Family Income Distribution in the Philippines, 1985-2009: Essentially the Same

A presentation by Mr. Tomas Africa at Social Weather Stations, Quezon City 18 March 2011

Outline of Presentation
A. Median Income B. Income of Top 1% families C. Coefficient of Variation of the Percentiles D. Gini Coefficient E. ABCDE Socio-economic Classification F. A Digression: Cut-offs for the Middle Income Class G. Summary
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A. Median Income
Table 1. Median Income and Income Distribution, 1961 - 2009 Family Income Median income (x P1,000)
% Income Share of upper 50% families

1961 1 82 18

1985 20 80 20

2000 89 82 18

2003 95 81 19

2006 111 81 19

2009 135 80 20

% Income Share of lower 50 % families

From 1961 to 2009, nearly half a century: Upper 50 percent of families had 80 percent of income. Lower half had 20 percent. As of 2009, the distribution appeared to be the same at the end of Martial Law days.

B. Income of Top 1% Families

Table 2. Top 1% Families and Bottom % Families Income Comparison 1985
Number of Top 1% Families (x1000)

2000 150 251.2 5.8 38% 249.6

2003 165 235 5.3 32% 227.1

2006 174 256.3 5.2 30% 257.9

2009 185 342.7 5.5 30% 343

100 31.4 3.15 32%

with Aggregate Income (PhP billion)

Equivalent to
Number of Families (in millions) % of Total with Aggregate Income (PhP billion)

31.3

B. Income of Top 1% Families

Table 2. Top 1% Families and Bottom % Families Income Comparison 1985
Number of Top 1% Families (x1000)

2000 150

2003 165

2006 174

2009 185

100

with Aggregate Income (PhP billion) Equivalent to Number of Families (in millions) % of Total with Aggregate Income (PhP billion) 31.3 249.6 227.1 257.9 343 31.4 251.2 235 256.3 342.7

3.15 32%

5.8 38%

5.3 32%

5.2

5.5

30%

30%

The 1:30 ratio in 2009 remained, or stabilized, at the same ratio in 2006.
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B. Income of Top 1% Families

The top individual taxpayers of 2009 released by the Bureau of Internal Revenue (BIR) in accordance with Section 71 of the National Internal Revenue Code of 1997. These individuals may not have been covered by the survey as their transactions would be categorized as statistical rare events and thus would have little chance or probability of being selected as samples.
Table 3. BIR Top Individual Taxpayers 2009
Rank 1 2 3 4 5 Taxpayer Elaine B. Gardiola Wilfredo B. Revillame Ronaldo R. Soliman Ramon S. Ang Oscar M. Lopez Tax Due P59.54M P57.25M P36.70M P26.44M P25.70M Rank 6 7 8 9 10 Taxpayer Henry Sy, Sr Carlos D.C. Ejercito Bonifacio D. Gumboc, Jr Ma. Teresa P. Gallego Felipe L. Gozon Tax Due P25.18M P25.02M P24.74M P24.45M P22.20M

B. Income of Top 1% Families

Families in top 1 percent in income distribution might be under-represented in FIES. Highest gross income in 2009 FIES P 30.4 million. Using a 28.50% effective rate on the average; i.e. that is how much of gross income is paid as tax (from Former Finance Undersecretary Milwida Guevarra). Tax Due of biggest income earner in 2009 FIES roughly estimated at P 8.65 million. From BIR data, the respondent could be among the top 85 taxpayers.
Table 3. BIR Top Individual Taxpayers 2009
Rank 84 Taxpayer Eric Van Oppens Tax Due P8.83M Rank 85 Taxpayer John Lloyd Cruz Tax Due P8.60M

B. Income of Top 1% Families

The total income of 100th percentile in 2009 FIES P 342.74 billion. The percentage undercount of the top 1 percent can be roughly estimated to be 1.3 percent (PhP 4.45 billion divided by PhP 342.74 billion). This is not too significant an amount to alter percentage shares of the income distribution.

