15 July 2008

FIES 2006: Poverty Increasing, Pattern Changing

The preliminary results of the 2006 Family Income and Expenditure Survey (FIES) released last 9 October 2007 not only showed the changing spending patterns among Filipino Families, but also raised several eyebrows on whether the country did gain something from the present administration’s anti-poverty programs. But before we discuss these issues in detail, let us try to find out first what is this survey all about.

The 2006 FIES is a nationwide survey of households undertaken every three years by the National Statistics Office (NSO). It is the main source of data on family income and expenditure, which include among others, levels of consumption by item of expenditure as well as sources of income in cash and in kind. The results of FIES provide information on the levels of living and disparities in income of Filipino families, as well as their spending patterns.

The 2006 FIES enumeration was conducted twice - the first visit was done in July 2006 with the first semester January to June as the reference period; the second visit was made in January 2007 with the second semester of 2006, that is, July to December 2006 as reference period. The same set of questions is asked for both visits.

Photo courtesy of jeridaking The number of households/families for the 2006 FIES was estimated using the 2000 Census of Population and Housing (CPH)-based population projections and information from the 2000 CPH on the average household size by province.

Survey Results

The Survey showed that the share to the total income of families belonging to the tenth decile exhibited a slight decrease, from 36.3 percent in 2003 to 35.9 percent in 2006. This is a very tiny and even negligible change in income distribution, but it is still an improvement.Relatedly, the Gini coefficient was estimated at 0.4564 in 2006, slightly lower than the 2003 ratio of 0.4605. The Gini coefficient provides a measure of income inequality within a population. A Gini coefficient ranges from 0 to 1, with 0 indicating perfect income equality among families, and 1 indicating absolute income inequality. However, if we try to further in time, the decrease in the Gini between 2000 and 2003 was more than eight times than the change between 2000 and 2006.

Photo courtesy of oebanda The Survey also showed that the average annual income of the bottom 30 percent of families (or the lowest three income deciles combined) increased by around PhP 8,000.00, while that of the upper 70 percent of families, by some PhP 31,000.00. Despite the increase for all families of about PhP 24,000.00, the total income of the top 10 percent of families accounts for 36 percent of total family income in 2006. It might be argued that this does not mean that a more equitable change took place since the bottom 10 percent accounted for only 1.9 percent of the total income. However, this is still an improvement considering that the share of the top 10 percent of families use to be more than 36 percent.

Spending Patterns

Accompanying the slight change in income distribution is the slight change in spending pattern among the poor. In 2006, 59 percent of all expenditure by the bottom 30 percent of families was on food, while it was 60 percent in 2003. This means that for every PhP 100 spent by this group in 2006, PhP 59 went to food, compared to PhP 60 in 2003. Even if it decreased slightly, it still accounts for almost half of the family’s total spending.

Consequently, there was a decrease in the shares of other expenditure items consumed by the bottom 30 percent of families like tobacco (2.0 percent to 1.7 percent), clothing, footwear and other wear (2.5 percent to 2.0 percent) and house maintenance and minor repair (0.5 percent to 0.2 percent). Notable increased can be observed in medical care (1.4 percent to 1.7 percent), utilities (6.6 percent to 7.3 percent), transportation and communication (3.2 percent to 3.8 percent) and taxes (0.2 percent to 0.5 percent).

Photo courtesy of Daniel Y. Go The non-poor or the upper 70 percent, managed to defend themselves much better from the decrease in their average real family incomes. Although their food expenditure slightly decreased from 40.0 percent in 2003 to 39.3 percent in 2006, they managed to decrease their tax shares from 2.3 percdent in 2003 to only 0.6 percent in 206. Hence, they were still able to spend in utilities (6.6 percent to 7.7 percent), transportation and communication (8.2 percent to 8.7 percent), household operation (2.1 percent to 2.4 percent), education (4.5 percent to 4.7 percent), medical care (2.3 percent to 3.0 percent) and house maintenance (0.8 percent to 1.8 percent). It is obvious now what the rich consider as their priorities as compared to those of the bottom 30 percent families.

What are the Implications?

Although the total income of Filipino families increased, both in nominal and in real terms, between 2003 and 2006, average family incomes decreased in real terms. This means that an average family in 2006 could buy fewer goods with its income than it could in 2003.

Why is this so? The answer is simple: population growth. Even if the government continue to harp about its economic policies that led to the increase in total income, it cannot be denied that the number of Filipino families continue to grow faster than the rate of increase in income. From about 16,480,000 families in 2003, the number of families grew to about 17,408,000 or 928,000 families were added in just 3 years. As former National Economic and Development Authority (NEDA) Director-General, Solita Collas-Monsod, put it "… even as the national 'bibingka' [pie] became larger, the share of each partaker became smaller, can only be due to one thing: the number of those partaking of the bibingka increased at a faster rate than the rate at which the bibingka increased." (PDI, 26 January 2008)

Photo courtesy of oebanda Knowing that the poorer families are also the ones with large number of members, the per capita figures would be worse compared to those in the top 10 percent of families. This is consistent with the observation of foremost poverty expert, Arsenio Balisacan, when he mentioned during the University of the Philippines' Centennial Lecture Series (A Centennial Conversation: Poverty: Facts, Theories and Remedies), that the percentage of people whose incomes are below the official poverty threshold increased by two percentage points (to 32 percent from 30 percent) between 2003 and 2006.

It is also mind boggling that although the FIES tells us that poverty must have increased from 2003 to 2006, what with average incomes decreasing, the National Income Accounts estimates for the same period reported that real per capita gross domestic product has increased. Is this possible? Maybe we will try to answer this in another article.