POVERTY AND INEQUALITY

I. BACKGROUND
INTRODUCTION

A peculiar aspect of Philippine development in recent decades is the

rather slow pace of poverty reduction and the persistently high level
of economic inequality
The Philippines has had the slowest rate of poverty reduction during
the last three decades and highest incidence of absolute poverty
In human underdevelopment, the Philippines had high initial
conditions compared with its neighbors
POVERTY
Relative Poverty
Defines poverty in relation to the economic status of other
members of the society
Absolute Poverty
Measures poverty in relation to the amount of money necessary
to meet basic needs such as food, clothing, and shelter
II. POVERTY PROFILE
CAUSES OF POVERTY
1. Relatively Low Growth Elasticity of Poverty Reduction
The Philippines has also performed poorly in the fight against poverty during the
last 25 years. The poverty reduction rate of 0.47% per year is slower than those of
Cambodia, Indonesia, the Lao People’s Democratic Republic, Thailand, and Viet Nam.
2. Weakness in Employment Generation and Quality of Jobs Generated
The failure to sustain a high level of economic growth also explains the
unavailability of jobs in the country.
3. Episodes of Food Inflation Increase the Number of Poor People
High inflation has further dampened the positive impact of economic growth on
poverty.
CAUSES OF POVERTY
4. Failure to Manage Population Growth
Population growth remains rapid by Asian standards and has decreased
slowly compared to other countries over the last three decades.
5. High and Persistent Levels of Inequality
High levels of inequality were recorded for the past 20–25 years, which
in turn have weakened the already moderate economic growth.
6. Economic Crises Increase the Number of Poor People
The Philippine government projects the economy to grow 3.7%–4.7% in
2009 after posting a three-decade high of 7.2% in 2007.
IMPACTS OF POVERTY ON ECONOMIC GROWTH &
DEVELOPMENT

A. Poverty and Economic Growth

Economic growth is a crucial factor in poverty reduction; however, other
factors such as inequality affect its impact on poverty.

B. How Poverty Constrains Economic Growth

In typical growth models, physical capital (investments), labor and human
capital, and technology are key for sustained economic growth.
IMPACTS OF POVERTY ON ECONOMIC GROWTH &
DEVELOPMENT

 Human Capital Constraints

highlight the cycles and intricate pathways from adverse health and education
conditions to poverty and back, within and across generations, labor productivity,
quantity and quality of human capital investments (particularly health and
education), and complementarities between human capital investments.

 Unprotected Risks and Shocks Causing Poverty Traps

Economic crises or large natural disasters can also cause poverty traps and
dampen growth.
IMPACTS OF POVERTY ON ECONOMIC GROWTH &
DEVELOPMENT

 Conflicts and Disorder Resulting from High Inequality Hamper

Investments and Destroy Social Capital
Inequality, particularly in terms of asset distribution, has been persistent
in the Philippines.
III. HISTORY AND REASONS
A. POVERTY REDUCTION AND POSTWAR
DEVELOPMENT PLANNING
INDUSTRIAL DEVELOPMENT

Industrial development continued to be a general development

thrust in much of the 1960s and throughout the 1970s, as
evidenced by the official pronouncements of top government
officials, and by successive development plans
 The chaotic events of the late 1970s and early 1980s—deep recession in
the world economy, sharp falls in the world prices of the country's
traditional exports, internal political turmoil punctuated by the
assassination of Benigno Aquino, Jr. in August 1983—revealed the
inherent fragility of the economic base that the heavily import-dependent
industrialization strategy had hitherto promoted.
FERDINAND MARCOS REGIME

The economic crisis of 1984-85 and the Marcos regime's loss of

political credibility propelled to power in February 1986 a new
government headed by President Corazon Aquino. The new
government's development program primarily stressed the
alleviation of poverty, the generation of more productive
employment opportunities, and the promotion of equity and
social justice.
AQUINO ADMINISTRATION (CARP)

