The UAE dirham to Philippine peso exchange rate has been on the rise, nearing the P16 mark. This means that Filipino expats sending money back home are benefiting, receiving up to P8,000 more than they used to three years ago. However, the increase in remittance does not necessarily translate to better financial security for the families receiving the money, as prices of goods and services in the Philippines have also increased rapidly.
Filipino chef Rudy Gamit Galorport, 47, mentioned that despite the higher exchange rate, he is actually sending more dirhams now to cover the increasing cost of groceries and utilities. Similarly, single mother Dayrene Capistrano Nollas, 36, is looking for a higher-paying job to meet the growing expenses of her family in the Philippines. This phenomenon is known as the ‘money illusion’ in behavioural economics, where the perceived increase in wealth does not reflect the actual purchasing power due to rising costs of living.
Dr. Rommel Sergio, a book author and Associate Dean at Canadian University Dubai, explained that the ‘money illusion’ concept is not unique to Filipino expats but affects workers globally. He emphasized the importance of focusing on controlling inflation to ensure that wage increases keep pace with or exceed the rise in living costs. Sergio recommended that governments and policymakers prioritize addressing the effects of ‘money illusion’ through comprehensive economic policies aimed at managing the cost of living and controlling inflation.
He also highlighted the importance of financial education for workers to understand the real value of money and the impacts of inflation on their financial decisions. Companies should consider regular salary reviews and adjustments based on inflation rates and cost-of-living indices to maintain viable purchasing power for their employees. By taking a holistic approach and implementing effective economic policies, the increase in remittance or salary can lead to genuine improvements in living standards for the global workforce.
