3 Considerations for OFWs Following Oil Price Fall
Since June 2014, the average oil price went down from 110 dollars to less than 50 dollars per barrel. This news would have not caught my attention if I was not observing the same trend with the exchange rate between Norwegian kroner and Philippine peso, given that I started sending money for my family at the same period of time. So I asked myself how does the current situation affect us OFW's (Overseas Filipino Workers) working in oil exporting countries (primarily from the Middle East, Norway, Canada etc.) in the long-term.
To give a concise overview of what has happened. The current oil price downward trend has been primarily due to the oversupply of oil following oil shale boom in the United States, slowed oil consumption following slowing economic growth in the Eurozone and China, and the OPEC's (Organization of Petroleum Exporting Countries) decision not to cut production from its current levels. On the other hand, we see other factors that potentially increases the price level, such as decreased investments by oil companies, continued terror threat on Middle eastern oil exporting countries, and geopolitical conflict between Russia (major oil exporter to Europe) and Ukraine (supported by the majority of the Eurozone and US). To sum it up, the supply went over the current demand for oil.
Although Norway is not part of EU and OPEC, the country where I worked now is indirectly affected by the factors mentioned. Fortunately, Norway has prepared well before this happened but this does not include those immigrants working in Norway, who are expected to send money monthly to their families in their home country. This group includes me.
In connection to this situation, I have enumerated some of the major points an OFW from the said countries would consider.
1. More work with relatively same expenditures
Family members are expecting the same amount of money sent every month as financial support, regardless of factors influencing it (controllable or not). This is because prior to earning the money, a plan has already been set on how to spend the money for current expenses and future plans. It is also good to note that even the price of oil is depreciating, in the Philippines are not expected to go the same direction, given demand stays high due to a expanding working middle class and ballooning employable young population. As a result, an OFW must work extra harder to meet these expectations. Whether working more is possible or not, an OFW must find ways, such as decreased personal expenses (more likely directed to the OFW's basic needs).
2. More tempting to go home permanently.
Although not officially and generally accepted, there exists a good criterion to describe a well-earning job abroad for OFW's. This criterion is that the job must yield a net income of at least 50,000 pesos a month ( about 9,000 NOK). Ofcourse, a lesser exchange rate means lesser net income for an OFW. This standard, however is doubled when the OFW is working in Europe or in any Western country. Although some may consider a salary good enough even if it is 20% to 25% lower from this standard. A good rule of thumb is that once an OFW earns at least two-thirds of this expected income in the Philippines (after the amount has been subjected to foreign exchange), the need to stay and work abroad becomes lesser, thereby making it more attractive to start businesses or anew in the Philippines. This applies more to OFW's working in the Middle East wherein countries do not offer permanent residency to foreign workers, providing fewer reasons for OFW's to stay for longer period of time.
3. More focus on long-term plans
Given that the level of uncertainty is increasing, an OFW must plan for the long term. This can in the form of investments, businesses, further education and skills development, savings or perhaps permanent residency or change of citizenship. This all depends on what OFW's consider best to contribute to long-term financial stability and reduce risks associated with foreign exchange rates. This need is the most challenging for most OFW's since not all are thinking the same way. Many are still good planners but bad in practice, such that they manifest signs and symptoms of the so-called "One Day Millionaire Syndrome". This is a challenge and a must for all of us OFW's.
Lastly, I do not believe that the lives and plans of OFW's depend entirely on exchange rates, which is affected by a variety of factors such as the oil price. However, what is more important is how we OFW's react to the current situation and manage our finances well. Perhaps, a decision for lifestyle change for all beneficiaries must be initiated. This is necessary because an OFW represents not just himself or herself but his or her family, who is financially supported. Thus, a concerted effort is a must.
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