Imaginary sharing is not enough

In the third quarter of 2017, the so-called Gross National Income per capita was P43,703, according to last week’s new report of the Philippine Statistics Authority (PSA). That’s not small. However, because of inflation, it’s equivalent to what P23,863 could buy, back in 2000.

I say “so-called” because the PSA obtains the gross figure by surveying, not individuals about their incomes, but business firms, farms, and other producing institutions about their value-added to the goods and services they produce.

The total value-added in production is, in principle, the total earnings of everyone from the production process. It is the income pie. Dividing it by the estimated population gives income per capita—i.e., per head. It’s an imaginary share, since it assumes equal sharing.

Multiplying the income per capita by 5 (to make it per household), and then dividing it by 3 (to make it monthly), implies an income of P72,838 per household per month in 2017Q3. I converted the income and time units to make the number easier to understand. Because of inflation, it’s equivalent to P39,772, back in 2000.

In 2017Q3, the so-called Household Final Consumption Expenditure per capita was P26,359, according to the PSA. Multiplying it by 5, and then dividing it by 3, gives a consumption expenditure of P43,931 per household per month at present. That’s not small; it’s equivalent in real value to P22,141 in 2000.

I say “so-called” because the gross figure is obtained, not by surveying the consumption of individual households, but by deeming certain goods and services as produced for household consumption, rather than for investment. This separates the consumption pie from the investment pie; dividing it by the estimated population gives consumption per capita.

The income and consumption per capita are imaginary shares, assuming equal sharing. Equal sharing would make it possible for every Filipino household to enjoy over P72,000 in monthly income, and over P43,000 in monthly spending for consumption, in 2017Q3.

In that case, there would be no more poverty in the Philippines. The fundamental reason poverty persists is this: Income and consumption have been very, very unequally shared, for many years.

Growth in the income and consumption pies has not been a problem. In 2017Q3, the per capita national income grew by 5.2 percent, and per capita consumption grew by 3.0 percent, compared to 2016Q3. These are real growth rates—i.e., corrected for inflation.

Although the growth of per capita income and consumption fluctuates over time, it has stayed positive for two decades. During 1998-2016, the annual growth of real per capita income ranged from 0.5 percent (in 1999) to 7.6 percent (in 2000), while that of real per capita consumption ranged from 0.6 percent (in 2009) to 5.2 percent (in both 2000 and 2016).

In every single year since 1998, income and consumption per capita never declined. All in all, from 1998 to 2016, income per capita grew by 88 percent, and consumption per capita grew by 74 percent. There was substantial progress indeed, in the imaginary shares.

If poor families had been regularly sharing in the growth, by now they would have covered their poverty gaps, whether declared from above by the PSA or rated from below by poor Filipinos themselves.

Watch for nonimaginary statistics on poverty in 2017Q3, in a forthcoming release by Social Weather Stations.

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