During the US presidential campaign, Trump raised the idea of remittances being a drain on the host nation. How true is this?
To understand what is going on with money flows, first consider a closed economy. A person earns $1000, they spend $900 and save $100. The $900 spent becomes someone else's income. The money saved gets lent out to a business or individual who then spends it. So the money circulating remains $1000 (or perhaps $1010 if the lending bank is practicing fractional reserve banking).
Now consider an open economy with a lot of remittances flowing out. A person earns $1000, they save $100, spend $500 and send $400 to their home country as a remittance. The money circulating in the host country from the person's work is now just $600.
So yes, Trump is right. BUT - capital leaving the country to invest abroad has the exact same effect as remittances. In this case, the worker earns $1000, spends $900 and saves $100. But the bank lends that $100 to a company who needs it to set up a factory in Mexico. So now there is only $900 circulating in the host country from this person's work.
The flow of remittance money from the US is small - about $48 billion. Which is peanuts compared to the flow of capital to invest abroad which is about $400 billion. Add that profits earned abroad are not repatriated to the US, and the behaviour of big business is a bigger threat than the behaviour of a migrant worker.
There is also another thing to consider: many migrant workers are NAFTA refugees. Big box American retailers moved into their territory and put the small shopkeepers out of business. Big American agriculture moved in and put the small farmers out of business. And with no welfare state, they have to move in order to live, or starve to death. Some get jobs in the new factories moving south, but many are forced to move north. Elites in all the countries involved love NAFTA, and they also love that the blame for NAFTA is going to the powerless migrant, rather than themselves.