It's official: poverty has worsened despite economic growth

The rumours have been flying in the economics circles for quite a while, but now it's official-- poverty has worsened between 2003 and 2006 despite "robust" economic growth. The National Statistical Coordination Board (NSCB) just released the results yesterday (read it here) with very little fanfare and very sparse analytical text (probably to discourage the more numerophobic reporters).

This finding is based on the 2006 Family Income and Expenditure Survey (FIES, n = 38,483 households), which is conducted every three years. First, let us define "poor". A family (NSCB's preferred term for household) is considered "poor" in 2006 if it had an annual per capita income of P15,057, or each member was living on P1,254.75/month. For a family of five, this would translate to a monthly income of P6,273.75. In 2003, the poverty threshold was P12,309 per capita, or P1,025.75/month for each family member, or a monthly income of P5,128.75 for a family of five (the difference in thresholds is due to inflation).

The 2006 FIES finds that:

• 26.9% of families were poor in 2006, up from 24.4% in 2003
• 32.9% of Filipinos were poor in 2006, up from 30.0% in 2003
• the number of poor families increased by 700,000 from 4.0 million in 2003 to 4.7 million in 2006
• the number of poor Filipinos increased by 3.8 million from 23.8 million in 2003 to 27.6 million in 2006

Now consider the following economic "achievements":

• real GDP growth was recorded at 4.9% in 2003, 6.4% in 2004, 4.8% in 2005, and 5.4% in 2006
• real GDP grew from P1.154 trillion in 2004 to P1.276 trillion in 2006, or a three-year growth rate of 10.6%

Therefore, during a three-year period that saw a 10.6% economic expansion, the number of poor Filipinos increased by 16.0%. Assuming a 2.36% annual population growth, the population would have grown 7.25% during the three-year period. So, crudely speaking, 7.25% of the 16.0% increase in poverty incidence can be explained by population growth, but 8.75% of it cannot (not-crude analysis to follow, hopefully). In other words, of the 3.8 million Filipinos added to the poverty headcount in 2006, roughly 1.7 million were the offspring of families that were already poor in 2003 and 2.1 million were from families that were not poor in 2003.

The recent "robust" economic growth, we can see, was not beneficial to the poor and, in many instances, detrimental to the borderline poor. Although the Philippine economic pie was enlarged, not a crumb of it went to the poor, instead benefitting... who knows. Worse, not only was there no trickle-down effect from "robust" economic activity, there might actually have been a trickle-up effect that extracted from the poor and borderline poor.

In other words, we have ourselves a pretty fucked-up situation.