Perception Of Ofw Children On The Inflation In Saudi Arabia

Introduction

​The economy is a man-made organization with the purpose of satisfying human wants by using limited or scarce resources available and known to a society (Aggarwal & Devi, 2002). It encompasses all of the activities involved in the production and distribution of goods and services that must be provided by every society for the welfare of its citizens. The success of an economy is measured by the standard of living that it delivers. The standard of living involves not only the goods and services that are consumed, but also other aspects of the quality of life including health, leisure time, and environmental amenities. The standard of living depends on the opportunities to consume, and that depends on the ability to produce (Nelson, 2009). Factors of production are engaged in some economic activities. Income is brought by these economic activities to economic agents that can either be consumed or saved and invested. Because of these gainful economic activities and accumulated earnings, some countries grow fast while others cannot reach such high growth rate.

As a result, some economies acquire the status of developed economies while others remain underdeveloped or developing economies (Aggarwal & Devi, 2002). Both developed and developing countries’ economy both suffer from inflation. (Hasan & Alogeel, 2008). Inflation driven occurs when prime commodities’ prices go high and bring down the value of money which affects every person’s lifestyle. When this happens, people prioritize their needs such as food, school tuition fee, and house rental. It is being considered that when inflation strikes, consumers spend wiser, and an average consumer goes on bargain hunting to make worth of the money they spend (Malki, 2014). Societies have been dealing with inflation for millennia. Records from ancient Rome indicate that the cost of a standard military uniform rose over time. Inflation struck often during Medieval Europe, and hit Spain particularly hard during the 1600’s.

The 1900’s saw hyperinflation in Europe, Africa, and South America, where price levels skyrocketed, doubling sometimes over the course of weeks or even days. Over the past decade or so, inflation has remained quite low, below 2% on an annual basis in much of the developed world. However, when inflation surged to double-digit levels in the mid- to late-1970’s, Americans declared it public enemy No. 1. Public anxiety over inflation has since abated, but people still remain wary of rising prices, even at the minimal levels we've seen over the past few years (Hayes, 2017). Prices driven by inflation can go up, though it is being statistically forecasted to make the economy going but it can cause a massive awareness due to the falling currency buying power. 12 developing countries that inflation targeting regimes: Brazil, Chile, Colombia, Hungary, Israel, Mexico, Peru, Philippines, Poland, South Africa, Thailand and Turkey (Borio & Filardo, 2007).

Economic manager or the central bank has already obtained information and forecast of how to tackle inflation and address the situation accordingly (Teles, 2009). Central bank independence refers to the freedom monetary policy makers and forecast the effect of inflation target. Under rational expectations, the public anticipate the central bank will attempt to expand the economy. The creation of micro business and cooperative to generate funds will somehow help to ease the effect the burden of inflation (Tutar & Eser, 2002). Inflation is widely interpreted as bringing the prices up of basic commodities and services. It is being adopted by economic managers to make the economy grow and to sustain the services needed. Fallen value of currency surely affects the buying power and turns priorities to basic needs. Detrimental effect of inflation which brings the prices up does more damage to a low-income country which mainly relies on their monthly wages income, while middle-income countries can vary turn to option with lesser expenditure but somehow manage with a proper anticipation (Moshiri, 2007). Global investors are looking at business potential by evaluating the political stability, size of the market, and the availability of the workforce locally.

In Saudi Arabia, for instance, it can be said that 80 percent of the population are above twenty which is the ideal age for a working force (Kuepper, 2018). They have a very strong currency though their economy is heavily dependent on oil, but some way, they can easily diversify other potentials such as tourism and etc. (Kuepper, 2018). Political stability played a significant role in inviting investors. Some investors have to evaluate the city infrastructure as it may add cost during transport. Inflation can cause a monetary effect and will drive consumers to focus more on basic necessities but somehow workable if it is being addressed.

