Invisible poverty, trivial solutions

August 22, 2022

by IBON Foundation

Huge crowds immediately swarmed outside social welfare department offices across the country after the department secretary announced Friday that they would give out a few thousand pesos in educational assistance. Last weekend, one of these crowds ended in a stampede that hurt at least 29 parents and students. Most went home empty-handed from a haphazard program that will probably not reach even just 1% of the student population.

Why is the government giving so little help? Part of the reason must be because official statistics make them only see so little needing help. The full year 2021 poverty figures released last week are a case in point. And, in an anecdotal way, the desperate crowds that massed up to try and get a little more cash for their families also points to how disconnected official statistics are from people’s daily realities.

The Philippine Statistics Authority (PSA) reported population poverty incidence increasing from 16.7% in 2018 to 18.1% in 2021. This translates to some 20 million poor Filipinos living below the Php12,030 monthly poverty threshold for a family of five. The economic managers attribute the uptick to the pandemic and expect poverty to ease as the economy reopens. They even target the poverty rate to fall to 9% by the end of the Marcos Jr. administration.

But is this really just how many poor Filipinos there are? Is having Php12,030 enough to ensure that the family can afford all the essentials of life?

Low ambition

How any government defines poverty says a lot about its economic policy goals. A low official poverty threshold means that less Filipinos will be officially considered poor while a high official poverty threshold means that more Filipinos will be officially considered poor.

Many would probably think that reporting high poverty is a sign of economic failure. Unfortunately, this kind of thinking also tends to lead to the notion that reporting low poverty is a sign of economic success – even if all that’s happening is that the reality of daily poverty is being made invisible to official statistics.

The government can and should have a more expansive view. A high poverty threshold can be the expression of ambition to raise more Filipinos, not just the extremely poor, out of their daily lived experience of poverty. As it is, many quickly reacted to the official poverty threshold used to declare only 18.1% poor Filipinos as unrealistically low and being far from enough to lift people out of a reasonable notion of being non-poor.

Setting the daily poverty threshold at a national average of Php79 per person per day basically says that this is enough to meet a person’s food and non-food needs. It translates to some Php396 per day for a family of five (or Php12,030 per month). This was immediately met with disbelief especially with so many still suffering the aftershocks of the government’s pandemic lockdowns on their livelihoods and struggling with rising prices of goods and services.

The poverty line is low because the food or subsistence threshold it sets is low to begin with. It is based on minimalist nutrition needs that are costed too low and with too little variety. The computation of the non-food requirement (i.e., housing, utilities, transport and communication, education, health, clothing, etc.) is moreover too mechanical and, again, costed too cheaply.

The impact of a low poverty line is significant. For instance, the Php90 per person per day threshold in the National Capital Region (NCR) results in just an incredible 3.5% of the population or 2.2% of families reported as poor. Yet the corresponding Php452 daily poverty threshold for a family of five is a mere 41% of IBON’s estimated Php1,107 family living wage (FLW) as of June 2022.

And as if things couldn’t get any worse, the ambition is, if anything, even diminishing — where the poverty threshold has become even lower. The inflation-adjusted annual poverty threshold in 2021 is actually 7.6% lower than in 1991, computed with 2018 as the base year. In effect, this says that it has somehow become 7.6% cheaper to maintain the same non-poor standard of living of three decades ago.

Small solutions

Seeing too few poor has some unfortunate side effects from a policy perspective.

One side effect is exemplified by the educational assistance debacle last week – immediate interventions will be too small. The Department of Social Welfare and Development’s (DSWD) educational assistance program is only targeted at indigents whose definition is strongly influenced by the official poverty line. This results in a Php500 million intervention which sounds like a lot but is miniscule considering over 31 million students in the country, most of whom likely come from families which are poor according to more reasonable standards of poverty than the official measure. It will probably reach just a tiny 1-1.5% of students in the country.

This is actually emblematic of how social protection is conceived on neoliberal terms where this is as targeted as possible on the specious justification of insufficient resources. The Bangko Sentral ng Pilipinas (BSP) reported that some seven out of ten (70.3%) of households do not have any savings as of the second quarter of 2022, which is equivalent to some 18.8 million families. This is a useful indicator of how many families are vulnerable to economic distress including those outright poor.

However, the 4Ps cash transfer program targets just some 4.3 million household beneficiaries which is just a little more than the 3.5 million families officially reported as poor in 2021. Perhaps not coincidentally, the social welfare secretary recently said that 1.3 million families have graduated from the program and are no longer eligible to receive cash transfers. Another program for targeted cash transfers (TCT) meanwhile targets around five (5) million other non-4Ps beneficiaries.

