Money transfer by educated professionals tends to flow between developed countries

| Wednesday, October 29th, 2014

Expat money transfer

Trends in Expat Money Flows

In what is possibly the biggest survey ever conducted of professional expats by expat networking site InterNations, Ecuador surprisingly tops the list as the world’s favourite expat destination in terms of personal and professional satisfaction. Ecuador scores particularly well for personal finance and cost of living, but the survey recognises that this is slightly skewed by the country’s popularity as a retirement destination, with those who transfer money from their pension to fund their retirement able to live comfortably. The numbers moving to Ecuador are small, however, with more obvious countries such as Germany, the US, UAE, Switzerland and the UK topping the list of host countries by popularity. Similarly, the largest sources of professional expats are the US, the UK, India, Germany, and France. Given that of the nearly 14,000 expats surveyed, only 26% declared themselves planning to stay in their host country indefinitely – a figure that will include retirees – the volume of international money transfer between these countries will be considerable.

The ExpatInsider survey focuses on professionals – 87% had at least a bachelors university degree, and 51% had post-graduate qualifications or a Ph.D. – rather than less-skilled migrant workers studied by the World Bank. As such, the dynamics in terms of numbers and likely money flows differ considerably. While the World Bank data seek to capture some international flows, the focus is on migrant workers, whether skilled or non-skilled, sending money back home to others. Professionals, however, are more likely to send money back for their own savings or pension contributions, or to meet obligations such as mortgages. They are also more likely to have income from pensions, savings or investment transferred to their new home abroad. And while the number of lower-skilled migrant workers in the world may exceed that of higher-skilled ones, the purpose of the latter’s transfers means that these transactions will be much greater in value.

Another key difference between the World Bank and the ExpatInsider surveys is the source countries of expats. Among professionals, six of the ten largest source countries are also among the top ten residence countries, namely, the US, the UK, Germany, France, Netherlands and Spain (albeit driven in large part by the EU’s internal freedom of work from which lower-skilled and seasonal workers also benefit). The general finding of the survey is that highly-educated workers or successful retirees tend – with a few exceptions – to move to other developed countries.

The exceptions are also very specific. The UAE and China are the only two destinations in the top ten not in Europe, North America or Australia. The UAE is a booming financial hub for the Gulf region, and China is a fundamentally important country for investment by Western firms, given rising incomes and the huge potential domestic market there, as well as being a source of West-oriented manufacturing. Of the top ten source countries, only India is an emerging economy, but this country has very high rates of literacy - certainly compared to its economic peers – and a highly educated middle class. As such, those sending money to India from countries such as Singapore, UAE, Qatar, and Saudi Arabia, where professional Indians – as well as their less-skilled compatriots – tend to seek work overseas, will do so for similar reasons as, say, a professional transferring money from the US to UK.

Source: InterNations Expat Insider Survey, June 2014

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