A half-true poverty report

The poverty report I critique here is the World Bank’s “Philippine poverty rate declines, more well-paying jobs and opportunities needed,” released on 5/30/18, accompanied by a 170-page monograph, “Making Growth Work for the Poor: A Poverty Assessment for the Philippines.”

Being an economist, rather than a general social scientist, the main focus of my research has been economic wellbeing. As a fan of Rawlsian philosophy (“A Theory of Justice”) as well, I think that poor people deserve more attention than average people, and very much more than the well-off. It is good that the World Bank (WB) continues to be interested in poverty.

Old lessons stay valid.  Many conclusions of the WB report are familiar: finishing high school is key to getting a decent wage; poverty is worse in the rural areas; poor families have more than their desired number of children, yet little access to family planning; migration of workers in response to higher wages is benefiting the families left behind.

The conditional cash transfer (CCT) program is succeeding. What is most notable in this WB report are the empirical evaluations of the CCT program based on surveys of both beneficiaries and non-beneficiaries.

The surveys were designed by a team of specialists of the WB, the Asian Development Bank and the government, and their field work was contracted to Social Weather Stations after competitive bidding. Then the data obtained in the field went to the specialists for analysis.

Yet only half of the poverty story is being told. What disappoints me about this WB report is that—like so many studies on poverty by the government and other institutions—it limits itself to official statistics, disregarding the tremendous amount of SWS data. The official statistics in the WB report cover only 2006 to 2015, i.e., only the times of Arroyo (partly) and Aquino III.

Its statement that it uses “the latest available data” on poverty is absolutely false. Over 1992 to 2018, there have been at least 105 SWS national surveys, compared to only four official Family Income and Expenditure Surveys, in 2006, 2009, 2012 and 2015. The full time-series of SWS data shows that the reduction in poverty did not end in 2015; it continued into early 2018.

The official poverty data account for only half of the poor. The WB report maintains the statistical fiction that only one out of every five Filipinos is poor. This is because the official poverty line is shamefully low—so stingy, in fact, that official poverty in the National Capital Region supposedly fell to only 4 percent by 2015 (Fig. 2.17, p. 42, WB report).

The reality on the ground, however, is that two out of every five Filipinos feel poor. The latest SWS poverty report is: “First Quarter 2018 Social Weather Survey: Families self-rated as poor decrease to record-low 42%; food-poor families decrease to a new record-low 29%,” www.sws.org.ph, 4/29/18.

Poverty should be observed with eyes open constantly, not occasionally. It should be observed with eyes open fully, not partially.

Call for econometric modelling of poverty. Though in principle economic growth should work for the poor, the past decades of economic growth have not done so, as a matter of fact. The key correlates of change in poverty have been price inflation and underemployment.

Wage rates ought to be relevant, but their study has been hampered by the suppression of quarterly wage data. And what is the effect of the recent change in tax structure on inflation and hence on poverty? The ideal way to examine the interrelationships of all these variables is by econometric modelling.

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