected by academia also. More and more researchers are beginning to see the so-called mobility turn, a shift in the nature of the way the population moves, changing from stability to what is sometimes called total flexibility. Various structures are no more stable but have become dynamic, and the importance of physical and virtual flows has grown considerably. Remittances are one of the most important signs of this essentially global change, which is also known to have a diverse potential which, however, is far from becoming fulfilled as of yet.

Hand in hand with this goes an overall change in the view on migration. Until recently, most of the time migration was perceived as a threat to developing countries. Safety aspects dominated the discourse, which went hand in hand with restrictions imposed on migration to the developed world. Now, among others, even in the paradigm migration-development-(remittances), everybody is becoming more and more aware of the fact that even though migration brings with it certain hazards, it is above all a challenge; an opportunity; an option to be made use of. Migration and the remittances resulting from it are, among other things, also a very important tool with the potential to foster development.

How did this translate into the way you think about the form of your research? The emphasis on the perception of migration as opportunity somewhat contrasts with the development of migration policies, where, as can be well seen in the Czech context, it is security which is gaining more and more ground.

The key is to provide a simple, basic description of what the reality looks like. Official data from the Ukrainian National Bank say that the Ukrainians have remitted from the Czech Republic about 34 million USD/per year (in 2011), which is a relatively low sum (e.g. approximately ten-fold lower than in the case of Ukrainians in Italy). The same sources say that a total of about 7 billion USD in remittances went to Ukraine in that same year. The Czech Republic, at the same time, with respect to the Ukrainian minority living abroad, belongs to top ten countries. Clearly, there is some mismatch. Furthermore, there are other sums which are only an estimate since the real transfer occurs through unregistered ways. These unregistered amounts of money are relatively high and the overall amount varies widely (according to various estimates). So there are ambiguities and inconsistencies, but the amount of remittances itself, or rather the conditions connected to the specific amount, represent only one aspect of the whole issue. What matters are also other related facts – the form and frequency of remitting, the addressees of remittances, their use, etc.

While remittances have been a key variable in the work on our project, we wanted, however, to carry out a more comprehensive research. We wanted to take a look at what Ukrainian labour migration to the Czech Republic looks like and what it means both for the target country as well as for the country of origin. For such a comprehensive concept, it was necessary not only to involve researchers in geography, but also an economist, because it is precisely the economic dimension which plays a relatively significant role in it. Another moment that can be assumed to have helped meet our objectives was the application of varied methods and approaches: both quantitative (survey questionnaires) and qualitative (the method of keeping daily records – diaries, interviews and direct observation, implemented also during the three visits to Ukraine).

The quantitative dimension was represented e.g. by a questionnaire survey carried out in Prague and Central Bohemian Region from May to October 2012 (321 Ukrainian workers took part in it; a necessary precondition for being included into the research was, among other things, working activity carried out in the time of the research or just before the implementation of the research, as well as sending money back to Ukraine). Another questionnaire survey was carried out in Ukraine with the help of workers of the National Institute for Strategic Studies in Uzhorod (it included representatives of 200 Ukrainian households, which had, at the time of the research, someone in the Czech Republic, as well as 50 respondents without anyone abroad to remit). What enabled us to capture the development of revenues and expenditures of selected respondents in a longer time horizon was the longitudinal approach exemplified by the so-called diary method (implemented in Prague). It is a method which has been applied for example in economics, transportation issues, lifestyle or health care research, however, in migration research it has not found its application yet. In the first round we worked with 12 respondent units (9 individuals and 3 couples), in the second round, we had 14 units (12 individuals and 1 couple). We were in weekly contact with the respondents during two half-year long periods. Every day for half a year, the respondents had to keep daily records for us, a "diary" containing a detailed overview of their income and expenses. Once a week we had a meeting with the respondents. This provided a very detailed insight into how they manage their finances, which is the fundamental factor determining the amount of remittances.

Our aim – and we were able to meet it – was to involve different types of work migrants in this research: there were individuals and couples with families of various size and structure at home in Ukraine. In our research we also involved one atypical unit – a student couple. It makes no sense to monitor one migrant when the household is managed together with someone else. In this case it was necessary to convince the other member of the couple sharing the household to participate. Furthermore, it was essential to build up confidence between the respondents and us, the researchers. In particular it was of great importance to convince the participants that the task was a purely academic, scientific one, and that the data were anonymous. Besides that, we tried to control the reliability of our data in a way. Each researcher was in charge of one respondent, or of a couple where appropriate. We tried to explain to them that the results, among other things, should primarily serve the function of revealing the reality, yet that the aim was also to help address certain issues differently, to the benefit of migrants, since some of the uncovered problems show that they could be addressed differently, and probably in a better way.

