Why many Filipinos are poor: WB’s latest report

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THE WORLD Bank’s most recent analysis of the Philippine economy released last month was quite underreported, probably since, as is typical of its reports, you have to wrestle through its technocratic language.

The title itself of the study doesn’t make for exciting reading: “The Philippines: Fostering More Inclusive Growth.” It would have been covered better in the press perhaps if it was titled based on its actual topic: “Why so many Filipinos are poor, and will be poor—and their numbers will certainly grow—if little is done by government.” As is typical of World Bank reports, it is a comprehensive analysis with a long list of “to-dos” for government (e.g., more efficient tax collection, more infrastructure), which, I would say, could be a good blueprint for President Aquino’s reform programs. We focus though on two of its major conclusions on why so many Filipinos remain poor.

First, the report’s good news: “After two decades of stagnation, the Philippine economy began to grow again by the mid-2000s, with per capita growth accelerating to an annual average rate of 3.5 percent during 2003-06 and reaching a record high of 5.4 percent in 2007.”

Now, the bad news, which explains the report’s title: “The Philippines’ improved economic performance has not translated into greater progress in poverty reduction, indicating that growth has not been sufficiently inclusive. Despite the acceleration in economic growth after 2001, the share of the population living below the national poverty line did not decrease. Instead, official poverty estimates indicate that the overall incidence of poverty increased from 30 percent in 2003 to 32.9 percent in 2006.”

Our noisy gang of leftist clerics and militants however shouldn’t rush to claim that this proves their dogmas that there is an evil conspiracy by the State and capitalists to exploit the poor, and to expand their number. On the contrary, as may be gleaned from this commentary’s two parts, these clerics’ and militants’ organizations actually contribute to the prevalence of poverty in our country.

The Report starts off with a deductive way of addressing the question why so many Filipinos are still poor by asking: “Who are the poor, what are the characteristics of the poorest Filipinos?”

The World Bank’s answers: First, the typical poor Filipino belongs to a large family of five members; second, he lives in a rural area.

Yes, our runaway population growth is a major factor for poverty. “As in many other countries, larger households in the Philippines tend to be poorer. Poverty incidence steadily increases with household size, with nearly half of households with seven or more members living below the poverty line in 2006; more than half of households with three of more children were poor, and nearly two-thirds of poor households had three or more children.”

The report explains: “The country’s population growth rate remains among the highest in the region. The continuous increase in the working-age population is putting tremendous pressure on the labor market, straining the economy’s capacity to maintain full employment and generate adequate real wage growth. Between 2001 and 2007, employment grew by 13 percent, while the working-age population grew by 17.6 percent. Meanwhile, the average real wage declined by 5 percent between 2003 and 2006.”

What that means in non-economist’s language is that with more and more Filipinos being born, the supply of labor power is too much, so just like any commodity, its price for (wages) is pushed down (which it was, by 5 percent). Furthermore, since labor is so cheap, there is no incentive to mechanize, which increases a society’s productivity.

It becomes a vicious cycle a poor family and their descendants can’t extricate themselves from. With only one or two breadwinners (the parents) in a large family, its resources are spread thin. The poor therefore cannot invest in human capital (through education, nutrition and medical services) that would increase their value (wages), and therefore they remain poor. Without access to information and contraceptives, the children of large poor families would have large families of their own, and the cycle continues.

As if replying to those who still insist that the link between population growth and poverty hasn’t been proven, the report emphasizes: “A convincing range of macro and micro evidence suggests that continued high fertility by the poor has affected progress in poverty reduction in the Philippines… .At the macroeconomic level, simulation models using economic and demographic data for the Philippines showed that higher population growth lowered GDP per capita.”

The “use of family planning has stagnated in the past decade, with persistent unmet needs for family planning and inadequate access to family planning services for poor women,” the report said. The percentage of married women using family planning has remained static at around 50 percent since 1995…. In 2003, only 24 percent of women in the poorest quintile were using family planning, compared to 58 percent in Vietnam and 49 percent in Indonesia.”

The Philippine State has been abdicating its responsibility to provide the poor with contraceptive information and tools. But there is not a shadow of a doubt that this is because of the Catholic Church’s vehement opposition to genuine family planning programs. The Church in the Philippines therefore has and continues to be an agent for Filipinos’ impoverishment.

The report noted: “Over half of pregnancies in the Philippines are unintended.” The horrible consequences of that fact was dramatized—for the nth time—by the baby cruelly abandoned last week in a Gulf Air lavatory bin. (Next week, Part 2: Poverty and insurgencies)

From the Philippine Daily Inquirer