Who are the Officially Identified

Lecture 14
POOR?
Republic Act No. 8425 - Social Reform and
Poverty Alleviation Act, passed by Congress
in December 1997:
Poverty and Inequality:
The poor refers to individuals and families
A National Concern whose incomes fall below the official poverty
threshold as defined by the government
and/or cannot afford to provide in a
sustained manner for their minimum basic
needs for food, health, education, housing,
and other social amenities of life.

What is poverty threshold? What is food threshold?

Refers to the cost of minimum basic Also referred to as the subsistence threshold
or the food poverty line
needs: food + non-food
Refers to the minimum income/expenditure
Refers to the minimum required for a family/individual to meet the
income/expenditure required for a basic food needs, which satisfies the
family/individual to meet the basic food nutritional requirements for economically
and non-food requirements necessary and socially desirable physical
activities

Poverty & Hunger Poverty & Hunger

Poverty incidence, by familes

0.7

1985 method
0.6
1992 method
2000 method
0.5
Incidence

0.4

0.3

0.2

0.1

0
1985 1988 1991 1994 1997 2000 2003 2006

Year

- Poverty incidence (or the proportion of individuals/ families Source: Social Weather Stations website, www.sws.org.ph

living below a fixed poverty line) has declined since the 1980s, However, self-rated poverty has been ranged from 46 percent
however, incidence increased in 20065 to 63 percent in the past nine years. 6

1
 Poverty & Hunger Poverty Situation Overall
Family Income and Expenditures Survey 2006

4.05 out of 16.4 million Filipino families live in

poverty (24.7% of all Filipino families)
or almost 30 out of 100 Filipinos are poor
A family of five needed (in Yr 2006) P 6,211 per
month to live with adequate food and non-food basic
needs
Food threshold was (in Yr 2006) P 4,151 per month
per family of 5
Source: Social Weather Stations website, www.sws.org.ph

Self-rated hunger has been rising for the past five years. National Statistics Coordination Board (2006)
7

Annual Poverty Indicators Survey Annual Poverty Indicators Survey

SURVIVAL SECURITY
2004 2002 2004 2002
INDICATORS INDICATORS
Both Both Both Both
Lowest Higher Lowest Higher Lowest Higher Lowest Higher
Income Income Income Income
30% 70% 30% 70% 30% 70% 30% 70%
Strata Strata Strata Strata

% with access to % with strong housing

80.2 65.4 86.5 80.0 67.5 85.4 unit
70.5 43.4 82.2 70.4 42.6 82.2
safe drinking water
% with owned house
and lot
64.4 60.7 65.9 66.5 61.9 68.5
% with sanitary toilet 86.2 69.7 93.2 86.1 70.3 92.9
% with family head who
is gainfully employed
84.2 91.8 80.9 81.2 88.3 78.1

% with electricity 79.7 52.8 91.3 79.0 50.5 91.2 % with member 18 yrs &
over who is gainfully 93.8 97.1 92.4 93.5 95.8 92.5
employed
Sources: National Statistics Office,2004 and 2002 Annual Poverty Indicators Surveys (APIS) Sources: National Statistics Office,2004 and 2002 Annual Poverty Indicators Surveys (APIS)

Annual Poverty Indicators Survey

ENABLING INDICATORS 2004 2002
Capabilities Approach
Both Both
Income
Lowest
30%
Higher
70%
Income
Lowest
30%
Higher
70%
Human Development Index
Strata Strata Conceptualized by the United Nations Development Program in
1990 in order to operationalize an international standard of
% with children 6-12 yrs
old in elementary
90.6 91.4 90.1 91.2 92.2 90.5 measure of social development
Four main measures:
% with children 13-16 Life expectancy at birth (as proxy for health)
yrs old in high school
74.5 63.0 82.0 77.0 66.8 83.3 Adult literacy rate and combined gross enrollment (primary/
secondary/ tertiary) rate (as proxy for education)
% with working children Real GDP per capita (in PPP $ terms) (as proxy for income)
5-17 yrs old
13.6 23.1 8.0 12.6 20.7 8.1
In the 2002 Philippine Human Development Report, two HDI
% with member involved indices:
in at least one legitimate
26.9 26.2 27.2 26.9 25.9 27.3 HDI-1 includes life expectancy, basic enrollment and high school
graduation, and per capita income in pesos
% with Philhealth HDI-2 includes life expectancy, basic enrollment and functional
member
41.8 28.3 47.5 27.5 6.9 36.3 literacy and per capita income using US$ PPP

