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

dc.contributor.authorJose Ramon G. Albert
dc.contributor.authorMichael Ralph M. Abrigo
dc.contributor.authorFrancis Mark A. Quimba
dc.contributor.authorJana Flor V. Vizmanos
dc.description.abstractOften 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.
dc.publisherPhilippine Institute for Development Studies
dc.titlePoverty, the Middle Class, and Income Distribution amid COVID-19
dc.typeDiscussion Paper
dc.subject.expertAlleviating Poverty
dc.subject.expertExtreme Poverty
dc.subject.expertFight Against Poverty
dc.subject.expertGlobal Poverty
dc.subject.expertHealth Aspects Of Poverty
dc.subject.expertIndicators Of Poverty
dc.subject.expertParticipatory Poverty Assessment
dc.subject.expertPoverty Eradication
dc.subject.expertPoverty Analysis
dc.subject.expertPoverty In Developing Countries
dc.subject.expertPoverty Reduction Efforts
dc.subject.expertUrban Poverty
dc.subject.expertDisaster preparedness
dc.subject.expertDisaster prevention
dc.subject.expertDisaster management
dc.subject.expertEmergency relief
dc.subject.expertFlood control
dc.subject.expertFire prevention
dc.subject.expertNatural disasters
dc.subject.expertMan-made disasters
dc.subject.expertPost-conflict recovery
dc.subject.expertFragile states
dc.subject.adbDevelopment Indicators
dc.subject.adbEnvironmental Indicators
dc.subject.adbEconomic Indicators
dc.subject.adbEducational Indicators
dc.subject.adbDemographic Indicators
dc.subject.adbHealth Indicators
dc.subject.adbDisadvantaged Groups
dc.subject.adbLow Income Groups
dc.subject.adbSocially Disadvantaged Children
dc.subject.adbRural Conditions
dc.subject.adbRural Development
dc.subject.adbSocial Conditions
dc.subject.adbUrban Development
dc.subject.adbUrban Sociology
dc.subject.adbIncome Distribution
dc.subject.adbDemographic Indicators
dc.subject.adbSocial Justice
dc.subject.naturalEconomic forecasting
dc.subject.naturalHealth expectancy
dc.subject.naturalSocial groups
dc.subject.naturalPolitical participation
dc.subject.naturalDistribution of income
dc.subject.naturalInequality of income
dc.subject.naturalDeveloping countries
dc.subject.naturalRural community development
dc.subject.naturalMass society
dc.subject.naturalSocial change
dc.subject.naturalSocial policy
dc.subject.naturalSocial stability
dc.subject.naturalSustainable development
dc.subject.naturalUrban policy
dc.subject.naturalUrban renewal
dc.subject.naturalSocial change
dc.subject.naturalSocial accounting
dc.subject.naturalInequality of income
dc.subject.naturalEconomic growth
dc.subject.naturalQuality of Life
dc.title.seriesPIDS: Discussion Paper Series
dc.title.volumeNo. 2020-22
dc.contributor.imprintPhilippine Institute for Development Studies
oar.adminregionSoutheast Asia Region
oar.authorAlbert, Jose Ramon G.
oar.authorAbrigo, Michael Ralph M.
oar.authorQuimba, Francis Mark A.
oar.authorVizmanos, Jana Flor V.

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