Assessing

the impact of migration on poverty and social inequality in the Philippines Benedict Bernabe Research studies on the impact of migration on poverty and social inequality have produced results that are as varied as the different contexts within which they were conducted. This essay will critically assess migration impacts on poverty and social inequality within the context of the Philippines as a major labour-exporting country. It will argue that migration has reduced cases of absolute poverty in the Philippines but has contributed to an increase in relative poverty, and therefore an increase in social inequality. The essay is structured as follows. The first section will review recent case studies on migration impacts on poverty and social inequality that show the poverty-reducing effects of migration. This will be followed by an introduction to the Philippine labour migration context, and a discussion on studies that likewise confirm a reduction in cases of absolute poverty as a direct result of labour migration. This will lead to a discussion of the negative effects of labour migration on social inequality. The essay will conclude that within the Philippine context, migration, specifically temporary labour migration, has had a poverty-reducing impact but has increased social inequality. The essay uses research materials that are predominantly biased toward an economic perspective of poverty and inequality and recognises this as a limitation to the scope of research. Poverty-reducing effect of migration According to Semyonov and Gorodzeisky (2008, p. 634), low-income households regard migration, specifically labour migration, as a logical strategy in alleviating poverty and improving their living conditions. Global wage disparities among countries provide enough incentive for poorer households to consider sending one of their members overseas in search of better opportunities (Beegle, De Weerdt & Dercon 2011a; Sherif-Trask 2010). Adams and Page (2005) confirm the statistical significance of the impact of international migration and remittances on poverty reduction in developing countries. Recent case studies (Acosta et al. 2008; Azzarri et al. 2011; Beegle, De Weerdt & Dercon 2011b; Gupta, Pattillo & Wagh 2009; Lokshin, Bontch-Osmolovski & Glinskaya 2011; Murrugarra & Herrera 2011; Semyonov & Gorodzeisky 2008) provide evidence showing that migration has a reducing effect on poverty. Research from the World Bank uses higher consumption growth among internal migrants compared to non-

migrants in Tanzania as an indicator of the poverty-reducing effect of migration (Beegle, De Weerdt & Dercon 2011b). Migration and remittances also play an important role in improving the living conditions within migrant-sending Nepalese households, with as much as 20 per cent of the decline in poverty attributed to overseas labour migration (Lokshin, Bontch-Osmolovski & Glinskaya 2011). The increase in household consumption among Albanian migrant-sending households has also been associated with international migration, both temporary and permanent (Azzarri et al. 2011). In Azzarri et al. (2011), evidence shows that remittances from temporary and permanent migrants account for a 5 per cent and 50 per cent increase in household consumption, respectively. Nicaraguan households sending migrants to Costa Rica and the United States also indicate a significant improvement in their standards of living, especially those who are extremely poor: a four to five percentage-point drop in the poverty level of Nicaragua is attributed to remittances received from international labour migrants (Murrugarra & Herrera 2011). Even in sub-Saharan Africa, which receives just four per cent of the total remittance flows to developing countries, international migrant transfers help directly mitigate the effects of poverty by easing constraints on the household budget (Gupta, Pattillo & Wagh 2009). They also facilitate the development of the financial sector by providing recipient households with funds that allow them to participate in formal financial systems (Gupta, Pattillo & Wagh 2009). At the macroeconomic level, the statistically significant impact of international migration and remittances is principally observable through the rise in the per capita income of countries at the receiving end of migrant transfers (Acosta et al. 2008). In a study across 71 low- and middle-income countries, Adams and Page (2005) estimate that, on average, increasing by ten per cent the number of international migrants in the population of a country will reduce by 2.1 per cent the number of people living below the poverty line of USD 1.00 per person per day. Similarly, increasing by ten per cent the per capita official international remittance will reduce by 3.5 per cent the number of people living in poverty. The study, however, cautions against the endogeneity of international migration and remittances on poverty, which implies that the varying levels of poverty in developing countries may have an influence on the number of migrants sent overseas and the amount of remittance sent back home (Adams & Page 2005). This means

