Homesickness, long hours, and demanding employers—many Filipinos who migrate to another country for temporary employment make personal sacrifices and face daunting working conditions.

To their family members receiving much-needed supplemental income and to the Philippine government bolstering its foreign reserves, they are the “new heroes.” Remittances from Overseas Filipino Workers (OFWs), as they are officially called, are now the country’s second largest source of foreign reserves, beating out foreign direct investment in terms of percentage of GDP. The government has even established an annual award to honor its most distinguished OFWs.

Marjorie Pajaron, the current Asia Health Policy Postdoctoral Fellow in Developing Asia, has been studying the significant economic benefit of OFW remittances to Philippine families and to the economy. She spoke recently with Shorenstein APARC about her research, which she will present at a seminar on May 9.

How many people from the Philippines are going abroad for temporary employment, and where are they finding work?

In 2008, OFWs numbered 2 million—representing 2 percent of the country’s total population. Fifty-one percent of these migrants were male, and 49 percent were female. Twenty percent went to Saudi Arabia; 14 percent to the Arab Emirates, Singapore, Hong Kong, Japan, Qatar, and Taiwan; 9 percent to Europe; and 8 percent to North and South America.

Where OFWs work depends on gender, education, and the type of employment. Many men go to the Middle East for construction-, mining-, and oil-related jobs. Women tend to go to Southeast and East Asia for caretaking and domestic jobs. In North America, most Filipino migrants work in professional jobs, including as nurses, doctors, and as other types of healthcare workers.

What is the “typical” profile of an Overseas Filipino Worker?

It often depends on the type of job. Healthcare professionals, for example, tend to be younger because they go abroad directly after graduation. Most of the nursing schools in the Philippines are linked to hospitals in the United States or Europe.

In general, overseas workers range from recent graduates to the median working age, from approximately 20 to 45 years old. Because of the large fixed cost associated with temporary overseas employment, families that are better off or who have the means to raise funds are those that are able to send family members abroad.

Most OFWs come from Manila or the surrounding urban areas. In the study I conducted, only 17 percent of rural households could afford to send a family member abroad. Usually several village families will pool together their resources, with the informal agreement that they will be repaid.

On average, male migrant remittances equal twice the amount sent by female migrants, who more frequently work in unskilled positions. For example, a well-educated man working in the Middle East in the construction and transportation industries earns higher than a woman working in a domestic position in Singapore. Some OFWs are overqualified in terms of education, but because of economic opportunity they decide to work abroad.

Do remittances provide short- or long-term economic benefits for families?

The benefits are both short and long term. Remittances can provide immediate assistance as needed, such as rebuilding after a natural disaster. From a longer-term perspective, many remittances in the Philippines go toward education, which is a form of human capital investment. Many families also invest in real estate, buying houses and land, and they also purchase durable goods, such as cars and appliances.

How do remittances benefit the country’s economy?

After exports, foreign remittances are actually the second largest source of foreign reserves in the Philippines. In 2006, remittances ranked even higher than foreign direct investment in terms of percentage of GDP. Some scholars have conjectured that OFWs have helped close the gap between the poor and the wealthy in the Philippines by contributing to a growing middle class. This is why migrant workers are called the “new heroes.” They sacrifice a lot by working in what are often unfavorable conditions. Because of the system of helping their families, they are also helping the entire country.

In your research, you have also looked at how rural farmers cope with natural disasters. What motivated you to study this issue, and what have you found based on recent years?

Farmers are the poorest of the poor in the Philippines, and since the country is in the Pacific Ring of Fire it is frequently hit by natural disasters, including earthquakes, typhoons, and drought. Filipino farmers are very vulnerable because most cannot afford to install irrigation. Instead, they have to depend on rain and their crops are continually susceptible to changes in the weather. There is limited government assistance available to them, and they do not have any formal insurance. In addition, they cannot take out loans because they do not have the collateral. So, I have been looking at how they survive after a natural disaster. The only possible explanation is that they depend on their networks of family and friends.

I had expected to find that they also depend on their family members abroad, but I have discovered that very few have been able to send relatives abroad in the first place. So this cannot be considered a reliable source of support. Instead, they seem to mainly rely on family members who have migrated to Manila and other cities.