C. Coefficient of Variation of Percentiles

Coefficient of variation (CV) is the standard error expressed in terms of the arithmetic mean (average). It is a measure of dispersion, a measure of disparity. CV is useful because the standard error of samples can be better understood in the context of the arithmetic mean of the data.
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C. Coefficient of Variation of Percentiles, 2009

5.00

In c o me C V s F IE S 2009

4.00

3.00

2.00

1.00

1s t

31s t

61s t

91s t

4th

7th

10th

13th

16th

19th

25th

28th

34th

37th

40th

43rd

46th

49th

55th

58th

64th

67th

70th

73rd

76th

79th

85th

88th

94th

97th

100th

22nd

52nd

82nd

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0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

Pe rc e
4.00% 5.00% 6.00% 7.00% 8.00%

0.00%

1.00%

2.00%

3.00%

Income CVs FIES 2006

C. Coefficient of Variation of Percentiles, 2006

C. Coefficient of Variation of Percentiles, 2003

Income CVs FIES 2003

nt ile 3r d 6t h 9t h 12 th 15 th 18 th 21 st 24 th 27 th 30 th 33 rd 36 th 39 th 42 nd 45 th 48 th 51 st 54 th 57 th 60 th 63 rd 66 th 69 th 72 nd 75 th 78 th 81 st 84 th 87 th 90 th 93 rd 96 th 99 th

1s t 4t h 7t h 10 th 13 th 16 th 19 th 22 nd 25 th 28 th 31 st 34 th 37 th 40 th 43 rd 46 th 49 th 52 nd 55 th 58 th 61 st 64 th 67 th 70 th 73 rd 76 th 79 th 82 nd 85 th 88 th 91 st 94 th 97 th 10 0t h

12

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P er ce
10.00% 12.00%
4.00% 5.00% 6.00% 7.00%

0.00%

1.00%

2.00%

3.00%

0.00%

2.00%

4.00%

6.00%

8.00%

nt ile

3r

C. Coefficient of Variation of Percentiles, 1985

C. Coefficient of Variation of Percentiles, 2000

Income CVs FIES 1985

Income CVs FIES 2000

6t h 9t h 12 th 15 th 18 th 21 st 24 th 27 th 30 th 33 rd 36 th 39 th 42 nd 45 th 48 th 51 st 54 th 57 th 60 th 63 rd 66 th 69 th 72 nd 75 th 78 th 81 st 84 th 87 th 90 th 93 rd 96 th 99 th

1s t 4t h 7t h 10 th 13 th 16 th 19 th 22 nd 25 th 28 th 31 st 34 th 37 th 40 th 43 rd 46 th 49 th 52 nd 55 th 58 th 61 st 64 th 67 th 70 th 73 rd 76 th 79 th 82 nd 85 th 88 th 91 st 94 th 97 th 10 0t h

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C. Coefficient of Variation of Percentiles

Any significant change aside from those at the tails, both at lowest & highest ends?

The general look of the distribution is that of a flat-liner, bereft of activity showing change. Family incomes are clustered closely together. Groupings due to a cut-off, for instance, a point/line representing the poverty threshold, would appear to be insufficient
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C. Coefficient of Variation of Percentiles

Table 4. Distribution of Percentile CVs, 2009 CV (in %) 0.01 -0.1 0.11 - 0.2 0.21 - 0.3 0.31 - 0.4 0.41 - 0.5 0.51 - 0.6 0.61 - 0.7 0.71 - 0.7 0.81 - 0.9 0.91 1.0 1.01 + Frequency 89 6 2 -1 ----1 1
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In 2009, eighty-nine (89) of the 100 percentile CVs were no greater than 0.1 percent

C. Coefficient of Variation of Percentiles

Income alone may not be a valid indicator of poverty classification because of observed homogeneity of incomes --- multidimensionality of poverty
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D. GINI COEFFICIENT
Gini coefficient - a measure of the inequality of a distribution, a value of 0 expressing total equality and a value of 1 maximal inequality. Gini coefficient - usually defined mathematically based on the Lorenz curve, which plots the proportion of total income of population (y axis) that is cumulatively earned by the bottom x% of population (see diagram).
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D. GINI COEFFICIENT
However, a low coefficient does not always mean an ideal condition. It could be that many incomes are similar (either low or high). In the Philippine example, the acknowledged income-poor Autonomous Region of Muslim Mindanao (ARMM) has the lowest coefficient followed by richer regions, such as National Capital Region (NCR) & Central Luzon (Region III)
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D. GINI COEFFICIENT
Table 4. Gini ratios, 2009
Region NCR CAR REGION 1 REGION 2 REGION 3 REGION 4 A REGION 4 B REGION 5 REGION 6 Ratio Region Ratio 0.4601 0.4841 0.4738 0.4737 0.4275 0.4425 0.4595 0.2948

Table 5. Gini ratios, 2006

Region NCR CAR REGION 1 REGION 2 REGION 3 REGION 4A REGION 4B REGION 5 REGION 6 Ratio Region Ratio 0.4639 0.4828 0.5054 0.4806 0.4225 0.4006 0.4452 0.3113

0.3953 REGION 7 0.4212 REGION 8 0.4086 REGION 9 0.4425 REGION 10 0.3727 REGION 11 0.4063 REGION 12 0.4004 CARAGA 0.4164 ARMM 0.4197

