Poverty: The Philippines Most Common Problem

Poverty and inequality have been recurrent challenges in the Philippines and have again come to the fore in the wake of the current global financial crisis and rising food, fuel, and commodity prices experienced in 2008. The proportion of households living below the official poverty line has declined very slowly and unevenly in the past four decades, and poverty reduction has been much slower than in neighboring countries. The growth of the economy has been characterized by boom and bust cycles, and current episodes of moderate economic expansion have had limited impact on poverty reduction. Other reasons for the relatively moderate poverty decline include the high rate of inequality across income brackets, regions, and sectors; and high population growth.

After years of recognizing poverty as a key development problem and devising various strategies and programs for its reduction, the government is still confronting high levels of poverty and hunger among its citizens. Long and persistent periods of high poverty may harm a country’s development path as poverty itself becomes a drag to economic growth. (Asian Development Bank, 2009). According to ADB (2009), it is possible that the impact of poverty on economic growth and development of the Philippines may constrain economic expansion. Official poverty statistics from the National Statistical Coordination Board (2011) shows that the reduction in poverty over the past two decades has been quite dismal from 38% in 1988 to 26% in 2009 or less than one percent reduction per year.

Official poverty measurement in the Philippines uses the cost of basic needs (CBN approach), in which poverty lines are calculated to represent the money resources required to meet the basic needs of the household (referred to as the food threshold), including an allowance for non-food consumption (referred to as the poverty threshold) (NSCB 2005). This paper examines why poverty is the common problem in the Philippines. In section II of the paper it contains the review of related literature that provides some details on the causes of poverty, some details on the effects of poverty and discusses some solutions on how to overcome poverty in the Philippines. Section III concludes. Nature of poverty in the Philippines. According to Philip Gerson (1998), poverty is both more widespread and more persistent in the Philippines than in neighboring ASEAN (Association of South East Asian Nations) countries.

While the poverty rate has decreased in the Philippines over the past 25 years, the decline has been slower than in other ASEAN countries. Some of the blame for the Philippines’ slow progress in reducing the incidence of poverty can be attributed to past economic policies that retarded growth by discriminating against agriculture and discouraging investment in human capital. These policies, in turn, sustained powerful interest groups that blocked or delayed economic reform. The Philippines began to undertake political and economic reforms in the late 1980s and early 1990s, however, and GDP growth has accelerated to about 5 percent a year since 1994.

With faster growth, the percentage of Filipinos living below the poverty line is decreasing, but agricultural reform and increased investment in human capital would allow a more drastic reduction in the poverty rate. Impacts of poverty on economic growth and development. Economic growth is a crucial factor in poverty reduction; however, other factors such as inequality affect its impact on poverty. Consistent failure to reduce poverty and inequality may also result in a lower economic growth trajectory (Lustig et al.,2001). There is theoretical and empirical evidence proving that the cause and effect runs in the opposite direction as well (i.e., reducing povertycan help boost economic growth rates).

For example, Latin America’s persistent poverty hasbeen impeding the achievement of higher growth rates and there are reinforcing vicious circles that keep families, regions, and countries poor and unable to contribute to national growth (Perry et al., 2006). On the reverse side, there is a possibility of entering a virtuous circle where growth lowers poverty, which in turn results in faster growth. Policies that increase the incomes of the poor-such as investments in primary education, ruralinfrastructure, health, and nutrition—tend to enhance the productive capacity of the whole economy, boosting the incomes of all groups (Rodrik, 2000).

The poor track record of the Philippinesin terms of economic growth in the last threedecades has often been compared with that ofmany Latin American countries. The failure of the Philippine economy to transition to a higher and sustained level of growth has been explained recently as the result of a sustained decline in domestic investments (Bocchi, 2008), weaknesses in institutions and social infrastructure (Alba, 2007), institutional uncertainty (Pritchett, 2003) and a history and culture that has negatively affected economic activities (Nelson, 2007). However, it is also possible that poverty itself is constraining economic expansion.

The channels through which poverty may impact on economic growth include: investment capacity constraints (lack of access to credit aggravated by the underdevelopment of the financial markets); human capital constraints (lack of education, health care, and nutrition); regular doses of risks and shocks, causing poverty traps; and conflicts and disorder resulting from inequality, which hamper investments and destroy social capital (Asian Development Bank, 2009). This study is assign to answer the following questions:

1. What is the nature of poverty in the Philippines?
2. How poverty impact the economic growth and development in the Philippines?
3. What are the causes of poverty in the Philippines?
4. What are the effects of poverty in the Philippines?
5. What are some solutions on how to overcome poverty in the Philippines?

