Understanding President Duterte #2: The fight against poverty
- During the first six months of 2015, 26.3% of the population was below the poverty line.
- The poverty line at that time was P9,140 per month for a family of five.
- The poverty line was 17% higher than it had been in the first half of 2012.
- “An additional monthly income of Php 2,649 is needed by a poor family with five members in order to move out of poverty in the first semester of 2015.”
The Philippine Statistics Authority (PSA) has elegant ways of calculating the impacts of poverty, but the methodologies, which include various statistical tests of probability, are a challenge those of us who prefer literature to statistics. I suppose that’s why the 2015 PSA report is signed by a PhD, to cut through our certain befuddlement to show that at least THEY know what they are doing.
Here’s my more simple way of looking at it.
The poverty goal is a moving target. It’s not a stationary bull’s eye, it is a duck moving across the shooting range at variable speeds, those speeds determined by:
- How fast babies are being made (5,000 per day) or 1.9% annual growth.
- How fast consumer costs are rising (causing that afore-cited 17% increase in the poverty line from 2012 to 2015).
The ammunition we have to throw at it comes from a number of guns, but they are pointed all over the place, because there are other targets to shoot at in nearby ranges: rabbits, frogs, spiders, ants . . . national defense, agriculture, energy, teacher’s salaries, judges and other creatures on the move.
How much money does the Philippines have? Well, it’s annual government budget is now around three trillion per year. But there is also this animal called gross domestic product that generates the riches that build the high rises and incent stock holders to invest in a company. The socialist mantra of re-allocating wealth presumes the nation can continue to grow its wealth yet funnel more of the profits from fat cats to starving cats. It is a wobbly presumption because socialist nations usually find productivity lags as money is sucked away from those doing the innovation and work needed to generate wealth. So there ends up being less money for everyone.
We can tuck that in the back of our minds.
Let’s start by sizing the population. From here on forward, consider this brainstorming built on a few assumptions that I’ll make. It is aimed at helping us understand the scope of the problem.
- The Philippine population today is pegged at 102 million, plus or minus a few hundred thousand.
- That calculates out to be 20.4 million “families of five”.
- Figuring 26% of the families are below the poverty line, we have 5.3 million families below the poverty line.
- At a gap of P2,700 per family per month to get them above the line, we have a pooled need of about P14.3 billion monthly . . . or P172 billion for the entire year . . . if we just did a cash payout to get those families up. Like PPPP on steroids.
Well, now let’s move the ducks. If population growth is a nice round 2% and costs go up at 4% a year, then next year, our payout will be P182.2 billion. And something similar until people have gotten the jobs needed to move themselves out of poverty with no assistance from the government.
The more jobs the government can create, the more people can help themselves out of poverty. So we start to look with attraction on ways to build, say, manufacturing, which can generate from 3 to 5 related jobs for each manufacturing job.
We can also look at the national budget and see that P172 billion is 5.7% of P3 trillion. To put things in perspective, the 10 departments receiving the highest allocations in the 2016 budget are:
- Department of Education (DepEd) – P411.9billion;
- Department of Public Works and Highways (DPWH) – P384.3 billion;
- Department of the Interior and Local Government (DILG) P124.2 billion;
- Department of Health (DOH) – P123.5 billion;
- Department of National Defense (DND) – P117.5 billion;
- Department of Social Welfare and Development (DSWD) – P110.8 billion;
- Department of Agriculture (DA) – P48.4 billion;
- State Universities and Colleges (SUCs) – P47.4 billion;
- Department of Transportation and Communications (DOTC) – P42.7 billion;
- Autonomous Region in Muslim Mindanao (ARMM) P28.5 billion.
A “cash out” effort is feasible, however it likely would have to be funded through debt. Imagine transferring P172 billion from defense or health or education, and what that would mean in terms of lost jobs or resources. Factor in as well the current request of incoming DepEd Secretary Briones for an additional P45 billion to bring unschooled children into the fold.
So, yes, President Duterte could pay cash to lift a lot of people out of poverty. But it would either stress the budget or go against the grain of other efforts aimed at building the job base or teaching kids or defending the PH against terrorists and land grabbers.
And he’d have to find or fund P182 billion the next year to keep people above the poverty line.
To pay cash is the short term solution that immediately helps people and makes the President look good. To build jobs so people can earn their way up is the long term solution that makes the Philippines look good.
The following chart shows employment trends (thousands). It is a hard trend line to move, other than through natural, slow economic growth. Getting 5.3 million more jobs (remembering our 5.3 million families below the poverty line) on top of natural growth is nigh on to impossible.
It seems to me there are three elements to meaningful poverty reduction:
- Time and strong economic growth that well exceeds population growth.
- Emphasis on manufacturing or other industrial initiatives (like the BPO industry) that can leverage up jobs.
- Shift more cash to the PPPP (CCT) program, or something similar.
Poverty is deep and enduring. A quick fix would be cosmetic, and it would burden the economy and overall productivity.
The nation needs economic growth and jobs. It is somewhat disconcerting to hear the Duterte Administration’s financial people saying we should expect slower economic growth in the future. They seem to be scaling down expectations, which . . . as far as poverty reduction is concerned . . . scales back confidence that they can solve this enduring problem.