 Serving as the centerpiece of the Aquino administration's economic and

social development program was the Comprehensive Agrarian Reform
Program (CARP). Started in the second half of the 1980s, the CARP
departed from all previous legislation by including all agricultural lands,
and by going beyond tenancy to include alternative production
arrangements such as production or profit-sharing, labor administration,
and distribution of stock shares.
RAMOS ADMINISTRATION

 The Ramos administration (1992-98) de-emphasized agrarian reform as

the key to poverty reduction and focused instead on accelerating the pace
of economic growth, by building the international competitiveness of
domestic industries, reforming regulation in services and industry
(mainly in commercial banking, transportation, and telecommunications),
and investing in basic infrastructure. But it also had a Social Reform
Agenda (SRA) for achieving its human development targets.
ESTRADA ADMINISTRATION
 The Estrada administration (1998-2001) came to power with a lavish pro-
poor agenda. It recognized the imperative of broad-based rural
development to win the war against poverty. Its Medium-term Philippine
Development Plan for 1999-2004 identified the main elements of the
development strategies required to spur growth and achieve sustainable
development in rural areas.
 On the ground, the Estrada administration's flagship program for poverty
alleviation was Lingap Para sa Mahihirap (Looking after the Poor).
The Lingap program involved the identification of the 100 poorest
families in each province and city.
MACAPAGAL-ARROYO ADMINISTRATION

 The ascension to power of the Macapagal-Arroyo administration (in

2001) following the exit of the disgraced President Estrada gave birth to a
new program for direct poverty alleviation. Dubbed KALAHI (Kapit-
Bisig Laban sa Kahirapan, or Joining Hands against Poverty), the
program covers asset reform, provision of human development services,
creation of employment and livelihood opportunities, participation of so-
called basic sectors in governance, and social protection and security
against violence.
B. THE WORLD DISTRIBUTION OF RELATIVE
LIVING STANDARDS, 1960 AND 2000
 The kernel densities1 of relative living standards in 1960 and 2000, using GDP per worker data from the Penn World Table
version 6.1 of Heston, Summers, and Aten (2002).
THE WORLD DISTRIBUTION OF RELATIVE LIVING STANDARDS,
1960 AND 2000

The density functions of both years are widely dispersed, with

the range of values spanning almost the entire length of the unit
interval.
The densities are skewed to the right, which means that in 1960
as in 2000 there were proportionately more poor than rich
countries.
The density for 2000 has a lower peak on the left and a small
hump on the right.
Unfortunately for the Philippines, its point on the scatter
diagram falls just below the 45-degree line, suggesting that it is
one of the underperforming countries, because its GDP per
worker did not grow as fast as the technological frontier.
 In 1960 the Philippines ranked a close third, after Singapore and
Malaysia, but by 2000 was dead last—with the 2000 relative living
standard even lower than its 1960 level, the country having been unable
to grow faster than the technological frontier. Even more telling is the
indication that the decline started in the early 1980s and has not been
reversed ever since, through successive terms of democratically-elected
administrations.
C. WHY HAS THE PHILIPPINES REMAINED
RELATIVELY POOR?
LIVING STANDARDS AND GROWTH RATE

The corruption hypothesis notwithstanding, it remains to be asked

why the Philippines has not made significant strides in improving
its relative living standard, unlike its high-flying neighbors.
An important fact in growth economics is that tremendous
improvements in living standards can be achieved by persistent
growth over long periods of time.
Stuck in a low-growth trajectory
NEOCLASSICAL GROWTH MODEL

Y = Kα (AH) 1–α
where Y is output, K and H are physical and human capital,
respectively, A is technology or total factor productivity, and 0
< α < 1 is the output share of physical capital.
 D. WHY DOES THE PHILIPPINES HAVE THE
WRONG ATTRIBUTES FOR LONG-TERM GROWTH
Social infrastructure - the set of social norms, laws, and government
policies, and the (formal and informal) institutions that enforce them
The reason why bad social infrastructure is so bad for the economy is
that productive activities are vulnerable to predation.
In contrast, with good social infrastructure, productive members of the
economy are able to reap the full benefits of their investments and
their hard work.
IV. DATA AND MEASUREMENT
FAMILY INCOME AND EXPENDITURE SURVEY (FIES)

