-
1A presentation by Mr. Tomas Africa
at Social Weather Stations, Quezon City
18 March 2011
Family Income Distribution in the
Philippines, 1985-2009:
Essentially the Same
2
A. Median Income
B. Income of Top 1% families
C. Coefficient of Variation of the Percentiles
D. Gini Coefficient
E. ABCDE Socio-economic Classification
F. A Digression: Cut-offs for the Middle
Income Class
G. Summary
Outline of Presentation
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23
Table 1. Median Income and Income Distribution, 1961 - 2009
Family Income 1961 1985 2000 2003 2006 2009
Median income
(x P1,000) 1 20 89 95 111 135
% Income Share of
upper 50% families 82 80 82 81 81 80
% Income Share of
lower 50 % families 18 20 18 19 19 20
From 1961 to 2009, nearly half a century:
Upper 50 percent of families had 80 percent of income.
Lower half had 20 percent.
As of 2009, the distribution appeared to be the
same at the end of Martial Law days.
A. Median Income
4
Table 2. Top 1% Families and Bottom % Families Income Comparison
1985 2000 2003 2006 2009
Number of Top 1% Families (x1000) 100 150 165 174 185
with
Aggregate Income (PhP billion) 31.4 251.2 235 256.3 342.7
Equivalent to
Number of Families (in millions) 3.15 5.8 5.3 5.2 5.5
% of Total 32% 38% 32% 30% 30%
with
Aggregate Income (PhP billion) 31.3 249.6 227.1 257.9 343
B. Income of Top 1% Families
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35
Table 2. Top 1% Families and Bottom % Families Income Comparison
1985 2000 2003 2006 2009
Number of Top 1% Families (x1000)100 150 165 174 185
with
Aggregate Income (PhP billion) 31.4 251.2 235 256.3 342.7
Equivalent to
Number of Families (in millions) 3.15 5.8 5.3 5.2 5.5
% of Total 32% 38% 32% 30% 30%with
Aggregate Income (PhP billion) 31.3 249.6 227.1 257.9 343
The 1:30 ratio in 2009 remained, or stabilized, at the same ratio in
2006.
B. Income of Top 1% Families
The top individual taxpayers of 2009 released by the Bureau of
Internal Revenue (BIR) in accordance with Section 71 of the
National Internal Revenue Code of 1997. These individuals may not
have been covered by the survey as their transactions would be
categorized as statistical rare events and thus would have littlechance or probability of being selected as samples.
B. Income of Top 1% Families
Table 3. BIR Top Individual Taxpayers 2009
Rank Taxpayer Tax Due Rank Taxpayer Tax Due
1 Elaine B. Gardiola P59.54M 6 Henry Sy, Sr P25.18M
2 Wilfredo B. Revillame P57.25M 7 Carlos D.C. Ejercito P25.02M
3 Ronaldo R. Soliman P36.70M 8 Bonifacio D. Gumboc, Jr P24.74M
4 Ramon S. Ang P26.44M 9 Ma. Teresa P. Gallego P24.45M
5 Oscar M. Lopez P25.70M 10 Felipe L. Gozon P22.20M
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47
B. Income of Top 1% Families
Families in top 1 percent in income distribution might be under-represented in FIES.
Highest gross income in 2009 FIES P 30.4 million. Using a 28.50% effective rate on the average; i.e. that is how much of gross income is paid as tax (from Former
Finance Undersecretary Milwida Guevarra). Tax Due of
biggest income earner in 2009 FIES roughly estimated at P 8.65 million.
From BIR data, the respondent could be among the top 85 taxpayers.
Table 3. BIR Top Individual Taxpayers 2009
Rank Taxpayer Tax Due Rank Taxpayer Tax Due
84 Eric Van Oppens P8.83M 85 John Lloyd Cruz P8.60M
8
B. Income of Top 1% Families
The total income of 100th percentile in 2009 FIES P 342.74 billion.
The percentage undercount of the top 1 percent can be roughly estimated to be 1.3 percent (PhP 4.45
billion divided by PhP 342.74 billion).
This is not too significant an amount to alter percentage shares of the income distribution.
