FILIPINOS may be tremendously benefiting from $12 billion worth of annual remittances sent by relatives working abroad, but seen from a broader scale there could be blips that might weigh down on income equality, local employment and country competitiveness, a labor economist said Friday.

For a country whose outmigration rate is highest in the region, the Philippines’ long-term risk of losing its skilled labor may be costlier than gains the economy gets from having higher foreign exchange inflows, Winfred M. Villamil, associate professor of the Economics Department of the De La Salle University, said in an interview.

“Labor migration is thought to alleviate poverty in the sending country by reducing the domestic supply of workers such that wages rise and consequently unemployment and underemployment fall. Migration therefore provides a safety valve for a country to ease pressures to provide employment to its labor force,” Villamil commented.

The De La Salle University associate professor had a caveat, though: considering most of the almost one million Filipinos who leave yearly for overseas work are mostly the skilled ones, the country needs to compete regionally and globally.

“The gains may be large if those who leave are the unskilled and who belong to the low-income class… but those who leave are skilled. This might have dire consequences on the Philippines, which hopes to compete with low-wage countries such as China through industrial upgrading and shift to skills-intensive industries to increase productivity,” he told BusinessMirror.

What may even be worse than the delay of structural transformation is the ensuing risk of “brain waste” wherein the educated and skilled Filipinos get employed for unskilled work, he added.

This, as Villamil pointed out, leads to another blip in terms of social and income inequity. “Most of migrants are skilled educated workers who are not necessarily poor… you have a situation where migration is substantially costly, so it is the relatively well-off who might have better opportunities for migration,” he commented, and leaves those unable to finance their migration having to contend with their limited financial capability.

Remittances, which make up about 9.4 percent of gross domestic product, also have a tendency to slow down economic growth, Villamil claimed.

“Some families who receive substantial remittances either stop working, reduce their time working or take a longer time looking for work because they now have reservation wages or other sources of income,” he said, thereby reducing potential household productivity.

Villamil noted there is even evidence of higher unemployment rates in households benefiting from overseas remittances.

On the contrary, the DLSU professor noted that remittances are also countercyclical in the Philippines’ case, as proven after the 1997 financial crisis and the series of El Niño events in the country.

“We experience higher remittances when there is a downturn in the economy… this plays an important role to support stability in the face of an economic shock and in mitigating the effects of this economic shock,” Villamil said.

CENTRAL bank officials believe that now or anytime soon is the opportune time to come out with a new retail treasury bond sale program for overseas Filipino workers, when interest rates are low and investor sentiment still sharp.

FILIPINOS may be tremendously benefiting from $12 billion worth of annual remittances sent by relatives working abroad, but seen from a broader scale there could be blips that might weigh down on income equality, local employment and country competitiveness, a labor economist said Friday.

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