Randomly collected a sample of more than 40,000 households

nationwide
Major source of the Philippines’ official poverty estimates
Provide information on the levels of living and income
disparities among Filipino families
ANNUAL POVERTY INDICATORS SURVEY (APIS)
 Gathers information on income and expenditures for minimum basic
needs.
 Classifies families into two income groupings:
 The lower 40% of the income distribution
 The upper 60%
 The data is classify into multiple indicators
 Survival
 Security
 Empowerment
NON-INCOME POVERTY INDICATORS

These indicators are used to track the country’s achievements of

the Millenium Development Goal (MDG)
 Health
 Education
 Population
 Demographics
PRIVATE GROUPS

Human Development Network

Computes the Human Development Index, Human Poverty Index, and
the Gender Development Index
Social Weather Stations
Quarterly survey on self-rated poverty
OFFICIAL POVERTY STATISTICS

Provincial statistics released every 3 years on food and poverty

thresholds and incidence
Income and poverty gaps
Foster-Greer Thorbecke measures
Annual statistics on food and poverty thresholds
ISSUES IN THE DETERMINATION OF POVERTY LINES

The use of expenditures instead of income is a broader measure

of welfare.
The nutritional requirements on which the poverty lines are
based may be more stringent than in other countries
The use of derived menus based on the food consumption of all
families, instead of actual food consumption by a referenced
poor population, may lead to inaccurate estimates
ISSUES IN THE DETERMINATION OF POVERTY LINES

The value of poverty line has not kept up with inflation

Urban poverty in the Philippines may be underestimated
because the survey sample omits families without official and
permanent residence
Poverty in the Philippines in general might be underestimated
OFFICIAL SOURCES OF POVERTY RELATED DATA
OFFICIAL SOURCES OF POVERTY RELATED DATA
INTEGRATING POVERTY DATABASES

Statistical agencies on the collection of poverty-related statistics

National policy makers and statistical agencies
Local government units and the statistical system
Government and the research and survey institutions
HISTORICAL POVERTY, 1985-2000
POOREST PROVINCES IN THE PHILIPPINES
SELF-RATED POVERTY AND HUNGER

 The proportion of families experiencing involuntary hunger at least once

in the past 3 months reached a record high of 23.7%, or an estimated 4.3
million households
 Social Weather Stations released the following:
 50% or 9.3 million Filipino families consider themselves poor
 27% put themselves on the borderline
 22% consider themselves as not poor
RURAL AND URBAN POVERTY

Poverty in the Philippines is partly attributable to decade-long

problems in agriculture
In 2006, almost 75% of the poor were found in rural areas
According to FIES 2006, there were 1.22 million poor
households in urban areas
HOUSEHOLD CHARACTERISTICS OF THE POOR

Educational Attainment of Household Head

 Almost 50% of household heads who did no complete any formal
schooling are poor
 Only 2% of college graduates have income below poverty line
 Around 67% of the poor household heads were elementary graduates or
lower
HOUSEHOLD CHARACTERISTICS OF THE POOR

Household Size of the Poor

 Less than 20% of households with four members or less are poor
 The percentage double to more than 40% when the household size is six
or more
HOUSEHOLD CHARACTERISTICS OF THE POOR

Sector of Work and Occupation of Household Head

 Highest percentage of the poor work in agriculture and forestry (52.49%)
 Wholesale and retail trade (6.76%)
 Construction (6.55%)
HOUSEHOLD CHARACTERISTICS OF THE POOR

