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Fighting poverty scientifically

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Along with the cheers for the newly released statistics showing a high rate of economic growth in 2012 have come doubts from critics as to whether the growth was genuinely “inclusive,” or helpful to the poor.

The way to resolve these doubts is to have scientific data, for all to study, about the trends in poverty and other economic variables, most of all employment and wages, that are supposed to connect the dots between economic growth and poverty.

Thus, National Economic and Development Authority Director General Arsenio Balisacan has called for strengthening of economic sectors he deems most capable of creating jobs and of reducing poverty. In particular, he has cited manufacturing, tourism, and agriculture as prime labor-intensive sectors deserving of priority in development.

Dr. Balisacan’s judgement may be right.  But the only way for him, and for the public in general, to know it for sure is to have much more detailed data about each sector.  Figuring out the labor intensity of a sector obviously requires knowing how many workers are employed in it, and relating them to how much the sector produces.

Furthermore, finding out the progress in labor intensity over time requires data not only for a single period, but also for the entire succession of periods over which the gross domestic product is tracked.  It is most likely unrealistic to expect poverty reduction to happen simultaneously with economic growth.  Having a dynamic stream of data on both matters will facilitate learning how to shorten the time lag from the latter to the former.

Last week, I pointed out that the value of production in each sector is the value added, and equivalently the income, of the primary factors labor, land and capital that collaborated in the production.  The income of each factor depends not only on how much of it is employed, but also on how much is its compensation per unit of service, i.e. wages/salaries in the case of workers, rentals in the case of landowners, and profits in the case of capitalists.

In order to be relevant to describing poverty or affluence, the number employed in the sector should be subdivided into unskilled workers, skilled workers, professionals, managers, and so forth.  Their respective rates of compensation should likewise be tracked over time.

In order to reveal the sources of inequality in the distribution of income, there should likewise be data on how much of the nonlabor factors of production (capital and land) are engaged in the sector, and how many persons own the said factors.  Such data will reveal the concentration of ownership of capital and of land.

In short, let there be full, and not merely partial, accounting of the aggregate value of national income. The classic social purpose of economic science is to understand not only economic production, but also economic distribution.

* * *

Reacting to my column last week, Dr. Jose Ramon Albert, head of the National Statistical Coordination Board, wrote: “The national accounts are released 58-60 days after the reference quarter for the first to third quarters of the year and 30 days after for the fourth quarter and annual estimates, per the advance release calendar (ARC) issued by the NSCB usually at the start of the year and posted on the NSCB web (http://www.nscb.gov.ph/calendar/default.asp). This has been a practice of NSCB for more than a decade, and it had nothing to do with my assumption of office. I am just fortunate enough to have a dedicated set of technical staff behind me.

“We also wish to inform you that revised figures for national accounts are released based on the revision policy approved by the NSCB Executive Board through NSCB Resolution No. 8, Series of 1997, entitled ‘Approving the Policy on Updating the National Accounts’ and consistent with the international practices. Thus, the national accounts in the immediately preceding quarter are revised every quarterly estimation round, while the rest of the past quarters are revised during the May round of estimates using updated/additional data inputs. However, starting in November 2012, revisions are released a day before the scheduled release of the national accounts. Thus, what were released last Jan. 30, 2013, were the revised figures for third quarter 2012. We had a preliminary set of estimates for the third quarter 2012 last November 2012. The next release of the national accounts will be on May 30, 2013, or the first quarter 2013 estimates. We will also be having revised estimates for the past quarters on May.

“Further, we are all aware that per capita GNI per capita and per capita GDP, are not measures of social welfare. With respect to your suggestion to estimate the value added among the owners of the factors of production, while this might be a very good idea this is not at all straightforward to do.”

To me, this seems like worrying that it is not easy, technically and/or politically, to generate the data that would clearly determine the linkages—or else reveal the disconnections—of the trend in poverty to the rate of economic growth.

My view is that, whether it is easy or difficult, such generation of statistics should be done in order for many to join hands and form a consensus on how to make economic growth inclusive.  Let us practice statistics in ways that are inclusive and activist, less in service to the rich, and more in service to the poor.

* * *

Contact SWS: or mahar.mangahas@sws.org.ph.


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