Sources: National Statistics Office,2004 and 2002 Annual Poverty Indicators Surveys (APIS)

2
 Poverty Situation
Poverty Situation Core Local Poverty Indicators
Provinces with high and low HDI 2001
Health 1. Under 5 mortality - Proportion of children aged 0-5 years
0.758 old to the sum of children aged 0-5 years old who died
0.80 0.708 0.698
0.693 0.69 during the reference year
0.70
Nutrition 2. Malnutrition prevalence Proportion of children aged 0-5
0.60
years old who are malnourished to the total number of
0.431
0.50 0.425 0.42 0.378
children 0- 5 years old
0.40 0.311
Access to 3. Proportion of households with access to safe water
0.30
Basic 4. Proportion of households with access to sanitary toilet
0.20
Amenities
facilities
0.10

0.00
Shelter 5. Proportion of households who are squatting
(do not own or rent the lot on which their dwelling stands)

6. Proportion of households living in makeshift housing

Philippine Human Development Report 2001

Poverty Situation
Core Local Poverty Indicators Millennium Development Goals
Philippine Midterm MDG Report: Halfway through
Peace and 7. Proportion of households with members victimized by the 2015 target year to achieve the Millennium
Order crimes Development Goals (MDGs), the Philippines has
Income 8. Proportion of households with income less than the made considerable progress particularly in
poverty threshold
9. Proportion of households with income less than the poverty reduction (In 2006 stalled back to 2000
food threshold level),
10. Proportion of households who eat less than three (3) nutrition,
meals a day
gender equality,
Basic 11. Elementary school participation rate (Proportion of 6-12
Education years old in elementary school) reducing child mortality,
12. Secondary school participation rate (Proportion of 13- combating HIV and AIDS,
16 years old in high school) malaria and other diseases and
Employment 13. Unemployment rate (Proportion of members 15 years access to safe drinking water and sanitary toilet
old and above who are actively seeking work but are facility.
not working)

Millennium Development Goals Millennium Development Goals

Access to primary education worsened in The decline in number of maternal deaths per
100,000 live births has slowed down
SY 2005-2006.
From 209 deaths in 1993 to 162 deaths in 2006.
It is unlikely that the 2015 target of 52 deaths in
This represented a decline in the net the maternal mortality ratio (MMR) will be met.
enrolment rate from the 2000 level of 96.8
percent to 84.4 percent, thereby setting Access to reproductive health care improved at
a modest rate for currently married women ages
back the 2015 target of universal access. 15-49
From 49 percent in 2001 to 50.6 percent in
2006. At this rate, the 2015 target of 80 percent
access is difficult to achieve.

3
 GDP 1950 - 1960 - 1970 - 1980 - 1990-
Causes of Poverty average 1960 1970 1980 1990 2000
growth/
SLOW GROWTH AND LACK OF Indonesia 4 3.9 7.6 6.1 4.2
EMPLOYMENT OPPORTUNITIES
Malaysia
3.6 6.5 7.8 5.3 7
HIGH POPULATION GROWTH RESULT TO
THE RAPID EXPANSION OF THE LABOR
Philippines
FORCE (3.8% Annually) 6.5 5.1 6.3 1 3.2

INDUSTRIAL EMPLOYMENT Singapore

AGRICULTURAL EMPLOYMENT n.a. 8.8 8.5 6.6 7.8
SERVICES EMPLOYMENT Thailand
5.7 8.4 7.2 7.6 4.2

Slow Growth is Cause of Poverty

Slow Growth is Cause of Poverty

Reforms to Influence Growth Other Causes and Determinants of Poverty

1981 GOVT LAUNCHED STRUCTURAL Inequality in Income and Assets

CHANGES TARIFF REFORMS,
LIBERALIZATION of FOREIGN TRADE and
INVESTMENTS TO PROMOTE GREATER
COMPETITIVENESS
But 1980s is a turbulent period in Philippine
History the lost decade in economic growth
INTEGRATED WITH THE GLOBAL
ECONOMY DURING THE 1992-1996
Gini coefficients has widened from .40 in
1994, .43 in 1997, .45 in 2000, to .46 in
2002.
The Richest 20% Receive more than Half
of the Total Income While the Poorest
40% Receive Only 12% of the Total
Income.

