Migration and remittances have become very significant for many economies and been hailed as offering new opportunities for economic development. And certainly migration is a right for people in their pursuit of decent work and livelihoods for themselves and their families. In particular much attention has been given to how remittances increase incomes of receiving households and how these have become an increasingly large part of financial flows to developing countries.
The benefits of migration and remittances to households and to economies as a whole are widely presumed – however their real contribution to development is much more qualified if these are assessed in their broader social, economic and political context. Indeed there is reason to be skeptical of any economic policy thrust that overly relies on these as a primary means to advance economic development.
Households and the Economy
There are two distinct aspects to migration and development. There is firstly the net effect on migrants and their families of a family member going abroad for work. The main benefit is the remittances which increase household incomes, while the main cost is the social stresses due to extended separation from family members. Second, though less understood but also important, is the impact on the domestic foundations for economic development. While related they are however distinct because what may be good for the household may not necessarily be good for the economy – put another way, reducing the poverty of particular remittance-receiving households will not necessarily reduce poverty in the economy as a whole.
Migration is doubtless effective in temporarily reducing poverty of particular households while remittances are received. But there is little reason to believe that it is able to make a dent on structural and systemic poverty especially in a country as large and with as many poor as the Philippines.
Overseas remittances have a direct and positive effect on recipient household incomes and reduce poverty, at least while these are received. Remittances self-evidently increase household incomes, purchasing power and consumption. The National Statistics Office’s (NSO) October 2008 Survey of Overseas Filipinos (SOF) produced estimates of overseas Filipino workers’ (OFW) remittances to households by major occupation group in the April-September 2008 period. It found that laborers and unskilled workers (18.8% of OFWs) remitted an average of P6,333 per month, clerks (5.1% of OFWs) P9,833, service workers and shop and market sales workers (13.5% of OFWs) P10,167, trades and related workers (17.4% of OFWs) P11,000, plant and machine operators and assemblers (15.0% of OFWs) P11,833, and technicians and associate professionals (8.1% of OFWs) P13,667.
To put this into context, the minimum wage in the National Capital Region (NCR) computed on a monthly basis currently stands at P11,620 (from a daily wage of P382). This implies that some 54.7% of OFWs are working abroad as laborers and unskilled workers, clerks, service workers and shop and market sales workers, and trades and related workers to be able to remit back even less than the NCR minimum wage. Meanwhile another 23.1% working as plant and machine operators and assemblers and as technicians and associate professionals are sending back only a little more than the NCR minimum wage.
At the household level there are benefits from investments in social capital – ensuring education and improving health through better diets and health care – which have potentially far-reaching social and economic benefits for the households concerned. The Bangko Sentral ng Pilipinas’ (BSP) 2nd quarter Consumer Expectation Survey (CES) noted that 96.2% of OFW households used remittances to pay for food, 68.2% for education expenses and 62.4% for medical expenses. The same survey found 25.9% of OFW households buying appliances and other consumer durables, while only 10.8% were spending on purchase of houses and only 7.0% on cars or motor vehicles. Just some 8.3% responded that they were spending on investments.
Overseas remittances are also an important source of foreign exchange and purchasing power at the macroeconomic level. These are regarded as significantly contributing to a country’s foreign exchange resources and boosting overall consumption spending as well as, to some degree, investments in real estate. Even as there is little reason to expect that saving rates of OFW households will be any different from the generally low savings rates of households in the country, the large amounts of remittances overall have prompted various efforts to leverage at least a portion of these as development finance’ such as OFW bonds, in philanthropy, for community investment projects and others.
The BSP recorded US$16.4 billion in remittances in 2008. This was much larger than net foreign direct investment (US$1.52 billion) and far outstripped net exports of goods and services (US$11.1 billion deficit) for the year, also according to BSP data. Remittances were also higher than foreign aid disbursed (US$1.05 billion, according to the National Economic and Development Authority) and the increase in government foreign debt stock (US$1.78 billion, according to the Bureau of the Treasury).
The income benefits from remittances for households are arguably considerably offset by the social harm for families due to separation for long periods of time. There are serious social costs for families when one or both parents are forced abroad to find work. The extended and physical separation can cause severe stress on the relationship of the spouses with each other and can adversely affect the quality of upbringing of children left behind to be cared for by relatives. This should be considered as setting the outer limits to how far migration should be institutionalized as a generalized source of livelihood rather than for instance a stop-gap or exceptional measure. There is presumably a limit to how many families in the Philippines can have missing parents that, when breached, means unacceptably great harm and trauma to family life at the national level.
Labor Export as State Policy
Nevertheless, the Philippine economy’s dependence on migration and remittances is unprecedented. The 8.7 million Filipinos overseas in 2007 was already equivalent to over a quarter of the 34 million total employed Filipinos, some 23% of the labor force, and nearly a tenth of the population then of 88.7 million. Remittances have swelled dramatically over the last three decades with a nineteen-fold increase from an annual average of US$823.7 million in 1981-1990 to US$16.4 billion in 2008. Their equivalent share in GDP has correspondingly increased nine-fold from 1.3% in 1980 to breach the psychological barrier of 10% in 2005.
Deployments of Filipino migrant workers and remittances are high and sustained although generally no longer seeing the peak high double-digit growth rates in some years of the 1980s and 1990s. The number of overseas Filipinos nonetheless continues to rise with deployments reaching a record 1.24 million in 2007 or an average of some 3,400 Filipinos per day.
The Philippines is one of only five countries worldwide that receive more than US$10 billion in remittances annually. In 2007 the country was the fourth-ranking remittance-receiving country in 2007 exceeded only by India, China and Mexico. These three economies are much bigger however – India’s economy is seven times larger than the Philippines, China’s twenty-one times larger, and Mexico’s over six times larger – so their inward remittances are a much less significant share of their respective economies.