There are almost 2 million transport workers in all yet only some 180,000 transport workers have received fuel subsidies. The Registry System for Basic Sectors in Agriculture records 5.5 million farmers, fishers and farmworkers in all yet only 1.56 million are targeted to receive subsidies.

Another side effect is the tacit endorsement given to overall economic policies which are, in truth, failing to create enough decent work and incomes for the majority of ordinary Filipinos. Poverty alleviation in this context will be exactly what they have always just been – chronic band-aid solutions and treating symptoms rather than root causes. But even when the band-aids seem to deliver impressive results, they are, in the end, still just band-aids.

The biggest recorded official poverty reduction in the shortest period of time in the country happened when population poverty incidence fell from 23.5% in 2015 to 16.7% in 2018.  However, this was illusory in two ways.

The first is that this reduction was most of all due to a large increase in the Pantawid Pamilyang Pilipino Program (4Ps) whose budget increased 44% to Php89.4 billion and whose average cash transfers to beneficiaries increased 53% from Php12,824 to Php19,641. This Php6,817 bump was enough to nudge those just below the low poverty line, or the borderline poor, to just above it – thus, no longer officially counted as poor but probably still living in poverty along with millions of other invisible poor.

The second is that, despite statistical poverty reduction, millions of Filipinos still remained poor and without decent jobs and working conditions. In 2018, there were 11.4 million combined unemployed – using IBON’s 4.6 million estimate rather than the 2.3 million officially reported – and underemployed. Also, according to the Family and Income Expenditure Survey (FIES), half of families were struggling to live off some Php20,000 or much less per month. Clearly, the economy was still not creating enough decent work.

Propaganda goal

The economic managers said they are looking to cut population poverty to 9% by the end of Marcos Jr’s term. The target means that poverty incidence has to be cut by around 1.5 percentage points per year which is much faster than the historical average of a less than one percentage point reduction annually.

Even assuming that the poverty line will not be adjusted downwards again to statistically reduce poverty incidence, there are too many factors going against the targeted rapid poverty reduction.

First, economic recovery is stalling with quarter-to-quarter gross domestic product (GDP) contracting in the second quarter of this year. It will also be recalled that economic growth was slowing in each of the three years even before the pandemic lockdowns hit – so there is really no pre-pandemic growth momentum to go back to.

Second, the government is also entering a period of fiscal austerity. The proposed 2023 national budget has the smallest increase in over 20 years and barely keeps up with inflation. The proposed Php5.27 trillion budget is a mere 4.9% increase from this year’s budget, and not even half the average annual budget increase of 10.4% over the long period 2002-2022.

The budget’s multiplier effect is also not maximized with so much going to unproductive debt servicing and import-dependent infrastructure projects. The stimulus effect would be greater if more of the budget goes to Filipino households or to buying domestic goods and services.

Third, household consumption which accounts for over 70% of the economy may stay depressed. This is because the employment situation remains poor with widespread informality despite seemingly rising employment. As of June 2022, 19.8 million or 42.4% of jobs are visibly informal work comprised of the self-employed, those employed in small family farms or businesses (including a huge 3.7 million unpaid family workers), and domestic help. Moreover, consumption spending will be squeezed by high inflation and especially if new consumption taxes are imposed. Wages are already failing to keep up with the rising cost of living.

Fourth, there are also major headwinds from the global economic situation with major countries going into recession and with record global debt introducing uncertainty in global financial markets. The Philippines remains dependent on external sources of growth and will be affected by any adverse developments here.

Big solutions

The problem of poverty in the Philippines is huge but not irresolvable.

Fixing it starts with acknowledging the problem with a poverty threshold that expresses the government’s bold ambitions to lift every Filipino from poverty rather than one which downplays or obscures this. At the very least, this should give way to larger and more systematic social protection programs. Not just in terms of emergency food, cash or other relief assistance in times of need but also in terms of the public and genuinely universal provision of essential education, health and housing.

But it will also draw attention to how chronic poverty is without basic reforms in the structure of the economy. The most fundamental cause of poverty is in how the overwhelming majority of Filipinos only have low value-added and low productivity work. This is not for lack of individual effort or capacity but because of the structure of the economy distorted by neoliberal policies.

Domestic agriculture and Filipino industry have been weakening for decades, the service sector is bloating as people look for work wherever they can, and there is an extreme over-dependence on overseas work. Poverty alleviation cannot just be about treating symptoms and short-term needs but must address these structural problems.

The national economy has to be transformed into a high value-added and high productivity economy. A truly comprehensive development plan is needed combining: national industrialization policy; agricultural modernization; quality public social services; and income and wealth redistribution. The range of trade and investment, monetary and financial, and fiscal policies have to support this transformative plan.

With the right government, big solutions are possible. ###