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The Perils of a Weakening Dollar for a Filipino Contract Worker
by Ryan Sumo on 03/20/13 05:43:00 am   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

 

weak dollar

The weakening American dollar has been a hot topic for the past couple of years.  It’s at its lowest point in decades and concerns have been ranged about topics as far ranging as the purchasing power of American tourists to the looming possibility of a currency war, wherein countries devalue their currency in order to protect their export industries.  However what is lost in the mainstream news cycle is the effect this has on developing countries and their citizens.

The last couple of years have seen a pretty astounding growth rate for the Philippines, with GDP growth at 6.6% percent (not reflective of inclusive growth) in 2012.  Its stock markets are seeing record highs and investment grade status is on the horizon, and the country as a whole seems poised for a breakthrough.  While that may be true on a macro scale, the situation on the ground is not as rosy, even for a privileged upper middle class white collar knowledge worker (woof, that was a mouthful) like myself.

Making Ends Meet

I’ve been working as a freelance contractor for the past 6 years, and have been in the games industry in some form or other for at least a year or two before that.  The success of Spacechem and a long term contract with the good folks at Introversion Software have secured me financially for the next couple of years, but for most of that time I was living virtually hand to mouth, paying for a mortgage and general expenses and barely managing to put some money away in a savings account.  That was when the exchange rate was closer to 44 Philippine Pesos to 1 US dollar.  On Paypal (which is the service I use to get paid) the exchange rate is now hovering around 39-40 Pesos to a dollar.  That’s about a 10% drop, and it has repercussions.

Let’s assume that the minimum amount of income (supplemented by my wife’s income) that I need to maintain my lifestyle is $1000.  That $1000 dollars covers my mortgage, electricity, water, phone, association dues, gas, and groceries, with some money left over for going out with friends and my one real vice, which is traveling.  The drop from 44 to 39.5 to a dollar means I’m losing roughly 4400 Pesos in my monthly income.  To provide context, that’s roughly the amount that I spend monthly on gasoline, and a little under what we spend on groceries.  It would be enough to cover my electric, water, and phone bill all in one.  In short, it’s a pretty substantial amount of money to be losing every month.

Mr. Scrooge

Scrooge

Lest I be accused of not knowing how to tighten my belt, I’d like to go off on a little tangent about how much of a cheapass I am.  I live every day in fear that some catastrophe will occur that will wipe away all of my money, be it a sudden illness or a real life catastrophe like an earthquake or something.  I’m not far enough down that road yet to start packing a bug out bag, but at the very least I treat every bit of money I have like it’s the last bit of money I’ll ever have.  This is life as a freelancer. When you never know when your next contract will come in you’re always preparing for the drought. 

I go to ridiculous lengths to save money.  I refuse airconditioning while I work, even though temperatures here can go up to 35 degrees Celsius (that’s 95 degrees for folks Stateside).  Instead I make do by pointing a fan directly at me and taking off my shirt (the perks of working from home).  I bathe in the dark and until I was forced to move my home office into the second bedroom I only worked with natural light (I turned on the lights in the evening, obviously).  Any article of clothing I own was probably bought on sale (as well as every video game, with the exception of the rather tragic Sim CIty).  When I used to go out on dates I would pick the cheapest item on the menu for myself so that my date (these days my wife) could have whatever she wanted.  I can lose 30 minutes walking around a food court deciding what the best value for money meal is.  Yes, I’m THAT guy. The point being that aside from a really radical change in my lifestyle, I have tightened about every belt that I can just as a regular way of living, which frankly has led to some consternation from my wife.  Now with that out of the way, let’s get back to the topic at hand.

What Now?

A strong currency typically hurts export industries. If you’re selling goods to the global market and getting paid dollars in return, obviously a weak dollar and a strong local currency does you no good.  Contractors aren’t necessarily an export industry (though there are similarities, as we basically export our “man hours”) but we are paid in dollars, so there’s a similar effect.  But a strong currency is also supposed to have positive effects.  Imports of oil and machinery should technically become cheaper, with these savings passed on to the consumer in the form of cheaper goods.  This hasn’t happened so far, and indeed based on Philippines NSCB (National Statistical Coordination Board) the consumer price index is at its peak over the past 7 years.  Basically this means that as my purchasing power weakens the prices of the goods I buy has actually increased.  So what am I to do?

The only real solution is to start charging more.  This occurs naturally as I gain more experience and work on more well known games, but I now have to ramp up my fees before my financial situation becomes untenable.  I cannot speak for other local contractors and companies, but I expect that they will be forced to follow suit.  Once they figure out their inefficiencies and slash costs where they can, local contractors and companies will simply start charging more for their services.  It’s hard to say what this means for the Philippine Game Development Industry, small as it is.  There’s a lot of competition out from other South East Asian countries and the perennial elephant in the room, China.  It may mean that we have to find different ways to be competitive in the global market, or it may ultimately force some companies to shut down (see : Kuju Manila) or at least lay off some of its workers.  Hopefully we can manage the former and avoid the latter.


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