Family earning at least P2.4M/year? You’re rich!

WHILE GAINS in poverty alleviation may have been achieved, a government-sponsored profile shows much still needs to be done to bridge the income gap among Filipinos.

Rich families spend less of their income in basic needs.

“How rich is rich?” asked Romulo A. Virola, secretary-general of the National Statistical Coordination Board (NSCB), in an article posted on the agency’s website yesterday.

NSCB computations using the Family Income and Expenditure Surveys (FIES) and other indicators, he said, showed that as of 2010 a family would be classified as rich if it is earning at least P199,927 a month or P2,393,126 per year.

The amount is higher than the 2006 threshold of at least P166,673 a month or P2 million annually.

Mr. Virola said that as of 2006, the rich comprised just 0.1%, or 19,738 families, of the estimated 17,403,483 households nationwide.

Their ranks, he added, have been dwindling “from 0.3% in 2000 (51,160 families) and 0.2% in 2003 (25,849 families).”

Mr. Virola said this decline “would not have been so bad” if it had led to more middle-income families — defined as earning from P294,296 to P2,393,125 annually. Instead, those in the low-income class — earning less than P294,296 per year — consistently expanded.

As a proportion of all families, the middle class comprised 19.1% as of 2006, down from 19.9% in 2003 and 22.7% in 2000. Over the same period, low-income families increased to 80.8% from 79.9% and 77%.

Mr. Virola said family spending across all classes had increased faster than their average income but the growth pace for the rich had decelerated — to 18% between 2003 and 2006 from 23% for the 2000-2003 period — while that for the middle- and low-income classes increased.

For the rich, their average monthly income was at P235,155 as of 2010 from P194,965 in 2006. Their average monthly expenditure was said to be P137,542, up from P114,035 three years earlier, of which P116,141 comprised basic needs such as food, fuel/light/water, and clothing.

The average 2010 monthly income for the middle class was said to be P36,934 compared to an average monthly expenditure of P29,767 (P26,479 for basic needs). For the lower-income class this was at P9,061 versus P8,345 (P7,717 for basic needs).

Limiting the analysis to 2006 and below data, Mr. Virola said the income difference between the rich and the rest of society has been narrowing, to just 6.4 times that of the middle class and 26 times for the lower-income class from 7.2 times and 36.7 times, respectively, three years earlier.

With respect to the rich’s saving pattern, Mr. Virola said their savings ratio fell to 47% in 2006 from 50% in 2003, compared to a stable 20% for the middle-income class and 2%, from 4%, for lower-income families.

“We do not know how it feels to save close to 50% of our income, but let us try to look more closely on how rich families spend,” he said.

In 2006, high income families spent 75% of their total expenditures on basic needs, compared to 85% and 90%, respectively, for middle- and low-income families. Of total expenditures, the rich spent 30% on food, compared to 40% and 60%, respectively, for the middle- and low-income classes.

The top four basic expenditure items as of 2006 were food, rent/rental value of dwelling units, transportation and communication, and fuel/light/water.

For non-basic spending, the top three were special family occasions, other expenditures such as insurance premiums, and payments on loans and durable furnishings. Taxes rounded up the top four for both the rich and middle-income families while for the poor it was tobacco.

Mr. Virola noted that while the proportionate share of the rich’s expenditures that went to taxes was high, the median amounts paid were low: P21,634 in 2006, P75,226 in 2003 and P56,182 in 2000.

“This low median amount of taxes paid indicates a low level of tax collection from the high-income class. Indeed, managing the budget deficit may be better addressed through more effective implementation of existing tax laws than by imposing new ones,” he said.

But the NSCB chief also noted that in 2006, the rich spent significantly more, or P2,800 monthly, on gifts and contributions, from just P1,300 in 2003 and P767 in 2000.

“[I]f the rich families sampled in the FIES will give a tenth of their savings towards poverty reduction, the family with median savings among the rich would be able to deliver five families from poverty,” Mr. Virola said.

The NSCB’s analysis, he said, found three predictors to be consistently significant for the high-income group:

* household head working as corporate executive, manager, managing proprietor, supervisor, or official of government and special interest organizations;
* owns at least three air conditioning units; and
* owns at least three cars/vehicles.

“Sa mga naghahangad maging ‘June bride’ or ‘June bridegroom’ with a good catch, dapat alam nyo na kung sino ang hahanapin! (For those wanting to be a June bride or bridegroom with a good catch, you should now who to look for!),” Mr. Virola said.

Results of the 2009 FIES, he said, are being awaited so that the impact of the global financial crisis on families can be measured.

The full article is available on http://www.nscb.gov.ph.