0.3988 REGION 7 0.4418 REGION 8 0.3953 REGION 9 0.4216 REGION 10 0.3994 REGION 11 0.4082 REGION 12 0.4106 CAAGA 0.4428 ARMM 0.4326

ARMM had lowest Gini ratio while Regions 8, 9 and 10 had the highest ratios

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D. GINI COEFFICIENT
Table 6. Gini Coefficient, Philippines Year Gini Coefficient 1985 0.4466 1988 0.4446 1991 0.4680 1994 0.4507 1997 0.4872 2000 0.4822 2003 0.4605 2006 0.4580 2009 0.4484

Movement of coefficient at national level showed an indication of more equality or less inequality over the years, with highest being in 1997 and 2000

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D. GINI COEFFICIENT
Gini Coefficients, Philippines, 1985-2009
0.5 0.49 0.48 0.47 0.46 0.45 0.44 0.43 0.42 1 2 3 4 5 6 7 8 9

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D. GINI COEFFICIENT

Of 135 countries and dependencies listed in the World Fact Book of the Central Intelligence Asia (CIA), the following rankings can be obtained. It is clear that the Gini ratio is not always reflective of state of a countrys development.
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D. GINI COEFFICIENT
Table 7. Countries with the lowest Gini Ratios
Country Sweden Norway Austria
Czech Republic

Table 8. Countries with the highest Gini Ratios

Country Brazil Colombia Bolivia Haiti
Central African Republic

Gini
Coefficient

Reference Year

Gini
Coefficient

Reference Year

Luxembourg Malta Serbia Slovakia Albania Germany

23 25 26 26 26 26 26 26 26.7 27

2005 2008 2007 2005 2005 2007 2008 2005 2005 2006

56.7 58.5 59.2 59.2 61.3 62.9 63 63.2 65 70.7

2005 2008 2006 2001 1993 1989 1993 1995 2005 2003

Sierra Leone Botswana Lesotho South Africa Namibia

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D. GINI COEFFICIENT
Table 9. ASEAN Countries Gini Ratios
Country Laos Vietnam Indonesia Cambodia Thailand Philippines Malaysia Singapore Myanmar Gini Coefficient 34.6 37 39.4 43 43 45.8 46.1 48.1 N/A Reference Year 2002 2004 2005 2007 est. 2006 2006 2002 2008 N/A

Among the Association of Southeast Asian Nations (ASEAN), it was Laos with the lowest Gini, and Singapore with the highest.

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E. ABCDE SOCIO-ECONOMIC CLASSIFICATION

Market/opinion researchers classify according through proxies of wealth/assets, aside from measure of income, to segment the (consumer) market. Conditions in community where household is Type of materials used for house Household furnishing Ownership of house and/or lot
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E. ABCDE SOCIO-ECONOMIC CLASSIFICATION

Table 10: Percent Distribution of Families, by SocioEconomic Class Socio Economic Percent Share of Families to Total Class 2007 2010 My guess-timate ABC 7 9 10 of which: AB n.a. 0.3* 1 C n.a. 8.6 9 D 68 62 60 E 25 29 30 Source: Pulse Asia, in consultation with Dr. Ana Tabunda Note: * - Undercounted due to refusals of AB respondents

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E. ABCDE SOCIO-ECONOMIC CLASSIFICATION

From the 16 April 2007 release of Pulse Asia, its nationally-representative sample has seven (7) percent making up classes A, B, and C; sixty-seven (67) percent, class D; and twentyfive (25) percent, class E. This breakdown has a sampling error of +/- 3 percent. Statistically speaking, classes ABC may be 4 to 10 percent of the population; class D, 64-70 percent; and class E, 22-28 percent.
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E. ABCDE SOCIO-ECONOMIC CLASSIFICATION

In 2010, the breakdown became: 9 percent for class ABC; 62 percent for class D; and 29 percent for class E. Class ABC can be further subdivided into class AB, 0.3 percent, and class C, 8.6 percent, although Pulse Asia estimates an undercount of class AB.
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E. ABCDE SOCIO-ECONOMIC CLASSIFICATION While statistical rigor will not be as robust, we can apply the above percentages [my guess-timates] to the income distribution and find out how much income these classes earned during the reference years.

