Bernardo M. Villegas
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Rebalancing Strategy
published: Mar 31, 2017



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Planning for the Fragile Middle

           The present Administration has the laudable objective of reducing the Philippine population below the poverty line of about 68 pesos per person per day (US $1.5) from approximately 25% this year to 16% by 2016.  They have a fighting chance if they really are able to implement an aggressive infrastructure program in the countryside (farm-to-market roads, irrigation systems, post-harvest facilities, potable water, etc); invest considerably more in improving the quality of basic education (up to the senior high school level); build more barangay health clinics, including maternity wards that are the most effective means of reducing both infant and maternal mortality (not family planning); and continue to administer efficiently and honestly the Conditional Cash Transfer program.  All these have to be focused on the rural areas where 75% of the poor live, especially in such regions as the Autonomous Region of Mindanao, CARAGA, Bicol, Eastern Visayas and Cagayan Valley. 

          But I have news for the future leaders beyond 2016.  A recent analysis of the Financial Times (April 14, 2015) reported that almost a billion people in the developing world are at risk of slipping out of the ranks of a nascent middle class, raising serious questions about the durability of the past years' remarkable success in delivering some 800 million people out of dehumanizing poverty, mostly in China and India, thanks to a combination of market-oriented reforms and massive investments in infrastructures and social services by the State. Most of these people delivered out of poverty are still in what can be called the "fragile middle", earning $2 to $10 per day in 2010.  About three years ago, the Asian Development Bank defined the entry point to the new middle class as the $2 per day poverty line, adjusting for purchasing power.  There is a very wide range of $2 to $20 per day for the middle class but for most countries, including the Philippines, the vast majority have to survive at $2 to $10 per day.

          Let me quote from the FT report:  "...analysis by the FT of world income distribution data from 122 countries going back to the 1970s makes clear that most of the  millions who have risen out of poverty in recent decades are sitting in what is best described as a 'fragile middle' between those two lines.  There were more than 2.8 bn people--or 40 per cent of the world's population--living on between $2 and $10 per day in the developing world in 2010, the most recent year available.  That makes the fragile middle the worlds' biggest income group...Moreover, a major portion of those lifted out of poverty remain in an even tighter band only just above the $2 per day line.  There were 962m people earning between $2 and $3 per day in the developing world in 2010, according to the FT analysis, a vulnerable segment that has grown more quickly than any other across the whole income spectrum."

          It is not difficult to apply these findings to the Philippines.  Just consider all the thousands of households in the areas devastated by such calamities as Yolanda, the Bohol earthquake, the super typhoons in Mindanao who were above the $2 per day threshold.  They are now back to below the poverty line.  Income distribution figures in the Philippines confirm the global figure that 40 per cent or even more of the population are in the category of the "fragile middle" who can easily fall into extreme poverty again, not only because of natural disasters, but because of  personal tragedies as the death or sickness of the main breadwinner.  Even if we are able to reduce the poverty line to 16% or below (it is already below 10% in Indonesia and Thailand), we have a long way to go to help the "fragile middle" from falling back to dehumanizing poverty.

          This makes it extremely necessary that we do not impose a birth control mentality among the poor.  As the overwhelming majority of the Justices of the Supreme Court opined in declaring some of the provisions of the RH Law unconstitutional,  the country's economy is being "propped up by remittances from our Overseas Filipino Workers and that is because of the 'ample supply of young and able-bodied workers."  They pointedly ask:  "What would happen if the country were to be weighed down by an aging population and the smaller younger generations were not able to support them?  This would be the situation if our total fertility rate would go below the replacement level of two children per woman."  The Justices, wittingly or unwittingly, gave the solution to the problem of the "fragile middle."  If those who are vulnerable to falling back to poverty are encouraged to have three to five children in each family, they would always have at least one of the children as a potential OFW who can be their insurance to the ups and downs of the global economy. This was already dramatically illustrated during the Yolanda disaster.  Many of the victims survived, thanks to the generous help of their relatives who are working abroad.  As the experience of the last five years of the Great Recession have shown, OFW remittances have been completely immune to the crisis.  For at least the next twenty years, Filipino workers will be in great demand in all the developed countries both in the West and the East that are suffering from the "demographic winter."   It is imperative that we do not cultivate a "contraceptive mentality" among the low middle income and poor households. That would remove the only insurance they have against falling back to stark poverty.  Population control would be the greatest enemy of the "fragile middle."   For comments my email address is bernardo.villegas@uap.asia