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Home / FRED / The economics behind the motivation to migrate : Income gaps and inequality in the U.S. and Central America’s Northern Triangle

The economics behind the motivation to migrate : Income gaps and inequality in the U.S. and Central America’s Northern Triangle

Summary:
[embedded content] In the past two years, the surge in undocumented immigrants from Central America’s Northern Triangle has been covered extensively by most news outlets. The stories of these migrants from El Salvador, Guatemala, and Honduras involve compelling and often perilous human experiences and intense reactions to the issues involved. Apart from the political and social views about immigration, there are fundamental questions to ask that may have some economic answers: What is the main motivation for these migrations? And why are people willing to put themselves and their families at great risk to migrate to the U.S.?* The graph above shows the ratio of per capita income in the U.S., the intended destination for many of these migrants, to per capita income in the three

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In the past two years, the surge in undocumented immigrants from Central America’s Northern Triangle has been covered extensively by most news outlets. The stories of these migrants from El Salvador, Guatemala, and Honduras involve compelling and often perilous human experiences and intense reactions to the issues involved.

Apart from the political and social views about immigration, there are fundamental questions to ask that may have some economic answers: What is the main motivation for these migrations? And why are people willing to put themselves and their families at great risk to migrate to the U.S.?*

The graph above shows the ratio of per capita income in the U.S., the intended destination for many of these migrants, to per capita income in the three Northern Triangle countries: El Salvador (in blue), Guatemala (in red), and Honduras (in green). The gaps are huge, as expected, but also quite varied, with clear movements over time.

Some history: For El Salvador, during most of the 1970s, the ratio was below 10. But, as a result of the civil war (1979-92), the gap surged to 17.5 by the late 1990s, which coincides with the migration of many Salvadorans to the U.S. (especially to L.A., D.C., N.Y., and Houston.) Ever since, the ratio has remained at the high end of its trajectory, around 15. Guatemala has a similar pattern: The ratio steadily rose from around 11 in 1980 to more than 18 in 2005, and it also has remained at a higher level. In Honduras, the poorest country in Central America, we see even more dramatic disparity: The ratio for Honduras has never been lower than 17.5. It reaches its peak of 28.4 in 1999, and as of today it’s at 25.

The income gaps between the U.S. and the three source countries reveal the magnitude of the potential earnings migrants could gain and the potential improvements migrants could experience in their living conditions. That is, the data suggest that increased migration is motivated by economic considerations. Obviously, these migrants wouldn’t expect, if they managed to enter and remain in the U.S., that they’d attain the average income of U.S. residents. Undocumented workers with much lower labor market qualifications would receive much less than the average. So the ratios in the above graph seem to greatly overestimate income gains. But consider that the countries in the Northern Triangle have traditionally had enormous internal economic disparity, and many immigrants are from the poorer segments of the population. So the ratios could greatly underestimate the earnings gains.

The second graph conveys income disparity by showing the Gini coefficients for El Salvador, Guatemala, and Honduras, as well as for the U.S. (The previous FRED Blog post also used Gini coefficients, a very common indicator of inequality: The higher the Gini, the more concentrated the income distribution: A value of 100% indicates perfect inequality, in the sense that all income would be concentrated with one person [or the tiniest fraction of the population]. A value of 0% indicates perfect equality, a state in which everyone has the same income.)

For most of these years, the Gini coefficients for these countries are very high. Guatemala and Honduras maintain similar levels over time, above 50%, with very slow improvement. In the early 1980s, El Salvador was on par with them; but since the end of the war, its inequality seems to have trended down dramatically. In fact, by the end of the sample, El Salvador exhibits less inequality than the U.S. But it should not be surprising that very poor countries have many desperate people and generate the economic motivation to migrate.

* “I cannot help feeling self-conscious as I try to answer these questions from the comforts of my office. But my aim in this FRED Blog post, as in every other FRED Blog post, is to show how using data from FRED can provide some objective, big-picture perspectives, even on this highly charged issue.” —Alexander Monge-Naranjo

How these graphs were created: For the first graph, search for and select “GDP per capita for the United States in constant dollars” (series ID NYGDPPCAPKDUSA). From the “Edit Graph” panel’s “Edit Lines” tab, use the “Customize data” tool to search for and add “GDP per capita for El Salvador in constant dollars” (series ID NYGDPPCAPKDSLV). Then add the formula a/b. Repeat these steps for Guatemala and Honduras. For the second graph, search for and select “Gini index for El Salvador” (series ID SIPOVGINISLV), and do the same for Honduras, Guatemala, and the U.S. From the “Edit Graph” panel’s “Format” tab, choose “Mark type” square with a width of 5 and a “Line style” width of 1 for all.

Suggested by Alexander Monge-Naranjo.

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The Federal Reserve Bank of St. Louis is the center of the Eighth District of the Federal Reserve System. This District includes Arkansas, eastern Missouri, southern Illinois and Indiana, western Kentucky and Tennessee, and northern Mississippi.

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