4
Other Causes and Determinants of Poverty
UNEQUAL LAND DISTRIBUTION
HIGH POPULATION GROWTH 2.8%
DECLINING PRODUCTIVITY
TOTAL FACTOR PRODUCTIVITY OF .6%
OVER THE PERIOD OF 1950-1987
INADEQUATE INVESTMENT IN
AGRICULTURE WORSENED BY LOW
AGRICULTURE PRICES
Other Causes and Determinants of Poverty
GEOGRAPHIC ATTRIBUTES
SPATIAL ISOLATION OR HIGH TRANSPORT
COST AND THE AVERAGE FREQUENCY OF
TYPHOONS HITTING A PROVINCE ARE
POSITIVELY CORRELATED WITH POVERTY
LACK OF INFRASTRUCTURE
LOW INVESTMENT IN HUMAN CAPITAL
Current Development Situation
Despite strong GDP growth, there has
been continued sluggishness in
investments and manufacturing. The
share of capital formation to GDP has
declined from 20% in 2003 to 17% in
2007, while manufacturing growth has
decelerated steadily since 2005.
Other Causes and Determinants of Poverty
LIMITED ACCESS TO QUALITY SOCIAL
SERVICES
HEALTH CARE (P1,180/YEAR)
EDUCATION: Access to primary education
worsened in SY 2005-2006. A decline in the net
enrolment rate from the 2000 level of 96.8
percent to 84.4 percent.
WATER SUPPLY - Two out of ten Filipinos do
not get water from safe sources (APIS 2004)
Current Development Situation
While the Philippines growth trend has
improved to 5.8% during 2002-2007 from
3.2% during 1990-2000, growth has been
led largely by private consumption
spending which in turn is heavily
dependent on remittances of overseas
workers.
Current Development Situation
The Government noted that the
Philippines has not attracted its potential
share of foreign investments,
notwithstanding overall positive
macroeconomic performance.
5
 Current Development Situation
Noted key constraints to the countrys
competitiveness include:
(i) inadequate infrastructure;
(ii) weak human resource base (?) due to
inadequate investment in health and education;
(iii) urban-biased policies and public investments
resulting in the narrow-based growth; and
(iv) lack of competition in some sectors (from
oligarchic power structures, regulatory capture,
and restrictions on foreign participation).
Philippine Development Forum 2008
Critical Constraints to Poverty
Reduction
Critical constraints to poverty reduction are
(i) lack and slow growth of productive
employment opportunities;
(ii) inequitable access to development
opportunities, especially education, health,
infrastructure, and productive assets; and
(iii) inadequate social protection and social
safety nets.
Source: Philippines Critical Development Constraints, ADB 2007
Critical Constraints to Growth and
Poverty Reduction
Removing these three constraints (e.g., tight fiscal
space, inadequate infrastructure, and weak investor
confidence) will result in increased private investments
from domestic and foreign sources.
But, to sustained at a high level similar to that achieved
by many Southeast and East Asian economies, the
Government will also need to address the market failures
(such as information and coordination externalities) in
order to encourage investments in diversifying and
expanding the manufacturing sector and exports, and in
upgrading the level of technology.
Source: Philippines Critical Development Constraints, ADB 2007
Critical Constraints to Growth
(i) tight fiscal situation;
(ii) inadequate infrastructure, particularly in
electricity and transport;
(iii) weak investor confidence due to
governance concerns, in particular,
corruption and political instability; and
(iv) inability to address market failures
leading to a small and narrow industrial
base.
Source: Philippines Critical Development Constraints, ADB 2007
Critical Constraints to Growth and
Poverty Reduction
Many of these critical constraints are interlinked. Only
when the fiscal situation sufficiently improves will the
Government be in a position to allocate more resources
to infrastructure investment. However, improved
infrastructure alone is not enough to lower the cost of
doing business and to stimulate private investment.
Better infrastructure has to be accompanied by
significant improvements in investor confidence, which
can be done through the Government adequately
addressing governance concerns by implementing
initiatives aimed at reducing corruption and improving
political stability.
Source: Philippines Critical Development Constraints, ADB 2007
Challenges and recommendations
The NEDA-UNDP MDG Midterm Report identified the following key
crosscutting issues in attaining the MDGs by 2015 and the priority
actions needed:
Addressing wide disparities across regions:
Regions with poverty incidence rates above the national average
must receive more than a proportionate share of the resources
allocated to overcome the problem.
Curbing the high population growth rate: This
problem will entail reassessment of the present programs and
projects on reproductive health particularly family planning and
adolescent reproductive health program, strengthening the national
governments role in population management and the full
implementation of the contraceptive self-reliance strategy (CSR)
6
 Problems Measuring Inequality
Challenges and recommendations
1. In-kind transfers: assistance that takes the form
Improving performance of the agriculture sector: of g&s rather than cash
The governments anti-poverty strategy must focus on agriculture and rural
development through asset reforms (agrarian reform, urban land reform and Omitted from measures of inequality and
ancestral domain reform) accompanied by reforms in the agricultural sector, poverty, biasing them upward
such as investments in productivity improvements and supporting
infrastructure. The government also should address; (a) poor governance of
support services e.g., lack of account-ability, coordination and program 2. The Life Cycle: the regular pattern of
focus in public spending for agriculture; and (b) high cost of doing business
owing to inefficient and archaic regulatory systems in the sector. income variation over a persons life
People can borrow and save to offset life-cycle
Accelerating the implementation of basic changes in income (e.g., saving for retirement).
education and health reforms: Two (2) major reform
packages for health and education must be implemented with critical
interventions supported by an effective management structure and financing
Life-cycle income variation causes inequality in
arrangements. Moreover, government and other education stakeholders
should look more seriously at the factors contributing to the comparatively
income but not inequality in living standards.
low completion and retention among boys.

