ABSTRACT
The rationale of this study is to examine the impact of cash transfer on school attendance in Indonesia and whether the proportion of school children receiving cash transfer and those not receiving cash transfer is having the same effect. Using the data of Indonesia’s Family Life Survey-5 (IFLS-5) in 2014 covering 19 provinces with total observations of 16.024 household obtained from Rand Corporation and field interview held in 2015, the multiple cross section regression model was applied by using 2SLS and Probit regression method to examine the effect of cash transfer as exogenous variable, and individual vector, parents, and household as control variables on school attendance of children as endogenous variable. The main finding is that the cash transfer has significant positive effect in increasing children’s school attendance and the expenditure for children education. Nevertheless, the children from household receiving cash remittance tend to have lower school attendance vis-à-vis children from household not receiving the cash transfer. As policy considerations, it is advised to anticipate the migration effects when evaluating the effect of cash transfer on children’s school attendance or when updating migration policies and to improve the availability of facilities and basic infrastructure for school age children.
Key words: Cash transfer, school attendance, household expenditure, education, children.
The World Bank Report as of November 2017 shows that there are 9 million migrant workers from Indonesia. Of that amount, 53% of this are working in informal sectors such as maid while 47% baby are working in formal sectors (Word Bank, 2017). This phenomenon affects mainly low skill workers as 60% of the workers have not completed high school so that they are unable to compete for the limited jobs with high productivity. The World Bank report also notes that on November 2017, 19% are working in agriculture, 18% in construction, 8% in manufacturing, 6% as nurses for elderly, 4% in hotel/restaurant, 2% as driver and 0.5% working on cruise ships. The World Bank report also mentioned that cash transfer is contributing to improve the long term life of the migrant worker and their families. This is due to the migrant worker obtaining income six fold higher
compared to working at home or domestically. Forty percent of migrant households utilize their cash transfer money for education, 15% for business investment and more than 20% for saving accounts. The Global Knowledge Partnership on Migration and Development (KNOMAD) in its report entitled Migration and Remittances; Recent Developments and Outlook as of April 2018, recorded that Indonesia is part of 10 biggest countries receiving cash transfer from overseas amounting to $9 billion and standing at 10th rank (KNOMAD, 2018). First rank is India with total amount of $69 billion, China ($64 billion), and third rank is the Philippines ($33 billion).
The cash transfer obtained by households originated from migrant workers is part of the strategy for households to ensure sustainability of their income. In the short run, the fund is used to purchase items such as buying food, clothes, and health needs that enable households to maintain their purchasing power. Whereas if the fund is used for investment financing such as education , in the long run it will increase household expenditure that will mitigate poverty (Bastagli et al., 2016; Ruiz and Vargas-Silva, 2010).
Cash transfer in our observation is defined as money remitted by child, parent, or spouse domicile in different countries as proxy of migration. The purpose of migration among others is to secure the income of the migrant workers and their families to stay at home (Stark and Bloom, 1985). A plethora of research showed that cash transfer originated from migrant overseas has a capacity to increase the number of children entering schools. There two ways the fund received from cash transfer is utilized. First, the fund can be utilized for any needs just like the fund received from other sources of income. Second, fund from cash transfer received by different socioeconomic backgrounds and different house members will be used differently (Maitra and Ray, 2003; Waidler et al., 2016). This is due to constraints such as migration cost, the fund from cash transfer is not received by low income category (Taylor, 1999). The cash transfer received from migrant workers in overseas has been continuing to increase (Bank Indonesia, 2019). Considering both opinions, the question needs to be further analyzed as whether cash transfer from migrant workers in Indonesia affects education represented by the number of school -age children enrolling in school.
Based on the above and data sourced from Household Survey in Indonesia the purpose of this study is to confirm and analyze the effect of cash transfer from migrant workers on numbers of children attending school. Second, to confirm whether proportion of school children receiving cash transfer and proportion of school children not receiving cash transfer are having the same effect. To the best of our knowledge there is scarce research on the impact of cash transfer on school attendance of children in primary and secondary schools in the whole country or nationwide. This study is only limited to several rural areas of the province. The contribution of this study among others is to observe meticulously how significant is the effect of cash transfer on household children education in Indonesia. The results of the study will be utilized as reference for central government and local government in designing their policies particularly on improving the facilities for education as well as to increase economic growth of the country. Academic wise, this study can be used as a tool for comparative study with other countries such as India, the Philippines, Burma and other migrant worker contributors.