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59
C. Coefficient of Variation of Percentiles
Coefficient of variation (CV) is the standard error expressed in terms of the
arithmetic mean (average).
It is a measure of dispersion, a measure of disparity.
CV is useful because the standard error of samples can be better understood in the
context of the arithmetic mean of the data.
10
C. Coefficient of Variation of
Percentiles, 2009
Inc ome C Vs F IE S 2009
-
1.00
2.00
3.00
4.00
5.00
1st
4th
7th
10th
13th
16th
19th
22nd
25th
28th
31st
34th
37th
40th
43rd
46th
49th
52nd
55th
58th
61st
64th
67th
70th
73rd
76th
79th
82nd
85th
88th
91st
94th
97th
100th
-
611
C. Coefficient of Variation of
Percentiles, 2006
Income CVs FIES 2006
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
1st
4th
7th
10th
13th
16th
19th
22nd
25th
28th
31st
34th
37th
40th
43rd
46th
49th
52nd
55th
58th
61st
64th
67th
70th
73rd
76th
79th
82nd
85th
88th
91st
94th
97th
100t
h
12
C. Coefficient of Variation of
Percentiles, 2003
Income CVs FIES 2003
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
Perc
entile
3rd
6th
9th
12th
15th
18th
21st
24th
27th
30th
33rd
36th
39th
42nd
45th
48th
51st
54th
57th
60th
63rd
66th
69th
72nd
75th
78th
81st
84th
87th
90th
93rd
96th
99th
-
713
C. Coefficient of Variation of
Percentiles, 2000
Income CVs FIES 2000
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
1st
4th
7th
10th
13th
16th
19th
22nd
25th
28th
31st
34th
37th
40th
43rd
46th
49th
52nd
55th
58th
61st
64th
67th
70th
73rd
76th
79th
82nd
85th
88th
91st
94th
97th
100t
h
14
C. Coefficient of Variation of
Percentiles, 1985
Income CVs FIES 1985
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
Perc
entile 3r
d6t
h9t
h12
th15
th18
th21
st24
th27
th30
th33
rd36
th39
th42
nd45
th48
th51
st54
th57
th60
th63
rd66
th69
th72
nd75
th78
th81
st84
th87
th90
th93
rd96
th99
th
-
815
C. Coefficient of Variation of
Percentiles
Any significant change aside from those at the
tails, both at lowest & highest ends?
The general look of the distribution is that of a flat-liner, bereft of activity showing change.
Family incomes are clustered closely together.
Groupings due to a cut-off, for instance, a point/line representing the poverty threshold,
would appear to be insufficient
16
C. Coefficient of Variation of
Percentiles
In 2009, eighty-nine
(89) of the 100
percentile CVs
were no greater
than 0.1 percent
Table 4. Distribution of
Percentile CVs, 2009
CV (in %) Frequency
0.01 -0.1 89
0.11 - 0.2 6
0.21 - 0.3 2
0.31 - 0.4 --
0.41 - 0.5 1
0.51 - 0.6 --
0.61 - 0.7 --
0.71 - 0.7 --
0.81 - 0.9 --
0.91 1.01.01 +
1
1
-
917
C. Coefficient of Variation of
Percentiles
Income alone may not be a valid
indicator of poverty
classification because of
observed homogeneity of incomes
--- multidimensionality of poverty
18
D. GINI COEFFICIENT
Gini coefficient - a measure of the inequality of a distribution, a value of 0
expressing total equality and a value of 1
maximal inequality.
Gini coefficient - usually defined mathematically based on the Lorenz
curve, which plots the proportion of total
income of population (y axis) that is
cumulatively earned by the bottom x% of
population (see diagram).
-
10
19
D. GINI COEFFICIENT
However, a low coefficient does not always mean an ideal condition.
It could be that many incomes are similar (either low or high).
