Poverty and inequality in the Philippines

The new World Bank (WB) report “Overcoming Poverty and Inequality in the Philippines: Past, Present, and Prospects for the Future” is a welcome reminder of what is needed for the country, and the government’s urgent agenda on the dual malaise of poverty and inequality. This had been a persistent challenge to the country, not only historically but also comparatively in the context of the Asean, especially its original neighbors in the region.

The WB paper is well-organized, starting with trends in the past 30 years, the present structural causes, future prospects, and policy recommendations. First, poverty rate declined from 49.2 percent in 1985 to 18.1 percent in 2021. Inequality (Gini index) at 42.4 percent in 1985, after climbing to 49.2 percent, trended back down to 42.3 percent in 2018. The shift of workers, including the poorer ones, to more productive sectors with wage income, besides expanded subsidy, largely accounted for the reduction in poverty. As well, better access to services and assets helped the downtrend in inequality to its previous level.

Nonetheless, the Philippines ranks as the 15th most unequal of 63 countries. More than half of laborers with only elementary schooling or less are in agriculture. Household heads who are college graduates have average per capita income fourfold higher than for household heads with no more than elementary education.

Inequality begins early in life and typically is sustained over the life cycle, starting with antenatal care and postnatal care which are disproportionately accessible to poorer families and mothers with lower education. Which leads to markedly higher rates of stunting, underweight, and wasting among poor families. Then children of poor households are greatly disadvantaged as regards schooling that links to future work and income opportunities. All this leads to intergenerational transmission of poverty.

Unequal distribution of hospitals, health centers, and educational institutions across subnational regions/provinces further worsens poverty and inequality. One bright note is that the Philippines is first in gender equality in Asia and 19th in the world. However, while women have generally higher education attainment than men, their labor force participation rate has been lower.

While the WB paper is an edifying read, it has a limited past perspective, thereby ignoring the population factor, which has made a crucial difference in the current state of the country vis-à-vis its Asean neighbors that used to trail it. The Philippines initiated population management-cum-family planning (PM-FP) program in 1970, along with other Asean countries. However, while the others sustained their programs over time without letup, the Philippines was constrained to jettison its own program in the late ’70s on orders of President Marcos Sr., who acceded for political expediency to the demands of the Catholic Church hierarchy.

In 1970, the Philippines’ population was 36.6 million and Thailand’s was 36.9 million. It had a gross national income (GNI) per capita of $220 close to Thailand’s $210, and both countries had identical poverty incidence at 13 percent.

Indonesia, with a very expansive land area (or resource base), had a much larger population of 115 million and also initiated its PM-FP program in 1970, but its GNI per capita was only $80. Malaysia, with a much smaller population of 11 million in 1970, started its program in 1966, and its GNI per capita was $370.

Fast forward to 2020, the foregoing indicators had dramatically diverged. Philippine population ballooned to nearly 110 million, while Thailand’s rose to slightly less than 70 million. GNI per capita was $3,430 in 2020 ($3,850 in 2019) for the Philippines, and $7,050 ($7,407 in 2019) for Thailand. On the other hand, poverty rate was estimated at 18.1 percent in 2021 (16.7 percent in 2018) for the former, and 8.8 percent in 2020 (6.2 percent in 2019) for the latter.

Indonesia’s population increased to 274 million in 2020. Its GNI per capita rose sharply to $3,870 in 2020 ($4,050 in 2019). Its poverty rate at 13 percent in 1970 was brought down to 9.8 percent by 2020. Malaysia’s population was up to 33 million in 2020, and its GNI per capita escalated exponentially to $10,580 ($11,230 in 2019), which enabled Malaysia to drastically cut its poverty rate to 8.4 percent in 2020 from a high of 49.7 percent in 1970.

The foregoing indicators show that the Philippines had the fastest growing population (threefold in 50 years) and also the largest relative to land area in all of Asean. As regards economic indicators, it has considerably lagged behind its original Asean neighbors, being the last to achieve demographic transition, thereby falling to bottom of the pile from the top in the ’60s to mid-’80s. One wonders, therefore, why the WB paper has eschewed the population factor in their analysis of poverty and inequality. It can be recalled that in the mid-1960s through to the mid-1990s, the World Bank had a major population program touted as a success in many developing countries, save the Philippines, unfortunately. So, is the program now regarded as an “elephant in the room” sleeping and not to be disturbed?

—————-

Ernesto M. Pernia is professor emeritus of economics, University of the Philippines Diliman, and former secretary of socioeconomic planning, National Economic and Development Authority.