This section discusses the theories and reviews from various research on effect of cash transfer. The previous theories on migration in general have not studied cash transfer as separated topics from migration. But the New Economic of Labor Migration (NELM) concludes that the decision to migrate is based on common initiatives specifically between the migrant worker candidates and their families. So, this theory does not opine that family is a separate entity from the migrant worker candidate. It is regarded as an unity that creates efficient and flexible relationship among them. Furthermore, the approach is shifting the focus on migration theory on ‘individual independency’ to depend among others and view migration as ‘strategy based on various considerations’ and not decision or optimism without limit (Stark and Bloom, 1985). The fund received from cash transfer will be used for improving income, as fund for new economic activity, and as guaranty for precaution motive of loss of income and production failure. The cash transfer from migrant workers is also potent for propelling development dynamics through relaxing production constraints and investment faced by the household in the underdeveloped countries (Taylor, 1999).
The motive of migrant workers to remit part of their income is based on various factors such as the amount of income, the willingness to distribute their ‘hard work’ income to their families at home including the ease of remitting the funds. As Lucas and Stark (1985) stated that there is no theory specifically that is discussing cash transfer comprehensively, but they notes that the motive of cash transfer is based on three reasons.. First, the altruism or caring for the families left at home; second, for benefitting the migrant worker himself or expecting profit or return such as to be invested and to be secured by their families as savings to be used by the returned migrant workers; third, the combination of both or known as NELM motive whereas the migrant workers and their families are bound by agreement to share the certainty of the sustainability of the income. There are two reasons supporting this motive which are investment and risk. For instance, the education invested by the head of the households for their children will create higher return for the household instead of investing the funds for their son-in-law, daughter-in-law or spouse. The second reason is to guarantee against the financial and insurance market imperfection by sending members of their families as diversification of sustainability of family income. For instance, the drought and hostile weather that causes harvest failure or unstable prices in rural areas (Taylor, 1999).
Overseas migrants in Indonesia total 3.7 million (Bank Indonesia, 2019). Migrant workers from Indonesia are categorized as low skills workers and those working in informal sectors such as maid, and babysitters. Only a small fraction of them are working in plantation or manufacturing sectors as unskilled workers. Most are working in Middle East and South East Asia countries (BNP2TKI, 2015). The cash transfer from migrant workers can increase the expenditure of the households but the pattern of the utilization is based on the level of income category. For those categorized as low income, the cash transfer is used for mostly on food consumption. For higher income household, the fund is used for investment such as education, health, housing, or increase of household assets (Adams and Cuecuecha, 2013). The usage of cash transfer for education and housing does not result in immediate impact on improving the economy of the household of the migrant workers (Taylor, 1999). The international cash transfer is also functioning as an effective informal social safety net (McKay and Deshingkar, 2014). Koechlin and Leon (2007) stated that in the early stages of migration only households categorized in the higher income distribution level are able to migrate as the costs for migration is relatively high. As a result, only those with the higher income are receiving the cash transfer funds. But, as time goes by, the earlier migrant workers will provide information and assistance to the new coming migrant workers that create new ‘migrant center’ in overseas. The continuation of the process enables those from low income distribution category to migrate and receive cash remittance.
McDade (2010) and Hernandez et al. (2012) reported that the households receiving cash transfer are having higher impact on increasing the number of children entering school. This finding is also related to findings by Yang and Martinez (2006) who conclude that cash transfer is able to support households receiving cash transfer to overcome the ‘financial shocks’ as experienced during the financial crises in 1997 so it is utilized as an informal safety net.
The effect of migration and cash transfer on the education of the children of the migrant workers is examined by Davis and Brazil (2016) and McKenzie and Rapoport (2006). The result of their study concluded that the absence of parents may inhibit the education process but the existence of cash transfer may support their children. The students from the migrant households are actively prioritizing the education to reach the prospect of migration in the future, and those coming from an ample migrant community tend to migrate as their age matures enough to migrate. The indirect effect is that the student does not appreciate the quality of education due to the opinion that the skills obtained from education are not sufficient for them for success in migration thus they disregard education albeit receiving cash transfer. Children of 7 to 12 years of age enroll in school is are close to 99%, but the higher the level of education, the children enrolling in school deteriorated from 95% for children age 13 to 15 years and decreased to 72% for 16 to 18 years (BPS, 2019). A study done by Bougas (2016) on children of women migrant workers from Malang, East Java, Indonesia found that their children lost attention of their parents specifically their mothers in supporting their formal education. Motivation to encourage their children to study is not obtained by their children as their mothers work overseas.