In the Philippine example, the acknowledged income-poor Autonomous Region of Muslim Mindanao (ARMM) has
the lowest coefficient followed by richer regions, such as National Capital Region
(NCR) & Central Luzon (Region III)
20
D. GINI COEFFICIENT
Table 4. Gini ratios, 2009
Region Ratio Region Ratio
N C R 0.3953 REGION 7 0.4601
C A R 0.4212 REGION 8 0.4841
REGION 1 0.4086 REGION 9 0.4738
REGION 2 0.4425 REGION 10 0.4737
REGION 3 0.3727 REGION 11 0.4275
REGION 4 A 0.4063 REGION 12 0.4425
REGION 4 B 0.4004 CARAGA 0.4595
REGION 5 0.4164 ARMM 0.2948
REGION 6 0.4197
ARMM had lowest Gini ratio while Regions
8, 9 and 10 had the highest ratios
Table 5. Gini ratios, 2006
Region Ratio Region Ratio
N C R 0.3988 REGION 7 0.4639
C A R 0.4418 REGION 8 0.4828
REGION 1 0.3953 REGION 9 0.5054
REGION 2 0.4216 REGION 10 0.4806
REGION 3 0.3994 REGION 11 0.4225
REGION 4A 0.4082 REGION 12 0.4006
REGION 4B 0.4106 CAAGA 0.4452
REGION 5 0.4428 ARMM 0.3113
REGION 6 0.4326
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11
21
D. GINI COEFFICIENT
Movement of coefficient at national level
showed an indication of more equality or less
inequality over the years, with highest being in
1997 and 2000
Table 6. Gini Coefficient, Philippines
Year Gini Coefficient
1985 0.4466
1988 0.4446
1991 0.4680
1994 0.4507
1997 0.4872
2000 0.4822
2003 0.4605
2006 0.4580
2009 0.4484
22
D. GINI COEFFICIENT
Gini Coefficients, Philippines, 1985-2009
0.42
0.43
0.44
0.45
0.46
0.47
0.48
0.49
0.5
1 2 3 4 5 6 7 8 9
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12
23
D. GINI COEFFICIENT
Of 135 countries and dependencies
listed in the World Fact Book of the
Central Intelligence Asia (CIA), the
following rankings can be obtained.
It is clear that the Gini ratio is not
always reflective of state of a
countrys development.
24
D. GINI COEFFICIENT
Table 7. Countries with the
lowest Gini Ratios
CountryGini
Coefficient
Reference
Year
Sweden 23 2005
Norway 25 2008
Austria 26 2007
Czech Republic 26 2005
Luxembourg 26 2005
Malta 26 2007
Serbia 26 2008
Slovakia 26 2005
Albania 26.7 2005
Germany 27 2006
Table 8. Countries with the
highest Gini Ratios
CountryGini
Coefficient
Reference
Year
Brazil 56.7 2005
Colombia 58.5 2008
Bolivia 59.2 2006
Haiti 59.2 2001Central African
Republic 61.3 1993
Sierra Leone 62.9 1989
Botswana 63 1993
Lesotho 63.2 1995
South Africa 65 2005
Namibia 70.7 2003
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13
25
D. GINI COEFFICIENT
Among the Association of Southeast Asian
Nations (ASEAN), it was Laos with the
lowest Gini, and Singapore with the highest.
Table 9. ASEAN Countries Gini Ratios
CountryGini
Coefficient
Reference
Year
Laos 34.6 2002
Vietnam 37 2004
Indonesia 39.4 2005
Cambodia 43 2007 est.
Thailand 43 2006
Philippines 45.8 2006
Malaysia 46.1 2002
Singapore 48.1 2008
Myanmar N/A N/A
26
Market/opinion researchers classify according
through proxies of wealth/assets, aside from
measure of income, to segment the (consumer)
market.
Conditions in community where household is
Type of materials used for house Household furnishing Ownership of house and/or lot
E. ABCDE SOCIO-ECONOMIC
CLASSIFICATION
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14
27
E. ABCDE SOCIO-ECONOMIC
CLASSIFICATION
Table 10: Percent Distribution of Families, by Socio-
Economic Class
Socio Economic
Class
Percent Share of Families to Total
2007 2010 My guess-timate
ABC 7 9 10
of which: AB n.a. 0.3* 1
C n.a. 8.6 9
D 68 62 60
E 25 29 30
Source: Pulse Asia, in consultation with Dr. Ana Tabunda
Note: * - Undercounted due to refusals of AB respondents
28
From the 16 April 2007 release of Pulse Asia, its nationally-representative sample has seven
(7) percent making up classes A, B, and C;
sixty-seven (67) percent, class D; and twenty-
five (25) percent, class E. This breakdown has
a sampling error of +/- 3 percent.
