Income inequality in the Philippines refers to the unequal distribution of income among individuals or households in the Philippines.
Overview Based on gathered data, the gross domestic product (GDP) of the Philippines has been growing at a rate of 6.8%.
YearAnnual GDP growth rate, constant prices20084.15320091.14820107.63220113.6620126.80120137.18120146.09620156.1320166.920177.7120186.3420196.122020minus 9.57 Source:Philippines GDP-Real Growth Rate-Economy(www.indexmundi.com)
According to World Bank Country Director Motoo Konishi, the Philippines had become a "rising tiger" in East Asia. However, at the same time, during the 2010–2011 fiscal year, the increase in the wealth of the richest families in the Philippines, amounting to 47.39%, comprised 76.5% of the GDP increase for that year. Thus, the benefits of this economic growth has not yet trickled down to the poorer segments of the population, as seen with the malnutrition, and poverty that continue to plague the country despite the fact that the economy seems to be growing.
According to Albert and Ramon, the poorest 20% of the population only had a share of 4.45% of the national income. This shows that the distribution of wealth is uneven in the Philippines for the data shows that the poorest 20% earned 14,022 pesos while the richest 20% of 176,863 pesos.
Measurement
Gini Index The Gini coefficient is also known as Gini index or Gini Ratio. It measures the degree of inequality in the distribution of family income in a country. A Lorenz curve plots the cumulative percentages of total income received against the cumulative number of recipients, starting with the poorest individual or household. The Gini index measures the area between the Lorenz curve and a hypothetical line of absolute equality, expressed as a percentage of the maximum area under the line. If income distribution were more nearly equal, the index would be lower or nearer to zero; if income distribution were more unequal, the index would be higher or nearer to 100. Zero indicates perfect equality, while 100 indicates perfect inequality. In the Philippines in 2015, the Gini Coefficient was approximately 0.4439. This is a slightly smaller number in comparison to a few years prior (in 2012, 0.4605). This means a bit more even wealth distribution across families.
Palma Ratio The Palma ratio is an alternative measure of inequality based on the work of Gabriel Palma. It is ratio of the top 10% of population's share of gross national income (GNI), divided by the poorest 40% of the population's share of GNI. Palma suggests that distributional politics relates mainly to the struggle between the rich and poor, and who the middle classes side with.
The Palma ratio could be a good comparison to the Gini coefficient measurement, and could cater the disadvantages of the commonly used Gini. These disadvantages include the fact that the measurement may give different results for individuals as compared to households. Furthermore, countries that are more diverse will display a higher regional coefficient than it does individually."Relative Deprivation and the Gini Coefficient", Shlomo Yitzhaki, May 1979
Historical background
Second World War (1942–1945) When the Japanese occupied the Philippines, those who were ruthless enough to deal with their fellow Filipinos as well as the Japanese forces became part of the elite. However, the number of people who fell to the lower classes increased and thus, became the main problem of the post-war period.Agoncillo, Teodoro (1990). History of the Filipino People. Quezon City: Garotech Publishing. p. 407. The number of people who fell into poverty increased because of the fighting which led to personal and property loss, monumental destruction, and social upheaval.Owen, Norman, ed. (2005). Emergence of Modern Southeast Asia. Hawaii: University of Hawaii. p. 290.
Since production was practically destroyed people engaged in the buy-and-sell business.Agoncillo, Teodoro (1990). History of the Filipino people. Quezon City: Garotech Publishing. p. 401. To encourage this, the Japanese created the so-called "Mickey Mouse" Money as their currency for the occupied Philippines and this caused inflation. An effect of this inflation was that prices rose to astronomical levels. A good example of this would be matches being sold at 100 "Mickey Mouse" Pesos.Agoncillo, Teodoro (1990). History of the Filipino People. Quezon City: Garotech Publishing. p. 402. This kind of money caused inflation because the Japanese had no way of backing it, thus it was worthless.
By the end of the war, irrigation facilities in farms were damaged and destroyed, and agricultural lands were neglected. Livestock also was reduced to 65%, thus a scarcity of food resulted and thus, family heads padded the numbers of their family members to get more food, thus becoming hoarders. Due to this hoarding, prices rose and thus, President Osmeña tried to solve this by prescribing the maximum prices for goods. However, in reality, the real market prices were way higher than those stated by Osmeña's order. Due to this, people had no choice but to follow the higher prices set by profiteers, since money was already circulating.Agoncillo, Teodoro (1990). History of the Filipino People. Quezon City: Garotech Publishing. p. 429.
