Next administration’s top priority: Narrowing gap between rich and poor Filipinos

By Cai U. Ordinario

The new administration wants to narrow the wide gap between rich and poor Filipinos by investing heavily in social programs, according to the incoming economic-planning chief.

Incoming Economic Planning Secretary Ernesto M. Pernia said the gap between the rich and the poor in the Philippines, as measured by the Gini coefficient, is the widest in Asean.

Pernia told the BusinessMirror that by the time the Duterte administration ends in 2022, it would have brought down the country’s Gini coefficient to around 0.40.

“There is a stark inequality [not only] among income classes or households but also among regions nationwide,” Pernia said in a presentation at the Makati Business Club (MBC) Forum held in Makati City.

“We really need to work hard on poverty reduction and inclusiveness, as has been used by so many observers already,” the incoming director general of the National Economic and Development Authority (Neda) added.

The Gini coefficient ranges from zero to 1, with zero indicating perfect income equality among families, and 1 indicating absolute income inequality.

Pernia said the current Gini coefficient of the country is at 0.46, the highest in Asean. He said some Asean countries have a Gini coefficient of as low as 0.41 or 0.42, allowing the region to post an average of around 0.40.

To address inequality and cut the country’s high poverty rate, the Duterte administration will place population control at the heart of its development strategy.

Pernia said the government needs to fully implement the reproductive-health (RH) law to expand poor families’ access to contraceptives. This, he said, will allow the poor to limit their children to 3—the number they consider ideal.

In 2008 Pernia led economists from the University of the Philippines School of Economics (UPSE) in expressing support for the RH law. Pernia and other UP economists argued that poor households are having more children than what they desire.

He said giving the poor more access to contraceptives will also allow them to make larger investments on their children’s health and education. This will allow them to have a better chance of avoiding the poverty trap.

Pernia added that better education and health will make children of poor households more productive members of the labor force. This will allow the country to reap the so-called demographic dividend.

“I’d like to note that the business community has been talking about the demographic sweet spot. Actually, we haven’t reached that because of our lack of attention or the lack of implementation of the RH law, which has been passed a couple of years back,” Pernia said.

“That demographic sweet spot does not entail quantity, more quality. It’s important that children, the youth, the dependent population are given quality healthcare and education [for them] to be better prepared to enter the work force,” he added.

Innovative statistics

Apart from focusing on population, the next administration will also give ample attention to the creation of
“innovative statistics.”

These innovative statistics, Pernia said, will allow the country to evaluate its policies and monitor the government’s progress in terms of wealth distribution.

In this regard, Pernia added that he will instruct the Philippine Statistics Authority (PSA) to create new metrics that will allow the measurement of the trickle-down effect of economic growth.

“That metric has to be developed. It’s not going to be easy, because it [entails] merging the National Income Accounts with the Family Income and Expenditure Survey, so it’s not that easy,” Pernia said.

Data obtained by the BusinessMirror earlier from the PSA showed that the ratio of the richest Filipinos—those at the top 10 percent of the income bracket—and the poorest, or bottom 10 percent, is 11.35 percent.

Reducing income inequality is part of the Sustainable Development Goals (SDG) 10, which aims to reduce inequality within and among countries by 2030. SDG 10 aims to “progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average.”

In the Philippines the ratio of the income of the top 10 percent and the bottom 10 percent declined by 0.72 percentage points, from 12.07 percent posted in the first semester of 2012.

Nonetheless, poverty reduction may have been faster under the previous administration, since the decline in the ratio of the income of the top 10 percent and bottom 10 percent in the first semester of 2009 was larger, at 1.05 percentage points.