Income Sources of the Poor

 The share of wages in per capita total household income has declined
steadily, from 46.1% in 1997 to 44.8% in 2003
 Major sources of income for the poor are enterprise activities
HOUSEHOLD CHARACTERISTICS OF THE POOR
Limited Access of the Poor to Social Services
HOUSEHOLD CHARACTERISTICS OF THE POOR
Limited Access of the Poor to Social Services
HOUSEHOLD CHARACTERISTICS OF THE POOR
Limited Access of the Poor to Social Services
V. INSTITUTIONS AND GOVERNANCE IN THE
POVERTY RESPONSE
The state’s response to poverty is crucial in terms
of how deeply and quickly poverty can be reduced.
STATE RESPONSE
(Medium-Term Philippine Development Plan) MTPDP Under the 2004–
2010, the Arroyo administration
The five main parts of the plan cover
1) economic growth and job creation,
2) energy The specified target is to
3) social justice and basic needs, reduce
the poverty incidence of
4) Education and youth opportunity
families from 28.4% in
5) anticorruption and good governance 2000 to 17.9% by 2010.
KAPIT-BISIG LABAN SA KAHIRAPAN (KALAHI)

Strategies include the following:

 Accelerated asset reform
 Improved access to human development services.
 Provision of employment and livelihood opportunities.
 Security from violence and social protection (including safety nets for
vulnerable groups)
 Institutionalized and strengthened participation of the basic sectors in
governance
 Pro-poor infrastructure development.
KALAHI & THE NATIONAL ANTI-POVERTY COMMISSION
(NAPC)
 KALAHI - emphasizes the convergence of local poverty interventions
The National Anti-Poverty Commission - serves as the lead agency in coordinating the convergence of
programs
 The NAPC is also responsible for convening the NAPC En Banc and the Cabinet Group on
Poverty Alleviation.
 it coordinates interventions on water
 electricity
 the use of the local poverty monitoring indicators system
 ensures allocation of funds for poverty reduction
 mobilizes resources from donor agencies and the private sector
 coordinates microfinance programs and services for the poor
CURRENT MAJOR GOVERNMENT PROGRAMS

Flagship/Special/Targeted Programs:
 Conditional cash transfer(4Ps) - Transfers to poor families conditional on,
among others, school enrollment and immunization of children.

 KALAHI Comprehensive and Integrated Delivery of Social Services

Project - Community-driven development project that seeks to improve
local governance, empower communities, and improve access to services
and basic infrastructure
CURRENT MAJOR GOVERNMENT PROGRAMS

Human Development Services:

 Basic education sector reform agenda - Package of policy reforms aimed
at systematically improving the institutional, structural, financial, cultural,
physical, and informational conditions affecting basic education
provision, access, and delivery

 FOURmula ONE for Health - designed to implement critical health

interventions as a single package, backed by effective management,
infrastructure, and financing arrangements
 Accelerated Hunger Mitigation Program - Interventions in both the supply side
(production) of food and the demand side (the means of obtaining it).
 Responsible parenthood and natural family planning - Promotion of natural family planning,
breastfeeding, and birth spacing.
Asset Reform:
 Comprehensive Agrarian Reform Program - Land redistribution and support services;
development of agrarian reform communities
 Community Mortgage Program - Innovative system of mortgage financing whereby the urban
poor, through the concept of community ownership, may acquire a privately owned,
undivided tract of land
 Indigenous Peoples Rights Act - promote, and protect the rights of indigenous peoples.
Social Protection:
 Social welfare services for vulnerable sectors – developmental programs and
initiatives that respond to a problem, need, issue, or concern of
children, youth, women, persons with disabilities, older persons, and families
who are in need and at risk
 Social insurance (National Health Insurance Program) - defray the cost of
treatment for illnesses and the cost of preventive health care
 Labor market interventions
 Disaster management - Mitigation, preparedness, response, and rehabilitation
PARTICIPATION IN GOVERNANCE

Sector participation - Sector representatives sit with key cabinet officials

to discuss and deliberate on proposed poverty-related social policies
Civil society participation - Representatives of civil society organizations
discuss with government counterparts issues on sustainable development
Local development councils - Representatives of nongovernment
organizations sit on the council with local government officials to discuss
development plans
GOVERNMENT INSTITUTIONS INVOLVED IN POVERTY
REDUCTION

National Economic and Development Authority

 Macroeconomic planning; policy coordination for social development concerns (Social Development
Committee) and regional development; secretariat for Investment Coordinating Council
 Formulation of MediumTerm Philippine Development Plan (MTPDP)

