The lowering of the official poverty line

By Mahar Mangahas
Philippine Daily Inquirer
First Posted 23:08:00 02/11/2011

Filed Under: Opinion surveys, Poverty

AS OF a week ago, the official time-series of national percentages of Filipino families in poverty was: 40 in 1991, 36
in 1994, 33 in 1997, 28 in 2000, 24 in 2003, and 27 in 2006?steadily going down in 1991-2003, then up in 2006.
The official frequency of poverty estimation?the job of the National Statistical Coordination Board (NSCB)?is once in
three years, making 2009 the next reference period. The year 1991 is the approximate start of the Millennium
Development Goals (MDG) period, which targets the halving of poverty by 2015, i.e., at 20 percent by then.
This week, the official data on poverty changed. Last Tuesday Feb. 8, the NSCB announced that the 2009 incidence
of poor families is 20.9 percent, based on a new (which it calls ?refined?) methodology. It also announced that the old
methodology would have put the incidence of poor families at 26.3 percent.
Thus the NSCB ?refinements? resulted in re-classifying 26.3 - 20.9 = 5.4 percent of all families (or about 1 million
families) out of official poverty in 2009. This came from lowering the average official 2009 poverty line for a family of
five to P7,017 per month with the new system, from P7,953 per month with the old system. The difference of P936
amounts to a substantial lowering of the official 2009 poverty line by 11.8 percent.
At the same time, the NSCB announced revisions of earlier years? official percentages of poor families as follows:
28.3 in 1991 (implicitly adjusting the MDG for 2015 down to 14 percent), 20.0 in 2003, and 21.1 in 2006; it had no
new figures for 1994-2000. In effect, it was saying that it had seriously overestimated poverty for two decades!
Thus the ?refinements? resulted in reducing the official poverty percentages by 12 for 1991, by 4 for 2003, and by 6
for 2006. These correspond to very large numbers of families, and even larger numbers of people, reclassified from
poor into non-poor. The new poverty lines dropped by 11.4 percent in the case of 2006, and by 10.2 percent in the
case of 2003, from the old poverty lines.
However the new lines came about, I believe that they amount to a downgrading of the official poverty line in terms of
living standards. I am not swayed by the claim in the presentation of Dr. Lisa Bersales, head of the small working
group on estimation of food thresholds of the Technical Committee on Poverty Statistics, that: ?The definition of
poverty did not change. The refinements are only meant to better measure the poor.?
For a given year, at given consumer prices, the reduction of a money-denominated poverty line must be due to some
reduction of quantities and/or qualities of consumer items prescribed as the borderline living standard.
How did the NSCB discover new ?least cost food bundles? that are cheaper than the previously prescribed bundles,
yet equally nutritious? What are these new bundles? Were they available to the poor in earlier years also?
Incidentally, the NSCB has no counterpart research on least cost non-food bundles for the poor; instead it uses a
rule-of-thumb ratio of food to non-food spending. In its new report, the food threshold is 69 percent of the total
threshold, i.e., if a rise in the cost of food requires an extra P69 for minimum food spending, then another P31,
exactly, will be allotted for non-food spending, regardless of changes in the cost of any non-food items.
Official poverty was flat. For either new or old methodology, the new NSCB report amounts to an official admission
that poverty was flat over 2003-2009.
There is no escaping the conclusion that the substantial growth in 2003-2009 of real GNP per capita by 24 percent,
and of real Personal Consumption Expenditures by 20 percent, had no effect on poverty (see my ?Six years of
unshared growth? column of Dec. 4, 2010).
Thus what the country needs is an economy more structured towards helping the poor, not merely one that grows
faster.
Keeping up appearances. I wonder if the poverty-line reduction is connected to a desire to improve the Philippine
poverty ranking in the region.
I notice that the new NSCB report lists the following percentages of population (not families) in poverty?Lao PDR 33.5
(2003), Myanmar 32.0 (2005), Cambodia 30.1 (2007), Philippines 26.5 (2009), Vietnam 14.5 (2008), Indonesia 14.2
(2009), Thailand 8.5 (2008), and Malaysia 3.6 (2007)?showing three countries with worse poverty than the
Philippines.
The new Philippine 2009 figure of 26.5 percent of people poor corresponds to 20.9 percent of families poor; the
former is higher than the latter because the poor have relatively large families. However, with the old poverty lines,
the NSCB?s Philippine rate of people poor is 37.3 percent (corresponding to 26.3 percent of families poor), and will
appear as the worst in Asean.
No more official data until 2014? My main disappointment with the NSCB is its failure to develop a means of tracking
poverty annually, if not more often. Under its current schedule, its next report on poverty is due only in February
2014. After that the next will be due only in 2017.
A government that seriously aims to reduce poverty cannot afford to wait so long between official poverty reports. I
recommend use of the Labor Force Surveys and/or the Bangko Sentral?s Consumer Expectations Surveys to obtain
practical, non-monetary yet valid, official measures of poverty quarterly and nationwide.