Russia, one of the world’s main recipients of migrant labor, is a major destination country for migrant workers from Central Asia. Remittances from Russia are especially critical to the economies of Tajikistan, Uzbekistan, and Kyrgyzstan,1accounting in Tajikistan’s case for nearly half of the country’s GDP. But as the 2008 financial crisis revealed, labor migration has become an unreliable political and economic crutch for these states. As Russia’s economy plunged, many sectors employing migrant labor came to a virtual standstill and anti-immigrant sentiment rose.

In the long run, Central Asian policymakers will need to strengthen social safety nets and focus on generating employment opportunities at home, but for the time being, remittances will remain important to their economies. Russian authorities meanwhile should view migration as a boon for their country’s labor force and avoid policies forcing migrant workers into the shadows.

An Economic Lifeline for Central Asia

In its present form, migration from Central Asia to Russia dates to the early 2000s, when the flow transitioned from a post-Soviet movement of ethnic Russians and forced migrants to a movement that is primarily economic in nature; labor migration has been growing steadily ever since. Central Asian migrants move to Russia in hopes of escaping high unemployment and poor economic conditions at home. With its shrinking working-age population and an economy riding on high oil prices, Russia offers better pay and a comparative abundance of job opportunities.

Accounting for migration flows between Central Asia and Russia is challenging because official data is frequently imprecise, and many migrants are in Russia illegally. Estimates of Central Asian labor migration to Russia and less popular receiving countries, like Kazakhstan, in the period between 2004 and 2008 vary widely across sources. Official figures say that 300,000 Kyrgyz migrants and 250,000 Uzbek migrants traveled abroad in that period, while more realistic estimates put those numbers at 800,000 Kyrgyz and three million Uzbek migrants, out of populations of 5.4 million and 28.2 million, respectively. Tajikistan, the poorest state in Central Asia, relies most heavily on labor migration: as many as 1.5 million of its 6.9 million people work abroad, the vast majority of them in Russia.

Migrant workers in Russia are most active in the construction sector. Russia’s Federal Migration Service (FMS) estimates that 40 percent of migrant workers were employed in construction in 2007, 19 percent in trade, and 14 percent in agriculture and the related processing industry. As of 2007, legal foreign workers comprised 13 percent of the construction workforce countrywide.

Remittances from Russia constitute a critical pillar of Central Asia’s economies (see figure). In 2008, remittances sent via money transfer operators reached a record $13.7 billion, with most going to former Soviet republics. Remittances equal around 49 percent of Tajikistan’s GDP, one of the highest proportions of remittances to GDP in the world; between 27 and 29 percent of Kyrgyzstan’s GDP; and between 10 and 13 percent of Uzbekistan’s GDP.

The money transfer market has evolved rapidly, responding to a growing demand for reliable and quick means of remitting money earned in Russia. Money transfers within the territory of the former Soviet Union have become very affordable: commissions dropped from 7 percent in the early 2000s to around 2 percent. According to the World Bank, sending $200 from Russia to Tajikistan in the first quarter of 2012 carried on average a 2.01 percent commission. In comparison, the same transfer from the United States to Mexico cost on average 5.78 percent.

Families of migrant workers rely heavily on remittances. In Tajikistan, over 30 percent of households have at least one family member working abroad; for these households, remittances account for an average 59 percent of income. Similarly, in a survey of labor migrants’ families in southern Kyrgyzstan, over half of the households questioned relied on remittances as their main source of revenue.

Central Asian labor migration to Russia parallels migrant flows to Europe and the United States. In each case, migrant workers provide a source of cheap labor and fill niches in the labor market that do not appeal to local workers. Because many work illegally or are not fluent in the host language, they often encounter resistance from and difficulty integrating into the host society.

Financial Crisis Raises the Stakes

As the financial crisis unfolded in Russia, the construction and services sectors slowed and labor demand dropped. Many migrants received lower pay or lost their jobs altogether.

Some unemployed migrants went home in late 2008 and early 2009. Others stayed to wait out the crisis, subsisting on savings. According to the FMS, new arrivals to Russia dropped by 10 percent in January 2009. Remittances dropped across the board. In Tajikistan, remittances per worker fell by around 30 percent. In Kyrgyzstan, 32 percent of the households that had received remittances in 2008 received nothing for the first five months of 2009. In Uzbekistan, remittances dropped two and a half times in the first quarter of 2009 compared to last quarter of 2008. 2

But the return flow to Central Asia was not permanent. Though an estimated one million Uzbek workers returned to Uzbekistan in late 2008, some went back to Russia in 2009. 3Several studies have found that, as the crisis deepened, migration increased: work was scarce in Russia, but even scarcer in Central Asia, and the region’s governments failed to create enough jobs for returning workers. In Tajikistan, wage employment fell, and with migrants sending smaller remittances, more people chose to go abroad to earn a living. In short, the global financial crisis, on balance, increased the economic incentive to migrate from Central Asia.