There is much more work to be done on this issue. Studying how rural residents survive is important given they have limited access to formal credit, capital, and insurance markets; and government aid and transfers may also be limited or non-existent.

China and India, neighboring countries and the undisputed global population giants, boast two of the world’s most rapidly growing economies.

With 1 billion-plus citizens and striking regional variation, both countries are racing to find policy solutions to two hallmarks of the demographic transformation under way in Asia: larger numbers of elderly citizens and decreasing fertility rates. How China and India resolve the challenge of supporting their elderly while maintaining economic advancement despite shrinking working-age cohorts will strongly shape their future and may provide valuable lessons for other developing countries, which will face similar issues in the coming decades.

This March, Stanford’s Asia Health Policy Program (AHPP) partnered with Harvard University to bring together experts from the United States and Asia for a results-oriented policy dialogue on the economic implications of aging in China and India. AHPP director Karen Eggleston describes the key issues in each country, and research findings presented during the conference, ranging from initial policy steps to the effects of gender inequality on aging.

Both China and India are rapidly developing countries with populations of over 1 billion. But there are also differences in the demographic landscape of each country, including the fact that China’s population is aging more rapidly. What can these countries learn from one another, and, what can we learn from their experience?

Since population aging shapes the future of almost everyone on this planet, and countries have experienced the process at different times and rates, there indeed is much that can be learned from other countries’ experiences. High-income countries began this demographic transition earlier. India and China are distinctive in that they together account for more than 1 in 3 people in the world, and are still developing countries. As a result of declining fertility, increasing life expectancy, and the progression of large cohorts to the older ages, both of them, like all other countries, have aging populations. 

The proportion of China’s population aged 60 and older is projected to grow from 13 percent today to 34 percent in 2050, as David Bloom and I noted in our call for papers for this conference. India’s 60-plus share is expected to increase from 8 percent to 19 percent over the same period. China’s total fertility rate began to fall much earlier and faster than India’s, and its life expectancy began to rise much earlier. As a result, China’s ratio of working-age to dependent population has recently peaked and will decline. In India, the ratio is still rising, and it will be several decades before the effect of population aging in lowering the ratio will be felt in a major way.

One might categorize India as “young Asia” and China as “maturing Asia,” as Sang-Hyop Lee of the University of Hawaii did in research presented at the conference. The challenge for India then is how to make the most of its current large cohorts in the working ages.

Demographic change can lead to a demographic dividend—a one-time boost in income per capita—when the working-age share of the population is relatively high, if that population is productively employed. Both countries will need to establish sustainable systems of old-age support to relieve the strains on the family support system, with that need more urgent in China. 

What are some of the policy steps the governments of China and India have already taken to help their countries adapt to the aging phenomenon? Why will they need to do more?

Both governments have begun to put in place policies to address various aspects of population aging, but both have considerable room to do more.

For example, health coverage remains limited in India; and although health coverage has improved dramatically in China, many people with chronic diseases like high blood pressure remain undiagnosed and untreated. India does not have health insurance or other medical cover for most of the population, although ambitious policy goals for universal coverage are being discussed. Indrani Gupta of the Institute of Economic Growth in Delhi shared research suggesting that fear of impoverishment from health expenditure results in the elderly in India foregoing medical care.

Some policies to improve old-age support, such as China’s new rural pension system, are so recent that little is known about their long-term effectiveness. During the conference, Bei Lu of the University of New South Wales and her colleagues discussed recommendations for strengthening China’s pension system.

The Brookings Institution’s Feng Wang and his colleagues shared new estimates of consumption and income by age in China. Their estimates for 2007 indicate a remarkably constant level of consumption across generations in China. On the one hand, this result could be considered a remarkable feat of intergenerational support, as Ronald Lee of University of California, Berkeley, pointed out at the conference. Even though the current elderly had much lower standards of living when they were working and limited opportunities for savings and investment, he said, they are nevertheless sharing in the higher level of consumption that their children and grandchildren are now enjoying.

On the other hand, relatively flat consumption by age could indicate a policy gap. National Transfer Account estimates show that consumption is fairly flat into old age for both China and India, compared to steeply increasing consumption by age in many higher-income countries like Japan or the United States, driven by large healthcare expenditures. The consumption profile by age in China and India suggests that many older adults may be foregoing the kind of medical care that those in higher-income countries regularly receive.