that a further reduction in poverty may lead to a reduction in labour migrants and a reduction in the amount of transfer income from abroad. At the microeconomic level, the poverty-reducing effect of migration is achieved largely by increasing the income levels of migrant-sending households through remittances (Acosta et al. 2008). Filipino households are no exception to this trend, having long used migration as a strategy to improve their living standards (Semyonov & Gorodzeisky 2008). International labour migration has been an official Philippine government policy since 1974, when then Philippine president Ferdinand E. Marcos enacted Presidential Decree (PD) 442 or the Philippine Labour Code (Dimzon 2005; Semyonov & Gorodzeisky 2008). PD 442 included a provision institutionalising the Philippine Overseas Employment Program (OEP), the main objectives of which was to respond to increasing domestic unemployment during the Marcos era and to fund the countrys foreign currency reserves (Dimzon 2005; Semyonov & Gorodzeisky 2008). Semyonov and Gorodzeisky (2008, p. 635) confirm that the goals of the Filipino migration policy were largely achieved. It allowed unemployed and underemployed Filipinos to find higher-paying jobs overseas, and in turn they remit large sums of money that contribute to the governments foreign currency reserves and to the improvement of their households income. Impact of migration on inequality It is at the household level where the poverty-reducing effect of migration is most readily demonstrated and it is also at this microeconomic level where the impact of migration on social inequality is most easily observed (Acosta et al. 2008). In the Philippines, remittance from migration not only has become a significant source of income for households, it has also grossly widened the income differentials between migrant-sending and non migrant-sending households (Semyonov & Gorodzeisky 2008). Most of the disparities between households with labour migrants and households without labour migrants in either income or standard of living are accounted by the availability of remittances. In fact, the entire income gap (101%) between households with and without overseas workers is found to be attributed to the flow (or lack) of remittances (Semyonov & Gorodzeisky 2008, p. 634).

Sawada and Estudillo (2008, p. 106) agree that, in the case of the Philippines, while international migration reduces poverty through overseas transfer income, transfer income from abroad causes an increase in household income inequality. The average monthly income of migrant-sending households that is roughly 45% higher than the minimum monthly wage, hence making them significantly better off in comparison to households deriving income solely from domestic employment (Dimzon 2005). Perspectives on the impact of migration on inequality are divergent (Jones 1998). Jones (1998) explains that this divergence of views is influenced by two factors. One is the stage of the migration process in which the migrant-sending unit is situated; the other is the geographic scale of the unit of analysis (Jones 1998). Using central Zacatecas in Mexico as an example, Jones (1998) illustrates how these two factors influence the resulting measurements of inequality. In terms of migration stage, it was found that as households go through the migration experience, inequalities between households decrease up to a point, after which inequalities increase (Jones 1998). In terms of geographic scale, the study finds that at the interfamilial (household) scale, inequalities increase in favour of better off families in the advanced stages of migration (Jones 1998). At the rural-urban scale, on the other hand, income differentials increase in favour of rural places as they approach later migration stages (Jones 1998). McKenzie and Rapoport (2007, p. 2) support Jones view by stating that the overall impact of international migration on economic inequality at origin is a priori unclear. They validate the significance of migration stages and likewise provide two additional factors that influence the impact of migration on inequality. First is the socioeconomic position of migrant-sending households in the initial wealth distribution at the time of the initiation of migration (McKenzie & Rapoport 2007). The second is the subsequent effect of migrant networks as migration cycles are perpetuated (McKenzie & Rapoport 2007). McKenzie and Rapoports (2007) case study illustrates that migration has an inequality-increasing effect at the initial stages of a Mexican migrant-sending communitys migration cycle and an inequality- reducing effect at the advanced stages. Migration costs initially favor better-off households at the initial stage, resulting to more inequality but migrant networks help alleviate this situation by reducing costs as the community approaches the later stages of their migration cycle (McKenzie & Rapoport 2007).