The research began in 2010, i.e. in the time of the "economic crisis"...

The impact of the crisis on migrants was directly addressed on the questionnaire in our survey (N=321) – there was a question on how their revenues, expenditures and remittances have changed in the time of crisis. It was clearly manifested that the crisis had a negative impact on the respondents. When comparing their own situation between the years of 2008 and 2012 (at the time of the research), they declared a reduction in their income over time and a decrease in the remittances sent (e.g. while only 12 % declared to send higher or significantly higher remittances, a full 50 % of respondents said the remitted amount was lower or significantly lower in comparison with the year 2008).

The diary research on the other hand also showed that some respondents had to use the money that they had saved up previously.

The results of the survey revealed that the monthly income was around twenty one thousand CZK. Those with a trade license had a higher income, employees had a lower income. However, it is true, that it is not a terribly small amount to be earning during the period of crisis as well as considering the largely unskilled labour delivered. Yet it has to do also with the number of hours worked. It was on average approximately fifty-five hours a week, i.e. on average significantly more time than Czech citizens spent working. It is, though, also a question of working conditions: in this respect, many respondents would, of course, welcome more a pleasant and safer working environment, which was also expressed in the survey.

This might support the argument that it is more advantageous for the employer to hire a migrant worker.

This, though, we did not directly find out and it was not the matter of our investigation either; yes, in general, migrants are paid less than the majority of the Czech population. But among our respondents were people with scarce professions, such as welders, auxiliary workers in the construction industry... The employers, then, are not only motivated by "saving money", but also by the "need".

I would like to come back to the salary issue. In the questionnaire (N=321), the wages given came out higher than the numbers on foreign employees published by the Czech Statistical Office (in 2011). In those statistics, among the selected representatives of individual countries, the wages Ukrainians were paid were the lowest – approximately fourteen thousand CZK. Average wages of our respondents – employees were around about seventeen thousand CZK. This difference, though, may be due to the region of Prague where our research mostly took place and where the wages are generally the highest in comparison to the rest of the country. In our total population, then, for some people, the salary was topped off with a secondary income – for a quarter of the population (N=321), this was an average of eight thousand CZK of additional income from unregistered, "black" work.

You spoke about the impact of the crisis. Your respondents were foreigners from third countries, i.e. those whose access to the labour market has been, in recent years, the subject of regulation which has been getting significantly more strict. Has your research shown an impact of these policies?

The policies for sure have had an effect in that the restrictions exacerbated the situation. If the purpose of those policies was, though, to push some migrants out from the labour market, then they, according to our findings, to a certain extent succeeded. The signals from our respondents were clear – many of the Ukrainian migrants who would have otherwise remained, did leave.

But others remained – they need to survive and their families are dependent on their money. For working migrants, the overall number of work opportunities was reduced and the overall cost of the stay in the Czech Republic has risen – see various permits, insurance, housing, and services. Because of higher rents, for example, some migrants could not afford to invite their family to come to the Czech Republic. Another thing we have encountered is the system of mediators and clients, which was quite big in the media approximately five years ago and now it seems to have disappeared. The research has shown that 39 % of the 321 respondents (from the questionnaire) are and have always been involved in the system (another 4 % are now working under a mediator, though they have not been before). It is a relatively high number; we did not expect it to be this prominent. We have learned from additional interviews that the client-mediator system is often used primarily for extending various authorizations and other paperwork.

Then there is also the competition from Russia. Ukraine has traditionally been significantly linked to Russia politically and economically. As some respondents told us, regarding work activities, Russia at the moment offers in many ways better opportunities and working condition than the Czech Republic – be it the earnings, working conditions, paperwork migrant workers face, etc. This appears to be such a well-known fact that many migrants from the eastern part of Ukraine are heading right there. Newly, it looks like Russia could become significantly more attractive even in the western part of Ukraine.

Let's go back to the remittances. There is one fundamental question to be asked: what is the size of the amounts we are talking about?

In our sample of 321 respondents, the remittances sent were around fifty thousand CZK per year (specified as the last twelve months from the date the questionnaire was filled in). Financial remittances – sending money – significantly dominated; however, there are also remittances in the form of goods. These are much less represented in our research. The average annual spending per goods and their shipping was 8 thousand CZK, yet it applies to much fewer migrants than those who remit finances (321).

