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By Jeremaiah M. Opiniano
EXTREME reliance on money from Filipinos
overseas hasn’t helped the country get out of the poverty rut and
may even hobble the poor’s income capability, says an economist.
Using government’s triennial Family Income and
Expenditures Survey (FIES), University of the Philippines economic
researcher Ernesto Pernia said remittances from overseas Filipino
workers may even be contributing to the persistence of high
inequality in the country.
The 2003 and 2006 datasets of the FIES saw the
country’s total Gini coefficient showed it hardly-changing: 0.4605
Gini coefficient in 2003, declining to only 0.4580 in 2006.
Gini coefficient ratios are a measure of
equality or inequality of wealth. Its values range from 0 to 1, 0
indicating complete equality, and 1 indicating complete inequality.
The Philippines is in the middling stage in terms of its Gini
coefficient ratios.
As overseas employment and permanent settlement
will continue to persist in the Philippines, Pernia said remittances
“could result to a further worsening of income inequality.”
“Such inequality tends to dampen the poverty
reduction effect of remittances—FIES reveals that poverty
incidence rose to 32.9 percent in 2006 from 30 percent in 2003.”
The poverty incidence figure reflects that
percentage of the population that is considered poor.
The recently released 2006 FIES showed there
were 27.6 million poor Filipinos, some 3.6 million more than the
survey’s last conduct in 2003. This means the number of Filipinos
who said they were poor increased to 700,000 or a total of 4.7
million poor families in 2006.
In a press conference in early March,
socio-economic planning secretary Augusto Santos declined to link
remittances and income gap between the “haves” and have-nots.”
He said he wants the 2009 FIES done first before
citing effects of remittances to poverty and inequality.
Using data on the FIES covering the years 1994,
1997, 2000, and 2003, Pernia noted that while remittances expanded
household incomes, the gain is smaller for the lower quintile groups
(21.5 percent) compared to the upper quintile group (46.3 percent).
“Despite their beneficial effects, remittances
cannot be relied on as a principal instrument for reducing poverty
or fostering the country’s long-run development,” he said in his
paper titled “Migration, Remittances, Poverty, and Inequality.”
Pernia said, benefits of OFW remittances to
purses of Filipinos couldn’t be discounted.
Remittances have positive and significant
effects on the well-being of poor households, particularly on the
two lowest income quintiles of the poor, Pernia said.
If the first poorest income quintile group
increases remittance receipts by P1,000 per capita (about $24), it
leads to P1,789 (about $40) additional annual family spending per
person.
Meanwhile, for the second poorest income
quintile group, the household expenditure per capita rises to P2,177
(about $55) for every P1,000 additional per capita remittance.
Pernia said the positive effect of remittances
on all these households’ well-being rises to the point that
remittances “become insignificant for the next higher
quintiles,” and these “probably matter less to richer
families.”
“The positive effect of remittances on
household incomes rises monotonically from 1 percent for the lowest
quintile, 4.8 percent for middle quintile, and 16 percent for the
top quintile,” Pernia said.
Actually, without remittances, the Philippines
would have more than 26.5 million poor. But thanks to remittances,
the poverty headcount is lower at 24 million, Pernia’s data found.
Having remittances as a share in a household’s
income “raises the likelihood [that a] household will get out of
poverty,” Pernia said.
“Poverty incidence for the bottom quintile was
slightly reduced by 0.1 percent, and by 13 percent for the second
quintile, while that in all three upper quintiles were completely
wiped out,” he added.
Besides the FIES data, Pernia also processed
information from the annual Survey on Overseas Filipinos, and the
quarterly Labor Force Survey of the National Statistics Office.
He also used gross regional domestic product
data from the national income accounts to see the regional
development impact of remittances.
Regions that have more overseas workers benefit
more from remittances compared to other regions that have less
numbers of OFWs, Pernia said.
Remittances have brought positive and
significant effects on poverty reduction in the regions—to the
point that a 10-percent increase in the ratio of remittance per
capita to gross regional domestic product (GRDP) per capita sees a
2.6-percent increase of households lifted out of poverty, Pernia
said.
Ironically, Pernia said, these benefits of
remittances to regional development “do not matter to the
worst-off as much as the better-off.”
Pernia found that regional development does not
benefit low-income households as much as higher income families.
Six of the country’s ten poorest provinces are
in the Mindanao island group, while provinces with the lowest
poverty incidence rates were in Luzon, FIES data showed.
FIES data also showed that poverty rates in the
regions increased, and that provincial poverty measures also
highlighted regional income disparities.
Trying a conjecture, Pernia discovered that had
Filipinos stayed to work within the country’s borders, domestic
remittances appeared to be “more welfare-enhancing for the poor
than are international remittances.”
Remittances are good for the poor, “but even
better for the less poor and better-off,” Pernia reiterated.
-- OFW Journalism Consortium
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