The Impact of Remittances on Youth Employment Decisions and Entrepreneurship: Policies for Selected Provinces in the Philippines Christopher James R.

Transcription

1 The Impact of Remittances on Youth Employment Decisions and Entrepreneurship: Policies for Selected Provinces in the Philippines Christopher James R. Cabuay Angelo King Institute for Economic and Business Studies De La Salle University

2 Objectives Estimate the impact of remittances on human resource development decisions Estimate the impact of remittances on youth employment decisions Estimate the impact of remittances on entrepreneurial activities of households Provide policy recommendations

3 Project Results Summary Model 1: Impact of Remittances on HRD decisions Methodology: Two-stage multinomial logit regression Sample: CBMS 2015 with YEE & SPIS riders; Cavite, Batangas, Bago, Ozamis, Manila, Marikina; Individual-level, aged 15-24, 12-18, Results: In all provinces and at the national level, results have been consistent. Individuals that receive remittances are more likely to end up in school participation outcomes rather than labor force participation, idleness, part-timing. Model 2: Impact of Remittances on YED Methodology: Two-stage multinomial logit regression Sample: CBMS 2015 with YEE & SPIS riders; Cavite, Batangas, Bago, Ozamis, Manila, Marikina Results: Given five outcomes (private household, establishment/institution, self-employed, family business, not working) National: individuals aged are less likely to be in working in private household, establishment/institution, self-employed, and more likely to be not working. No effect for family business Batangas, Cavite, Bago, Ozamis, Manila, Marikina: more likely to be not working, less likely to be in all work outcomes, or having no significant effect.

4 Project Results Summary Model 2: Impact of Remittances on YED Methodology: Two-stage multinomial logit regression Sample: CBMS 2015 with YEE & SPIS riders; Cavite, Batangas, Bago, Ozamis, Manila, Marikina; individual-level Results: Given four outcomes (original set without the outcome of not working) National: individuals aged are more likely to be working in family business. No significant impact on other outcomes. Batangas: less likely into private household, no significant impact in others Cavite: less likely to be in family business, no significant impact in others Bago: more likely to be in family business, less likely to be in private household, no impact on selfemployment Ozamis: less likely into private household, no significant impact in others Manila: no significant impact Marikina: no significant impact

5 Project Results Summary Model 3: Impact of Remittances on Entrepreneurial Activities Methodology: Impact Evaluation, ATT generated using Propensity Score Matching Sample: CBMS 2015 with YEE & SPIS riders; Cavite, Batangas, Bago, Ozamis, Manila, Marikina; household-level Results: Activity Cavite Batangas Bago Ozamis Manila Marikina National Entrepreneurship ~ Crop ~ ~ + + ~ ~ + Poultry ~ ~ + + Fishery ~ ~ ~ - ~ ~ - Forestry ~ ~ ~ ~ ~ ~ - Retail Trade ~ + ~ ~ Manufacturing ~ ~ - ~ ~ - ~ Service + + ~ + ~ + + Transportation ~ ~ ~ - ~ - ~ Mining + ~ ~ ~ + ~ + Construction

6 Policy Recommendations: National-level Despite the negative perception on migration (brain drain, erosion of family ties, disruptive impacts on schooling), there is direct evidence that migration causes greater accumulation in human capital. Theoharides (2014): liquidity effects and relative-wage effects Remittances have been perceived to induce dependence/idleness (Tullao, Cortez, and See, 2007) and an exclusive consumption-smoothening effect Migration, and particularly the receipt of remittances can serve as an avenue to improve a country s work force through greater investment in human capital via liquidity and aspiration There is a need to smoothen the channels of remittances, reduce financial and administrative costs of sending remittances There is a need to look into factors that affect the management/mismanagement of remittances and need to link remittances to education at household levels, increase household commitments towards improved participation in school

7 Policy Recommendations: National-level At the national level, there is evidence that although the youth are more inclined to study rather than work when they receive remittances, those youths in working only outcomes tend to be more likely engaged with a family business. This points toward the potential for remittances to be a driver of family-run entrepreneurial venture However, the proportion of households in the sample that are engaged in some form of entrepreneurship is very low. This may be due to administrative costs (formal procedures) or difficulties in setting up businesses, or perhaps, this may hint that there may be mismanagement in the part of households that receive remittances. That is, remittances encourage entrepreneurship, but the extent of this may be determined by who manages remittances in the family. The impact of remittances also vary according to the type of entrepreneurial activity wherein it enhances the likelihood of entrepreneurship in activities that may be easily connected to distribution-related activities: crop and poultry (agribusiness), service activities, and construction.

8 Policy Recommendations: Provincial Level On human resource development There is very large variation in educational attainment across provinces A significant portion of the individuals aged have more highschool graduates than college graduates. This is the same for individuals aged Among individuals aged and 15-30, there are more that are in school and not working, but there a nearly just as many that are working and not in school which implies that for the youth, school participation remains very low. In Cavite and Ozamis, the largest proportion are those not working AND not in school.

9 Policy Recommendations: Provincial Level On human resource development Despite the reforms in place that enhance participation of school-aged individuals such as the 4Ps and Education For All, participation has remained low, this may imply that there are issues in terms of survival and retention There may be a need to administer financial literacy programs for households to teach them on how to better manage remittances, and channel them to higher human capital outcomes rather than purely for consumption smoothening. To enhance the impacts of remittances on the pursuit of higher education, there is a need to look at the industry-makeup/locality of each province to match graduates to relevant occupations. On youth employment decisions As much as possible, the youth should be encouraged to be in school, at least until they can complete their basic education (given the K-12 reform). Despite programs that enhance participation, it may be that households require additional working members, as indicated by those aged that are in work but not in school. This may also imply that cash transfers are not enough to provide support that households need to keep their children in school. Programs that influence aspirations may be desirable to generate motivation among individuals to pursue higher levels of education (in the presence of migration). Programs that will reinforce the retention of children may be pursued as well in order to ensure their completion.

10 Policy Recommendations: Provincial Level On entrepreneurship Remittances generally encourage entrepreneurial activity among households, and encourage the youth to work for family businesses. However, those engaged in entrepreneurship remain low. Remittances as a way to finance entrepreneurial activity must be pursued. In conjunction with financial literacy programs, courses that teach households how to start businesses and make them sustainable should be considered greatly. In the long run, enhanced entrepreneurship does not only improve household income but generates employment as well. There may be a need to accelerate the administrative process of setting up businesses to prevent would-be entrepreneurs from being discouraged. For the relevant provinces in the study, there is a need to look at each locality with more depth. Before designing any course for encouraging entrepreneurship, consider incubating businesses that have the potential to not only increase income, but those that can become sustainable and match the needs of the province as well. Incubating businesses in crop and poultry farming and teaching people to use remittances as capital or avenues to improve technologies and investments, may eventually lead to smaller businesses to enter agribusiness which is a broader-based, higher-income industry. Ventures that are highly-transferrable to other regions or provinces, such as service-based businesses and constructionbased businesses, should be incubated as well. At the same time, developing skills necessary for these businesses may also be relevant for future migration (since there is strong demand for service-based and construction workers.

11 References Theoharides, C., (2014a). Manila to Malaysia, Quezon to Qatar: International migration and its effects on origin-country human capital. In Three Essays on the Economics of International Migration, a dissertation submitted to the University of Michigan. Available at Tullao, T.S., M. A. Cortez, and E. See. (2007). The Economic Impacts of International Migration: A Case Study on the Philippines. Report to the East Asian Development Network. Manila: Center for Business and Economics Research and Development, De La Salle University.