WB study: OFW money lifting families out of poverty

Posted: 2:09 AM Oct. 25, 2005
Inquirer News Service
http://money.inq7.net/topstories/view_topstories.php?yyyy=2005&mon=10&dd=25&file=4

MONEY remitted by overseas Filipino workers (OFWs) is lifting many Philippine households out of poverty by boosting funds for education, health and entrepreneurship, a new World Bank study has noted. The study, titled "International Migration, Remittances, and the Brain Drain," includes a detailed analysis of household survey data in the Philippines, Mexico and Guatemala.

The chapter on the Philippines says households with OFWs tended to be wealthier than others in terms of per capita income based on 1997-1998 data. It said that in June 1997, a month before the Asian financial crisis set in, 5.9 percent of Philippine households had one or more members working abroad.

Fifty-one percent of these households landed in the top 25 percent of the national household income per capita distribution while 28 percent were in the next-highest quartile, it said. Only nine percent of Philippine households with OFWs were noted to be still living below the poverty line.

The average per capital income of OFW households was estimated at P20,235 ($778) during the pre-Asian crisis period as opposed to ordinary households, which had a higher poverty rate of 31 percent and a lower per capita income of P11,857 ($456).

The study further noted that a currency exchange shock similar to the peso devaluation against the US dollar during the Asian crisis could lead to increases in household remittance receipts and in total household income. A 10-percent improvement in the exchange rate leads to a drop of 0.6 percentage point in the poverty rate, it noted.

Households enjoying a more favorable exchange rate were also more likely to start a business, particularly in transportation and communication services, and manufacturing, which were activities involving considerable fixed costs in vehicles and equipment that could become more affordable in the wake of positive exchange rate shocks, the study pointed out.

Those investing in transportation services were likely to venture into taxi and minibus operation while likely manufacturing activities include small activities such as mat weaving, tailoring, dressmaking and food processing, the study said.

"The fact that the exchange rate shocks stimulated such investments suggests that the shocks are likely to have persistent and positive effects on household well-being over the long term, in addition to their leading to reductions in current poverty," it said. The study also found evidence of positive spillovers to households without OFWs in terms of gift-giving.

Other key findings of the WB study were:

• 31 percent of OFW household heads have college or higher education, compared with just 20 percent of non-OFW household heads.
• 23 percent of OFW household heads work in agriculture, compared with 38 percent in all other households.
• 68 percent of OFW households live in urban areas, compared with 58 percent of non-migrant households.
• Saudi Arabia is the biggest single destination of OFWs, with 28.4 percent of the total.

Hong Kong (China) comes in second with 11.5 percent. The only other economies that account for six percent or more are Taiwan (China), Japan, Singapore, and the United States.

• OFWs have a mean age of 34.5 years; 38 percent are single and 53 percent are male. The two largest occupational categories are production and related workers, and domestic servants, each accounting for 31 percent of the total.

• 31 percent of OFWs have achieved some college education, and an additional 30 percent have a college degree.

To address rising unemployment and balance-of-payments problems, the Philippine government initiated an Overseas Employment Program in 1974 to facilitate the placement of Filipino workers abroad.

At first, the government directly managed the placement of workers with employers overseas, but soon yielded the function to private recruitment agencies and assumed a more limited oversight role.

Doris Dumlao, with INQ7.net