Poverty and Inequality: After the rhetoric of the past, a look into the future

By Marivic Raquiza

Social Watch Philippines

The Philippines’ economic growth rates have averaged at 5.1 per cent since 2000, but only the elite few are benefiting. In more recent years, economic growth has ranged from 6-7% so that now, the country is heralded as one of the more important emerging economies. In the meantime, poverty incidence has remained high, reaching 26.3% in 2009, 25.2% in 2012, and 24.9% in the first semester of 2013. As many analysts have argued, it is not so much the size of the economic growth, but its nature that matters. This means that if high growth rates are not accompanied with the creation of quality jobs, this means that the gains of economic growth only benefit a few. This Southeast Asian country must craft a post-2015 development agenda that sets human rights as the normative framework, especially ensuring the right to decent work, quality basic social services and addressing long-standing inequalities. This includes completing agrarian reform, developing a progressive taxation system and supporting the revitalization of the manufacturing sector for the creation of decent jobs. Furthermore, a new international financial architecture is required to provide adequate policy space for countries like the Philippines to independently chart its own development agenda.

The aspirations and the reality that unfolded

When the Philippine government signed the Millennium Declaration in 2000, the clear mandate was to significantly reduce poverty, improve access to social services and promote global cooperation along these lines. Furthermore, the overarching framework of the 2011-2016 Philippine Development Plan is ‘inclusive growth’, defined as ‘sustained, high growth that generates mass employment and reduces poverty’. According to President Aquino, this is to be accomplished by “improving transparency and accountability, strengthening the macro-economy, boosting the competitiveness of industries, facilitating infrastructure development, strengthening financial sector and capital mobilization, improving access to quality services, enhancing peace and security for development and ensuring ecological security.”

However, twelve years since the signing of the Millennium Declaration and three years into the Aquino presidency, the above stated goals generally remain elusive. With just about two years to go before the expiry date of the MDGs, no less than the United Nations has described the Philippines’ performance in that respect as dismal, an observation that hews closely to the views of civil society and social movements (see Social Watch Report, 2010). Despite these assessments, the government claims that the country is generally on track to achieving most of the MDG goals.

In particular, poverty incidence for the first time increased from 2003 at 24.9% to 26.6% in 2006 and then slightly decreased in 2009 to 26.3% and lowered a bit to 25.2% in 2012.

Self-rated poverty and hunger, as measured by the Social Weather Station, a private survey outfit, have registered peak levels in the first quarter of this year. According to the 2009 Small Area Poverty Estimates, poverty worsened in the Philippines in the years 2006 to 2009 for young people, migrants and formal sector workers (each with 1% increase), and children and individuals in urban areas (with 0.3% increase). The poorest people today are fisherfolk (41.4%), farmers (36.7%) and children (35.1%). This means that development in the last decade has not benefited those who need it most.

However, economic growth rates have remained fairly respectable, averaging at 5.1% per cent since 2000. Today, government is proud of improved assessments from international ratings agencies about its competitiveness. This leads us to certain conclusions. In the first place, it is not so much the size of the growth, but the nature of the growth that matters. In particular, it is clear that only the elite few are benefiting from economic growth. In 2011, GDP increased by US$17 billion; on the other hand, the collective wealth of the forty richest Filipinos rose by US$13 billion in the same year (or a collective 37.8% jump), as former government official Cielito Habito recently observed.

According to Habito, this means that the increased wealth of the country’s richest forty individuals is equivalent to the bulk —76.5 per cent or more than three fourths— of the country’s overall increase in income last year, reinforcing perceptions of an “oligarchic” economy. Little wonder why the country’s Gini co-efficient —at .44— is among the highest in the region.

Second, it is a kind of growth that is unaccompanied by the creation of jobs, much less decent work. The United Nations Research Institute for Social Development (UNRISD) (2010) argues that employment is the single biggest source of income for most people. It is what keeps most individuals and families alive, and determines their ability to access a good life.  Unfortunately in the Philippines, employment, much less quality employment is not the reality for the majority of Filipinos.

According to the ILO Global Employment Trends , the Philippine unemployment rate in 2013 stood at 7.3%, the highest compared to neighboring countries like Thailand at 0.8%, Vietnam at 1.9%, Malaysia at 3.2%, and Indonesia at 6%.

Furthermore, the 7% unemployment rate has stagnated in the last five years, underscoring the fact that this indicator is not sensitive to changes in labor trends because the country’s labor force is significantly composed of self-employed workers and unpaid family workers (Raquiza, 2010). In countries like the Philippines where most people do not have adequate access to social protection, the majority of people have no recourse but to work in order to survive (ibid).

It is in this context that the underemployment rate is the more meaningful indicator. The underemployment rate has generally been high in the Philippines, registering a high average of 19.25% in the last ten years. In October of 2013, it still posted a considerably high 18.1% which means that Filipinos are working doubly, or triply harder, in order to make ends meet. The underemployed constitutes a significant part of the working poor in the country as of the 2009 Family Income and Expenditure Survey (FIES), and can mostly be found in the agriculture, forestry and hunting sector.