The absolute total amount of (financial) remittances more or less corresponds e.g. with the remittances sent by Mexicans in the 1990s. Back then, the average remittances were approximately 240 USD per month (Lowell, De La Garza 2000 in Brown 2006). For more information see e.g. the recent research on a relatively large sample of Moldovan citizens in the European Union; here remittances reach an average of 1,750 EUR per year, which does not differ much from our research (Piracha, Saraogi 2011). On the other hand, the amount of remittances identified by our research is higher than what our colleagues Leontiyeva and Tollarová (2011) found to be the case for the Czech Republic.

Nevertheless, we also found similarities with the research carried out by Leontiyeva and Tollarová; e.g. that men remit significantly more than women. Another interesting fact, which has been identified in both bodies of research, is that the peak of sending remittances comes sometime around the fifth year of residence, up to this time the remittances increase, yet after five years they start falling. This effect has been confirmed again and again. One of the important explanations of this may be the fact that when the immigrant decides to remain in the Czech Republic permanently, as time passes by, the links with one’s country of origin may fade and subsequently the remittances get reduced (that is the so-called remittance decay hypothesis known from the literature – progressive erosion of relations and contacts within one’s country of origin).

Therefore, does the research suggest that the foreigners settling here are becoming more deeply rooted in the Czech Republic and therefore cease to have, as the saying goes, their "feet in two worlds"?

The intensity of the relationships and links of those who settle down in a new country will generally decrease over time, yet it does not mean that they would be lost completely. We do not know whether what we are witnessing is a conversion of working migrants into "longer working" or permanent migrants, or a continuation of the circulation between the two countries. Also, the result may be a flexible (unstable) quasi-settling in the Czech Republic with very intense contacts with Ukraine. This is confirmed by many examples from our conversations, in particular it is the case of highly educated migrants where even though the whole family has already settled in the Czech Republic, intense relations with Ukraine persist.

The attempt to capture the transferred amounts is linked to the form and the methods of transfer...

Let us stress here one very important thing, which is pointed out in other studies, and carried out also in Ukraine. The fact is that the use of the banking sector, namely banks, is minimal. In our questionnaire survey, 49 % of the respondents say they carry cash money themselves. Further 31 % either used their relatives, friends, or some well-known courier (usually the bus driver). The remaining 20 % make use of virtual forms of money transfers, yet bank transfers comprise an absolute minimum. Among companies that organize money transfers, we can mention WesternUnion, Medigran, etc. But the banking sector, including these firms, is used at a minimum.

Is it because of the lack of trust?

Yes, in our opinion it is first and foremost because of the mistrust of the system. Another role is probably due to the socialist heritage, but mainly it is the problem of "gray/unofficial" (Mafia-like) structures which can threaten those who send money through a bank. From the perspective of the working migrant, what matters especially is the safety of the anonymity of the transaction.

Another reason is the fact that it is expensive. For example, in one study, transfer fees for 200 USD from various countries in the world to China are listed. The fees charged are in the range of 10–20 % of the amount sent (Jha, Sugiyarto, Vargas-Silva, 2010). This means, we are speaking about huge amounts of money. However, there are banks (e.g. from the post-Soviet era) which offer lower fees and it seems that these can fill the gap in the market. However the fees in general continue to remain relatively high.

Safety is also given as a reason why foreigners most often use personal transportation of the money. Among other things, this proves a certain positive shift in the overall environment. 10-15 years ago, from this point of view, safety levels were definitely much lower. We know of many cases where people were mugged at the bus stop, etc.

You talked about remittances as a potential – the scale and form of remittances should be followed by the hotly debated theme of their development impacts. How are they most often used?

In this respect, it turned out to be what we expected. In some cases it is undeniable that remittances serve to boost the living standards of a family, and/or to overcome emergencies. Remittances are used to cover basic needs – food, clothing, energy, partly also health care and education. However, it seems, and here the experiences found in (academic) literature have confirmed, that remittances actually do not contribute to a more robust local, let alone regional, development. The research shows us that surprisingly little money was invested into building or repairing houses /apartments. We propose the explanation that many of the migrant respondents have been residing in the Czech Republic for quite some time, so that the houses/apartments have mostly been built or repaired, so there is no need anymore for this type of investment.

