MANILA, Philippines -- The story that is told by the final results of the 2006 Family Income and Expenditure Survey (FIES), a survey that is undertaken triennially and used as the basis for the country?s poverty estimates, is not a particularly happy one. But before we get to the depressing parts, let us focus on the relatively good ones.

First, there has been an improvement, albeit small (actually negligible, but we?re trying, here), in our income distribution. How can one tell? From the so-called Gini Coefficient, which can range from zero to one, where getting closer to one means having a more unequal income distribution, and getting closer to zero means a more equal income distribution (zero is where every family has the same income). Our Gini was 0.4580, down from 0.4605 in 2003, or a decrease of 0.0025. To give the reader a basis for comparison, the decrease in the Gini between 2000 and 2003 was more than eight times that figure.

Related to the above is that, whereas in 2003 the total income of the top 10 percent of families was more than 20 times that of the total income of the bottom 10 percent, in 2006 that multiple had gone down to less than 19. The top 10 percent accounted for 36 percent of total family income in 2006, while the share of the bottom 10 percent was 1.9 percent. The media had a heyday citing that 36 percent share, the implication being that this was bad news. Actually, it is part of my good news, because in all but two of the previous surveys going back to 1965, the share of the top 10 percent of Filipino families in total income was more than 36 percent.

And finally, the last of the good news: the total income of Filipino families increased, both in nominal and in real terms, between 2003 and 2006.

Which brings us to the bad news, which we all have already heard: average family incomes decreased in real terms -- that is, the average family in 2006 could buy fewer goods with its income than it could in 2003. Which means a deterioration -- with everything else remaining the same -- in their well-being.

That real average family incomes decreased even as real total incomes increased, i.e., that even as the national ?bibingka? [pie] became larger, the share of each partaker became smaller, can only be due to one thing: the number of those partaking of the bibingka increased at a faster rate than the rate at which the bibingka increased. Specifically, between 2003 (16,480 families) and 2006 (17,408), 923,000 more families were added. No matter how one tries, one cannot get around the population ?challenge? that stares us in the face.

The ?challenge? is exacerbated when we factor in the fact that the poorer families are also the families with the larger number of members. Therefore, with the decrease in real family incomes (the 2006 FIES shows that no decile was spared -- every one of them showed a decrease in average real incomes), it must follow that those in the bottom deciles are going to be hit the hardest as far as purchasing power and the ability to buy basic food and non-food needs are concerned.

This conclusion is underscored when we look at the expenditure patterns of the bottom 30 percent of Filipino families in 2006, compared with 2003 and with the expenditure patterns of the upper 70 percent of families.

For example, the FIES shows that the food expenses of the bottom 30 percent increased from almost 50 percent of their total incomes to almost 60 percent. Since food expenditures are income inelastic (i.e., changes in income don?t change food expenditures as much), this suggests that their incomes must have decreased, because the same (or less) expenditures on food, even with their substituting cheaper food items, now comprise a larger share of their income.

That also means the share of other expenses to total income must have gone down for the bottom 30 percent. And indeed these did, with potentially negative impact on the families? future. I refer to the fact that the share of their education and medical care expenditures in total income decreased (from 2.9 percent to 1.3 percent, and from 2.1 percent to 1.7 percent, respectively), which of course condemns them to the vicious circle of poverty: low incomes, leading to poor education and poor health, leading to lower productivity, leading to lower income...

The non-poor, the upper 70 percent, managed to defend themselves much better from the decrease in their average real incomes. They must have done a lot of intra-food substitution, since the share of their food expenditures to their income dropped slightly (from 40 percent to 39.3 percent). But it would seem that they were not about to cut either their education expenditures (these went up from 4.5 percent to 4.7 percent) or their medical care expenses. The latter increased from 2.3 percent of income in 2003 to 3.0 percent in 2006. Obviously, they consider these as necessities, whereas our bottom 30 percent families must regard them as luxuries.

By the way, it seems that the bottom 30 percent turned to tobacco and alcoholic beverages for comfort in their misery, because their expenditures on these items rose from 0.8 percent to 1.2 percent and 1.3 percent to 1.7 percent, respectively.

The bottom line here is that if the FIES tells us that poverty must have increased from 2003 to 2006, what with average incomes of the bottom 30 percent decreasing, why is it that our National Income Accounts estimates for the same period tell us that real per capita gross domestic product has increased? How are these conflicting statements to be reconciled? Another challenge.

More Inquirer columns

Previous columns:
?Out of sight, out of mind? ? 1/19/08
A real gain in war vs poverty ? 1/12/08
Silver linings ? 01/05/08
Double shame ? 12/22/07
Shameful! ? 12/15/07
Injustice in snail-paced CARP implementation ? 12/08/07
A look at CARP?s impact on poverty and growth ? 12/01/07