OFW Money Fails to Bridge Income Gap

By Jeremaiah M. Opiniano | www.ofwjournalism.net

MAKATI CITY — 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, University of the Philippines economist Ernesto Pernia said in a research that remittances from overseas Filipino workers may be contributing to the persistence of high inequality in the country.

The 2003 and 2006 datasets of the FIES saw the total Gini coefficient (or the measure of inequality of wealth) showed it hardly changing: 0.4605 Gini coefficient in 2003 to 0.4580 in 2006.

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 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 to the 2009 FIES done first before citing effects of remittances to poverty and inequality.

But Pernia, using data on the FIES covering the years 1994, 1997, 2000, and 2003, 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”.

Benefits

OF COURSE, 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 his data analyses reveal.

If the first poorest income quintile group increases remittance receipts by P1,000 per capita, it leads to P1,789 additional annual family spending per person.

Meanwhile, for the second poorest income quintile group, the household expenditure per capita rises to P2,177 for every P1,000 additional per capita remittance.

Of course, Pernia says, the positive effect on 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.