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E. ABCDE SOCIO-ECONOMIC CLASSIFICATION

Table 11. Percent Distribution of Families & Incomes, by Socio-Economic Class, 1985 Families Cumulative Income Average Class No. Share Amount Share Income (x 1000) % (x PhP 1 mil.) % (x PhP 1 thsd.) ABC D E Total 985 5,908 2,954 9847 10 60 30 100 111,420 165,857 28,498 305,775 36 54 9 100 113 28 10 31
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E. ABCDE SOCIO-ECONOMIC CLASSIFICATION

Table 12. Percent Distribution of Families & Incomes, by Socio-Economic Class, 2000 Families Cumulative Income Average No. Share Amount Share Income Class (x 1000) % % (x PhP 1 mil.) (x PhP 1 thsd.)

ABC
D E Total

1,507
9,043 4,522 15072

10
60 30 100

838,445
1,174,919 173,886 2,187,250

38
54 8 100

556
130 38 145
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E. ABCDE SOCIO-ECONOMIC CLASSIFICATION

Table 13. Percent Distribution of Families and Incomes, by Socio-Economic Class, 2003 Families Cumulative Income Average Income Class No. Share Amount Share (x 1000) % % (x PhP 1 mil.) (x PhP 1 thsd.) ABC D E Total 1,648 9,888 4,944 16480 10 60 30 100 884,478 1,346,581 206,191 2,437,250 36 55 8 100 537 136 42 148
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E. ABCDE SOCIO-ECONOMIC CLASSIFICATION

Table 14. Percent Distribution of Families and Incomes, by Socio-Economic Class, 2006 Families Cumulative Income Average No. Share Amount Share Income Class (x 1000) % (x PhP 1 mil.) % (x PhP 1 hsd.) ABC D E Total 1,740 10,442 5,221 17,403 10 60 30 100 1,082,478 1,669,309 254,316 3,006,104 36 56 8 100 622 160 49 173
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E. ABCDE SOCIO-ECONOMIC CLASSIFICATION

Table 15. Percent Distribution of Families and Incomes, by Socio-Economic Class, 2009 Families Cumulative Income Average Class No. Share Amount Share Income (x 1000) % % (x PhP 1 mil.) (x PhP 1 thsd.)

ABC
D E Total

1,845
11,071 5,536 18,452

10
60 30 100

1,343,697
2,117,478 343,150 3,804,325

35
56 9 100

728
191 62 206
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E. ABCDE SOCIO-ECONOMIC CLASSIFICATION

When class ABC is further subdivided into class AB and class C, it becomes apparent that class AB could be the top 1 percent, with an income share equal to that of class E.
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E. ABCDE SOCIO-ECONOMIC CLASSIFICATION

Table 15-A. Percent Distribution of Families and Incomes, by Modified Socio-Economic Class, 2009 Families Cumulative Income Average Income CLASS No. Share Amount Share (x 1000) AB C D E Total 185 1,661 11,071 5,536 18,452 % 1 9 60 30 100
(x PhP 1 mil.)

% 9 26 56 9 100

(x PhP 1 thsd.)

342,736 1,000,960 2,117,478 343,150 3,804,325

1,857 603 191 62 206

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E. ABCDE SOCIO-ECONOMIC CLASSIFICATION

In summary, the shares of income of class ABC ranged from 35-38, class D, from 5456, and class E, from 8-9 percent during the period from 1985-2009, nearly a quartercentury The good news is that the income distribution has not worsened. The bad news is that it has remained essentially the same..

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F. A DIGRESSION: CUT-OFF FOR MIDDLE INCOME CLASS?

Many have been asking about the middle class in the Philippines but literature on this has been scarce. As an exercise & perhaps to start a discussion on what would be the middleclass, I would proceed with a simplistic assumption of equal income shares across groups.
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F. A DIGRESSION: CUT-OFF FOR MIDDLE INCOME CLASS?

If income is to be divided into five (5) more or less equal shares [1st 20% share, next 20% share,, highest 20% share] the cut-offs will fall in these percentiles: Table 16. Percentile Cut-offs in an Income Distribution Divided into Five Equal Groups Class 1985 2000 2003 2006 2009 A&B 96 97 96 96 96 B&C 88 89 88 87 87 C&D 73 75 74 74 73 D&E 49 53 51 51 50
40

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F. A DIGRESSION: CUT-OFF FOR MIDDLE INCOME CLASS?

Family Income, by Percentile, 2009
400,000,000,000

350,000,000,000

poverty threshold

300,000,000,000

250,000,000,000

200,000,000,000

150,000,000,000

100,000,000,000

50,000,000,000

1st

22nd

52nd

82nd

4th

7th

10th

13th

16th

19th

25th

28th

34th

37th

40th

46th

49th

55th

58th

64th

67th

70th

76th

79th

85th

88th

94th

97th

100th

43rd

73rd

31st

61st

91st

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F. A DIGRESSION: CUT-OFF FOR MIDDLE INCOME CLASS?

