RemittancesGateway.org

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

Saturday, 13 March 2010 11:19

Source: ABS CBN news
By Jeremaiah M. Opiniano

More families of overseas Filipino workers (OFWs) 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% in 2000 to 43.3 % in 2006.

But expenditures to health are increasing (from 2.3% in 2000 to 3%) while allocations for durables are steady (2.2% 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% of all Filipino households received cash from abroad in the year 2000, ADB estimations show. This figure rose to 20.72% in 2003 and 23.3% 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% in 2000 to 4.4 in 2006), as well as for housing operations (2.0% in 2000 to 2.1% in 2006).

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

Table 1: Percentage shares of income sources and savings of migrant households

	Income quintiles (income groups)
	1	2	3	4	5
Year 2000
% of Households receiving cash from abroad (18.05% Overall)	4.30	9.19	15.81	24.48	35.23
Average Annual Income (PhP)	32,242	57,835	90,244	148,270	374,621
% share to Annual Income
Cash Received from Abroad	1.10	2.29	4.36	7.87	11.63
Agricultural Wage	12.11	9.10	4.80	1.80	0.42
Non-agricultural Wage	13.61	24.61	37.19	47.61	50.44
Domestic Remittances	8.21	4.93	3.83	2.57	1.54
Entrepreneurial Income	40.13	39.35	31.79	22.88	18.35
Income from Investments*	2.05	3.19	4.20	5.85	9.92
Savings	-4.89	3.02	8.89	14.54	23.73
Year 2003
% of Households receiving cash from abroad (20.72% Overall)	4.98	11.48	19.79	30.86	43.79
Average Annual Income (PhP)	34,696	62,357	95,857	154,811	392,382
% share to Annual Income
Cash Received from Abroad	0.86	2.06	4.51	8.47	13.76
Agricultural Wage	14.60	11.15	5.99	2.51	0.69
Non-agricultural Wage	12.49	24.83	36.63	45.16	47.33
Domestic Remittances	6.93	4.97	4.11	3.22	1.62
Entrepreneurial Income	40.53	37.44	30.76	23.56	19.21
Income from Investments*	1.74	2.80	4.29	5.72	9.91
Savings	-5.87	2.39	7.19	12.73	20.80
Year 2006
% of Households receiving cash from abroad (23.30% Overall)	7.08	13.86	22.69	33.46	44.09
Average Annual Income (PhP)	41,543	72,802	111,324	180,580	455,481
% share to Annual Income
Cash Received from Abroad	1.30	2.72	5.49	9.75	14.74
Agricultural Wage	14.51	10.95	6.04	2.27	0.47
Non-agricultural Wage	12.11	23.47	36.11	44.74	46.70