POVERTY AND INCOME INEQUALITY IN THE PHILIPPINES

Abstract

The trends in Philippine poverty and income inequality were examined using the 1985, 1988 and 1991 Family Income and Expenditure Survey (FIES) series. Three measures were used to determine the extent of poverty namely: the Headcount Index, the Poverty Gap and the Foster, Greer and Thorbecke (FGT) Measure. The three measures indicate that there have been marginal improvements in the poverty situation during the 1985 to 1988 period and a deterioration during the 1988 to 1991 period and that rural poverty is worse than urban poverty. In terms of regional dissaggregation, the three measures consistently identified Bicol (Region V) and Central Visayas (Region VII) as having the most serious problem of poverty. The FIES series was also used to construct a profile of the poor. It was observed that the average poor family is headed by a male member in his mid 40s, with only elementary education. The household head is generally self-employed in the primary sector. The urban household's main source of income is wages and salaries while the rural household's is entrepreneurial activities. Of the household's total income, three-fifths is spent on food and one-fifth is spent on non-food items while the rest is saved. The measures used to assess income inequality (Relative Mean Deviation, Gini Coefficient and Theil Index) show that income inequality has remained unchanged in the six year period under study. Rural incomes remained more equal compared to urban incomes, and the situation in the regions has not changed. Regression analysis showed that the levels of per capita gross regional domestic product and per capita gross value added in public construction significantly affected poverty incidence and income distribution. Furthermore, it was seen that unemployment levels had significant effects on the level of poverty, while underemployment rates and secondary school participation rates had significant effects on the degree of income inequality. In the discussion of related issues, it was identified that the bias against sectors on which the poor rely on, as well as the poor delivery of social services resulted in the poverty and income inequality situation being largely unchanged. Ensuring the growth of the economy, implementing an effective land reform program, and improving the targeting and delivery of social services, particularly education and health, were identified as crucial issues in addressing the problem of poverty and income inequality.