Measured as a share of GDP, the Philippines is the 19th-ranking remittance-receiving country in 2006. However the other countries in the Top 20 are much smaller and, excluding Nepal, their average population is just a little over four million. The Philippines’ population is even larger than of these 18 small countries combined (summing to just 78.9 million in 2006). Nepal is the only other relatively large country in these upper ranks but its population of 28 million is not even a third of that in the Philippines. These give the Philippines the dubious distinction of being by far the largest among the most migrant- and remittance-dependent countries in the world.
Philippine migration policy is disproportionately focused on maximizing the overall inflow of remittances as a development goal in itself without weighing this against the welfare of migrant workers and their families. The government has, for many years now, been aggressive in crafting programs and services aimed at facilitating and encouraging migration. While acknowledging the many social costs, these are effectively downplayed and the resoluteness of the labor export effort often creates the impression that migration is unequivocally beneficial for the migrants and their families. This is particularly done by overstating supposed development benefits for the economy and the income benefits for households. Migration has relatively immediate and visible quantitative benefits while its significant costs are more qualitative (ex. social costs) or otherwise difficult to quantify (ex. lost economic potential).
Remittances and Underdevelopment
But the fact remains that greatly increased overseas employment and remittances have not been accompanied by economic development for the Philippines as a whole. The country still suffers economic backwardness despite increasing migration and remittances over the last decades and since the start of the government’s labor export policy in the mid-1970s. The absolute number of Filipinos in poverty continues to rise with a 530,642 increase in the number of poor families between 2000 and 2006 (to 4.7 million poor families) and a 2.1 million increase in the number of poor Filipinos (to 27.6 million in 2006), according to the National Statistical Coordination Board (NSCB). The poverty incidence measured in percentage terms also even increased from 30.0% of the population in 2003 to 32.9% in 2006.
Migration and remittances, despite the large numbers and vast sums involved, are still essentially disconnected from local economic activity aside from still being beyond much of the population which greatly limits their possible contribution to sustainable domestic development. Migrants go abroad, work abroad, and send back money to be spent. This is in contrast to agriculture or domestically-grounded industry which involves interacting with different economic units and sectors domestically, as well as creates valuable technological, multiplier and synergistic effects – yet these are necessary to build solid economic foundations. Peso for peso the income earned from economic activity actually occurring in the country is more developmentally meaningful than from remittances merely received from abroad.
The limits of migration and remittances are little mitigated by efforts to leverage the contribution of remittances at the microeconomic and macroeconomic levels – i.e., improving migrant entrepreneurship, encouraging savings, pooling remittances for private and public investment projects, and so on. Indeed there are several factors negating the theoretically positive multiplier effects. There is not much of capital left behind for reinvestment with remittances largely going first to household debt repayments then to basic subsistence consumption expenditures on food, rent, education and health care. The lack of meaningful investment prospects in the country means that the largest part of ‘investment’ by OFWs is in mainly small-scale service sector activities such as tricycles, jeepneys, taxis, street restaurants and sari-sari stores. These are minimally productive in a deeper macroeconomic sense, generate few jobs and result in minimal domestic capital formation.
The multiplier effects of local spending are also limited by how much of these go to imported goods in the absence of domestic industry. Any supposed ‘brain gain’ is also somewhat exaggerated inasmuch as few migrants are really in skilled work and even fewer are in skilled work with technologies appropriate to the Philippine context. Moreover, technology transfer goes beyond just individual migrants ‘knowing’ the technology and also includes legal license to use these as well as having the local resources and opportunities to put technologies into practice.
From the perspective of the ruling elite, it appears that sending Filipinos is more politically expedient than addressing basic structural problems. The economic experience of developed countries affirms the necessity at some point of a fairly long period of fundamental domestic economic policy reform measures. For a country in a stage of underdevelopment and of a size such as the Philippines this involves agrarian reform and building national industry. Labor export and remittances can play a role as a supplementary source of income and foreign exchange yet, on the contrary, it appears to have become a cornerstone of development strategy.
A plausible reason for this is that labor export does not threaten any entrenched domestic interests nor conflict with economic interests of foreign corporations – as for example land reform or national industrialization would. The resistance of landlords to agrarian reform and of foreign-dependent agricultural, industrial and service interests are among the local barriers to major policy reforms, aside from the influence exerted by foreign governments and international financial institutions. At the same time a steady flow of Filipinos going abroad and remittances make it convenient for the government to pay less attention to domestic unemployment, underemployment and inequality.
Migrant Workers Rights
The economic compulsion for the government to keep exporting Filipinos especially to maintain or increase remittances unfortunately appears overriding and precludes undertaking any measures that, directly or indirectly, would constrict the flow of migration. This is even if such measures would immediately and in the long-run go far in lessening the incidence of abuses and migrant rights violations. Even worse is that pursuit of a cheap labor policy could encourage a ‘race to the bottom’ with the government effectively competing with other labor exporting countries in giving the cheapest and most docile labor to potential employers.
In the context of a labor export policy there is then an underlying conflict between the government as promoter/recruiter of migration in pursuit of overall macroeconomic ends and the government as monitor/protector of migrant rights and welfare which can move in different directions. This goes far in explaining for instance why many migrants in distress are prompted even by Philippine embassies and consulates to essentially concede the violations of their rights by employers.
Continued promotion of migration will undeniably increase the number of Filipinos put in vulnerable situations as well as strain already insufficient national and overseas mechanisms for protection.
Hence one clear way to gauge the government’s commitment to promoting migrant rights is whether it is willing to scrap its labor export policy altogether.
This is an extract from the Migrant Workers’ Human Rights Research Report prepared by IBON Foundation and Migrante International for the Commission on Human Rights of the Philippines.