Furthermore, "investments in investment" are very low, too: e.g. the purchase of land, machinery or "know-how", agricultural machinery, etc., which might lead to various paths of development, e.g. various types of services or agriculture and farming. The problem is, however, that the purchase power of the local population is very low – as well as e.g. quality infrastructure of various kinds is generally lacking – all of this is a significant obstacle to development. Another problem is co-operation; there are no follow-up (supply) services. Looking at the fundamental needs the population needs to have secured, there is great room for improvement. For example, in Ukraine, the comprehensive general health insurance system does not work. Pensions make up an average of around 100 USD per person per month, while the price level of basic goods is relatively high. The government has not yet started to function in the roles in which it operates in standard advanced democracies. As professor Skeldon aptly put it in one of his lectures: for migrants to go back to their country of origin, there "must be something to return to".

As far as we could tell about the situation in western Ukraine during the period of our research, aside from emotions and nostalgia for home, there is actually nothing that a person would return to. The situation there was, and still is, truly tragic. The non-functional state policies are replaced by phenomena typical of the developing world, such as corruption, nepotism, etc. While the standard of living in the Czech Republic in 2012, according to the value of HDI ( "Human Development Index"), was in the 28th place in the world, Ukraine takes the 78th position, just before Mauritius.

Yet I think that, ironically, it is remittances that prevent change in Ukraine, since the situation there has not reached a tipping point yet where a "real revolution" cannot be avoided and deep reforms can begin. Actually, what remittances do is they freeze this reality and prevent a complete fall to the bottom. As we see it, remittances keep the status quo, which allows families to survive or be a little better off in an otherwise miserable standard of living. Remittances also replace the missing government social policy, which in turn does not allow the state to reach the tipping point. On the other hand, it enables the people to survive. It is such a vicious cycle.

You are saying that "in order for migrants to return, they must have a place to return to". Do you say that they have the more than twenty-year-long experience of post-Soviet migration, yet they continue to maintain housing in Ukraine, and maintain real-estate which often remains empty?

We understand that it is sort of a desire to have something stable, to keep a link to home; hence the houses. Many of the buildings are left unfinished. There, the building does not take one year, or two, or even three. Houses are being built for 10 years there. In the overwhelming majority of those less affluent, it looks like this: they save up money, transport it home and for example with the help of friends who are paid minimum amounts of money or who are given promises to receive mutual assistance, the house is finished. There is the emotional factor which plays a major role, because, from an economic (rational) perspective, this behavior often does not make sense. By doing that, they make it clear where they are at home, even though they are aware that most likely they will never return. The houses we have seen in the Transcarpathian Ukraine, often lack protection against adverse effect of the climate: it is a symbol which is exposed to erosion.

Let's go back, please, once again to the government policies – looking at migration in the context of development in the country of origin, what is their role?

Where literature talks about recommendations regarding the development-migration and development-migration-remittances paradigm, what is preferred is the opening up of migration barriers, not the imposition of restrictions. This, however, does not mean that no conditions should be in place, but it mainly calls for simpler authorization mechanisms which make repeated migration possible.

If we make a decision for isolation and make movement impossible, the result will be a conflict situation. This is e.g. the manner of existence of the Republic of South Africa, which is a segregated world. In order to defend itself against the influx of migrants (and that of any size), the "rich" group consumes a lot of energy: it is logical that the second world (the poorer, but just as eager to be rich in opportunities and wealth as the wealthy ones) will want to tear down these barriers... Also, it will be costly and will distract us from building a happy, successful and rich society. This "battle" entails many negative phenomena, e.g. an increase in migration without authorization and tension in the country, region, city of destination... That is one side of things. On the other hand I understand the fight with unauthorized migration. The state most probably has to impose certain policies and restrictions. In this context, also the need of a state to first employ its own citizens and then migrants, it is understandable.

It should be pointed out, however, that the openness of systems, and this applies to all its levels, is certainly more positive for development than isolation. Among other things, there has been an economic computational estimate that the so-called Johannesburg system is economically less efficient than the Amsterdam system which is open and comprises more intense and more efficient interaction, etc. (Levy 2001). It follows that significant closed-ness and lack of interconnectedness is unfavourable for the economy. From a psychological viewpoint, too, life in an open society is much more pleasant; it is also culturally richer, etc.

What does the interest of government bodies, both Czech and Ukrainian, look like in the results of the research?