There are so many variations that can cause inflation; one of those is the improper forecast of the needs and demand. If a country has an average growth rate of 10% of their population, then economic managers have to adopt the demand and increase their forecast to sustain the demand (Kuepper, 2018). In a study by San Juan Jr. (2018), the current economy of the Philippines was caused by the underdevelopment of the country during the Marcos Regime. Back then, the country’s development was attained through borrowing money from outside the country (San Juan Jr. , 2010). During the Marcos Regime, the Philippines lost years of development, underwent severe poverty, borrowed more than what the country could pay in a short amount of time, development of manufacturing sector was neglected, and the working environment of the employees deteriorated (Punongbayan & Mandrilla, 2016). At present, Philippines is still suffering from the backlash of the debts incurred by the Marcos Regime towards the country.

As a result, low earnings, payment, and revenue were worsened by inflation and global financial problems (San Juan Jr. , 2010). Aside from debts, the Marcos regime started the systematic deployment of Filipinos overseas, or what is nowadays called the OFW system. As Regalado () quoted in Medina & Pulumbarit’s “How martial law created the OFW Phenomenon”, “During Marcos' time, labor outmigration of Filipinos took on a new dimension. The Marcos dictatorship made the deployment of Filipino workers more systematic, ushering in the transformation of Filipino cheap labor into an exportable commodity through the labor export policy,” (Medina & Pulumbarit, 2012). OFWs helped make the country more resistant against economic crisis faced by the nation through their remittances to the Philippines (Custodio & Ang, 2011).

“In 1998 alone, according to the Commission on Filipinos Overseas, 755,000 Filipinos found work abroad, sending home a total of P7. 5 billion; in the last three years, their annual remittance averaged $5 billion. Throughout the 1990s, the average total of migrant workers is about a million a year; they remit over 5 percent of the national GNP, not counting the millions of pesos collected by the Philippine government in myriad taxes and fees. In 2004, OFWs sent $8. 5 billion, a sum equal to half of the country’s national budget. In 2007, they sent $14. 45 billion and $15. 65 in 2008” (San Juan Jr. , 2010). OFW parents have a huge influence on their children. Their children’s satisfaction is directly related to the finance they provide their children. Moreover, the attitude of their children towards money is related to their parents (Miller, 2001).

According to a study by Masters (1969), children whose parents have little education or income are more likely to drop out of college or high school compared to those whose parents have higher income and better education. Children of affluent parents were also shown to succeed in life compared to children whose parents were not that influential (Mayer, n. d. ). In a study conducted by the POEA, Saudi Arabia is one of the most sought-after countries by OFW’s who are looking for jobs (Esplanada, 2012). This might sound good for Saudi Arabia but not all Saudi Arabian nationals agree with this. According to Sevilla Jr. (2014), labor exporting countries, Philippines included, have been continuously exporting workers to the Middle East for more than four decades thereby replacing the labor force the Arab countries need to fill up with their own nationals. As a result of being more dependent on expatriates and increase in hiring foreign workers and rapid development, the younger generations of Saudis have become spoiled so much that most of them face difficulties in accepting labor jobs or jobs isolated areas (Ramady, 2009). Aside from the unemployment problem, Ramady (2009) also emphasizes on the significance of money supply in Saudi Arabia’s inflation. He explained that the more money supply the kingdom has, the lower the inflation rate would be as more money would be present in the economy’s circulation of money (Ramady, 2009).

In a study conducted by MD Rahmatullah Khan (2012), Globalization of Saudi Arabia resulted in the kingdom becoming a weaker country because globalization lessened the effects and impact of domestic products on the kingdom. Thus, more and more products used as commodities are mainly imported goods which do not help the economy of the country. Sevilla Jr. (2014) discusses that Saudization (nitaqat) system is a solution to most of Saudi Arabia’s economic problem. The Saudization aims to increase the employment rate of Saudi nationals and at the same time lower the remittance of OFWs to the Philippines as the oil industry which serves as the pillar of the Saudi economy will not last forever (Sevilla Jr. , 2014). The researchers have chosen to conduct a study on the perception of OFW children on the inflation in Saudi Arabia for it has recently become a very concerning issue. The researchers have noticed that as the inflation in Saudi Arabia has lately been increasing rapidly, residents, both expats and local citizens, are not familiar with this economic phenomenon.

