When enough is not enough
Updated: Dec 23, 2020
What causes poverty? How are we supposed to address it? These are the million dollar questions - which are probably worth more than millions of dollars!
You have probably heard a lot of insights and opinions about this topic; some from economic experts telling us the secrets of capital formation, trade, globalization, or even driving a specific sector in the country to further achieve economic growth and consequently achieve economic development. Poverty alleviation structures can come from many angles depending on which part you are peeking from and what you see from that end - if you ask teachers or people from the academe, you could easily get education improvement or increased regards to literacy as keys to alleviating poverty in the Philippines; if you ask medical practitioners, you would probably get answers in health improvement and lifestyle development as key factors affecting productivity that can ease poverty; or if you ask the business industries you would probably get increased spending and entrepreneurship as the answers to the improvement of our economy. But improvement and development are somehow subjective. And recently I have reached a point when I was asked, if further development is something Filipinos really want to achieve, or are we simply happy and content with what we have obtained.
Mayantoc Tarlac Municipal Councilor Erika Rafael has much to say about it.
Councilor Rafael pointed out “Filipinos’ contentment to the way we’re living” as the main reason for poverty in the country. “Maging masaya ka sa kung anong meron ka,” is a line the councilor claims to be rampant in many rural areas. She has shared that many of us are fine with achieving even just a little more than what we previously have in life and swift in considering those as successes. While it is never wrong to celebrate small wins and successes, her point was more towards being keen in long-term solutions and higher regards to our future and those of the next generations’.
Meeting a few people in their municipality, Rafael shared that there were many who would opt to sell their poultry subsidized by the local government through a project, after just a couple of months without even thinking of expanding the assets as businesses for more reliable sources of income. This sometimes ends up in many of them running back to the local government for additional support. She added that many 4Ps (Pantawid Pamilyang Pilipino Program) recipients have used their money in non-essentials like gambling and cigarette smoking, instead of purchasing pertinent items like food and school materials ought to support their studying children. A few also go for pawning their 4Ps cash card to obtain fast money. Her examples are actual scenarios happening on the ground which reflects the perception of many of us of progress being synonymous to immediate happiness.
The Pantawid Pamilyang Pilipino Program (4Ps), as the Official Gazette of the Philippines defines it in article, is a human development measure of the national government that provides conditional cash grants to the poorest of the poor, to improve the health, nutrition, and the education of children aged 0-18. It is patterned after the conditional cash transfer (CCT) schemes in Latin American and African countries, which have lifted millions of people around the world from poverty. This program, primarily governed by the Department of Social Welfare and Development (DSWD), is a flagship project of the Aquino administration. Its core objectives are social assistance and social development, and it helps the Philippine government fulfill its commitment to the Millennium Development Goals (MDGs) - specifically in eradicating extreme poverty and hunger, in achieving universal primary education, in promoting gender equality, in reducing child mortality, and in improving maternal health care. In November 2019, the Department of Finance (DOF) through their official website reported that Finance Secretary Carlos G. Dominguez III, on behalf of the Philippine government, and World Bank Country Director Mara Warwick signed a loan agreement providing an additional US$300 million financing for the 4Ps under the second phase of the Social Welfare Development and Reform Program, this time under the Duterte administration.
While there are unwanted stories about 4Ps like that of Rafael’s, the program has been recognized as the third largest conditional cash transfer program in the world by number of beneficiaries, and given the top rating of “highly satisfactory” by the Independent Evaluation Group (IEG) based from data showing that 4Ps increased the uptake of children’s health and education services in the poorest households in line with its objectives, and it stands remarkable because it implemented an effective system to identify beneficiaries and deliver cash transfers to them in a regular and reliable way, all in less than four years.
When asked about what she thinks causes the behavior displayed by some of the people in poor communities, Councilor Rafael was quick in saying that it is not the lack of formal education. She adds that many college graduates, at least in their municipality, are still lacking skills in managing finances and are content with what they have after graduation, or with a simple work afterwards. So even with high education, some tend to just be fine with how their family is living, which equates to having communities of people being fine with how the entire place is doing. But could her views be right, and does it even make economic sense?
Contentment is a state of being that’s presently impossible to precisely measure, and the closest data we can look at (also based on the councilor’s explanation of contentment) would be that of the happiness index. The research “The Philippines Happiness Index: Towards Measuring The Progress of Societies” by Mr. Romulo A. Virola, Secretary-General, and Ms. Jessamyn O. Encarnacion, Chief, Social Sectors B Division, National Statistical Coordination Board, Philippines, states that The Philippine Happiness Index (PHI) was meant to measure happiness that can be combined with "conventional" economic indicators to come up with a more relevant measure of the progress of a society.