Migration increases social inequality in the Philippines These two factors initial wealth distribution and subsequent network effects are useful in the analysis of the impact of migration on social inequality in the Philippine context. A number of case studies on the Philippines using varying units of analysis have come up with a number of observations that are helpful in examining the wealth distribution-migration-remittances-poverty-inequality nexus. Sawada and Estudillo (2008) saw a correlation between a provinces (a subnational government unit in the Philippines) breadth of implementation of land reform to its level of migration and the amount of remittances that it receives. Land reform in the Philippines was initiated at around the same time as the Overseas Employment Program (OEP). Presidential Decree (PD) 27 provided the legal framework for comprehensive agrarian reform in rice and corn farms (Sawada & Estudillo 2008). The Comprehensive Agrarian Reform Program (CARP) of the Aquino administration expanded PD 27, including in its scope alienable public lands and other plantation crops (Sawada & Estudillo 2008). Sawada and Estudillo (2008) contend that provinces that have more land included in their land reform program tend to have more international migrants and higher transfer income as they progress through land reform. This correlation is explained by the asset-building nature of land redistribution. Households that benefit from land reform receive a certificate of land transfer (CLT) upon inclusion in the program, and an emancipation patent (EP) upon full payment of the amortization of the land (Sawada & Estudillo 2008). These asset-backed securities can be used to access credit through formal and informal channels. Households that hold EPs use these titles as collateral to acquire loans from formal financial institutions while those that hold usufruct land rights pawn these out to trusted sources of credit, such as families, friends and community leaders (Sawada & Estudillo 2008). The pawning out of usufruct land rights is illegal, hence they are carried out through informal networks (Sawada & Estudillo 2008). Sawada and Estudillo (Sawada & Estudillo 2008) conclude that further progress in land reform will induce international migration by distributing assets that allow access to credit, which will result in more transfer income from overseas, thereby reducing poverty in beneficiary households. The ultra-poor, however, are excluded from this entire process from the very beginning: with no access to land at the initiation of the land reform program, they fail to gain access to credit that would facilitate migration,

hence denying them the poverty-reducing effect of transfer income from abroad (Sawada & Estudillo 2008). Aside from benefiting from the poverty-reducing effect of international migration and remittances, beneficiaries of land reform also gain disproportionately from economic growth (Balisacan 2000). According to Balisacan (2000), poverty alleviation was most evident in the agricultural sector during the growth of the Philippine economy in the 1980s and 1990s. Rural households who participated in the agricultural sector, mostly beneficiaries of land reform, increased their consumption more rapidly compared to other groups (Balisacan 2000). The ultra-poor are again excluded from this poverty escape route, having no access to land that will enable them to participate in income-increasing agricultural activities. Use of remittance causes more inequality Labour migrants most likely use remittances to invest in activities that will reduce their households dependence on migration (Jones 1998). Jones (1998) cites agricultural inputs, family enterprises, higher education, and health access as the primary channels into which remittances are directed. In the Philippine context, Semyonov and Gorodzeisky (2008) agree that, while Filipino households utilise a substantial portion of remittances received to increase household consumption, a significant amount of money is set aside for investment in education. The use of remittance to invest in agricultural inputs and in higher education, however, leads to more inequality. Investing in agricultural inputs in the form of the acquisition of more land, for example, can lead to an increase in income differentials. Beneficiaries of land reform who chose to pawn their usufruct land rights run the risk of forfeiting the productive use of their asset in case they default on their loan. Since pawning of these land rights is illegal, the legal system does not afford them the benefit of protection from loss of asset. Investing in farm technology, on the other hand, will result into the loss of employment of the ultra- poor. These are typically unskilled labourers working in the agricultural sector as farmhands. As technological advancement in farm work demands a skilled labour force, unskilled workers are eased out of the agricultural economy (Sherif-Trask 2010).