Basrowi (2020) studied migrant workers and former migrant workers in Lampung province-Indonesia and concluded that remittances had a positive and significant impact on improving the family's economy, children's education duration, and children's health level. Other studies concluded that only a small fraction of the cash transfer is used for children’s education as a major part of the cash remittance allocated for consumptive usage. Based on the review above, the hypothesis developed for the study to be executed is that cash transfer obtained from migrant workers working overseas has significant impact to increase the number of children’s school attendance. This result contradicts the fact that the children’s parents left their children for working overseas to continue their children’s formal education.
This study is based on cross section data sourced from The Indonesian Family Life Survey (IFLS) fifth wave year 2014 of RAND Corporation. The study covers 19 of 33 provinces in Indonesia and is considered valid to represent nationwide. The Indonesian Family Life Survey (IFLS) is an on-going longitudinal survey in Indonesia. The sample is representative of about 83% of the Indonesian population and contains over 30,000 individuals living in 13 of the 27 provinces in the country. The map below identifies the 13 IFLS provinces in the IFLS.
The first wave of the IFLS (IFLS1) was conducted in 1993/94 by RAND in collaboration with Demographic Institute, University of Indonesia. IFLS2 and IFLS2+ were conducted in 1997 and 1998, respectively, by RAND in collaboration with UCLA and Demographic Institute, University of Indonesia. IFLS2+ covered a 25% sub-sample of the IFLS households. IFLS3, which was fielded in 2000 and covered the full sample, was conducted by RAND in collaboration with the Population Research Center, University of GadjahMada. The fourth wave of the IFLS (IFLS4), fielded in 2007/2008 covering the full sample, was conducted by RAND, the Center for Population and Policy Studies (CPPS) of the University of GadjahMada and Survey METRE. The fifth wave of the IFLS (IFLS-5) was fielded 2014-15. On the fifth wave, the observation totals 16.024 households.
The IFLS surveys and their procedures were properly reviewed and approved by IRBs (Institutional Review Boards) in the United States (at RAND) and in Indonesia at the University of GadjahMada (UGM) for IFLS3, IFLS4 and IFLS5, and earlier at the University of Indonesia (UI) for IFLS1 and IFLS2. Thus all requirements for consent of adults and children were met and approved by those IRBs before fieldwork could begin.
In 2012, Survey METER fielded a survey based heavily on the RAND IFLS in the eastern provinces of Indonesia that were not in the RAND IFLS. Though it is not supported by RAND, lthe IFLS EAST is listed as a sister survey that may be of interest to RAND IFLS users. It is assumed that each cash receiving household is receiving the exact amount as reported by them during the survey. The household expenditure is used as proxy for income based on reasons as follows, first high degree of income data losses vis-à-vis expenditure; and second, low correlation between income and expenditure data. Spearman correlation test is 0.56 indicating that there is weak correlation between income and expenditure. Education in this study is to observe the number of children from 13 to 18 years which is categorized as ages for mandatory primary and secondary school years. Using probit method based on studies by Acosta et al. (2008) and Bucheli et al. (2018), the model is formulated as below,
A = λ + βXi + λ Pi + ΦCi +βRi + Єi
A representing probability of children school attendance , and Xi is individual vector (dummy of child age, gender, disabled child or not, living with parent or not), Pi is parent characteristics (father’s year of schooling, mother’s year of schooling, working mother or not, mother is head of family or not), Ci is household characteristics (number of siblings, order of birth, per capita monthly expenditure without cash transfer, and whether households reside in the city or not) and Ri is cash transfer per capita per month. Parents’ education is a binary variable of four categories: completed primary school, completed junior high school, completed senior high school, and completed college or university degree.
In this study, we compare the households receiving cash transfer and those not receiving cash transfer (Table 1). Table 2 explains that the households receiving cash transfer have higher proportion of education expenditure vis-à-vis the households not receiving cash transfer. This is consistent with a study by Cabegin and Alba (2014); Mahapatro et al. (2015); and Quisumbing and Meniven (2010). Age of the head of household receiving cash transfer is higher than that not receiving cash transfer, indicating that the head of the household receiving transfer is no longer productive, so need to be supported by cash transfer. The table also shows higher proportion of household residing in the cities vis-à-vis rural areas indicating that the ease of accessing bank in the cities for receiving cash transfer from overseas. Higher proportion of maximum year of schooling of household members receiving cash indicates that the household members are well educated and have higher income that enables them to overcome the cost of migrating to overseas.