INCOME INEQUALITY 38
Source: Philippine Midterm Progress Report of the MDG, 2007 AND POVERTY

Problems Measuring Inequality The Political Philosophy of

3. Transitory vs. Permanent Income: Redistributing Income
People can borrow and save to smooth out We consider three philosophies:
transitory income fluctuations.
Utilitarianism
A better measure of inequality in living
standards would be based not on current Liberalism
income, but on permanent income, a persons Libertarianism
normal income.
4. Economic mobility:
Many people move among income classes.
The poverty and inequality measures
discussed above do not distinguish between
INCOMEthe temporarily poor 39
INEQUALITY and the persistently poor. INCOME INEQUALITY 40
AND POVERTY AND POVERTY

Utilitarianism Liberalism
Utility: a measure of happiness or satisfaction Liberalism: argues that govt should choose
Utilitarianism: argues that govt should choose policies deemed to be just by an impartial observer
policies to maximize societys total utility behind a veil of ignorance
Founders: Jeremy Bentham, John Stuart Mill Founder: John Rawls

Because of diminishing marginal utility, Maximin criterion: govt should aim to maximize
redistributing income from rich to poor the well-being of societys worst-off person
increases utility of the poor more than it reduces Calls for more redistribution than utilitarianism
utility of the rich. (though still not complete equalization of incomes).
Yet, utilitarians do not advocate equalizing Income redistribution is a form of social insurance,
incomes would reduce total income of everyone a govt policy aimed at protecting people against the
due to incentive effects and efficiency losses. risk of adverse events.
INCOME INEQUALITY 41 INCOME INEQUALITY 42
AND POVERTY AND POVERTY

7
 Libertarianism
Libertarianism: argues that govt should punish
Policies to Reduce Poverty
crimes and enforce voluntary agreements but not
Poor families more likely to experience
redistribute income
homelessness
Advocate: Robert Nozick
drug dependence
Instead of focusing on outcomes, libertarians focus health problems
on the process.
illiteracy
Govt should enforce individual rights,
unemployment
should try to equalize opportunities.
Most people believe govt should provide a
If the income distribution is achieved fairly, safety net.
govt should not interfere, even if unequal.

INCOME INEQUALITY 43 INCOME INEQUALITY 44

AND POVERTY AND POVERTY

CHAPTER SUMMARY

Political philosophers differ in their views of the

proper role of government in altering the income
distribution. Utilitarians believe that income
distribution should maximize the sum of everyones
utility. Liberals believe the government should aim
to maximize the well-being of the worst-off person
in society. Libertarians believe the government
should aim for equality of opportunity, not equality
of income.

45