Manpower export and economic development: evidence from the Philippines.

Abstract

The Philippines has actively pursued a policy of labor export with the expectation that it would relieve unemployment, augment the supply of skills, and relieve pressure on the balance of payments. It was also anticipated that the inflow of overseas workers' remittances would translate into increased investment, the sine qua non for economic development. However, recent evidence casts some doubt on the extent to which these goals have been achieved. Particularly in the areas of skill formation, there appears to be a significant discrepancy between anticipated and actual outcomes. Indeed, it appears that the labor export may reduce the supply of skills available since 1) many skilled and educated workers are taking jobs requiring skill levels lower than they possess, and 2) a large majority of returning workers do not want to take up employment in those occupations reliant on the skills they used abroad. There is conflicting evidence regarding the impact of labor export on Philippine industries. There is some anecdotal evidence that a few industries have suffered because of a loss of key workers. In general, however, it appears that unemployment is still quite significant in those occupations most heavily represented in labor export. Despite this observation, it may still be true that labor emigration is selective of only the best workers, implying a decline in quality of the work force and possibly productivity in certain industries. The export of professional, technical, and managerial workers is another issue. Unless it can be shown that these workers are in excess supply, it is not advisable to expand the number going abroad. Although their salaries may be higher, and hence their remittances greater, their loss can impose costs on indigenous industries well in excess of a any marginal gains. Remittances from overseas workers do constitute a relatively significant source of foreign exchange. However, the translation of remittances into investment has been restrained by the very low propensity of remittance recipients and returnees to undertake productive investment and by the diversion of remittances from formal banking channels into informal channels. Remittances which are being channeled through the formal banking sector constitute a potentially important source of loan funds, as well as providing a potential stimulus to indigenous industry.