Proponents of the proposed Tax Reform for Acceleration and Inclusion (TRAIN) law promised that, once it takes effect, it will expand the country’s middle class and economically empower poor families.
Now that inflation has hit another high of 6.7 percent in September and seems to be showing no signs of slowing down, one has to wonder. Are we seeing the shrinking of our middle class and the expansion of our poor population instead?
Of course, finance officials are quick to say the TRAIN law is not the cause of inflation, blaming global oil prices, rice prices, the weather and other factors. But whatever the explanation, it is not just the poor but also the middle-income families who are suffering from the sustained increases in the cost of rice and other food commodities.
Food prices have been going up for most of the year. Rice, vegetables, fish, you name it, they have all exhibited increases that have extended beyond the reach of ordinary consumers; and whether this is because of the TRAIN law or the financial markets, or the impact of weather disturbances on farm output and fishing, or due to profiteering by rotten traders, what matters most is this: If inflation continues to tick upward in the latter months of the year—as more than a few research groups and economists have predicted—we are going to see the rapid erosion of the real value of wages, affecting both poor and middle-income workers who would be able to buy fewer goods and services.
Whatever new policies and programs the Duterte administration comes up with should not just lighten the economic burden of the poor, or the poorest of the poor, although it is true that they suffer most from the ever-increasing prices of basic commodities and services. Right now, it just may be that a good chunk of the middle class are also being driven into borderline poverty because of inflation.
Inflation affects everybody, even the rich, but the rich can fend for themselves. They have a strong financial buffer against inflation, which the poor and middle class do not have.
The government should also help the middle class who are not qualified for government subsidies and other programs that target only the poorest of our population, like the billions spent yearly on conditional cash transfers, for instance.
The National Statistical Coordination Board once came out with a study, “Trends and Characteristics of the Middle Class in the Philippines: Is it Expanding or Shrinking,” which found that in a span of six years, from 1997 to 2003, close to four families for every 100 middle-income families have been lost to the low-income category. Middle-income families, as defined by the NSCB at the time, were those families with a total annual income ranging from P251,283 to P2,045,280.
We wonder if that trend has continued to this day. If the National Economic and Development Authority says the Philippines can become an upper middle-income country by end-2019 (below $4,000 or around P208,178 income per person), national wage averages can be misleading.
With the current economic risks and the rising cost of everything, there may be more families who cannot even earn enough to make it into middle-income range in terms of real wage values; or even if they can, they would be at the low end of that range. What they call middle class today may be just on the higher end of poor. And if true, we just have rich and poor in society, in varying degrees.
When the NSCB study came out, its Executive Director Dr. Romulo Virola then hit the nail on the head when (referring to the results of the study) he said: “For a country to be truly and sustainably prosperous, there must be a broad-based middle class…that has the knowledge, the skills and the resources to foster economic growth and help generate employment for the poor. But so far, the poverty-reduction programs we have crafted have focused mainly on being “pro-poor,” “anti-poverty,” helping the “poorest provinces,” etc. We seem to have completely ignored the needs and the strategic importance of building and expanding the middle class of Philippine society.”
His statement may still be true today.
It would be a most ridiculous—and ironic—government strategy to wait for middle-class families to become poor in order for them to qualify for government subsidy programs.
Image credits: Jimbo Albano