Worsening inflation makes admin ayuda cuts even more unconscionable – IBON

February 7, 2023

by IBON Foundation

With inflation continuing to rise to 8.7% in January 2023 to its highest in over 14 years, research group IBON said that it is unconscionable for the Marcos Jr administration to keep slashing cash assistance to struggling Filipinos in urgent need of relief. Soaring food prices threaten to drive millions of Filipinos into hunger especially with the recent acceleration in housing, water, electricity, gas and other fuels. Amid worsening informality of work, falling family incomes and growing poverty, government should provide meaningful cash assistance and wage hikes as well as support for rural producers and small businesses.

IBON stressed that food prices still remain the main problem with inflation and underscored the failure of the Department of Agriculture (DA), helmed for the last seven months by the president, to deal with the problem. According to the Philippine Statistics Authority, the biggest acceleration in price increases from the previous month was in housing, water, electricity, gas and other fuels where inflation rose from 7% in December 2022 to 8.5% in January 2023. However, inflation in the much more heavily-weighted food and non-alcoholic beverages is still much higher and increased from 10.2% to 10.7% over the same period.

The biggest weights in the consumer price index (CPI) are given to food and non-alcoholic beverages (38%), housing, water, electricity, gas and other fuels (21%), and restaurants and accommodation (9.6%) which cumulatively account for some 69% of total expenditure weights. They are also seeing among the highest inflation rates across commodity groups.

Tens of millions of Filipinos entered the new year poorly positioned to cope with even higher prices and inflation. IBON estimates that employment in merely informal work ballooned from 29.3 million in 2019 to 32.8 million in 2022. In December 2022, some 21.7 million or 82% of Filipino families rated themselves as poor (12.9 million) or borderline poor (7.8 million), according to the Social Weather Station (SWS). Bangko Sentral ng Pilipinas (BSP) data meanwhile indicates that as many as 18.6 million or 70% of households did not have savings as of the fourth quarter of 2022 and were essentially living hand-to-mouth.

Yet the Marcos Jr administration has been tight-fisted with urgent relief and assistance programs. The government withheld Php18.3 billion in promised targeted cash transfers last year while cutting this year’s budgets for regular emergency assistance by Php7.5 billion and for the Pantawid Pamilyang Pilipino Program (4Ps) by Php5.1 billion.  

The research group added that the gap between workers’ wages and the estimated family living wage continues to widen. The minimum wage is highest in the National Capital Region (NCR) but the Php570 here has fallen to only 49.1% of the NCR family living wage of Php1,161, as of January 2023. The Bangsamoro Autonomous Region of Muslim Mindanao (BARMM) has the lowest minimum wage at Php341 and this is only 17.5% of the BARMM family living wage of Php1,944. The real value of these minimum wages have continued to fall and are down to Php482 for the NCR and Php285 for BARMM, measured at 2018 prices.

The administration however has been tepid towards giving wage increases, claiming that doing so would be inflationary. But IBON said that a closer look at data comparing wage increases and inflation since 1986 disputes this claim. The group noted that out of 31 wage hikes, 15 wage hikes were followed by slower inflation in the six months after. It was only in the other 16 wage hikes that inflation increased. This showed that it is not true wage hikes would automatically lead to higher inflation.

The group said that a wage hike would give relief to millions of workers. This need not be inflationary if employers become more willing to give up part of their profits to enable higher wages for their workers. The government can also help micro, small and medium enterprises (MSMEs) give higher wages with a program of wage subsidies and other financing support.

IBON stressed that the government should be taken to task for giving mere lip service to dealing with inflation since taking office. Inflation has been accelerating for the last seven months apart from a momentary and only incremental dip in August 2022. It can help millions of Filipino families that can hardly make ends meet. The group said expanding social protection for the poorest families, a wage hike, and support to rural producers and small businesses is possible. They should not be made to bear the burden of austerity measures justified as “fiscal consolidation.”