In Table 2, there is a significant positive correlation between income without cash transfer and education of head and members of households. This means that the higher the education of the head and member of the households, the higher their income. Positive correlation of the male head of households indicates that his income is higher than his female counterpart. Positive correlation of households residing in the urban/city indicates that their income is higher than their counterpart in the rural areas. Positive correlation of retiree/pensioner indicates that the cash transfer received by households serving at least one retiree/pensioner is higher than households without retiree/pensioner. So serving more retire/pensioner will significantly increase the cash transfer received by households that are regarded as unproductive and need to be supported financially. Households having better household head/member education will definitely receive higher income. Based on this result, it is concluded that those who are migrating and transferring cash are definitely not from a low income category.
The increase in monthly expenditure based on Table 3 is having positive correlation with education expenditure; whereas for other proportion of expenditure it is not significant. For cash transfer as mentioned by Adams and Cuecuecha (2013), the increase in cash transfer is having a negative significant impact on housing investment; whereas there is significant positive correlation with education expenditure and other utilities expenditure such as transportation, durable goods, clothes, etc. Positive results on education expenditure are consistent with other previous studies in other countries whereas cash transfer is mostly utilized for investment including education (Cabegin and Alba, 2014). The result is consistent with the economic theory of permanent income hypothesis-cash transfer regarded as transitory income. This type of income is not spent for today’s consumption but spreads along one’s individual lifetime. The transitory income tends to be used as investment or saving.
Based on Table 4, school attendance of children receiving cash transfer is higher as they have less supervision from their parent working overseas and tend to work overseas in the future after leaving school. Davis and Brazil (2016) reported that the absence of fathers causes the children not to be motivated to go to school and receiving cash transfer motivates them to become migrant workers too. Acosta et al. (2008) stated that cash transfer significantly and negatively affects school children’s attendance in rural area in El Salvador. The age of the children receiving cash transfer is higher than those non receiving cash transfer, there is no difference in number of individuals between male and female children, mothers who are also head of household tend to have more opportunity to receive cash transfer, probably because their husbands are migrant workers.
Table 5 indicates that school attendance is not dominated by children’s gender whereas disabled children have more significant school attendance. Farther year of schooling has significant and positive impact in increasing children’s school attendance. This may be due to ‘patriarch culture’ being strong in which father is the ultimate decision maker/ head in the household/family including in children’s education matters. Working mothers and mothers as head of house also have positive and significant impact increasing children’s school attendance. Therefore, the role of the mothers is also financial, to make the children focus in school without necessity to help parents to make a living.
As found in previous topics, the households residing in urban areas or cities are able to increase children’s school attendance. Cash transfer only is not sufficient without the availability of sufficient facilities and infrastructure. This finding is also consistent with a study by Febriany and Suryahadi (2012) and The World Bank (2011).
This research sought to provide an in-depth analysis on the effect of cash transfer on children’s education in Indonesia. The study found that cash transfer has a significant impact on the increase in children’s school attendance and education expenditure, but the children from households receiving cash remittance tend to have lower school attendance vis-à-vis children from households not receiving cash transfer. Referring to permanent income hypothesis, up to certain degree cash transfer is categorized as transitory income. Cash transfer affects the consumption pattern of receiving households.
Based on the conclusions above, the policy recommendation to ensure the benefits derived from cash transfer is effective by anticipating the migration effects when evaluating the effect of cash transfer on children’s school attendance or when updating migration policies. The strong positive effect of cash transfer may overcome the negative effect of cash transfer on children’s school attendance that eventually will increase cash transfer inflow and increase household investment on children’s education. The investment on education can be only effective if followed by the availability of adequate supporting facilities such as basic infrastructure and availability of good schools, predominantly in rural areas. Therefore, the improvement and increasing of the number of facilities and infrastructure need to be continuously executed. The limitation of this research is the unavailability of respondents’ data from East Indonesia zone; whereas it is known that part of migrant workers doing cash transfer reside and originate from East Indonesia Zone. For future study it is advised to add interaction variable or longitudinal data to detect the effect of cash transfer comprehensively.
The author has not declared any conflict of interests.
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