If income is divided into three (3) more or less equal parts, the cut-offs will fall in these percentiles:
Table 17. Percentile Cut-offs in an Income Distribution Divided into Three Equal Groups Class 1985 2000 2003 2006 2009 A&B 91 92 91 91 91 B&C 66 69 67 67 66
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F. A DIGRESSION: CUT-OFF FOR MIDDLE INCOME CLASS?

Family Income, by Percentile, 2009
400,000,000,000

350,000,000,000

300,000,000,000

poverty threshold

250,000,000,000

C
200,000,000,000 150,000,000,000

100,000,000,000

50,000,000,000

1st

22nd

52nd

82nd

4th

7th

10th

13th

16th

19th

25th

28th

34th

37th

40th

46th

49th

55th

58th

64th

67th

70th

76th

79th

85th

88th

94th

97th

100th

43rd

73rd

31st

61st

91st

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F. A DIGRESSION: CUT-OFF FOR MIDDLE INCOME CLASS?

Estimates of class ABC (Table 16) show 11-13 percent, not far from percentages (9-10) in Table 10. However, estimates of lower class that would be of concern; in Table 16, about 50 percent (one-half), and in Table 17, about 67 percent (two-thirds).
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F. A DIGRESSION: CUT-OFF FOR MIDDLE INCOME CLASS? The middle class would be somewhere in-between. In Table 16, the size of middle class [C] is about 15 percent, and if measured as difference between top (A) and bottom (E) classes, about 25 percent. In Table 17, about 25 percent.
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F. A DIGRESSION: CUT-OFF FOR MIDDLE INCOME CLASS?

The National Statistical Coordination Board (NSCB) in its website
http://www.nscb.gov.ph/headlines/StatsSpeak/2010/061510_ rav_joe.asp#table1 posted a feature article on How

Rich is Rich? One of tables as presented below can be compared to Table 17, with a significant difference with respect to high income class. This however compares with Pulse Asia estimate of 0.3 percent of class AB in Table 10.
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F. A DIGRESSION: CUT-OFF FOR MIDDLE INCOME CLASS?

Table 18. Percent Share and Magnitude of Families, by Income Class: 2000, 2003, and 2006 Income Class Year Low Income Level 2006 2003 2000 14,065,921 13,182,297 11,598,258 Percent Middle Income Level High Income Percent 0.1 0.2 0.3 Estimated Total Number of Families 17,403,483 16,494,156 15,071,942

Percent Level 19.1 19,738 19.9 25,849 22.7 51,160

80.8 3,317,824 79.9 3,286,010 77 3,422,524

Source: Special computations made by the NSCB Technical Staff using the results of the 2000, 2003, and 2006 Family Income and Expenditures Survey of the National Statistics Office
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G. SUMMARY

From the following data and discussion we can surmise that development efforts for the past five (5) decades have failed to effect an equitable/equal distribution of income.

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G. SUMMARY

The income split at the median has been at 82:18 to 80:20 in favor of the families at the upper 50 percent over the past 50 years.

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G. SUMMARY
The top one (1) percent families earned income equivalent to income earned by 32 percent of the families at the bottom of the income ladder in 1985. This peaked to 38 percent in 2000, was replicated in 2003, and moved down to 30 percent in 2006 and 2009. In twenty-five (25) years the top 1 percent gave up two (2) percent to the families at the bottom rungs.
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G. SUMMARY

The CVs show very little variation at the percentiles except those at the extreme ends, indicating little spread of income across the entire distribution. (Sampling implications?)

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G. SUMMARY The Gini coefficient, with its measure of inequality subject to misinterpretation, had moved up during the Baht financial crisis, and down from then on. The Gini ratio of the Philippines is neither among the highest nor the lowest in the world, including ASEAN.
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G. SUMMARY The shares of income of class ABC ranged from 35-38%; class D, from 54-56%; and class E, from 8-9 % percent the past 25 years, from 19852009. My computations and that of NSCB seem to agree on a very large low income class.
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G. SUMMARY
Utter lack of information on distribution of family income which the government, particularly the NSO and the statistical system, need to address. Perhaps one of reasons why the distribution has generally remained unchanged is because even if many think that this is so, there has been insufficient empirical evidence to establish its extent and chronicity
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G. SUMMARY
I also urge the NSCB to come up with an official definition of the often-used ABCDE socio-economic classification & the generic low-middle-high income classes in cooperation with academe and private sector. Many policy and decision-makers & the general public have accepted & used these rather than deciles, quintiles and percentiles. These can also help improve statistical literacy of society, in this case understanding income distribution.
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