Drivers of upward mobility in the Philippines

By Melcah Pascua-Monsura and Randy Tuaño

On October 5 and 6, more than 11,000 applicants took the entrance exams at the Diliman campus of the University of the Philippines; this is just a fraction of more than 80,000 high-school students who are expected to take the exams this year. Last year, it was reported that more than 160,000 students took the college admission tests.

The large number of students who took the exams is an indication of the value that Filipinos hold for tertiary education and a desire for many families, especially from the poor and lower income classes, for greater upward mobility in the country. Experience and many studies have confirmed the fact that completion of tertiary-level education is one of the main indicators of upward movement in welfare in the country.

During the past decade, many studies on upward and downward movements in welfare have been undertaken. Income mobility in the Philippines has been characterized by offsetting forces of upward and downward mobility. Although some households experienced upward mobility due to high economic growth, a large number of households were pushed into poverty because of many man-made and natural crises. This means that the income gains experienced by a significant number of Filipinos during this period of economic growth has been neutralized by the income reductions experienced by others (Martinez et al. 2014). Policy targeting for this kind of findings can be done by examining the main drivers of their income mobility.

In a study that had been undertaken by the authors of this article, socioeconomic characteristics of households, such as geographical location, number of dependents and household head’s marital status significantly affected income mobility, using total family income as the basis for categorization. Living in rural areas and Mindanao exert a downward influence in mobility because there has been lack of sustainable income opportunities in these areas. In addition, the number of dependents in a household negatively affect income mobility, as well. An increase in the number of dependent members means that as the family size increases, the probability of experiencing a movement to a lower category increases.

Meanwhile, being single is associated with an initial increase in absolute income because non-married individuals are more flexible in searching for greater opportunities to earn higher incomes compared to household heads with spouses and children. On the other hand, married or separated household heads are more likely to experience upward mobility over time because of the association with longer employment experience.

The research study also indicates that occupations with high skills requirements like professionals and officials are insignificant factors of absolute income mobility due to weak demand for these types of employment occupations. In the study, it is shown that household heads with higher education are engaged in low-skilled jobs. These low-skilled jobs have negative significant effect on income mobility of sliders because these jobs offer poorer income prospects.

Since educational attainment of the household head has significant effect on absolute (movement of households in terms of nominal income) and relative income mobility (movement of households across categories), government investment in basic schooling gives opportunity to low-income households to obtain primary and secondary education needed to gain employment in the future. However, schooling alone is not enough because other related issues persist, such as school accessibility, children’s lack of interest in going to school and classroom congestion.

Investments in health and education are complements. For the sick and unhealthy child, poor health translates to a lower educational attainment that may affect both future income and market productivity. To prevent household members from illnesses and diseases due to sanitation problems resulting in low productivity and low income, household investment in toilet facilities and safe water sources have significant effects on income mobility. On the other hand, public spending on health facilities, like barangay health stations and public hospitals, to enhance human capital but surprisingly found to be an insignificant factor of income mobility due to the challenges like insufficient government investment, inappropriate incentives for health service providers, weak social protection and high inequity.

Although there are challenges in improving human development among Filipino families, it is important to note that government programs in basic education and health have influenced income mobility as shown by the increase (albeit slow) in the proportion of families in the middle class in the past 30 years. These investments in primary schooling and well-being programs are clearly important; whether universal subsidies to tertiary-level programs which are accessed more by those who are already in the top categories of the income ladder is another question and matter for further discussion.

Melcah Pascua-Monsura is a doctoral student at the Economics Department of the Ateneo de Manila University, and is a faculty member of the Polytechnic University of the Philippines. Randy Tuaño is chairman and assistant professor of the Economics Department at the Ateneo.

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