REVIEW OF RELATED LITERATURE
Causes of Poverty in the Philippines
According to Schelzig (2005), there are many interrelated causes of poverty in the Philippines. These are the following: Rapid population growth. The links between rapid population growth and persistent poverty have been, well established. Rapid population growth hinders development for two interrelated reasons. First, because it reduces growth in per capita incomes and thus savings, it reduces the funds available for investment in productive capacity. This underinvestment in turn reduces overall economic growth and prospects for poverty reduction. Second, as population growth outpaces the capacity of industry to absorb new labor, urban unemployment and rural underemployment are compounded. In 2003, the Philippine economy generated 566,000 new jobs, of which 60% were in the services sector.

Despite this job creation, unemployment levels rose because the job market was inundated with 624,000 new entrants (ADB Asian Development Outlook 2004). Orbeta (2002) reviews the empirical evidence to show that high fertility is associated with decreasing investments in human capital (health and education). Children in large families perform less well in school, have poorer health, lower survival probabilities, and less developed physically. The problem is one of resource dilution, where each additional child means a smaller share of family resources including income, time, and maternal nutrition. Orbeta (2002) further shows that larger family sizes in the Philippines are not the result of rational choice among the poor. Unemployment. Labor is the most important asset of the poor. Unemployment and underemployment are thus key determinants of poverty, as is the sector of employment.

The official unemployment rate for 2003 was 11.4% of the labor force. The labor force participation rate in 2003 was 67.1% of the population aged 15 years and over (NSCB, 2003 Philippine Statistical Yearbook). The basic problem of the poor is not so much lack of employment as the low incomes derived from employment. This has to do with both low wage rates and the phenomenon of underemployment. Underemployment, defined as the percentage of employed persons who would like to work additional hours, was 15.3% in 2002 (NSCB, 2003 PSY). The UNDP Philippine Human Development Report 2002 points out that the link between work and poverty is primarily manifested in the quality of employment. While most of the poor may be employed, they are mostly mired in jobs with low productivity and low pay.

According to Schelzig (2005), the issues of work and poverty are much broader, of course, and include, for example (i) a lack of labor rights for some categories of workers, making them particularly vulnerable to poverty (especially workers within the informal sector); (ii) child labor, the incidence of which increases the lower the household income; and (iii) informal/illegal migration, which is sometimes the only option for the poor. According to Gonzales (2012), Job generation is one of the recurring themes the politicians never fail to mention during their election campaigns. But up to this point, the country is still on the losing side in the global jobs-generation field. A certain job is being paid to provide a service or to produce and supply a product to others in the economy that they are willing to pay for. The country’s products, goods, and services hoist the economic status of the country.

Economic growth. According to Schelzig (2005), economic growth is a necessary precondition for poverty reduction, but the quality of that growth is important, and not all growth is pro-poor. The Philippine empirical record demonstrates that the poverty headcount declines when the growth rate of average family income is higher than the rate of inflation. The flipside is an increase in the poverty headcount when the reverse is true, whether or not there was overall economic growth. The Philippines provides a concrete example of GDP growth that did not reduce poverty,although the economy recorded growth of more than 4% in 3 of the past 4years. Datt and Hoogeveen (2003) analyze the dual impacts of the financial crisis and El Niño on poverty and inequality in the Philippines. When the financial crisis set in, the Philippine economy stalled.

With the slowdown in output growth came the labor market shock, with unemployment rates increasing. Inflation accelerated, and food prices increased even faster than the general level of prices with the plummeting of agricultural output. According to Schelzig (2005), the high fiscal deficit, a fluctuating regulatory environment, ambiguous enforcement of contracts, and security concerns all contribute to a lack of investor confidence. This has flattened the economic growth trends and long-term development prospects of the economy.

The list of chronic macroeconomic problems in the Philippines is long and includes: declining revenue collection causing fiscal deficit and heavy public sector debt; a poor investment climate resulting in particularly low foreign direct investment; nonperforming loans in the banking sector; a gradual loss of international competitiveness; and a governance structure rife with corruption and inefficiency ineconomic management. Effects of Poverty in the Philippines

Malnutrition. The hunger situation is alarming. The National Statistical Coordination Board (2003), stated that more than 11 million Filipinos were considered food-poor or living below subsistence level in 2003. The Food and Agricultural Organization (2005), reported that there were more than 17 million undernourished Filipinos. Food insecurity is blamed for the fact that many preschool children are underweight and malnourished. An economist pointed out that “inadequate food can adversely influence workers’ productivity.” The World Bank (1996), estimated that the total annual economic loss due to malnutrition was about US$8 billion. Poor economic growth. Canlaset. al (2009), states that the pace of growth in the Philippines is slower than that of many neighboring countries, and despite increasing growth in the period before the current global financial crisis, domestic investment remained weak, and had a declining share in gross domestic product.

