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    Poverty, the Middle Class, and Income Distribution amid COVID-19

    Albert, Jose Ramon G.; Abrigo, Michael Ralph M.; Quimba, Francis Mark A.; Vizmanos, Jana Flor V. | August 2020
    Abstract
    Often development focus has been on measuring and analyzing poverty in order to reduce poverty. While the poor face future prospects of being perpetually trapped in poverty, the nonpoor also are vulnerable to poverty. Vulnerability has been particularly recognized in the wake of the impact of the novel coronavirus (COVID-19) that is likely to yield declines in incomes because of reduced economic activities. In this study, we provide an updated profile of the poor in the Philippines, as well as various segments of the income distribution, based on the 2018 Family Income and Expenditure Survey. We follow the typology of the low, middle and high income classes proposed in previous research reports, and simulate the likely effects of contractions in per capita income on poverty and the entire income distribution amid the coronavirus pandemic. In estimating the impact of COVID-19 on poverty, and the income distribution, data are not available at this time. The study makes use of simulation scenarios and assumptions. We find that in a (medium case) scenario of declines of incomes by 10 percent across the entire income distribution, the number of poor Filipinos can increase by 5.5 million, but with the emergency financial subsidies (i.e., the social amelioration program and the small business wage subsidy in. place) that targeted 90 percent of households, the worsening of poverty conditions has been managed so that only 1.5 million would fall into poverty, i.e., 4 million less than expected number of Filipinos falling into poverty. These simulation results are consistent with nowcasting exercises of IFPRI and the World Bank on poverty amid COVID-19 that assume a global GDP contraction of 3 percent. Further, low-income classes would, on average, transition only a quarter year more than the baseline of 21.25 years for this (medium-case) scenario if after the pandemic (and an assumed V-shaped economic recovery), their incomes would have a constant annual growth of 2.5 percent. However, under tougher conditions of income contractions of 20 percent with social protection cash assistance, we simulate that the average time for low income Filipinos to move up into middle income class would increase by three years from baseline figures. Under a protracted recovery, we would thus expect a longer period to transition. These results, though relying on simulation scenarios and simplistic assumptions, are helpful in illustrating the importance of government efforts to provide social protection not only for the poor but also for segments of the income distribution that could likely to fall into poverty given income contractions from reduced economic activities during this COVID-19 pandemic. The study also discusses various policy and data issues, recommending that the Philippine Statistics Authority start reviewing its official poverty measurement system, including the current use of income over expenditure as the poverty metric, as well as the poverty line setting methodology given the changes in income and expenditure patterns in the past decade (prior to the onset of COVID-19) that improved living conditions.
    Citation
    Albert, Jose Ramon G.; Abrigo, Michael Ralph M.; Quimba, Francis Mark A.; Vizmanos, Jana Flor V.. 2020. Poverty, the Middle Class, and Income Distribution amid COVID-19. © Philippine Institute for Development Studies. http://hdl.handle.net/11540/12319.
    Keywords
    Alleviating Poverty
    Anti-Poverty
    Extreme Poverty
    Fight Against Poverty
    Global Poverty
    Health Aspects Of Poverty
    Indicators Of Poverty
    Participatory Poverty Assessment
    Poverty Eradication
    Poverty Analysis
    Poverty In Developing Countries
    Poverty Reduction Efforts
    Urban Poverty
    Disaster preparedness
    Disaster prevention
    Disaster management
    Emergency relief
    Flood control
    Fire prevention
    Natural disasters
    Man-made disasters
    Post-conflict recovery
    Fragile states
    Covid
    Pandemic
    Development Indicators
    Environmental Indicators
    Economic Indicators
    Educational Indicators
    Demographic Indicators
    Health Indicators
    Disadvantaged Groups
    Low Income Groups
    Socially Disadvantaged Children
    Rural Conditions
    Rural Development
    Social Conditions
    Urban Development
    Urban Sociology
    Income Distribution
    Demographic Indicators
    Social Justice
    Poor
    Economic forecasting
    Health expectancy
    Social groups
    Political participation
    Distribution of income
    Inequality of income
    Developing countries
    Rural community development
    Mass society
    Social change
    Social policy
    Social stability
    Population
    Sustainable development
    Peasantry
    Urban policy
    Urban renewal
    Social change
    Social accounting
    Inequality of income
    Economic growth
    Quality of Life
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    Citable URI
    http://hdl.handle.net/11540/12319
    Metadata
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    Author
    Albert, Jose Ramon G.
    Abrigo, Michael Ralph M.
    Quimba, Francis Mark A.
    Vizmanos, Jana Flor V.
    Theme
    Poverty
    Disaster
     
    Copyright 2016-2020 Asian Development Bank Institute, except as explicitly marked otherwise
    Copyright 2016-2020 Asian Development Bank Institute, except as explicitly marked otherwise