Raya is a trustee of Action for Economic Reforms (www.aer.ph) and a convener of Social Watch Philippines.This article came out in  the Yellow Pad column, BusinessWorld, 26 May 2008, pages S1/4-S1/5.

How does one cope when income drops, when food and fuel prices go up, and when there is no money left to send the children to school? The latest Family Income and Expenditure Survey (FIES 2006) suggests that for poor Filipino households, coping meant spending more on alcohol and tobacco. Well, at least the poor were creative enough to find happy moments amidst difficult times. In comparison, the non-poor were more prudent but maybe less happy, although the FIES does not come out with any index on happiness or misery.

But seriously, when families experience a drop in real income, spend less on education and health care, but increase spending on alcohol and tobacco, then one can say that times are indeed harsh.

Hardly anyone was actually surprised when the National Statistics Office (NSO) announced that average family income in real terms declined in 2006 compared to three years before then. Following this report, the government admitted that poverty incidence increased in 2006.

Perhaps more disturbing are the observed changes in the expenditure pattern of Filipino families.

Over the years, the share of education in the family budget has been generally increasing. In 2003, Filipino families spent an average of P5,580 annually on education, representing 4.5% of total family expenditure. The spending share increased to 4.7% in 2006. However, when spending pattern is examined across income groups, a different picture emerges. NSO data show a decrease in the spending share of education among poor families (those belonging to the bottom 30% income group) – from 2.9% of total family expenditure in 2003 to only 1.3% in 2006.

This means that in 2006, the poor spent just half of what they spent for education in 2003. The same trend was observed for medical care, with poor families spending only 1.7% for health in 2006 compared to 2.1% in 2003. This pattern of expenditure will have long-term implications on human capital and poverty reduction in the country.

Reduced spending of the poor on education confirms what has been reflected in the data of the Department of Education (DepEd) and the Education Network (E-Net), a civil society network working for key reforms in the education sector. Parents are cutting on cost, specifically on tuition fees, books, school supplies, educational materials and allowances, but with consequent impact on learning achievement. Children are migrating from private to public schools, which are generally more affordable. More students are working—and for longer hours—thus affecting learning outcome. Worse, a huge number of children from poor families drop out and stay out of school due to financial difficulties and the high opportunity cost of keeping children in school.

What accounted for this fall in education spending? NSO data show that the poor had to spend more on food, fuel and utilities in 2006, which took away 66.4% of the family budget. Given the worsening food and energy crisis in the last two years, expect  the poor to dig deeper into their pockets to cover food essentials, leaving very little for education and health.

NSO data further reveal that the poor have less access to education, have shorter school life expectancy and have lower learning achievement. The children from the poorest 20% income group are four times more likely to drop out of school compared to the richest 20%. Such disparities in education access and outcome perpetuate poverty and intensify inequity in society.

Government’s role becomes especially important during difficult times and crisis events. When families go hungry and reduce their spending on education, and when children drop out of school to work, then government must act to cover the financing gap and provide safety nets to help the poor and disadvantaged. But this is not happening in the case of the Philippines.

In fact, the Philippines has been under-investing in basic education, as shown by the study done by Rosario Manasan of the Philippine Institute of Development Studies (PIDS). In 1997, national expenditure on basic education was 3.2% of gross domestic product (GDP). This went down to 2.5% in 2001 and to 2.1% in 2005. Similarly, the share of basic education in the national budget has been shrinking over the years. By 2007, the allocation for basic education was down to only 11.9% of the national budget from a high of 16% in the late 1990s. International benchmarks set the desirable level of education expenditure at 6% of GDP and 20% of total public expenditure.

Indeed, the current level of expenditure is low and falls short of the requirements for quality education. It places the Philippines among the lowest spenders on education in Asia and the rest of the world. Thailand spends over six times what the Philippine government spends for educating its citizens, while Malaysia spends over ten times more. India spends nearly 4% of GDP on education while Sri Lanka allots about 3% of GDP.

The trouble with the country’s public financing of education is that the government thinks it is richer, talks as though it is performing better, but acts and spends on the same scale as those countries that are much poorer and with far lower educational achievement. The Philippines’ spending level at 2.5% of GDP is about the same as Bangladesh, Laos and Pakistan. But we are doing better (well, at least for now) than Burma, Indonesia and Cambodia, which spend only between 1% and 2% of GDP. This situation has prompted the Alternative Budget Initiative (ABI) led by Social Watch along with other civil society networks to propose substantial increases in the education budget to address key issues and cover critical gaps in financing.

UNESCO’s global monitoring of education performance shows that spending shares tend to increase with income, suggesting that, over the long term, countries with bigger economies tend to allocate a larger share of their GDP on education. When countries were classified into four groups based on income, the spending level of the Philippines (a middle income country) on education at 2.5% of GDP was even lower than the median (3.9% of GDP) expenditure of countries belonging to the lowest income group.

There was a time when the Philippines ranked next only to Japan in education. That was in the 1920s. By the 1940s, Sri Lanka, Thailand and South Korea joined the Philippines in the lead pack. By the first half of the 1970s, the Philippines was still in the lead pack. But this was the time when the country started to lose steam. Today, the country is among the bottom performers in Asia and the rest of the developing world. UNESCO’s Education Development Index ranked the Philippines 75th among 125 countries, falling behind most Asian countries like China, Malaysia, Indonesia and Vietnam.

Many Asian countries are now taking concrete steps to increase real spending on education in comparison to the size of their economies. Not a few countries have achieved significant headway in literacy, net enrolment, cohort survival and teaching quality. Sadly, the Philippines appears to be stalling and moving in the other direction. Unless education expenditure is increased to a more respectable level and unless governance of the school system is improved, the country may end up as the education waste bin in the Asian region.