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Poverty thresholds and family size

/ 08:59 PM February 17, 2012

An earlier piece (“Poverty fell in 2011 Q4,” Inquirer, 1/28/2012) pointed out that the quarterly SWS poverty surveys also ask the household head of each poor family for the minimum monthly peso budget for home expenses needed in order not to feel that the family is poor.  “Home expenses” are explained by the interviewer to the respondent as excluding any work-related expenses, like commuting to work by the household’s earners.

The answer, called the self-rated poverty threshold, is given after the household head has already rated the family as poor, and thus has no bearing on the poverty-status of the household. It simply describes the family’s needs.

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Almost all the answers are round numbers, in thousands of pesos; most people don’t state their needs in hundreds of pesos any more.  (Incidentally, households that do not self-rate as poor are also asked what they think a poor family, of the same size as theirs, needs so as not to be poor. I will present their very interesting answers at another time.)

Like self-rated poverty itself, this threshold varies across households, areas, and points in time. The earlier column reported the national median of these self-rated poverty thresholds of the poor at P8,000 per month, per household, in 2011. This comes from the pooled sample of 4,800 households surveyed nationwide by SWS in the four quarters of 2011.

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The column also reported median thresholds for the poor of P12,000 in the National Capital Region (NCR), P7,700 in the Balance of Luzon, P8,000 in the Visayas, and P6,000 in Mindanao, in 2011. These figures reflect the relatively high cost of living in NCR, the relatively low cost of it in Mindanao, and the middling cost of it elsewhere.

Poverty thresholds by household size. Like last week, let us use again the categories XS (extra small, 1-2 persons), S (small, 3-4 persons), M (medium, 5-6 persons), L (large, 7-8 persons), and XL (extra large, 9 or more persons).

By size of household, the 2011 median monthly thresholds of the poor, for the Philippines in general, per household, are: XS P5,000, S P7,500, M P8,000, L P10,000 and XL P10,000.

These money-amounts would bring half (not all) of the poor of each size-group out of poverty, in their own judgment (not the judgment of an official statistical agency). To me, the amounts are quite modest.  The Filipino poor are not greedy.

One can readily see that the median threshold of poor XL households is only twice that of poor XS households, even though their membership is over four times as large. The relationship is not linear or proportional to the number of members, but convex, i.e. the minimum home budget needed per member declines as the number of members rises.

Obtaining the threshold by asking in a survey for the need of the entire household, for the common budgetary period of one month, is simple and straightforward.  It produces findings that are realistic and guaranteed to be popularly acceptable.

(Contrast it to the official, top-down, procedure of first making assumptions about the minimum daily needs of one person for food etc., then getting the daily cost using local prices, then adjusting the period to one month, and then multiplying it by five to get the official monthly threshold of a five-person family.)

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Thresholds by area and household size. The median home budget thresholds by poor-household size for 2011 are:

National Capital Region: XS P10,000, S P10,000, M P15,000, L P15,000,  and XL P20,000.

Balance of Luzon: XS P5,000, S P8,000, M P8,000, L P9,400, and XL P9,000.

Visayas: XS P5,000, S P8,000, M P8,000, L P8,500, and XL P10,000.

Mindanao: XS P4,500, S P5,000, M P7,000, L P8,000,  and XL P10,000.

Each area displays the convex relationship.  In the case of the Balance of Luzon, I see size L’s “off-line” P9,400 as a mere statistical blip, and would readily adjust it to P9,000.

The SWS statistics are for the use of all anti-poverty programs that need timely data.  They will be updated every three months, from a rolling pool of the latest four quarterly surveys.

Comparison with legal minimum wages. The official (National Statistical Coordination Board) poverty thresholds are available at the provincial level, but only every three years, the last time being 2009.  Inflation of 4-5 percent per year renders them constantly passé.

More current are the legal minimum wage rates set by the National Wages and Productivity Commission.  (But there are many exemptions; moreover, non-compliance in NWPC-inspected establishments is 22 percent.)

The legal minimum wage range in NCR—from P389 to P426 daily, which I convert to P10,144 to P11,076 monthly (after multiplying by 26)—is thus adequate for sizes XS and S households only.

Minimum wages in the Balance of Luzon range from P190 to P337 daily, or P4,940 to P8,580 monthly—adequate for size XS, but not for sizes S or M unless entitled to the upper wage levels.

In the Visayas, they are from P213.50 to P305 daily, or P5,551 to P7,930 monthly—alright for size XS, but only for S and M at the upper wages.

In Mindanao, they are from P222 to P291 daily, or P5,772 to P7,566 monthly—alright for sizes XS and S, and maybe for some of size M.

Note that none of the legal minimum wage rates is adequate for poor households of sizes L or XL.

* * *

Contact SWS: www.sws.org.ph or [email protected]

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