Labor migration did become riskier during the crisis, partly because fewer migrants had prearranged jobs and partly because of stricter regulations. Faced with rising unemployment, Russia implemented measures aimed at controlling labor migration and keeping enough jobs available for Russians. In December 2008, the government blocked foreign workers from working as salespeople in retail and in marketplaces, which employ over 30 percent of Russia’s migrant workers. Russia also introduced quotas limiting the number of available work permits and introduced tougher regulations on employers. These initiatives appear to have been mostly politically motivated—there is scant proof that migrants compete for jobs with locals. Their effect has been to make it harder to legally hire foreign workers and to essentially incentivize workers and employers to operate illegally in the “shadow sector.”

Looking Ahead

Remittances have been recovering steadily since 2009. According to Russia’s central bank, labor migrants remitted $4.3 billion to Uzbekistan, $3 billion to Tajikistan, and $1.5 billion to Kyrgyzstan in 2011. Russia’s construction sector is also recovering. While this is good news for labor migrants and their home countries, the crisis was a sharp reminder of the extent to which Central Asian states are economically and politically dependent on labor migration, essentially using migration to “export” unemployment. With people traveling abroad for work, there are fewer unemployed at home and there is consequently less fuel for popular discontent.

However, the policy of exporting unemployment may eventually backfire. If labor flows survive another wave of crisis in Russia, they could still suffer at the hands of Russia’s migration policy. On June 13, President Vladimir Putin signed a revised State Migration Policy, which requires foreign workers to pass Russian language and history exams to obtain work permits and, in effect, pushes more migrants to work illegally. Putin has also discussed pursuing criminal penalties for illegal migrants and their employers.

It is not clear whether Putin’s statements will result in a crackdown on illegal labor, or whether they are empty threats aimed at boosting his domestic political support. It is apparent, however, that more stringent requirements and harsher penalties, especially when combined with the current quota system, would make it harder for low-skilled foreigners to find work in Russia. Unless the governments of Uzbekistan, Kyrgyzstan, and especially Tajikistan become serious about strengthening social safety nets and addressing unemployment, their countries’ reliance on remittances may well contribute to political and economic instability in the future.

Russia, for its part, should not view labor migration as a threat but as a boon. According to the Russian Federal State Statistics Service’s middle-scenario projection from 2008, Russia’s working-age population may shrink by 14 million by 2025. The UNDP reports that this decrease will result in a labor shortage that will significantly hamper Russia’s economic growth potential, even if labor productivity increases. To cover this shortage, the country will need to attract foreign workers. In this respect, persisting anti-immigrant sentiment and the current quota system are counterproductive.

Critics of the quotas, which are imposed annually by region based on declared labor demand, say that they do not reflect the reality of the labor market and do not offer enough flexibility in the event that labor needs change midyear. Quotas that are set too low prevent in-demand labor migrants from obtaining work permits, driving them into the shadow sector. Without a legal work permit, migrants cannot conclude labor contracts, leaving them vulnerable to exploitation. A more appropriate approach to managing low-skilled labor migration would address the shadow sector problem by making the quota system more flexible and removing excessive administrative obstacles facing workers and employers who attempt to operate legally.

Daria Anichkova is a research assistant and project coordinator of the al-Farabi Carnegie Program on Central Asia at the Carnegie Endowment for International Peace.

[1].This analysis omits Kazakhstan and Turkmenistan, focusing instead on Russia as the receiving country for migrant labor and Tajikistan, Kyrgyzstan, and Uzbekistan as the source countries. Official migration statistics on Turkmenistan are not readily available. Meanwhile, Kazakhstan, the most economically successful country in the region, receives fewer labor migrants than Russia, which provides a more striking example of the effects of a financial and economic crisis on migration flows.

[2]. Sevilya Murodova, Inward Remittance Channels to Uzbekistan and the Impact of Global Economic Crisis on Migrant Laborers and Remittances, unpublished manuscript, February 2011.

[3]. Ibid