Thursday, June 21, 2007

Exodus: Movement of the People

International Labor Migration & Remittances in the Philippines

Overseas Filipino workers are all over the world
Quick Facts
  • Approximately 8 million Filipinos, or 10% of the population, are currently working overseas.
  • Filipinos are in over 200 countries around the world.
  • According to government figures, 2,700 Filipinos leave the country everyday, not including unauthorized migrants.
  • During the Spanish colonial period (1565-1898), sons of the emerging middle class known as illustrados were sent to Spain to study while working class men served on ships that moved between Manila and Acapulco (Tullao).
  • During the American colonial period, colonial ties allowed easy entry of Filipino workers to the plantations of Hawaii and California in spite of restrictive immigration policies toward Japanese and Chinese (Tullao).
    • Filipino scholars, known as pensionados, went to the U.S. to study.
    • Filipinos were also permitted to enter the U.S. Navy.
  • U.S. liberalization of immigration policies and removal of quota system in the 1960’s opened the doors for Filipino professionals, particularly nurses, doctors, accountants, engineers, and teachers (Tullao).
    • The passing of Tydings-McDuffie Act set restrictions on migrant professionals which prompted Filipino overseas workers, especially nurses, to look for jobs in other countries such as the UK, Canada, and Australia.
  • Filipino migrants to the U.S. generally remain as permanent residents (Tullao). Permanent residence; however, is mainly offered only to high-skilled workers, whereas low-skilled workers (factory workers, maids, entertainers) generally have temporary work contracts of 6 months to 3 years.

Filipina entertainers train to work abroad as singers and dancers
  • Filipino temporary migration (Tullao)
    • Indonesia and Malaysia were popular in the 60’s for jobs in logging and construction.
    • Filipinos were ubiquitous as musicians and entertainers in major cities around Asia during the post-war years.
    • The oil boom in the 70’s expanded economies in the Middle East. The economic growth attracted Filipinos both skilled and unskilled.
    • East Asia growth in Japan, China, Hong Kong, Singapore, South Korea, etc. has attracted many Filipinos working as entertainers, factory workers, domestic helpers, and construction workers.
    • Filipino seafarers dominate the world's maritime industry.
  • The Philippines has a long tradition of international labor migration with annual outflows rising from a few thousand in the early 1970's to 867,000 in 2001. Filipino migrants generally travel to the Middle East, Japan, Hong Kong, and Singapore for work (Yue).

Makati, Manila- The Manhattan of the Philippines

Human Capital
Migration is inextricably linked to the Philippines. From colonization to independence, the pearl of the Orient has been a cultural melting pot for centuries resulting in opportunities for overseas work and studies. More recently, local economic depression, unemployment, and underemployment have fueled demand to work abroad and earn higher wages.

In recent years international labor migration has become increasingly important to the stability and growth of the Philippine economy. In the Philippines, local industries such as call centers and business process outsourcing firms are growing and serve as welcome sources of employment for college graduates; however, these budding industries generally employ only the wealthy, or those who can afford higher education, thus leaving the poor to earn minimal wages driving jeepneys or tricycles or perhaps running a karinderia, a cheap roadside food stand. More often than not, unemployment is the reality of the poor in the Philippines. And despite the hype of a strong peso and the billions of dollars from remittances, the Philippines remains a country where, according to the World Bank, 48% of the population lives on less than $2 a day, a rate that hasn't changed in at least the last 10 years.

Squatter settlements like these dot the Philippine landscape

The Grass Really is Greener
The unemployment rate has hovered at 11% for the last few years. There are not enough jobs. The jobs that do exist do not pay well and do not fully utilize the skills of the work force. College graduates work as messengers, waitresses, and bellboys. Starting salary for these positions can be as low as $5 a day. Underemployment is the norm (23% in January of 2006). Those without college degrees are less fortunate- the available jobs pay even less and many face unemployment.

The Philippine economy is not developed enough to fully utilize its human capital. Because of this, skilled and unskilled workers look abroad to greener pastures where suitable jobs and higher wages can be found.

Eight million Filipinos work overseas, including many high-skilled workers who become permanent residents

Developing countries have done their fair share to capitalize on the glut of labor in the Philippines, and other third world countries for that matter. Developed countries often experience labor shortages as their populations age and their reproductive rates decrease. This can decrease labor productivity, increase cost of labor, and over time cause markets to shrink. An effective way to maintain economic growth and hurdle the aforementioned obstacles is to attract professionals and high-skilled migrants from abroad, thus filling the gaps in the labor force. High wages and relaxed immigration policies such as permanent residence entice the high-skilled workers to emigrate while low wages and unemployment at home push them to leave. All this means the Philippines has almost no chance of retaining its high-skilled workers who instead migrate, often permanently, to countries like the U.S., Canada, and Australia.

The exodus of skilled workers in the Philippines, if unchecked, can eventually lead to brain drain, or loss of local productivity caused by excessive emigration. This loss of productivity can increase the cost of labor, which may in turn decrease the demand for labor and result in the shrinking of local industries- similar negative effects that developed countries would face if they did not import labor. While migration to labor import countries such as the U.S. relieves the burden of unemployment in the Philippines and provides an injection of foreign currency to the economy, it can also create a labor shortage at home and end up hurting local industries.

Foreign Aid
While the Philippine economy may not directly benefit from the intellectual capital of its high-skilled workers, migrant workers are playing a key role in keeping the economy afloat by sending funds, or remittances, to families at home and providing a much-needed source of income.