Hence, familiarity with inflation among the residents of Saudi Arabia is far below the familiarity of other nations’ citizens toward inflation. It may have already become a worrisome problem to some because of how much it affects people on a day-to-day basis. This study aims to address Saudi's current economic status, specifically on the sudden inflation caused by the Value-Added Tax. This paper also aims to: (a) analyze the OFW children’s insights regarding inflation and how deeply they understand it; (b) make them aware of the sudden rise of inflation rates and how it may affect their lifestyles; and (c) provide ways for OFW children on how to help their parents in budgeting. This research is conducted in hopes of preparing the readers, teenagers, into adulthood. In time, they will become just like their parents – live independently, provide for their family, and manage their own money. This research intends to help them grow into responsible adults in a financial sense.

Statement of the Problem

This study examines inflation in Saudi Arabia along with other economic problems faced by children of OFWs who live with their parent/s and their perception on it. Furthermore, this study aims to answer the following research questions:

1. ​How do teenage offspring of OFWs cope with the inflation in Saudi Arabia?
2. ​What are the perceived effects of inflation to the OFW children’s?
3. ​How does inflation affect lifestyle?

Conceptual FrameworkPerception of Teenage Children of OFWs

Teenagers are individuals who are aged 13-19 years old. Nowadays these are persons who are commonly at the phase of their high school, and college lives. As students, they are influenced by their family, peers and friends, school, mass media, religion/ state, and social/historical background. The effect of inflation on a teenage student affects how they adjust to the society. It also affects how this people try to manage their money along their way to adulthood. ​Education is the process of schooling or being schooled. Education is a tool that allows humans to pass on their knowledge to the next generation.

As society progresses further, more and more information are required to be learned by the next generation. Knowledge about inflation which is an economic phenomenon that grows along with our society must be passed on as they are evolving every day. Teenagers, have the need to be informed about it so that they can adjust better to society. ​Finance is how the teenagers receive their needs and wants from their parents. It also refers to how they budget the allowance given to them by their parents. The crisis in Saudi Arabia puts a strain on the income of the parents.

Due to Saudization, the OFWs suffered from lower salaries thus sending lower remittances to the Philippines. The income of the parents directly influences the money their child receives (Mayer, 2010). ​Surplus is the excess supply of goods and services caused by low demand. Saudi experiences a surplus of products while implementing inflation along with the nationalization reform of the government. Inflation brings about surplus which causes a deficit in the country’s economy. “Merchandise exports and imports of Saudi Arabia amounted to 688. 4 billion riyals and 525. 6 billion riyals, respectively, leading to a trade surplus of 162. 8 billion riyals in 2016, up 54. 5 billion riyals or 50. 3% as compared to the surplus of 108. 3 billion riyals in 2015” (General Authority for statistics, 2016). ​Shortage is the deficiency of goods and services caused by high demand and low supply. It affects how money flows in a society.

In Saudi Arabia, shortage of local workers has been experienced for a long time because the private sectors prefer expatriates due to their high quality in contrast to the locals’ (Al-Asmari, 2008). Because of this, the government implemented Saudization to create more jobs but this was done at the cost of having to send home thousands of expatriates back to their countries (Sevilla Jr. , 2014). ​Recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters (Google, 2018). Saudi Arabia faces recession because of the low income of the oil-sectors, implementation of new economic reforms, and the government’s tight budget in achieving its goals (Ampudia, 2017).

Purposive sampling was used for choosing the selected participants in this qualitative research. The researchers sought to collect and analyze the thoughts of these participants with regards to the topic. According to Benoot, Hannes, and Bilsen (2016), purposive sampling could make the results more conceptually aligned with the synthesis purpose for it gives opportunities to the possible inclusion of new perspectives to the line-of-argument and the enhancement of the theoretical diversity of the papers being included. ​The following criteria used by the researchers in choosing the participants are: (1) junior and senior high school students; (2) 13-19 years old; and, (3) rational thinking students. The researchers chose to conduct questionnaires to the students of International Philippine School in Jeddah (IPSJ) from grades 8 to 12: 10 students from each grade level, with a total of 50 participants. Most of the students who will participate are expected to give reliable answers and admit that they are mindful enough to help their parents survive the inflation in Saudi Arabia.