No electricity in the poverty line

The release of new poverty statistics last Monday, by the National Statistical Coordination Board (NSCB), was the very first time the government made two reports on poverty in a single year.  The first one, on April 23, 2013, referred to poverty in the first semester of 2012.  The second one, on Dec. 9, 2013, refers to it in the full year of 2012, and hence implicitly adds new data for the second semester of 2012.  It was also the first time for data of a reference year to be reported within 12 months; ordinarily, it would only be in February 2014 that the public would learn about official poverty in 2012.

In 2013 and 2014, the first semester only. The government recently did a survey of household incomes of the first semester of 2013, which will enable it to issue a corresponding poverty report by 2014, hopefully as early as next April.  However, it seems that the second semester of 2013 will not be surveyed—which is a shame on account of (a) Supertyphoon “Yolanda,” and (b) impending increases in costs of electricity and transportation for households.

Then, I am told, there will be an official survey of income in the first semester of 2014, enabling an official poverty report of that semester in 2015.  In 2015 there will be separate surveys of the first and second semester, enabling two semestral reports in 2016. Reporting of first-semester poverty will become annual—which is a real achievement—but full-year reporting will stay triennial as before.

Poverty lines should be computed more often. The official lines for 2012, for a family of five, are P5,513 per month for food-poverty in particular and P7,890 per month for poverty in general. But that was in 2012; right now is what matters to the poor.

The NSCB does not need a survey of income to update its official poverty line.  It only needs its official definition of basic minimum needs, and the current prices whereby consumers can fulfill them.  Knowing the current official poverty line would be very valuable to the public, especially to workers and employers.

The NSCB computes its food-poverty-threshold first, and then simply divides it by 0.7 to get its  total-poverty-threshold—i.e., it simply assumes that the cost of minimum food is a constant 70 percent of the cost of all items needed by a borderline poor family.  Although it says that the nonfood items include “clothing, housing, transportation, health and education expenses, among others,” the NSCB does not designate any separate minimum quantities of such items and then apply their prices to compute how much these quantities actually cost consumers.

There is no separate allowance for electricity. Neither is there a separate allowance for transportation fares.  This fixing of 70 percent (called the Engels ratio) as the cost of food in the entire home budget in effect assumes that the prices of nonfood items all move in fixed proportion to the prices of food items.  It is like supposing that the price per kilowatt hour of electricity only changes if the price of rice changes, and always changes in exactly the same proportion as the latter.

The official poverty line for the National Capital Region is particularly unrealistic. For 2012, the official line for NCR is P20,344 per person per year, which works out to P8,477 for a five-person family, per month.  The official 2012 percentage of poor families in NCR is only 2.6; it was 2.4 in 2009 and 2.9 in 2006.

The 2012 official food-poverty line for NCR is P14,206 per person per year—i.e., P5,919 for a five-person family, per month.  Officially, the food-poor in NCR in 2012 are only 0.3 percent, versus 0.3 percent in 2009, and 0.5 percent in 2006.

To me, these are statistical fictions, originally caused by the unwarranted lowering of the official poverty line in February 2011 (see my “The lowering of the official poverty line,” Inquirer, 2/12/2011).

The poverty rate is still flat. The official proportion of poor families for 2012 is 19.7 percent, compared to 20.5 percent in 2009 and 21.0 percent in 2006.  The NSCB calls these time-changes statistically insignificant.  The 0.8 drop from 2009 to 2012 amounts to an average drop of only 0.8/3 = 0.27 annually.

The poverty rate in 1991, the base year of the Millennium Development Goals (MDG) program, was reestimated at 29.7 percent—i.e., the MDG goal of halving the poverty rate by 2015 has been reset to 14.85 percent.  Reducing poverty by a total of 14.85 points over 25 years implies reducing it by an average of 0.594 points per year.  In the 21 years from 1991 to 2012, it should have been reduced by 21 x 0.594 = 12.474 points by now, or to 29.7 – 12.474 = 17.226 percent.

Completing the poverty-MDG now requires that poverty fall by 1.21 points per year over 2012-2016.  This is 4.5 times the size of the mere 0.27 fall per year achieved in 2009-2012.  Therefore, it is already impossible to achieve the poverty-MDG on time.  Nevertheless the fight against poverty should go on.

The flatness of poverty was known long ago. The Social Weather Stations quarterly surveys showed self-rated poverty at 52 percent of families in 2012 (BusinessWorld, 1/14/2013; this is the four-quarter average).  Previous averages were 54 in 2006, 50 in 2007, 53 in 2008, 49 in 2009, 48 in 2010, and 49 in 2011.  In 2013, the percentages have been 52 in March, 49 in June, and 50 in September, or an average of 50.3 in three quarters so far.  The flatness has continued.

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