Another important policy arena is family planning. Demographers have long argued for China to relax its family planning policies. It is unclear whether the recent announcement of the merger of China’s Ministry of Health and its Family Planning Commission might bode relaxation (or even abandonment) of the unpopular “one child policy.”  

Indeed, almost all policies are inter-related with the phenomenon of population aging to some extent. For example, the current generation’s educational investments, financial burden, and labor market opportunities can benefit from improvements in old-age support and changes in the traditional pattern of support through co-residence (as research presented by Anjini Kochar and Ang Sun discussed for India and China, respectively). One interesting paper even explored the relationship between climate change and nutrient intake. Kimberly Singer Babiarz, Jeremy Goldhaber-Fiebert, and colleagues argue that as the Indian government develops policies to address climate change, it is important to consider how climate change will impact food insecurity—particularly through reductions in macro- and micronutrient intake—for different population groups, including the elderly.

Are there investments that can be made in childhood health and education that can help make a significant difference later?

Certainly. A growing body of evidence shows the importance of early life investments for life-long wellbeing. For example, Mark McGovern and colleagues presented research showing that early life conditions impact “frailty” in old age in China, and that size at birth in India is correlated with later health as well. As they note, investments in improved child health could have large pay-offs in terms of better health throughout the life course. Related research by David Bloom and colleagues showed how costly non-communicable diseases are for both China and India, and how some policies to prevent non-communicable diseases among children and young adults could provide large social and economic benefits. Moreover, improved educational attainment of young people can make them more productive and resilient, helping to offset the social and economic challenges associated with a smaller workforce. Some have suggested a “second demographic dividend” could arise for economies that invest sufficiently in their young people, encouraging education, savings, and investment.

What are some of the impacts of gender inequality on aging?

Gender inequality and population aging interact in several ways in India and China; these interactions were an important sub-theme for the conference discussions. While it is complicated to fully capture the resource allocations and power dynamics within households, new datasets are increasingly providing a window into these important dimensions. For example, research presented by Ajah Majal and colleagues using the Longitudinal Aging Study in India (LASI) data suggested the need to focus on female elderly and elderly residents in poorer states, and to use multi-dimensional approaches to assessing wellbeing. Similarly, Jinkook Lee and James P. Smith of the RAND Corporation use the LASI to study gender differences in late-life cognition. They note that greater access to education among girls and women could significantly reduce gender disparities in India, and that greater access to education will benefit not only those who receive the education directly, but also their parents and children.

David Weir of the University of Michigan and colleagues combined data from numerous sources to document large gender differences in human capital and in cognitive capacity of individuals that are now over age 50 in China and India. Elderly women lag particularly in cognitive capacities involving numbers, and in India more so than China, while gender gaps go beyond education.

China has made dramatic progress in reducing gender disparity in education, as James Smith emphasized. It is quite common for illiterate grandmothers—who themselves had many fewer opportunities than men—to have college-educated granddaughters with educational opportunities comparable to that of young men. Of course, both China and India are large and diverse countries, with significant regional differences in son preference and gender disparities, as well as large income and wealth disparities for both genders.

Revised papers from the conference will be considered for a special issue of a new academic periodical, the Journal of the Economics of Aging. The special issue will be co-edited by David Bloom (co-editor of the Journal of the Economics of Aging and professor of economics and demography at the Harvard School of Public Health) and Karen Eggleston (director, Asia Health Policy Program, Shorenstein Asia-Pacific Research Center, Stanford University).

Image: A Kashmiri boy touches the hand of his grandmother, November 2005. (REUTERS/Kimimasa Mayama Pictures)

Image: An elderly couple dances in a public park in Kunming, July 2005. (Flickr user maverick2003)

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Triyana will focus on analyzing the effects of rural-urban migration on children’s health outcomes in China and Indonesia, contributing valuable insight toward Shorenstein APARC’s research initiative on demographic change in Asia.

Currently an Indonesia Research Fellow at the Ash Center for Democratic Governance and Innovation at Harvard University, Triyana is also completing her doctoral degree from the Harris School of Public Policy at the University of Chicago. She holds a BA and an MA in economics, and a BS in mathematics, all from the University of Chicago.