Why can't OFWs in Korea save money?

by Cathy Rose A. Garcia, ABS-CBNnews.com

Posted at Aug 24 2014 09:17 AM | Updated as of Aug 26 2014 06:21 PM

A woman using her mobile phone walks past advertisements promoting Samsung Electronics' products in Seoul, South Korea. Photo by Kim Hong-Ji, Reuters

MANILA, Philippines - It's a familiar story: a Filipino leaves his family to work in South Korea, where he can earn an equivalent of P40,000 a month.

The OFW sends his hard-earned money back home for his family to spend on food, housing and schooling. After a few years, the OFW decides he has had enough of being homesick, and returns home with his severance pay and pension.

Yet after a few months, the OFW realizes the money is fast-running out and thinks of going back to South Korea or any country to earn some more.

Filipino professor Joeffrey Calimag has heard this story so many times from OFWs in South Korea, during his time volunteering at the Korea Migrants Center.

In a recent interview with ABS-CBNnews.com, Calimag said he always wondered why the OFWs, despite earning as much as 4 times what they used to earn in the Philippines, continued to worry about their finances.

This prompted him to explore the reasons why Filipino workers under the Employment Permit System (EPS) cannot seem to save much of their earnings in South Korea.


This year, he finished his thesis titled "Exploring the Consumption and Saving Propensities of Filipino Migrant Workers in South Korea: A Life Cycle Model Analysis" at the Graduate School of International Studies, Hanyang University.

In his study, Calimag noticed that Filipino migrant workers' actual savings were "consistently very low" compared to their potential savings.

For instance, EPS workers, who used to earn around P10,000 a month in the Philippines, can earn at least 1.1 million won (around P47,000) every month. If they work overtime, they can earn up to 1.7 million won a month (P72,000).

"Four times ang pag-increase ng income nila, from P10,000 to P40,000... Tapos may free housing and food pa sila, wala rin silang gastos sa transportation," Calimag said.

Based on his estimates, Calimag said Pinoy migrant workers in Korea have the potential to save between P20,000 to P30,000 a month, if their family maintains the same lifestyle.

"Pero take into consideration ugali ng Pinoy na nag-abroad ka pa, wala naman pinag-iba ang buhay, so mga P20,000 na lang potential savings. Multiply this by 4 years and 10 months (the length of stay allowed for EPS workers in Korea), and add the severance pay and lump-sum pension which is around 10 million won... I think around P1.5 million ang potential savings, which is enough to buy a small house," he said.


So why can't Pinoy workers in Korea save money? Calimag cited four factors: 1) global economic crisis; 2) emotional state; 3) stress; and most importantly, 4) culture of consumerism.

The global economic crisis triggered unfavorable foreign exchange rates for OFWs, as well as rising inflation.

OFWs' emotional state was also a factor. Calimag noted many OFWs feel pressure from society, and struggle with homesickness, which often leads them to spend more.

However, the most important factor is the culture of consumerism, which leads to impulse-buying.

"There is a change in lifestyle. Biglang umangat at nagka-pera... They increased their consumption as their income increases, but most of them are not forward-looking, so they don't save enough," Calimag said.

He noted many OFWs don't realize they have to set aside savings first, before spending their salaries. Most of them usually spend first, then whatever is left becomes "savings."

"Kung ano kailangan ng pamilya, ang naiwan ay savings... Kadalasan wala na natitira, in fact kulang pa. Bakit kulang pa? Yung P40,000 to P45,000 bakit kulang pa? Kasi marami sa kanila di macontrol ang lifestyle, pati family sa Pinas," he added.


Most Filipino migrant workers don't have to spend on food and housing since their employer provides these. Yet, instead of saving, they usually end up spending their extra cash.

"Filipino migrant workers showed that buying gadgets, addiction of vices and staying trendy have become a norm after receiving their salaries. South Korea, offering a wide variety of options consumers to enjoy, has engulfed the Filipino migrant workers in providing high technology gadgets, fashionable things and places to enjoy. All of the aforementioned activities encourages more spending and therefore left them with high expenditures. But what really triggered their high expenditures is their behavior to 'keep-up-with-the-Jones' and provide 'instant gratification' to themselves," Calimag said.

In his study, he asked several Filipino migrant workers why they can't save money.

"Mahilig lang ako sa mga gamit, kaya napapabili ako. Diko kasi maiwasan eh. Gaya last month, bumili ako ng DSLR na camera kasi nahiligan ko na rin. Tapos yung mga gadgets ba. Mahilig ako mangulikot," one Filipino worker said.

Another worker defended his actions, saying "masarap gumastos ng sariling pinagpaguran."

Another OFW noted that the cost of living in South Korea is quite high. "Akala ko, mahal lang sa umpisa kasi di ko pa alam ang mga pasikot-sikot sa Korea. Paniwala ko ay siguro kalaunan, magkakatipid na ako pag naka-adjust na ako. Pero wala pa rin," one Filipino said.


Others said their families back home have become profligate in spending the money they worked hard for.

“Yung mga bata, pati na rin ibang miyembro ng pamilya ko, kung ano makita sa TV o sa kapitbahay, gusto rin ipabili eh," another OFW said.

Another Pinay complained that her husband in the Philippines wastes the money she sends on his vices.

“Mabisyo ang asawa ko. Minsan nga, di ko pinapadala sa kanya ang pera eh. Sa nanay ko pinapadala kasi gagamitin nya lang sa biyso nya. Buti sana kung isa lang ang bisyo eh, andami eh. Sigarilyo, alak, sugal. Kapag nalaman nyang sa nanay ko pinadala, eh malaking giyera naman," another said.


Calimag gave some recommendations on what should be done to help OFWs start saving and investing.

For instance, the Philippine government should encourage OFWs to spend their money on asset investments, not consumer durables.

Calimag said said financial literacy seminars should also be redesigned to take into consideration the needs and circumstances of the OFWs. The government can coordinate with companies in insurance, real estate and investments to conduct roadshows in cities with a significant Filipino community to offer investment and savings products.

To address the sharp fluctuations of host country currencies, Calimag proposed the establishment of a special bank for OFWs, which can create a "buffer currency" mechanism.

On the part of the South Korean government, Calimag said employers should be encouraged to institute higher compulsory savings and retirement for OFWs.

Employers are also urged to provide investment and savings coaching sessions for their Filipino employees.