Poverty declining, but PHL one of most unequal nations

NEARLY half or 44 million of the Philippine population are considered economically secure but the country remains one of the most unequal in the world, according to the World Bank.

Inequality, the World Bank also said, is expected to worsen in the Philippines due to the pandemic. Its latest report estimated that the country’s gini coefficient reached 45.3 percent in 2020; 45.2 percent in 2022; and 45.3 percent in 2024.

In 2018, the country’s Gini coefficient, a measure of inequality, averaged 42.3 percent. This rate was already considered one of the highest income inequality rates in East Asia, second to Thailand and the 15th most unequal country in the world.

“The Philippines aims to become a middle-class society free of poverty by 2040, but we know from global experience that no country has managed to make this transition while maintaining high levels of inequality,” said Ndiamé Diop, World Bank Country Director for Brunei, Malaysia, Philippines, and Thailand.

“Inequality of opportunity and low mobility across generations wastes human potential and slows innovation, which is crucial for building a competitive and prosperous

economy that will in turn improve the well-being and quality of life of all Filipinos,” he added.

The World Bank said with high growth rates and the expansion of jobs outside agriculture, poverty fell by two-thirds to 16.7 percent in 2018 from 49.2 percent in 1985.

By 2018, the middle class had expanded to nearly 12 million people and the economically secure population had risen to 44 million.

However, inequality remained high since the top 1 percent of earners together captured 17 percent of national income, with only 14 percent being shared by the bottom 50 percent.

The World Bank said the expansion of secondary education, mobility to better-paying jobs, access to basic services, and government social assistance have started to reduce inequality since the mid-2000s.

However, unequal opportunities, slow access to tertiary education among low-income households, inequality in returns to college education, and social norms putting the heavier burden of childcare on women has slowed down the narrowing of inequality in the Philippines.

Despite the strong recovery of growth and the labor market, the Covid-19 pandemic has partly reversed decades-long gains in reducing poverty and inequality in the Philippines.

It halted economic growth momentum in 2020, and unemployment shot up in industries that require in-person work. In 2021, the national poverty rate rose to 18.1 percent despite government assistance.

“Inequality shapes outcomes later in life, such as employment opportunities and income, which in turn influence how much support adult Filipinos are able to provide for their children to help maximize their potential,” said Nadia Belhaj Hassine Belghith, Senior Economist with the East Asia Poverty Global Practice covering Thailand and the Philippines, who led the study.

Recovery in the Philippines is uneven across the income distribution and the poorest who suffered the most from Covid have yet to fully recover their incomes.

With food prices going up, many families coped by reducing their consumption, including eating less. These coping strategies can have serious consequences on the health and nutrition of children in these vulnerable households.

The report says that inequality starts even before birth and is perpetuated over the life cycle. It starts with maternal nutrition and health during pregnancy.

Differences continue into childhood, where disparities in access to health care, proper nutrition, safe drinking water, sanitation, and quality education determine the extent to which a child’s human capital develops.

The World Bank said policy priorities to reduce inequality in the Philippines can be structured around three themes, including healing the pandemic’s scars and building resilience, setting the stage for a vibrant and inclusive recovery, and promoting greater equality of opportunity.

Healing the pandemic’s scars will require promoting greater vaccine booster uptake, overcoming the learning loss due to Covid-19, strengthening social assistance, unemployment insurance programs for the informal sector, and taming inflation.

Setting the stage for vibrant recovery entails reskilling of workers, promoting entrepreneurship, increasing the participation of women in the labor force, and raising the productivity of agriculture.

Promoting greater equality of opportunity entails increasing access to quality health care, increasing equality of opportunity in education, and improving access to quality housing, among others.

Equality of opportunity needs to target the lagging regions and other people disadvantaged in accessing these because of the circumstances of their birth.

Image credits: Nonie Reyes