Statistically speaking, classes ABC may be 4 to 10 percent of the population; class D, 64-70
percent; and class E, 22-28 percent.
E. ABCDE SOCIO-ECONOMIC
CLASSIFICATION
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15
29
In 2010, the breakdown became: 9
percent for class ABC; 62 percent for
class D; and 29 percent for class E.
Class ABC can be further subdivided into
class AB, 0.3 percent, and class C, 8.6
percent, although Pulse Asia estimates
an undercount of class AB.
E. ABCDE SOCIO-ECONOMIC
CLASSIFICATION
30
While statistical rigor will not be as
robust, we can apply the above
percentages [my guess-timates] to the
income distribution and find out how
much income these classes earned
during the reference years.
E. ABCDE SOCIO-ECONOMIC
CLASSIFICATION
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16
31
E. ABCDE SOCIO-ECONOMIC
CLASSIFICATION
Table 11. Percent Distribution of Families & Incomes,
by Socio-Economic Class, 1985
Class
Families Cumulative Income Average
IncomeNo. Share Amount Share
(x 1000) % (x PhP 1 mil.) % (x PhP 1 thsd.)
ABC985
10 111,420 36 113
D 5,908 60 165,857 54 28
E 2,954 30 28,498 9 10
Total 9847 100 305,775 100 31
32
E. ABCDE SOCIO-ECONOMIC
CLASSIFICATION
Table 12. Percent Distribution of Families & Incomes,
by Socio-Economic Class, 2000
Class
Families Cumulative Income Average
IncomeNo. Share Amount Share
(x 1000) % (x PhP 1 mil.) % (x PhP 1 thsd.)
ABC 1,507 10 838,445 38 556
D 9,043 60 1,174,919 54 130
E 4,522 30 173,886 8 38
Total 15072 100 2,187,250 100 145
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17
33
E. ABCDE SOCIO-ECONOMIC
CLASSIFICATION
Table 13. Percent Distribution of Families and
Incomes, by Socio-Economic Class, 2003
Class
Families Cumulative Income Average
IncomeNo. Share Amount Share
(x 1000) % (x PhP 1 mil.) % (x PhP 1 thsd.)
ABC 1,648 10 884,478 36 537
D 9,888 60 1,346,581 55 136
E 4,944 30 206,191 8 42
Total 16480 100 2,437,250 100 148
34
E. ABCDE SOCIO-ECONOMIC
CLASSIFICATION
Table 14. Percent Distribution of Families and Incomes,
by Socio-Economic Class, 2006
Class
Families Cumulative Income Average
IncomeNo. Share Amount Share
(x 1000) % (x PhP 1 mil.) % (x PhP 1 hsd.)
ABC 1,740 10 1,082,478 36 622
D 10,442 60 1,669,309 56 160
E 5,221 30 254,316 8 49
Total 17,403 100 3,006,104 100 173
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18
35
E. ABCDE SOCIO-ECONOMIC
CLASSIFICATION
Table 15. Percent Distribution of Families and
Incomes, by Socio-Economic Class, 2009
Class
Families Cumulative Income Average
IncomeNo. Share Amount Share
(x 1000) % (x PhP 1 mil.) % (x PhP 1 thsd.)
ABC 1,845 10 1,343,697 35 728
D 11,071 60 2,117,478 56 191
E 5,536 30 343,150 9 62
Total 18,452 100 3,804,325 100 206
36
When class ABC is further
subdivided into class AB and class
C, it becomes apparent that class
AB could be the top 1 percent, with
an income share equal to that of
class E.
E. ABCDE SOCIO-ECONOMIC
CLASSIFICATION
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19
37
E. ABCDE SOCIO-ECONOMIC
CLASSIFICATION
Table 15-A. Percent Distribution of Families and Incomes,
by Modified Socio-Economic Class, 2009
CLASS
Families Cumulative IncomeAverage
IncomeNo. Share Amount Share
(x 1000) % (x PhP 1 mil.) % (x PhP 1 thsd.)
