OFW families spending less on food, more on health – ADB study

by JEREMAIAH M. OPINIANO
OFW Journalism Consortium

MANILA—MORE families of overseas Filipino workers are spending less on food and more on health, a study by the Asian Development Bank revealed.

Using econometric estimations, Filipino Alvin Ang, Indian Shikha Jha, and Indonesian Guntur Sugiyarto noted that the percentage share of expenditures of migrant households to food went down slightly, from 44.9 percent in 2000 to 43.3 percent in 2006.

But expenditures to health are increasing (from 2.3 percent in 2000 to three percent) while allocations for durables are steady (2.2 percent in 2000, 2.2 in 2006).

Remittances “do not have a significant influence on other items of expenditure, particularly investment spending on education, health care, and durable goods,” said the authors of “Remittances and Household Behavior in the Philippines.”

Whether it’s a crisis year or not, Ang told the OFW Journalism Consortium that the share of spending for food by households in the Philippines receiving remittances is lower even with rising remittances.

Some 18.05 percent of all Filipino households received cash from abroad in the year 2000, ADB estimations show. This figure rose to 20.72 percent in 2003 and 23.3 percent in 2006.

“[This is] because these families are getting increased incomes, and also spend on other items,” said Ang who also teaches economics at the University of Santo Tomas.

Hence, Ang and his colleagues concluded in the paper, there’s no evidence consumption is being fueled solely by remittances.

This view douses the oft-quoted analysts’ view that prompted property developers, telecommunication companies, insurance firms, and shopping malls to chase the money of overseas Filipinos.

Not even billions of dollars coming from over-eight million Filipinos overseas can provide clear proof remittances have been stirring domestic demand in sectors such as education, health care, and durable goods.

“[Our] analysis…does not support evidence of remittances contributing toward rebalancing growth by creating domestic demand, except for food.”

Spend

THE ADB paper is among the first papers to precisely show how OFWs and their households spend their remittances, even as previous studies have observed that overseas Filipinos spend their remittances on “conspicuous consumption” or “unproductive expenses”.

The authors analyzed data from the 2000, 2003, and 2006 Family Income and Expenditures Survey (FIES) of the National Statistics Office, and looked at the income and expenditures of both migrant and non-migrant households.

The data used were prior to the global economic crisis of 2008 since government has yet to process the FIES of 2009.

Ang, however, said it does not matter whether there is a crisis or not.

“The same remittance economy is affected.”

If the 2009 FIES data would be available at the least by 2011, Ang himself said he would be interested to determine if the “shock event” called the global economic crisis “would have stopped or diminished the expenditures of migrant households on certain items”.

Still, the authors said their conclusion on remittances and domestic demand wasn’t definitive.

What we looked at, or attempted to look at, is what we call “reverse causality”, Ang said explaining that remittances affect domestic demand, and vice versa.

The ADB paper looked at how remittances impacted on poverty and household expenditure, and the reverse, he added.

The paper noted that overseas Filipino households’ spending for education are fairly stable (4.5 percent in 2000 to 4.4 in 2006), as well as for housing operations (2.0 percent in 2000 to 2.1 percent in 2006).

Not surprisingly, spending for transportation and communication (including mobile phone expenses to reach loved ones abroad) increased from 6.2 percent in 2000 to 7.2 percent in 2006 (see Table 1).

But comparing these expenditures to those of non-migrant households, the percentage shares of expenditures of migrant households to food are lesser than non-migrant households.

Plus, the percentage shares of expenditures of migrant households to health, education, durables, transport and communication and housing operations are higher than the percentage share expenditures of non-migrant households in these allocations (see Table 2).

Savings

THE paper noted that if a migrant or non-migrant household with five members has P75,000 per annum (roughly $1,667 at US1=P45) or P15,000 per person per year, that household is out of poverty.

All migrant households are “automatically” part of that group, Ang said.

In the 2000 FIES, migrant households with an average annual income of P32,242 form the lowest quintile group. The highest –fifth income quintile group– would have an P374,621 annually. Six years later, the average annual income for the first quintile group is P41,543 and the fifth income group is P455,481.

Notably, Ang said, the number migrant households belonging to the lowest income group is increasing, from 4.3 percent of all migrant households in 2000 to 7.08 percent in 2006.

As shown in the three FIES years, the first quintile group of migrant household got most of their incomes from entrepreneurial income, while the fifth quintile group had most of their incomes from remittances abroad, placed under “non-agricultural wages” in the FIES.

This is even if among the income sources of all quintile groups of migrant households are “cash received from abroad”. For the fifth quintile income group, cash received from abroad increased to 14.74 percent in 2006, from 11.63 percent in 2000.

Remittances from abroad can fall under two items in the FIES: “non-agricultural wages” and “cash from abroad”.

Officials of the Bangko Sentral ng Pilipinas cite in previous media pronouncements its quarterly consumer expectations survey to show that OFW households are increasingly saving, and that their program for financial literacy to OFWs is working.

However, FIES data crunched by the ADB reveal that the first, second, third fourth and fifth quintile income groups’ allocations of household incomes to savings are all decreasing by percentage share.

Probability estimates made by the authors also showed that households savings are “very important” in lifting migrant and non-migrant Filipino households out of poverty.

“If only the OFW saves more, the more that the probability for them and their households will improve their lot increases,” Ang said.

Remittance inflows to the Philippines in 2009 reached $17.348 billion,.

ADB, in 2005, released a landmark study on OFW remittances that included remittance dynamics, remittance usage, and OFWs’ behavior in using remittance channels.

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OFW Journalism Consortium