Understanding limits to growth in the Philippines’ economy and how they may be counteracted is crucial for policy makers seeking to encourage economic development. The poor remain poor because they cannot borrow against future earnings to invest in education, skills, new crops, and entrepreneurial activities; they are cut off from economic activity because many collective goods (such as property rights, public safety, and infrastructure) are under-provided, and they lack information about market opportunities. Child labor. According to the National Statistics Office (2003), 3.6 million Filipino children, aged 5-17, are child laborers. When the parents just don’t have enough money to make ends meet they usually force their children out of school and send them to work out on the streets, haciendas or factories. Earning money for their food and shelter became their sole purpose, no longer the education that should have served to bring them a better future.

Solutions to Overcome Poverty
Harri et al. (2012), states that poverty can be defined as a persistent shortage of the financial means necessary to upholding a relatively acceptable or comfortable quality of life. Rising above poverty involves improving several aspects of your personal and financial well-being using a number of different methods. Guidelines on how to overcome poverty: Avoid counter-productive and spending behaviors. Assuming responsibility for ending poverty entails cutting habits out of your life that contribute to poverty. Unnecessary spending. Don’t spend money on anything you don’t need. Additionally, avoid paying full price for items that can be bought on sale, with coupons or through discount avenues such as auction sites, pawn shops, thrift stores, yard sales and consignment shops.

Betting on chance, rather than planning for a future. Studies show that the poor spend nearly twice as much on lottery tickets than the affluent. Statistically speaking, this type of spending rarely pays off, and contributes to poverty. Take advantage of government welfare programs. These programs can be used as a stepping stone for overcoming poverty, if you use the funds to offset your living expenses while you advance your financial situation. Apply with local, state and national government agencies for things like food, healthcare, education loans and grants, rent and utility assistance. Increase your income. Effectively ending poverty requires that you have a steady stream of income that not only covers your monthly financial obligations, but that also allows you to save for and invest in a future without poverty.

You may employ 1 or a combination of these methods to increase your income: Job advancement. Ask for a raise at your current job, or apply for a higher-paying position within your organization of employment. Second job. Taking a part-time job on the side can provide you with the temporary means for overcoming poverty while you work toward more permanent, full-time opportunities. Side work. If you have a marketable talent or skill, then you can use it to generate extra income for overcoming poverty. For example, you can babysit, cook meals, clean houses, mow lawns, do handyman repairs or paint to make extra money. Alternatives to occupational income. Having yard sales, auctioning items on auction websites, donating blood and participating in medical research studies are examples of ways you can increase your income outside of work. Learn about money management.

When you are on a restricted budget, it is important that you take measures to organize and allocate your income funds so that you are meeting your financial obligations as well as accounting for your future goals. Meet with a professional at a financial institution to discuss balancing a checking account, creating a savings plan and using credit accounts. Secure your future. Once you overcome poverty in the present, you can ensure your chances at staying poverty-free by taking the following steps: Education. Studies show that an education is invaluable to increasing your income and overcoming poverty for good. Education opens the door to numerous and varietal employment opportunities that would otherwise be unavailable to you.

Moreover, education better equips you to navigate through the complex network of government aid programs and money management techniques – both of which contribute to your ability to stay out of poverty. Investments. Speak with a financial advisor about investment vehicles that you can use to leverage a small amount of money into a larger one. This way you can make your money work for you, toward your goal of permanently overcoming poverty. Job benefits. Invest in employer retirement programs. Even the smallest monthly investment will add up over the long run, especially if your employer offers company matching.

CONCLUSION
Poverty in the Philippines became a country’s common problem or a scenario that its causes and effects may affects its development in terms of economic or in etc. For much of history in the Philippines and in other countries, poverty was considered largely unavoidable as traditional modes of production were insufficient to give an entire population a comfortable standard of living. From one perspective, poverty is a function of total output of an economy relative to its population–GNP per capita–and the distribution of that income among families. In the World Bank’s World Development Report (1990), the Philippines was ranked at the lower end of the grouping of lower middle-income economies. Given its relative position, the country should be able to limit the extent of poverty with a reasonably equitable sharing of the nation’s income.

In fact, the actual distribution of income was highly skewed. Although considerable underreporting was thought to occur among upper-income families, and incorrect reporting from lack of information was common, particularly with respect to noncash income, the data were adequate to provide a broad overview. The World Bank report concluded, and many economists associated with the Philippines concurred, that the country’s high population growth rate was a major cause of the widespread poverty, particularly in the rural areas.

Implementation of a government-sponsored family-planning program, however, was thwarted by stiff opposition from the hierarchy of the Roman Catholic Church. Church pronouncements in the late 1980s and early 1990s focused on injustice, graft and corruption, and mismanagement of resources as the fundamental causes of Philippine underdevelopment. These issues were in turn linked to the concentration of control of economic resources and the structure of the economy. Land ownership was highly unequal, but land reform initiatives had made little progress.

BIBLIOGRAPHY
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