By Randy Tuaño
During the past few years, inequality as a socioeconomic issue has moved to the front and center among the different global challenges around the world, and has, thus, captured increasing attention among policy-makers, academics and development professionals. In much of the developing world, including the Philippines, there has been an increasing concern that economic growth would not be able to reduce, and may even exacerbate economic and social disparities.
While the Philippines has made several strides in terms of economic growth, there has been very little change in the Gini index, one of the main statistical measures of inequality, at the national level; from around 0.45 in 1988, the index had barely moved to 0.46 in 2012. In fact, the results of this year’s national and local elections have shown that it may not be enough to improve GNI/GDP growth, but also to ensure that marginalized social sectors and underdeveloped regions in the country should be able to benefit from the fruits of economic development.
There have been several reasons that have been put forward to explain the persistence of income inequality in the country. The concentration of economic development in the urban areas in the past has increased spatial inequality in the country. At the same time, household characteristics (i.e., family size, number of child dependents); infrastructure (i.e., electricity, road); and access to human capital (i.e., education) have shown to be important factors in variation in living standards. High levels of inequity in land ownership also have contributed to the
differences in household incomes. Panel data studies that track the same set of families over a long period of time have also showed that social cohesion and trust networks are also important to social mobility over a longer period.
In the recent decades, there have been public efforts in redressing some of the sources of inequities in the country. Since the 1980s the government has increased allocation of resources in education and other social services, and allotted a greater share of public investments in agriculture and rural development, including the implementation of a wide-ranging agrarian-reform program. In the 1990s Congress passed a series of “affirmative action” laws designed to increase access to economic and social opportunities among marginalized sectors. Institutional mechanisms have been established to allow the greater participation of civil society in national and local governance.
Despite these actions, there are still several underlying causes of the weak progress in inequality reduction. Some of these causes could include the pace and structure of economic growth that has not benefited the poorest; the weak structural transformation of agriculture and the preponderance of low-productivity service-sector employment that have led to poor wage growth. Another reason could be that there are bureaucratic and other institutional constraints that affect the performance of sectors important in raising the productivity of the labor force.
But another cause could be that there are other policy areas that may also be important in addressing the problem of inequality, which have not been given due attention in the country. Fiscal policy, specifically the implementation of progressive taxation and tax reforms that allow for the mobilization of domestic resources necessary for supporting transfers to the poor, could be an area. The legislation and implementation of explicit policies that reduce inequality in the redistribution of natural, financial and other types of productive assets could be another key action.
In the past six years, the Aquino administration has poured a significant amount of financial resources to social-protection programs, including conditional-cash transfers (the Pantawid Pamilyang Pilipino Program) and community-driven development (the Kapit Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services), and also programs designed both to improve welfare and increase participation of marginalized groups, such as the Bottom-Up Budgeting program. All of these are designed to elevate households from their poverty traps, and ensure that they are able to have a voice in community decision-making.
But, at the same time, it is incumbent that programs designed to reduce the still large disparities in income should be emphasized in the coming years. Asset-redistribution programs that aim to disperse ownership of natural and financial assets is still important; up to now, targets for ancestral domain for the indigenous peoples and socialized housing for the urban poor still have to be met. Strengthening productivity in the agriculture sector, which have been the subject of recent Eagle Watch articles, and further reforms in the fiscal sector are also key actions.
While the pronouncements in the socioeconomic arena of the incoming administration seem to lay the foundations for further economic growth, it is apparent that more actions need to be undertaken beyond its eight-point agenda to address these equity concerns. The challenge in the coming years would be to address the existing gaps without undermining the strides made in improvements in welfare in recent years.
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Randy Tuaño is an assistant professor of the Department of Economics at the Ateneo de Manila University. He is also project coordinator at the Human Development Network (HDN), an aggrupation of academics and civil-society leaders whose mission is to propagate and mainstream the concept of sustainable human development through research and advocacy. Portions of this article were also derived from a research note written for the HDN.