The Philippine government is making it easier and cheaper to send remittances home so more of the funds pass through official channels and are counted

Remittances are the fruit of migration for the Philippines. They are the reward for sacrificing labor productivity at home and potentially putting local industries at risk. They are the reward for being isolated from family and loved ones for sometimes years on end. And they enter the country by the billion- $12 billion last year to be exact (and another estimated $8 billion through unofficial channels for a total of $20 billion).

Remittances are the reason the Philippines has been able to avoid falling into economic trouble. They are the reason that President Gloria Macapagal Arroyo is able to tout the economic strength of the Philippines despite the brazen poverty visible in almost every community. They are the reason that plasma TVs sit in living rooms, that gleaming villas sit newly constructed next to the neighbor's shack, that brothers, sisters, cousins, and second cousins are sent to school, that tita (aunt) can get the operation she needs and pay for the necessary medication afterwards, that families can sit at home unemployed and wait for checks or cash in the mail, that a culture of migration develops that relentlessly promotes the romanticism and fantasy of working abroad, and that the Philippine educational system has been focusing on skill sets, such as nursing, that are most appealing to international labor markets.

Caregivers, a profession in demand abroad, learn how to move a bedridden patient out of bed

International Migration- Pros & Cons
An Asian Economic Policy Review article by Siow Yue summarizes the benefits of labor migration:
The bulk of the economic gains from international labor migration accrue at the micro level to the migrants and their families and these gains are often large, as wage levels in receiving countries are much higher than what these migrants received back home in similar occupations. At the macro level, the labor-exporting country benefits from remittances received, and from skills and experiences gained when these migrants return.

Remittances augment domestic savings and provide a steady stream of foreign exchange earnings that help overcome the balance of payments constraint and
improve a country’s credit worthiness for external borrowing.

Remittance-funded houses like the one above provide a stark contrast to the wood and palm leaf houses of the neighbors

A recent case study by Tullao et al summarizes the positives and negatives of labor migration:
Positives of human capital/migrant labor include employment opportunities out of country that may not exist in-country, alleviation of pressure on local economy, remittances and increase in quality of life for those receiving them, injection of foreign currency into local economy, stability of local currency, brain gain (technology/skills transfer of returning migrants).

Negatives of human capital/migration labor include the substantial opportunity cost of overseas employment, decrease in productivity of local economy and comparative advantage (especially if a large number of highly skilled workers emigrate), cost of training for those left behind (especially if education has been subsidized by the state), brain drain, and labor shortage.

Higher education is generally accessible only to the wealthy leaving the poor with few employment options

An Uncertain Future
As the Philippines becomes increasingly dependent on remittances, the local economy will become less significant except to serve as a training ground for new workers to gain experience before going abroad. As stated above, brain drain and labor shortage can threaten local markets and fuel unemployment (increased labor cost as productivity declines can cause decreased output which can shrink markets and decrease jobs). At least families receiving remittances will be shielded economically from political instability and other crises (family illness, unemployment, natural disaster) because a significant portion of their income is derived from stable, external economies outside of the Philippines.

Another effect of remittances has been an improvement in the exchange rate of the Philippine peso, 6.8% against the U.S. dollar so far this year. Normally an increasing exchange rate signals a healthy economy, and in the case of the Philippines it does, except not that of the local economy, but rather of the economies of developed nations that employ Filipino migrants. An increased exchange rate makes exports more expensive, and therefore less attractive, to the international market and also cuts into the profits of call centers and business process outsourcing centers in the Philippines. A higher exchange rate also reduces the value of remittances, which in turn decreases the buying power of families who depend on overseas income.

And this article hasn't even addressed the social cost of international labor migration- of breaking apart families, of mothers, fathers, sons, and daughters working abroad for years on end, unable to come home, and becoming less a family member and more a provider of money, a source of income. The challenges of working in another country, the racism and abuse overseas Filipino workers can face, the very real dangers of being trafficked and enslaved, and the hardship of being away from friends and family are obstacles all migrants must confront. While international labor migration may be necessary to build the Philippine economy, it must be aknowledged that there is a significant social cost to this strategy and programs to support migrants before they leave, while abroad, and upon return must be effectively instituted and implemented by the government in partnership with labor importing countries like the U.S. and supported by non-governmental organizations to ensure that overseas workers receive the support they need at each stage of the migration process.

The Philippines' long relationship with migration has had its share of positives and negatives: while the country receives much needed cash from abroad, this same monetary inflow works to stunt local economic growth and increase the gap between rich and poor, which is a huge gap since almost half the population lives on less than $2 a day. While migration labor employs those who would either be underemployed or unemployed at home, it also creates brain drain and labor shortages in local markets. It has been found that many high-skilled workers stay abroad permanently, which does not promote brain gain where the Philippines would benefit from their newfound skills and intellectual capital. Whether international labor migration will lead to significant local economic growth in the long run is still open to debate, but from government quotas of 1 million plus migrants a year to the flourishing culture of migration, for better or worse the Philippines has whole-heartedly adopted international labor migration as a prime strategy for economic development.

But how does this relate to human trafficking?

Find out in part two coming later this week...

The Economic Impacts of International Migration: A Case Study on the Philippines
Tereso Tullao, Jr., Michael Angelo Cortez, Edward See
Center for Business and Economics Research and Development
De La Salle University- Manila, Philippines

Labor Mobility and East Asian Integration
Siow Yue CHIA
Singapore Institute of International Affairs
Asian Economic Policy Review (2006) 1, 349–367


  1. Anonymous2:26 PM

    WHERES PART 2?!?!

  2. Here you go:

  3. Thanks for the helpful facts on Philippine remittance:) I guess it pays to know more about how the country is doing in terms of the remittance Philippines industry since we have a lot of OFW's.