The recent survey on self-rated poverty done by the Social Weather Stations (SWS) piqued my curiosity. The Fourth Quarter of 2019 survey (conducted on Dec. 12-16, 2019) showed self-rated poverty spiking by 12 points compared to the previous quarter. It increased from 42% in September 2019 to 54% in December 2019. In the same vein, self-rated food poverty increased by six points in the same period, from 29% in September 2019 to 35% in December 2019.
To put things in perspective, SWS computed the annual average of self-rated poverty rate in 2019 at 45%, still lower than that of 2018, which was 48%. For self-rated food poverty, the annual average rate for 2019 was 31%, also lower than the self-rated food poverty rate in 2018, which was 33%.
Nevertheless the spike in self-rated poverty in the last quarter of 2019 is surprising, taking into consideration other factors or developments, namely:
1. In the first quarter of 2019, SWS’s survey on self-rated poverty showed a remarkable drop, 12 points below December 2018. This is remarkable given that the reduction in self-rated poverty happened on the heels of the elevated inflation in 2018 brought about by the sharp rise in food prices (mainly, a rice shortage because of a policy that restricted imports) and the increase in petroleum prices, mainly arising from the surge in international crude oil prices. (The culprit is not the tax reform.)
2. According to the SWS, the hunger incidence dropped — from 9.1% of families experiencing involuntary hunger (at least once in the past three months) in September 2019 to 8.8% in December 2019. The annual average hunger rate in 2019 was 9.3%, compared to 10.8% in 2018.
3. The fourth quarter of 2019 SWS survey found an increase in the number of Filipinos who believed their lives improved. The survey result showed that 39% of Filipinos were better off while 21% were worse off, hence a net gain score of +18. This was an increase from the net gain score of +11 in September 2019.
4. Inflation has leveled off at a low rate. In December 2019, inflation stood at 2.5%, compared to 5.1% in the same period in 2018. The annual average inflation rate for 2019 was likewise 2.5%, down from 5.2% in 2018.
5. Philippine unemployment decreased to 4.5% in October 2019, from 5.1% in October 2018. Underemployment likewise declined to 13% in October 2019, from 13.3% in October 2018. One in fact can observe a steady annual decline in unemployment since 2014. Moreover, the unemployment and underemployment rates in October 2019 were the lowest across all quarters since 2005.
How then can we reconcile the increase in self-rated poverty with other indicators (some of which are also drawn from the SWS survey) like the trend of declining poverty (as shown by the SWS’s self-rated poverty and the Philippine Statistics Authority’s official figures on poverty incidence), hunger incidence, low and stable inflation, and decreasing unemployment and underemployment?
SWS founder and former economics professor Mahar Mangahas has pointed out that the most significant determinants of self-rated poverty are inflation, especially food price inflation, and underemployment.
But in the current period, inflation is low, although there was an uptick in the inflation rate between the third and fourth quarters of 2019. The rise in inflation can nevertheless be overcome by a higher increase in income. Underemployment and unemployment have decreased. The increase in employment, particularly in the service and industry sectors, translates into higher incomes. Moreover, the budget for government transfers increased.
On top of the conditional cash transfers (CCT), government introduced unconditional cash transfers (UCT) as a compensation for the poor and the near poor in conjunction with the comprehensive tax reform. The UCT was calculated in a way that the amount to be given was greater than the estimated costs that could be attributed to the tax reform.
It is worth mentioning that a 2018 World Bank publication titled Making Growth Work for the Poor: Q Poverty Assessment for the Philippines did state that the leading income sources that contribute to poverty reduction (2006-2015) are non-agriculture wage, government transfers, domestic remittance (note, not foreign remittance), and agriculture wage, in that order. In short, Filipinos escape poverty by having quality employment (wages) and receiving government cash transfers.
So, what can possibly explain the significant increase in the self-rated poverty, in light of the positive indicators on prices and employment?
I posit three possible explanations.
The first plausible explanation is that self-rated poverty is also about relative poverty (hence the respondents would indicate sharply differing income thresholds to be above poverty). As lives of households or families improve, as they receive or earn higher income, their standards and expectations likewise get higher.
Second, still related to relative poverty, is the feeling of inequality, again leading the self-rated poor to aspire for higher living standards. Although what has happened is that the rising tide has lifted all boats, and although the lives of the poor have improved, the fact is that the non-poor — the middle class and the upper class — have gained more from the economic gains. To illustrate, the middle class has benefited tremendously from the income tax reform, through a significant reduction of tax rates. The middle and upper classes, too, are the main beneficiaries of populist measures like free college education. The poor, on the other hand, do not have a direct benefit from the income tax reform (they are exempted from paying income tax, for they do not have sufficient income). Nor can their children avail themselves of free college education, for many of the poor children cannot even finish primary education.
The third explanation is the dismal performance of the Department of Social Welfare and Development (DSWD) and the Land Bank of the Philippines in distributing the cash grants to 10 million poor households and indigent senior citizens. According to the Land Bank, the completion rate of the UCT in 2018 was 81.9%, equivalent to around 8.2 million beneficiaries receiving the UCT amounting to P2,400. But in 2019, wherein the cash subsidy was increased to P3,600, the completion rate was less than half, or 42.85%, equivalent to about 4.3 million beneficiaries. The disbursement rate to Land Bank branches in 2019 was also low, equivalent to 55%, compared to a sterling 97.55% fund disbursement rate in 2018.
For the third reason alone, which is factual, we could have avoided the spike in self-rated poverty.
Self-rated poverty is a politically sensitive indicator. After all, the Filipino people will not vote on the basis of the official poverty data released by the Philippine Statistics Authority. They will vote on the basis of what they feel, what they think. Government agencies and politicians must pay serious attention to it.
Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.
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