Income inequality in the Philippines
Income inequality in the Philippines is the extent to which income, most commonly measured by household or individual, is distributed in the Philippines in an uneven manner. It is an important indicator of equity in an economy, and has implications for other social outcomes such as crime and social exclusion.
Income inequality has been a long lasting development challenge for the Philippines. In a statement released by the National Statistical Coordination Board in 2005, it was recognized that the income gap between the rich and the poor was wider in the Philippines than in Indonesia and Thailand, indicating serious inequality in the distribution of the country’s economic gains. It is noted that the income of the Philippines’ richest ten percent of the population was in fact twenty times the income of the poorest ten percent.
Data spanning across 1985-2006 in the Philippines have shown that income inequality has been prevalent throughout her history, despite signs of economic growth. It has been observed that since 1985, the richest quintile of the population has consistently commanded more than 50% of total family income in the country, with the poorest quintile at less than 5%. Despite major fluctuations in economic performance during the period 1985-2003, income inequality while very high, has remained relatively stable.
From the Philippines’ National Statistics Office latest released statistical booklet, the Gini coefficient ratio fell, only slightly, from 48.22 in 2000, to 45.80 in 2006. However, this slight fall in income inequality has to been taken into context. The total family income rose from 2,199 billion Pesos to 3,006 billion Pesos in this same period, indicating an income growth of 37% - the 5% fall in Gini coefficient pales in comparison.
Causes of Inequality
Institution: Corruption and Political Dynasty
Philippines’ political culture is dynastic in nature, meaning local officials are often related to each other by blood. It is expected national resources would flow more favorably to provinces which have local governments related to the ruling political figures. These national resources are used to build infrastructure, create employment, and target poverty. Hence such ties only serve to exacerbate income inequality in Philippines.
Interestingly, studies have found an opposite relationship, by running simple regressions. It is found that political dynasties are destructive in a different way. Political dynasties in this case tend to reduce economic efficiency by allocating resources selfishly, and hence inefficiently . Access to the basic services is also restricted to the poor in provinces governed by political dynasties. Hence when compared to areas which are more competitive and efficient, the poor continue to remain poor. In addition, rampant graft and corruption created a rent that discriminated against the poor in favour of connected individuals and businesses. It hinders the growth of efficient yet competitive start-ups in the country without any political connection. This accentuates income and wealth inequality in the country.
Another main contributing factor to income inequality in Philippines is the lack of adequate education opportunity in the country. Through the enhancement of skill and knowledge of the underprivileged sections of the society, education play a vital role in stopping the cycle of generations of poverty among the poor due to a lack of skills and ignorance. Rich Filipinos are able to access significantly better educational resources through better funded schools and private tutoring. There is also a substantial number of Filipinos who send their children overseas for education to America, Europe and neighbouring countries such as Singapore. Equal access to good education is the main pathway of upward social mobility among the poor. Due to the absence of high quality universal education in the Philippines, many Filipinos are stuck in poverty trap for generations as they are not equipped for knowledge intensive jobs.
Additional research has found that education is significant in determining levels of inequality. The author of the paper also notes several measures taken by the government to target education, like the "Education for All" (EFA) Policy. This policy aims to expand public education, up to at least the level of secondary schools.
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