The great equalizer

A businessman, who is known to be very close to President Arroyo, conceded reluctantly that her administration has definitely made headway in reducing the poverty incidence in the Philippines. Certainly true and he wisecracked to the President that the rich are indeed getting poorer in our country. The President reportedly just brushed off the businessman’s joke as one of those things that smart-alecks love to downplay her success stories in government.

When she took over the government in January 2001, the President promised to drastically cut at least by half the poverty incidence in the country. By June 2010 when her term ends, she would have served a total of 10 years. Mrs. Arroyo was given this unique opportunity to achieve what could be a miracle story because she would be the President of the Republic next to the late President Ferdinand Marcos who served the longest in office. Marcos stayed in power for 20 years.

The Arroyo administration seeks to highlight the breakthroughs in anti-poverty programs to bring up the quality of life of the greatest number of Filipino families across the country. While there could indeed be a significant reduction in the poverty incidence in the country, the gap between the rich and poor remains a wide divide.

The fact remains that the richest 10 percent of families in the Philippines continue to rake in more than one-third of total income generation in the country. As most leftist leaders love to shout in the streets, the rich are getting richer and the poor are getting poorer. Nothing could be far from the truth even if we look at government-generated statistics. This could be gleaned from the 2006 Family Income and Expenditures Survey (FIES) results released over the weekend by the National Statistics Office (NSO). The NSO does this FIES every three years.

From the 2006 NSO survey, they calculated Filipino families earned a total of P3.01 trillion for that period. To get an idea of how the wealth is divided, this total annual income is distributed among the estimated 17.4 million Filipino families covered by the NSO survey in 2006. From the looks of it, the income distribution though, changed slightly when compared from the 2003 NSO survey in 2006 to the evaluation of “income deciles” as used in the FIES. “Income decile” is the distribution of families into 10 groups in terms of annual family income. The first decile has the lowest income and the tenth decile has the highest income.

The 10 percent richest families that comprised the tenth income decile, or 1.74 million families, earned 36 percent of the total 2006 family income in the Philippines. This is slightly lower than their share of 36.3 percent or P0.88 trillion in 2003. If it is any comfort, there appears to be a very slight “narrowing of the gap” between the tenth and first deciles that could be seen in 2006 FIES statistics.

The total family income of the tenth decile in 2006 was about 19 times more than that of the first decile, while it was 20 times that of the first decile in 2003. This is because the share of 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. So maybe there is a little bit of grain of truth to the humor thrown the way of President Arroyo by her crony businessman.

Nonetheless, a more scientific measure of this income survey indicated “a movement towards a widening income disparity among families” as suggested by the “Gini coefficient.” This is a global standard of statistical measure of income equality within the population of a country. A “Gini coefficient” ranges from 0 to 1, with 0 indicating perfect income equality among families, and 1 indicating absolute income inequality. In the 2006 FIES, the “Gini coefficient” was estimated at 0.4564. This is slightly lower than the 2003 “Gini coefficient” of 0.4605.

Beyond these technocratic terms in economic statistics, the meaning of these numbers could really cause concern and worry to the elites as expressed in a joke dished out by the likes of Mrs.Arroyo’s businessman crony. What has caused this income disparity to narrow down this bit is the fact that we have more than eight million overseas Filipino workers whose foreign exchange earnings have brought about this new wealth to a sizeable portion of our population through these years. The mighty dollars in the hands of our OFWs have become the great equalizer between the rich and the poor in our country.

The OFWs have thus become the lifeblood of our country’s economy with their billions of dollars in remittances annually. Lately, though, the weakening dollar have boosted the Philippine peso that has naturally resulted to lesser peso equivalent of OFW earnings remitted here to their families. From a high of more than P56 to $1 last year, it now ranges at an average of P40.60 to $1 at the close of trading last Friday.

I am glad to learn, though, that Finance Secretary Margarito Teves has finally acted on a long pending proposal by Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. for the national government to issue OFW investment bonds. Teves announced last week the government would come out soon with this new instrument called the OFW bonds to be launched by the Finance Department, the state-owned Land Bank of the Philippines, Hong Kong Shanghai Bank and other financial institutions. This would mop up the excess dollar savings in the hands of OFWs and their dependents to help them protect the source of their income from the negative consequence of a stronger peso.

This would certainly mitigate the adverse reduction in the family income of OFWs due to the stronger peso. The investment bond would not only enable our OFWs and their dependents to hedge from the appreciation of the peso but more importantly, it would teach and train our OFWs and their dependents to put their extra dollar earnings to productive use than splurge in luxury goods and non-essential spending. If the rich have dollar accounts, the poor OFWs can now invest in dollar bonds. It’s not really a joke after all if the rich feel they now get poorer.