Investment in education can influence migrations impact on inequality in two ways. First, higher education not only improves an individuals access to the overseas labour migration market, it also ensures them higher income, therefore allowing them to send more transfer income (Bollard et al. 2011). Empirical evidence shows that migrants with a university degree remit $300 more yearly than migrants without one (Bollard et al. 2011, p. 155). This means that there is greater cost-benefit in case a migrant- sending household decides to continue its participation in the labour migration market after investing in higher education, given the relatively higher income of migrants with university degrees. Secondly, and more profoundly, investment of remittances in education produces a large-scale and long- term distorting effect on a migrant-sending countrys human resource development system. While remittances allow households with migrant workers to invest in education, the increased demand for programs offering education and training in specific skillsets warps the human resource development thrust of the higher education sector (Tullao & Rivera 2009). The demand for specific skills in the global labour market influences the demand for certain higher education programs to the detriment of the development of other skills that are equally necessary in the functioning of the Philippine society but are not in high demand from the global labour market (Tullao & Rivera 2009). The free market structure of the higher education sector, which has a high private sector penetration rate and minimal government regulation, creates additional barriers that exclude the poor from gaining a university degree (Tan 2009). High-demand skills, such as healthcare professionals, scientists, engineers, and IT professionals, incur higher educational and training costs compared to other skillsets (Tan 2009). High demand for placements in these educational and training programs, which outpaces their supply, pushes the cost of gaining entrance into these programs upwards. These twin effects reduce the ultra- poors prospect of getting a higher-paying job overseas (Tan 2009). Addressing inequality, preserving poverty reduction gains Sawada and Estudillo (2008) agree that redistributive spending can lead to a significant decrease in poverty incidence and inequality in the Philippines. Evidence shows that private income redistribution, through altruistically motivated private transfers from rich households to poor households, has a

considerable poverty-reducing effect (Sawada & Estudillo 2008). However, governments of countries such as the Philippines, where redistributive spending are most necessary, are the ones that are least likely to implement income redistribution through public policy (Carneiro, de Mello & Tiongson 2002, p. 103). There are widely recognized challenges to public policy-driven income redistribution. This includes opposition from constituencies that will most likely bear the tax burden of funding programs from which they will not directly benefit (Carneiro, de Mello & Tiongson 2002). Inefficiencies in redistributive spending programs, such as non-poor capture, also prevent the ultra-poor from reaping the full benefits of such programs (Carneiro, de Mello & Tiongson 2002). Measures that protect the poor from economic shocks such as social safety nets, as well as those that allow them smoothen consumption, such as microfinance programs, allow households to preserve the gains made in poverty reduction while at the same time addressing inequality through conditional and selective targeting of beneficiaries. Similar programs, such as the current Aquino administrations conditional cash transfer program and the Philippine central banks active promotion of microfinance, are already in place in the Philippines. Balisacan and Fuwa (2004) and Sawada and Estudillo (2008) stress that faster and sustained economic growth and further progress in land reform can help address poverty and inequality, especially if they become more inclusive. The limitations of an economic view of poverty and social inequality are recognised. There is emphasis on the need for further studies on the impact of non-monetary remittances on poverty reduction, as well as on the non-economic dimensions of social inequality and well-being (Semyonov & Gorodzeisky 2008). Jones (1998, p. 23), for example, cites the role of migration in creating a new, broad-based, upwardly mobile migrant class that weaken the political and economic power of traditional elites, if not completely replacing them. Sawada and Estudillo (2008), on the other hand, highlight the need to explore other important mechanisms through which the poverty reducing effect of migration is transmitted to the ultra- poor, particularly the use of sharing mechanisms between families and within communities.

Conclusion The poverty-reducing impact of international labour migration on migrant-sending households, communities, and countries is widely supported by evidence from all over the world. Migrations poverty alleviating effect operates through the increase in household income from overseas remittances, driving household consumption to go up, and allowing investments in activities such as education and agricultural inputs. The impact of migration on social inequality, on the other hand, is dependent on a number of factors such as migration stage, geographic scale, initial income distribution, and subsequent network effects. In the Philippine context, the uneven progress of land reform creates an unequal asset distribution in the initial stages of migration. This creates inequalities between households that are able to participate in the migration process and those that are unable to participate because of the lack of access to credit that may help fund initial migration costs. Use of remittances in the educational and agricultural sector also creates further inequalities that prevent the ultra-poor from gaining access to higher-paying jobs overseas through a university degree, or from continuing to participate in the productive sector as unskilled farmhands. Redistributive public spending is seen as a complementary program that will help address economic inequality and at the same time preserve the gains made in poverty reduction.

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