Govt methodology underestimates number of poor Filipinos—IBON

December 7, 2019

by IBON Media

Research group IBON said that the government methodology to count the poor grossly underestimates Philippine poverty. The recently released 2018 poverty statistics can be taken to mean those in extreme poverty but IBON says that many other poor Filipinos are left out.

The Philippine Statistics Authority (PSA) explained that Republic Act 8425 of 1997, or the Social Reform and Poverty Alleviation Act, defines “poor” as “individuals and families whose income fall below the poverty threshold as defined by the National Economic and Development Authority (NEDA) and/or cannot afford in a sustained manner to provide their minimum basic needs of food, health, education, housing, and other essential amenities of life.”

The number of poor are counted as the number of Filipinos whose incomes fall below the poverty threshold or the minimum amount needed to meet basic food and non-food needs. Using official data on provincial food bundles and prices, the methodology first computes the subsistence threshold or the minimum amount a family needs to meet basic food needs. The subsistence threshold is then assumed to be 70% of the poverty threshold where the balance of 30% is assumed enough to meet basic non-food needs.

The number of poor are estimated using family income data from 180,000 sample households from the provinces and highly urbanized cities. Filipinos whose incomes are below the poverty threshold are those officially counted as poor.

However, poverty estimates according to this methodology are unbelievably low and unrealistic. The monthly poverty threshold is just Php10,727 for a family of five. This is just around Php71 per person per day at Php50 for food needs and Php21 for non-food needs.

These low standards explain the reported fall in the number of poor Filipinos. Poverty incidence, or the percentage of poor families to total families reportedly fell from 23.3% in 2015 to only 16.6% in 2018, and the number of subsistence or food poor Filipino families from 6.4 million in 2015 to only 3.4 million in 2018. NEDA hailed government’s poverty reduction measures for successfully getting poverty alleviation on track.

IBON however said that the methodology uses unrealistically low standards and is detached from daily poverty realities.

The food or subsistence threshold, for instance, the group said, conservatively assumes a “least cost” food bundle. It is unrealistic to expect that all families have ready access to this lowest-priced or cheapest food, the group argued. Moreover, the food bundle is based on so-called “revealed preference” which is presumably based on actual spending. Yet IBON said that this is not necessarily a desirable food bundle and may just reflect the food that Filipino families are forced to buy or make do with given their poverty or limited budget, such as the notorious pagpag or recycled garbage food.

These mean that the subsistence threshold estimated is over-optimistically low and not necessarily of the needed quality for decent eating.

Estimating non-food expenses, meanwhile, does not take into account the actual cost of basic non-food items, IBON said. The cost of non-food needs is merely assumed to be a certain ratio to food needs. However, the cost of many non-food needs has been rising rapidly for instance due to the privatization of utilities and social services. Non-food needs include clothing and footwear; fuel, light, and water; housing maintenance and other minor repairs; rental of occupied dwelling units; medical care; education; transportation and communication; non-durable furnishing; household operations; and personal care and effects. Thus, this also too conservatively assumes that non-food needs are available at illusory low prices.

IBON stressed that poverty has many dimensions and while income is a convenient indicator this is only one of them. The current low Php71 poverty threshold should be adjusted to be more realistic and reflective of the true potentials of the economy, said the group. As it is, PSA data indicate that around 12.4 million families or about half of the population is trying to survive on Php132 per person per day. On the other hand, chief executive officers of the country’s biggest corporations can earn the equivalent of as much as Php60,000 or more per day.

IBON said that a more realistic and higher poverty threshold will send a strong signal of the government having ambitious anti-poverty targets and genuinely seeking to eradicate this. On the other hand, persistently low poverty thresholds and illusory reductions in poverty will only result in persistent neglect of the needs of the many.###