However, it is not just access to jobs but quality jobs that allows people to combat poverty. One can have a job but be part of that category referred to as the ‘working poor.’

Because of the bleak employment scenario, some eight million Filipinos have opted to work overseas. Their earnings, sent back to the country in the form of remittances at around USD 20 billion annually, drive consumption spending in the country. Overseas remittances benefit families at the higher end of the economic ladder, underscoring how overseas labor migration exacerbates inequalities in the country (Raquiza, 2010). Furthermore, it must be noted that there are social costs implications with the exodus of labor from the country (e.g., children growing up without a parent), as well as the creation of a brain drain to the economy. 

The long-time phenomenon of jobless growth has continued under the Aquino administration.

What went wrong?

‘Kung walang corrupt, walang mahirap’ (‘if no one is corrupt, no one will be poor’) was the battlecry of the Aquino administration as it came to power in June 2010. Three years after, the vaunted anti-corruption campaign of the Aquino administration is now seriously in doubt in light of recent corruption scandals that have been exposed in media, implicating the closest allies of the President, if not the President himself. How this will play out remains to be seen as President Aquino has less than three years left in office.

However, providing access to decent work remains as elusive as ever. The manufacturing sector is generally seen as being able to provide decent work. Indeed, the labor-intensive nature of the manufacturing sector has high employment potential, including for the less-skilled workers. Yet, a look at the structure of the Philippine economy point to a shrinking agriculture sector (from 25.1% of GDP in 1980, to 13.1% in 2009 to 12.8% in 2011), a declining manufacturing sector (from 25.7% of GDP in 1980, to 21.3% in 2009, and 19.4% in 2011) and a burgeoning services sector (from 36.1% of GDP in 1980 to 55.2% in 2009, and 55.7% in 2011).

The Philippines saw the dismantling of the manufacturing sector in the eighties due to the debt crisis that made it very difficult to import inputs needed by local industries. Furthermore, the manufacturing sector has been on a decline because it “has not benefited from intra-regional trade because the country is stuck in low-value added industries such as semiconductors and assembly-type activities”, according to Rafaelita Aldaba of the Philippine Institute of Development Studies (PIDS). Simply put, the Philippines generally imports parts and reassembles these for exports with low value-added in the process. Joseph Yap, also of PIDS, further states that “while trade in parts and components in manufacturing goods has been increasing in the Southeast Asian region, the contribution of the country’s manufacturing sector to the total economic output has deteriorated”(ibid). Citing UN data, he observed that the share of manufacturing in the Philippine GDP declined to 21.4% in 2010 from 27.7% in 1980. For Filipino women, this means that the manufacturing sector, unlike in the 70s and 80s, ceased being a source of employment for them and they have since turned to trade and services, as well as domestic work in households (Raquiza, 2010). In 2013, there was a reported increase in the output of the manufacturing sector but whether this can be sustained, especially in light of the upcoming ASEAN integration by 2015 remains to be seen.

The President, in his 2012 State of the Nation Address, points to the Business Process Outsourcing (BPOs), or more specifically call centers and allied industries, as important sources for job creation. The reality though is that, while providing much revenues into Philippine coffers (to the tune of USD 9 billion in 2010), call centers only contribute one percent to Philippine employment given its focus on skilled labor.

Generally speaking, the government’s development strategy is essentially “business as usual” which is to say, that of re ‘growing the pie’, so to speak, with the implicit assumption that when this happens, jobs will be created, and poverty will be reduced. In such a scenario, privatization is the preferred mode of the delivery of goods and services so that the role of the private sector is enhanced through public-private partnerships (PPP).  This has been the case since the post-Marcos regime and the evidence point to a weakened public sector in the delivery of goods and services like in health and education, and that the provision of basic utilities like electricity, fuel and water, are privatized, and remain expensive.

In terms of social policy, the government has placed a premium on the Pantawid Pamilya Pilipino Program (Pantawid Pamilya), a conditional cash transfer program patterned after those implemented in Mexico, Brazil and other countries. The lion’s share of social protection spending in the national budget is devoted to Pantawid Pamilya, where allocation has been dramatically increasing every year since the program started in 2007, while the budget for other pro-poor programs has suffered by comparison.

The Pantawid Pamilya is a demand-side intervention to increase access to education and health services to poor children and pregnant mothers. A study conducted by the Philippine Center for Investigative Journalism (PCIJ) however shows that the majority of health and education centers in Pantawid Pamilya sites do not pass the quality benchmarks imposed by the Department of Health and Department of Education, raising serious questions about the quality of services provided in CCT areas. For as long as the supply-side aspects are not addressed, investing huge amounts of funds constitute a huge resource leakage and waste of public resources on the part of the national government. Furthermore, part of Pantawid Pamilya’s funding are loans from the World Bank and the Asian Development Bank, which raises questions about its financial sustainability.