Because of lack of food and economic dislocation, people could be seen on the streets scavenging for food or dying from diseaseAgoncillo, Teodoro (1990). History of the Filipino People. Quezon City: Garotech Publishing. p. 406. while those who were able to profit from the buy-and-sell business and war profiteers were able to join the upper class. Thus, during the Second World War, the already-present problem of income inequality grew larger to the extent that its effects, like crimes such as theft, kidnapping, and murder occur regularly.Agoncillo, Teodoro (1990). History of the Filipino People. Quezon City: Garotech Publishing. p. 565.
Republic of the Philippines (1946–1972) After the Philippines became an independent nation in 1946, the politics of the nation remained as it was during the period before the war even though in theory, it was a constitutional republic similar to that of the United States. However, the gap in income between the wealthy landlords and their tenants and the landless workers was so great that it led to the problem of agrarian unrest and the Huk movement. This movement was crushed by President Ramon Magsaysay using reforms and military force.Church, Peter (2009). "Philippines". A Short History of Southeast Asia. Singapore: John Wiley and Sons. pp. 124–139. During Magsaysay's term, the country began to prosper again due to the war reparations from the Japanese and US Korean War spending.Owen, Norman, ed. (2005). Emergence of Modern Southeast Asia. Hawaii: University of Hawaii. p. 293.
Despite Magsaysay taking time to listen to the masses and doing his best to develop the impoverished areas of the country, he failed to really improve their lot because they became dependent on him to uplift them. This was because he had failed to tell them that he needed their help and he lacked a blueprint for uplifting them and ending their gap with the rich. Thus, Magsaysay failed to put an end to the inequality between the masses and the elites.Agoncillo, Teodoro (1990). History of the Filipino People. Quezon City: Garotech Publishing. p. 468.
When Diosdado Macapagal was elected president to succeed Carlos P. Garcia, his plan for the economy stated that he planned to resolve income inequality by making possible conditions that provided more income to those who need more to be able to meet their basic needs. He also planned to continue President Garcia's "Austerity Program" with his slogan of "simple living".Agoncillo, Teodoro (1990). History of the Filipino People. Quezon City: Garotech Publishing. p. 473. However, this plan was undermined by his fellow Kapampangans and other members of the elite for they threw luxurious parties for him. Thus, Macapagal's "simple living" turned out to be mere rhetoric and only was true for the poor.Agoncillo, Teodoro (1990). History of the Filipino People. Quezon City: Garotech Publishing. p. 474.
Martial Law (1972–1991)
In 1972, President Ferdinand Marcos placed the Philippines in a state of Martial Law promising economic growth and making it more acceptable to the business and international community while allowing Marcos even more control over the Philippine economy. According to Marcos, his New Society, which was supposed to be the result of Martial Law, was based on the discontent of the poor which led to their struggle against the ruling classes.Marcos, Ferdinand (1976). Notes on the New Society II:The Rebellion of the Poor. p. 2. To help alleviate the unequal distribution of wealth in the Philippines, Marcos ordered that all land holdings that were larger than 7 hectares were to be distributed to landless tenants while the owners were given just compensation.Agoncillo, Teodoro (1990). History of the Filipino People. Quezon City: Garotech Publishing. p. 576.
Another reform implemented by Marcos during the Martial Law period was that corporations were ordered to start selling their shares to the public so that these companies were no longer owned only by a single family and their friends, but also by those who were willing to become shareholders by purchasing stocks. This reform helped alleviate income inequality to a certain extent for it allowed income to be distributed to the lower middle class.
However, the "crony capitalism" of President Ferdinand Marcos only made the gap between rich and poor wider because funds that could have been used for crucial development needs were siphoned off to be used for the benefit of Marcos and his allies. Due to this, the problem of income inequality that was very much present even during the period of the Third Republic was made worse. This led Rep. Stephen Solarz of the 13th District of New York to observe in 1986 that more than half of the Filipino population was living in squalor while Marcos and his allies were living in luxury.
Real wages fell from 1970 and 1975 and remained stagnant until 1986. While poverty incidence was 42% in the 1960s, it rose to 52% in 1971 and 59% toward the end of Marcos's dictatorship. Due to the economic decline that began under Marcos's martial law, the Philippines was sometimes called the "sick man of Asia".
EDSA Revolution to the present (1986– ) Due to the success of the EDSA Revolution, Marcos and his family fled to Hawaii and Corazon Aquino became the new Philippine President. When she took power, President Aquino was able to restore democracy and basic rights such as the writ of habeas corpus and free speech.Owen, Norman, ed. (2005). Emergence of Modern Southeast Asia. Hawaii: University of Hawaii. p. 461. However, when she redistributed the corporations of the cronies, these companies were sold to Chinese businessmen and members of the old elite.Owen, Norman, ed. (2005). Emergence of Modern Southeast Asia. Hawaii: University of Hawaii. p. 462. President Aquino was an honest leader, but she was not able to solve other issues because of instability caused by attempted coups staged by the military which tried to overthrow her government.