The guiding principle in coming up with the PHI is the fact that economic progress and happiness are not synonymous. It is therefore important to integrate in a measure of progress of Philippine society the two distinct although not mutually-exclusive concepts of economic progress and happiness. However, one of additional findings on the paper says that 8 out of 10 respondents think that progress is actually synonymous with happiness.
Putting together data from the World Bank and the World Happiness Index Report 2017 - 2019, the Philippines ranks 52nd in the World Happiness Ranking with a happiness index of 6.006. This is behind Singapore’s 6.377 happiness index at the 31st place with its 2018 GDP per capita of 64,582 USD. On the other hand, the table below shows how the idea of Filipinos’ contentment could be pulling growth which consequently slows down poverty alleviation.
Figure 1. GDP Per Capita and Happiness Index of select Southeast Asian Countries
Happiness Index (World Happiness Index Report 2017 - 2019)
All of these comparisons with some of our Southeast Asian neighbors, plus South Korea, which is at the 61st on the world happiness ranking (9 ranks behind RP’s) but with GDP per capita more than ten times ours, tell us that although we’re running late in terms of economic growth we are happier. It also sounds different when delivered the other way around - although we are happier, we are running late when it comes to economic growth vs other countries. Does this mean that Filipinos are plainly happy with what they have? Does this mean that Indonesia’s economic growth can be further pushed by its people’s desire to be happier and subsequently increase GDP per capita even farther from the Philippines’?
The law of diminishing marginal productivity is a concept we can look at next. According to Investopedia, the law of diminishing marginal productivity suggests that managers find a marginally diminishing rate of production return per unit produced after making advantageous adjustments to inputs driving production. When mathematically graphed this creates a concave chart showing total production return gained from aggregate unit production gradually increasing until leveling off and potentially starting to fall. Applying this to our claim, Filipinos’ productivity increase starts to diminish at a certain point - in this case, at a certain level of happiness. This shall be represented by the point touching the red line on the figure below.
Figure 2. Illustration of Diminishing Marginal Return
Similar to how much less a runner desires for water the more he gains access to it towards the end of a marathon, Philippine workforce’s desire to be more productive is affected by how content or happy they are with what they get in return (pay/salary/earnings), and to believe that they have enough would probably mean the beginning of the diminishing desire to be more productive.
According to a report from the National Economic Development Authority (NEDA) released March 2020, the Philippines’ Underemployment rate, is down to 14.8 percent in January 2020, from 15.6 percent in January 2019. However, this number is still high compared to that of Malaysia’s which is 2.2 percent (2019), and that of Indonesia’s 3.4526 percent in 2019. Although there may be a few differences in how underemployment rates are measured from one country to another, the figure for RP remains distant. This means that many in our labor force are still able and are willing to increase their work hours, therefore showcasing huge untapped work bandwidth and stagnant capacity.
Additionally, since we identify an underemployed as someone who is employed but declares himself/herself during the labor force survey that he/she desires to have additional hours of work in his/her present job, or to have a new job with longer working hours, there could actually be a number of people who are excluded from the underemployed figure, despite working less than regular working hours, simply because they do not actually seek for more hours of work, essentially happy with what they can obtain. This, in totality, affects the country’s overall output!
Back to the councilor’s share of story, to further deal with the use of 4Ps in gambling and unnecessary pawning for fast cash, she has sponsored a local ordinance patterned after the draft from DSWD, penalizing those acts.
We wrapped our discussion around possible solutions and one of which is a distinct type of literacy support that goes beyond what our schools currently offer. “It’s not just simple math, budgeting, or reading, pero kailangan maturuan din natin sila mangarap ng mas mataas, mag-plano ng long-term, and ma-realize nila na mas marami pa tayong pwedeng ma-achieve,” Rafael said. She believes that a specialised program on personal wealth and financial management, that uses the community’s language, may help in poverty alleviation by influencing their perception of their own potentials and how much more they can achieve and how to manage their entitlements when achieved. But it is a clear step-by-step process - and an extensive one, indeed.
Technically, additional educational support means additional expenditure from the government. Taxes can either be allocated or repurposed to efforts in line with these, if we want to see things change. And since we’re looking at spending taxes, corruption and transparency are two other concepts we should highlight when it comes to poverty alleviation, not just in education, but in all aspects of governing our country.
Councilor Rafael is a believer of the holistic efforts of the local government unit of Pasig under Mayor Vico Sotto’s leadership.
“There’s hope for people, especially those in public service, to further fight poverty, the way I see it in Pasig’s case,” Rafael pronounced.
But it still begs the question. How do we change people’s mindset about poverty fast enough to make things go right?
Poverty has deep roots, and we are all in for a hard fight to defeat it so long as there are those who prefers the status quo.