US minimum wage raise could boost remittances

Like low-wage workers across the US, many migrants from Latin America are hoping for a federal minimum wage increase.

Low-wage worker Wilfredo Vargas migrated to Washington chasing the American dream [Curt Devine/Al Jazeera]

Washington, DC – Wilfredo Vargas left Guatemala in 2011 searching for what he calls “El Sueno Americano,” or the American Dream. With three children and a terminally ill wife, he believed he could earn enough money in the US to provide necessities for his family as they remained in the city of Puerto Barrios.

Since arriving, Vargas, 33, has struggled to make ends meet on the minimum-wage salary he earns at Quick Pita, a restaurant in Washington DC. Vargas’s wife died six months after he left home, making him the sole provider for his children.”I send money to them every 15 days, but sometimes I have to borrow to afford it,” Vargas said in Spanish. “A raise in wages would change this.”

The current federal minimum wage is $7.25 per hour, but this year alone, 38 states have approved or considered policies to raise these wages, according to the National Conference of State Legislatures. Connecticut, Hawaii and Maryland, for instance, recently approved measures to gradually raise wage floors to $10.10 in the next few years. The city council of Washington DC, voted in April to raise its minimum wage to $11.50 per hour by 2016. 

On a national scale, US Senate Republicans filibustered a proposal last week which would have raised the federal minimum wage to $10.10 by 2016, in essence killing the measure for now. Senate Democrats, however, plan to bring up the bill again after garnering more support.

Maria Luisa Hayem, a finance specialist with the Inter American Development Bank, said raising the minimum wage to $10.10 these raises could directly affect the remittances sent to Latin America by US migrants.

Hayem said most migrants consistently and proportionally remit a portion of their wages, so a 20 to 30 percent hourly raise could proportionally increase the remittances some individual minimum-wage workers send home.

“When the economic conditions improve locally, remittances improve,” Hayem said. “There is a strong link.” Hayem stressed it is impossible to predict the exact percentages of increase.

Economic debates

Wilfredo Vargas currently sends $160 to his children twice a month from the $8.25 per hour he earns. When the executive order signed by President Barack Obama takes effect in 2015, which will raise minimum federal-contract wages to $10.10 an hour, Vargas said he could send almost $200 every two weeks. This increase would help his children buy more food, clothes and medical care, he said.


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Stephen Moore, chief economist at the Heritage Foundation, a conservative think-tank, said minimum wage raises could enable migrants with job security to send more money to families abroad, but he argues these raises will not benefit Latino migrants and their families across the board.

Higher wages, he said, would make employers more selective of the individuals they do hire, which would increase competition for minimum-wage jobs. “The problem is many immigrants will be the victims – the least-skilled workers will be the first people laid off,” Moore told Al Jazeera.

Maria Enchautegui, a senior researcher with the Urban Institute, disagrees that wage raises will cut job opportunities for Latino migrants, but she points out that some undocumented migrants will not see the benefits of reform because many work in the underground economy.

“Many undocumented immigrants remain vulnerable. They do not report wage violations because they fear losing their jobs, or worse,” Enchautegui said.

About 42 percent of undocumented migrants do not have high school diplomas, according to the Urban Institute, and Enchautegui said this, combined with low-language skills and fear of deportation, makes migrants vulnerable to exploitation by employers.

An estimated 11.7 million undocumented immigrants lived in the US in 2012, a number that appears to be rising, according to the Pew Research Center.

‘The American dream still exists’

Maria Velasco, 47, came to the US nine years ago from El Salvador with a temporary work permit, but after it expired, she remained in the US to earn money for her three sons in Central America. 

As an undocumented migrant, Velasco lives in daily fear of detainment. Adding to this vulnerability, she said she has been repeatedly overlooked when applying for jobs and said she earns a dollar less per hour on her wage of $8.75 than her co-workers who have legal immigration status.

Labour rights groups have been pushing for an increase to the minimum wage [Reuters]

Velasco remits $500 each month from her earnings at the two restaurants where she works in Washington DC, but said she would send two-thirds of every extra dollar she earns after minimum wage raises take effect.

“Now we have to think about paying each bill, but better wages would help us think about our future,” Velasco said in Spanish.

In 2013, remittances to Latin America and the Caribbean totaled about $60bn, according to a report released by International Money Transfer Conferences. Although remittances sent by migrants to Colombia, El Salvador, Guatemala, Honduras and Mexico have risen by 12 percent since the 2008-2009 recession, these figures fall short of the $68bn sent to the region in 2007, according to a recent study commissioned by the Multilateral Investment Fund. That was before the US economy took a plunge.

The report, titled Economic Status and Remittance Behavior Among Latin American and Caribbean Migrants in the Post-Recession Period, shows one in three migrants remains financially vulnerable in terms of wages, savings and debt levels.

In response to this vulnerability, migrant workers throughout the nation have participated in strikes and labour movements calling for wage raises with organisations such as Service Employees International Union, Change To Win, and the digital platform, a website that enables workers to organise online.

Jaime Molina, an organiser with Change To Win, a labour rights group, said he meets many Latino migrants who feel powerless because they lack job security or formal education.

He tells migrants to “not be afraid, to be strong” as he invites them to participate in strikes calling for better wages. Molina helped organise seven strikes in the Washington DC area in which fast-food workers walked off their jobs in 2013 and 2014. Molina said hundreds of migrants marched in these strikes, which preceded President Obama signing the executive order to raise federal contract wages.

“Many people get involved because they want to help their families abroad,” he told Al Jazeera. “If they make more money they could send more money.”

After befriending a number of fast-food labour activists, Wilfredo Vargas decided to participate in several strikes in the past year, and he plans to strike again in June. For now, he works additional odd jobs, such as landscaping and home repair, to earn enough to cover his expenses with remaining funds to wire to his children, ages 7, 9 and 18, in Guatemala.

“I still believe the American Dream exists, but it’s a fight,” Vargas said.

Source: Al Jazeera