Easing inflation’s impact
There has been much public discussion about the way prices have lately risen faster than we’ve seen in the last five years. Rather than debate on the magnitude and causes of current price increases, it’s more useful to put our minds on what can be done to ease the impact of inflation, especially on those who are hit most.
An inflation rate of 4.6 percent—the year-on-year rate reported last month—means that for every P100 spent by the average family last year for its usual purchases, it now must spend P4.60 more. Government used an official poverty line of P9,064 per month per family of five in counting poor families in 2015. Adjusted for inflation, that threshold income is now P9,882.
This approximates the controversial P10,000 monthly income figure that the National Economic and Development Authority recently used for illustrative purposes. Setting aside questions on the appropriateness of the number, the roughly 4 million Filipino families living below that defined poverty line must now spend P460 more per month to maintain the already inadequate level of consumption they had last year.
How do the poor spend their money? The 2015 Family Income and Expenditures Survey indicated that, for every P10,000 of income, our poorest families would spend P6,100 on food (around P2,000 of it on rice alone); P1,350 on housing and maintenance; P900 on water, electricity and fuels; P310 on transport; P290 on tobacco and alcoholic drinks; P190 on health and medical expenses; P180 on clothing and footwear; P30 for education; and smaller amounts for other expenditure items.
Interestingly, poor people spend much more on tobacco and alcohol (with more than two-thirds on tobacco) than they do for their health. In contrast, the richest one-fifth of families spend over three times more on their health (4.3 percent of their budget) than on these “sin” products (1.2 percent).
This expenditure pattern of the poor shows where the impacts of recent inflation might possibly be lightened for them. Obviously, the single biggest item is food, more specifically rice, which alone takes up a fifth of the poor family’s budget. This is why letting our rice prices more closely approximate the levels paid by consumers in our Southeast Asian neighbors is critical for our poor.
And, as has been long argued over the years, it’s vital that we ease rice import restrictions that have jacked up domestic prices to twice what our neighbors pay. This is the single biggest way we can help our poor now and in the future. Surely, we can find much better and cheaper ways to help our 2 million rice farmers than with a policy that hurts 22 million poor (along with 83 million other Filipinos).
Ironically, maintaining this decades-old policy has not lifted most of our rice farmers out of poverty, and has in fact hurt them as well. One hopes that the current inflation episode will finally spur decisive action from the government. A 15-percent rice price reduction will already offset most of last year’s cost-of-living rise for the poor.
The P200 monthly cash grant for the bottom 10 million families under the TRAIN Law more than offsets the actual additional impact of tax increases on prices (estimated to be P50 out of the P460 cost-of-living increase for a borderline poor family, cited earlier). But it will not offset the total impact of inflation; hence we need more mitigating measures for the poor.
A new round of wage increases from the Regional Tripartite Wage Boards would be timely, and the government has already mobilized this mechanism. Still, that won’t help the 2 million who are jobless, and some 15 million workers who do not receive wages, but are
either self-employed or unpaid family workers. Government can also move to further ease the health expenses of the poor through wider free health services and medicines.
For their part, the poor could also help their own health, as well as their pockets, by cutting down on tobacco and alcohol, a major chunk of their budget, as seen earlier.
Meanwhile, the Bangko Sentral has moved to tighten money further, aimed to quell self-fulfilling inflation expectations. Whether that works or not ultimately depends on us.
Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.