A small study conducted by Social Watch Philippines (SWP) among Pantawid Pamilya beneficiaries reveal that while the latter are grateful for the conditional cash grants, they believe that what will generally get them out of poverty is access to jobs. Indeed, in an attempt to respond to the popular critique of Pantawid Pamilya that it is de-linked from job provision, program planners are currently linking it up with livelihood programs. However, the efficacy of these programs bears watching. As of this writing, program planners of the Pantawid Pamilya admit that they have yet to finalize a clear exit strategy to this five year program. The main question remains: after five years, will beneficiaries exit from poverty or merely from the program? For as long as access to sustained employment in general, and decent work in particular, is not part of the equation of Pantawid Pamilya, public skepticism abounds about its effectiveness as a pro-poor program. Indeed, this very expensive program which has been in existence since 2007/2008 has yet to make a dent in reducing poverty.

In the meantime, universal access to quality education and healthcare remain elusive goals, especially given the perennial problem of underinvestment. It is worth asking: would education and health outcomes be better served by significantly increasing the budgets of the departments of education and health rather than simply through CCT?

Finally, promoting the progressive realization of universal social protection needs to be amplified in light of government’s pre-occupation with narrow targeting approaches which are riddled with exclusion (those who should benefit are not targeted and are therefore excluded from pro-poor programs) and inclusion (those who should not benefit are targeted and are therefore included) errors, and other attendant problems.

The Post-2015 development agenda: another chance at getting it right

The starting point in crafting a post-2015 Philippine development agenda l is in using human rights as the normative framework in the articulation of policies, strategies and programs. And grassroots movements for social change comprised of poor and marginalized women, men and children, regardless of age, ethnicity, (dis)ability, sexual orientation, and geographic location should be one of the key drivers in developing the post-2015 Philippine development agenda. At the core of people's participation is building their potentials and capacities —whether they be children, youth or adults.

To address long-standing inequalities in the country, redistribution and affirmative action must take center stage. This includes the long-standing quest for social justice by completing the agrarian reform program. Unfortunately, this quest is beyond reach more than ever as the newly created Save Agrarian Reform Alliance (SARA) recently scored the current administration’s dismal performance on agrarian reform, charging that it has the worst implementation rate, accompanied by rampant land conversion from agricultural to commercial lands. Asset reform, including the need to reform the tax system to make it more progressive, are urgently needed. Financing these reforms must come from revenues generated from more progressive taxation system—meaning prioritizing direct over indirect taxation, and taxing more affluent spending, to name a few measures.

Consistent with the demand of poor women and men for sustained access to decent jobs, there is an urgent need to make job creation central in the development agenda and to revitalize the manufacturing sector. This underscores the need for structural change in favor of the more dynamic sectors and that will help ensure the creation of quality jobs (United Nations Institute for Social Development, 2010). This also means pushing for reforms in the international economic and financial architecture so that adequate policy space will be opened up for countries like the Philippines to independently chart its own development agenda. In terms of climate change, while acknowledging that the Philippines’ contribution to greenhouse gas emissions lies in the vicinity of 1%, any forthcoming industrial policy must be consistent with a low-carbon path of development.

Furthermore, it must be recognized that the majority of poor women and men remain in the agricultural sector. As such, considerable investments must be made to increase the incomes and productivity of small producers through credit facilities, irrigation, farm to market roads, and the like. It is also important for farmers and fisherfolk to have access to non-farm incomes. Also, rural women must be provided with the necessary support facilities (e.g., daycare centers) and capacity-building activities in order to have greater access to sustainable livelihoods and employment.

Finally, as the poorest peoples are those located in conflict areas, and are socially excluded due to differences in culture, language, and the like, the post-2015 development agenda must include peace building and the promotion of cultural diversity. In real terms, this means addressing the historical injustice committed against indigenous peoples and the Muslims, and respecting their right to self-determination.

References:

Habito, Cielito (2012). Economic Growth for All, in No Free Lunch column in the Philippine Daily Inquirer. http://opinion.inquirer.net/31439/economic-growth-for-all. Retrieved on Oct. 26, 2012.

InterAksyon.com, the online news portal of TV5 (2012). Manufacturing revival key to Philippine economic growth - ADB report. http://www.interaksyon.com/business/29747/manufacturing-revival-key-to-philippine-economic-growth---adb-report  Retrieved on Oct. 26, 2012.

International Labour Organization (27 May, 2014). Where is the unemployment rate the highest? http://www.ilo.org/global/research/global-reports/global-employment-trends/2014/WCMS_233936/lang--en/index.htm. Retrieved on June 4, 2014.

Raquiza, Marivic (2010). On Poverty, hunger and employment: Off-track but not without hope. in Winning the Numbers, Losing the War’, the other MDG Report 2010, Social Watch Philippines: Quezon City.

United Nations Institute for Social Development (2010). Combating Poverty and Inequality: Structural Change, Social Policy and Politics. UNRISD: Geneva, Switzerland.