National Anti-Poverty Commission

 Policy coordination for poverty and related programs

Department of Health
 Implementation and delivery of educational services and programs for basic and secondary levels;
policy coordination for education-related issues
 Policy coordination and regulation of tertiary educational services
Department of Social Welfare and Development
 Policy and program coordination in the delivery of social welfare services and other safety nets;
relief and rehabilitation during natural and human disasters
Department of Trade
 Policy coordination for investments toward job creation; price watch for consumer welfare

Department of Labor and Employment

 Policy coordination related to labor market issues and delivery of services related to labor market
(domestic and foreign)
Department of Agriculture
 agricultural services and development
Department of Agrarian Reform (DAR) and Department of Environment and Natural
Resources (DENR)
 agrarian reform (private land distribution–DAR; public lands–DENR)

Department of the Interior and Local Government

 local government concerns

Housing and Urban Development Coordinating Council

 housing and shelter

National Disaster Coordinating Council

 disaster response and management
National Nutrition Council
 nutrition and hunger

PhilHealth
 Government corporation in charge of the delivery of social health insurance and social
security
Presidential Commission for the Urban Poor
 Antidemolition; community mortgage programs

National Commission on Indigenous Peoples

 Land Tenure Program; indigenous peoples’ human rights
 Cooperate Development Authority
Registration of cooperatives; regulatory guidelines and standards setting
 National Statistics Office/National Statistical Coordination Board
Policy and actual collection on poverty information across regional and
local units
 LGUs (province, city, municipality, barangay)
Forefront in the delivery of basic services and poverty reduction projects
THE ROLE OF THE PRIVATE SECTOR AND CIVIL SOCIETY
GROUPS

The Private Sector

Private companies spent P26.0 billion on social projects in the last decade,
mostly on widening the poor’s access to quality primary education

P18.4 billion were spent for poverty alleviation projects. Education projects
accounted for 77.0% of the total amount, and livelihood projects 16.0%.
Around 100 members of the League of Corporate Foundations (LCF)
created an “education roadmap” in 2006 to consolidate private sector
support for education
Concerns about global warming
LCF, along with the Philippine Business for Social Progress (PBSP) and
other organizations
created an “environmental roadmap” to improve energy efficiency in
corporations, water and sanitation quality, carbon footprint reduction,
biodiversity, products and services supply chain management, and waste
management.
CIVIL SOCIETY AS IMPLEMENTERS OF POVERTY
PROGRAMS

as alternative providers of public goods

some NGOs and voluntary organizations are involved in the delivery of:
 Education
 Health
 social welfare services
- as providers of credit - private cooperatives provide small loans to individuals and
microenterprises involved in agriculture or nonagriculture activities
- as community or sector organizers and advocates of issues related to poverty
- as watchdogs—ensuring the delivery of social services such as education
VI. STATUS QUO
FAMILY SIZE AND CHARACTERISTICS OF FAMILY HEAD
HOUSING CHARACTERISTICS

 In 2017, nearly 6 in 10 families (60%) own the house and lot they
occupied. The remaining 40% occupied houses and lots under the
following tenure: own house, rent-free lot with consent of owner (16%),
rent house/room including lot (11%), rent-free house and lot with consent
of owner (7%), own house, rent-free lot without consent of owner (4%),
own house, rent lot (1%), or rent-free house and lot without consent of
owner (1%). Among families in the Bottom 30% stratum, 52% owned
their house and lot, while 63% among families in the Top 70% group.
EDUCATION

 Members of families in the Top 70% families tend to have attained higher
level of education than members of families belonging to Bottom 30%
group. Persons who had attained a college level and a higher level of
education comprised 28% among Top 70% families compared to 7%
among Bottom 30% families. Those who were high school graduates in
Top 70% group of families comprised 22%, while 15%of families in the
Bottom 30% group
ECONOMIC CHARACTERISTICS
FAMILY INCOME
OTHER RELEVANT INFORMATION