In the Czech Republic, the interested subjects are from academia, the Czech Statistical Office and the Czech National Bank. Our project also touched upon the issue of remittance statistics. There should be government effort for gaining the best possible information on remittance flows and setting conditions so as to enable as many migrants as possible to be part of the system. It clearly dictates the need for setting up a system which will be transparent, simple and secure. Such a system will enable money transfers which will be part of legal structures. For the time being it is assumed that unregistered flows of money occur on an enormous scale. The activity of the World Bank in the Czech Republic (cf. the above-mentioned study from year 2010) was one of the signs of interest in gathering this information at the international level. Everything, however, somehow faded out and the results of the initiative in question did not have any significant implications.

In Ukraine, there is interest to cooperate with our team especially among scientists in academia; we have not offered the results of our research to government bodies yet. But as I mentioned, the current situation in Ukraine, in many ways dismal (editorial note: the author is speaking about March 2013), does to a certain extent suit those in power. In fact, remittances substitute social policy and do not allow Ukraine to completely reach the bottom, so that a total change can occur and the need to jump-start fundamental changes of the Ukrainian society virtually in all walks of life can be felt.

For example Latin America, though, shows that countries of origin recognize the importance of the remittance issue and pay extra attention to it...

Yes, but it's not just about Latin America. Bangladesh, Pakistan, and Nepal are countries with large quantities of unregistered remittances – and these things are known about, and it works there, but on an informal basis. E.g. Jamaica and Salvador are countries that benefit from emigration and from their citizens which are long-term work migrants abroad. The benefits of remittances flowing into these countries exceed the negatives which this migration also brings with it. The question is, though, for how long this can last? In Mexico, as literature shows, remittances were to a certain extent used for starting up small businesses, which is further linked to structural changes.

Remittances alone cannot bring about a significant change of situation in the given country in its basic political and socio-economic settings. What may be a crucial source of change, are fundamental socio-economic, and where relevant also political, reforms which enable switching the overall way things work to another level. What really matters is an improved socio-economic policy, where applicable also laying down foundations for a system with appropriate settings and such things as insurance and bank markets, etc. Following the kick-start of such changes leading in the right direction, migration and remittances can represent a significant help. It becomes clear, too, that remittances intensify their flow into regions where the economy is on the move; they are not sent only to countries where there is nothing happening, and where they are absolutely necessary for survival. They flow into more advanced countries, too, where their role as a significant driver of development becomes more prominent.

You mentioned that the research should help the respondents "find different solutions to certain things, in ways beneficial for migrants". Even though it is still early for any overall conclusions, what main recommendations in this sense emerge from the research?

In order to be able to give a relevant and fundamental answer to this question, we need more time to analyze all the acquired data in greater detail and with more sophisticated methods. What is already clear, however, is the fact that what is missing in the Czech Republic and in Ukraine in direct relationship to remittances is a transparent, cheap, and safe system and environment that would enable the transfer itself. It is a matter between the two countries, but also a matter of international institutions (see above in particular the initiative of the World Bank).

More generally, what is perhaps even more important are less restrictive settings of an elaborate and controllable migration system which would allow on one hand the use of the workforce needed in the target country, the Czech Republic, (see, for example, inspiration can be found in Barbone, Kahanec, Zimmermann 2013 ), and which would on the other hand allow for more freedom and a "fairer" setting for migrants who would be able to live in the target country under more dignified conditions. And, where appropriate, when meeting certain criteria (possible to be met), they would have clear prospects for a possible meaningful permanent residence.

Allowing for a less strict approach towards Ukrainian workers working in the Czech lands, especially concerning short-term visits to their Ukrainian home (less paperwork, smaller fees, etc.), is also important since ensuring a higher frequency of visits home is one of the factors which leads to higher remittances of these migrants, and that way it further enhances and multiplies the importance and effect of their migration mission. This is, among other things, a clear outcome of the analysis of our questionnaire survey (of 321 respondents). To put it in different terms – "freedom of movement" strengthens the "development of households" in the country of origin, and it probably also leads to more circulation and possible return rather than to the tendency to settle down and integrate into Czech society, which is one of the proclaimed objectives of the newly prepared instruments of Czech migration policy (the way individual settings are specified is quite a different issue...).

Thank you for the interview.

The interview conducted in April 2013 and subsequently completed via e-mail.

More conclusions with regard to the migrants themselves bring scientific papers published by the members of the research team GEOMIGRACE in the Czech Republic and abroad.

This text was translated as a part of the project “Foreign workers in the Labour Market“, which is carried out by the Association for Integration and Migration (SIMI) in cooperation with the Organization for Aid to Refugees (OPU) and Multicultural center Prague. International partners of the project are Caritasverband für die Diezöse Osnabrück from Germany and Anti - Slavery International from Great Britain.