AB 185 1 342,736 9 1,857
C 1,661 9 1,000,960 26 603
D 11,071 60 2,117,478 56 191
E 5,536 30 343,150 9 62
Total 18,452 100 3,804,325 100 206
38
In summary, the shares of income of class
ABC ranged from 35-38, class D, from 54-
56, and class E, from 8-9 percent during the
period from 1985-2009, nearly a quarter-
century
E. ABCDE SOCIO-ECONOMIC
CLASSIFICATION
The good news is that the income
distribution has not worsened. The bad
news is that it has remained essentially the
same..
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20
39
F. A DIGRESSION: CUT-OFF FOR
MIDDLE INCOME CLASS?
Many have been asking about the middle
class in the Philippines but literature on
this has been scarce.
As an exercise & perhaps to start a discussion on what would be the middle-
class, I would proceed with a simplistic
assumption of equal income shares
across groups.
40
F. A DIGRESSION: CUT-OFF FOR
MIDDLE INCOME CLASS?
If income is to be divided into five (5) more or less equal
shares [1st 20% share, next 20% share,, highest 20% share] the cut-offs will fall in these percentiles:
Table 16. Percentile Cut-offs in an Income
Distribution Divided into Five Equal Groups
Class 1985 2000 2003 2006 2009
A & B 96 97 96 96 96
B & C 88 89 88 87 87
C & D 73 75 74 74 73
D & E 49 53 51 51 50
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21
41
F. A DIGRESSION: CUT-OFF FOR
MIDDLE INCOME CLASS?
Family Income, by Percentile, 2009
-
50,000,000,000
100,000,000,000
150,000,000,000
200,000,000,000
250,000,000,000
300,000,000,000
350,000,000,000
400,000,000,0001s
t
4th
7th
10th
13th
16th
19th
22nd
25th
28th
31st
34th
37th
40th
43rd
46th
49th
52nd
55th
58th
61st
64th
67th
70th
73rd
76th
79th
82nd
85th
88th
91st
94th
97th
100t
h
DE BC A
poverty
threshold
42
F. A DIGRESSION: CUT-OFF FOR
MIDDLE INCOME CLASS?
If income is divided into three (3) more or less
equal parts, the cut-offs will fall in these
percentiles:
Table 17. Percentile Cut-offs in an Income
Distribution Divided into Three Equal Groups
Class 1985 2000 2003 2006 2009
A & B 91 92 91 91 91
B & C 66 69 67 67 66
-
22
43
Family Income, by Percentile, 2009
-
50,000,000,000
100,000,000,000
150,000,000,000
200,000,000,000
250,000,000,000
300,000,000,000
350,000,000,000
400,000,000,0001s
t
4th
7th
10th
13th
16th
19th
22nd
25th
28th
31st
34th
37th
40th
43rd
46th
49th
52nd
55th
58th
61st
64th
67th
70th
73rd
76th
79th
82nd
85th
88th
91st
94th
97th
100t
h
F. A DIGRESSION: CUT-OFF FOR
MIDDLE INCOME CLASS?
C B A
poverty
threshold
44
F. A DIGRESSION: CUT-OFF FOR
MIDDLE INCOME CLASS?
Estimates of class ABC (Table 16) show 11-13 percent, not far from
percentages (9-10) in Table 10.
However, estimates of lower class that would be of concern; in Table 16, about
50 percent (one-half), and in Table 17,
about 67 percent (two-thirds).
-
23
45
F. A DIGRESSION: CUT-OFF FOR
MIDDLE INCOME CLASS?
The middle class would be somewhere in-between. In Table 16,
the size of middle class [C] is about 15
percent, and if measured as difference
between top (A) and bottom (E)
classes, about 25 percent.
In Table 17, about 25 percent.
46
F. A DIGRESSION: CUT-OFF FOR
MIDDLE INCOME CLASS?
The National Statistical Coordination Board
(NSCB) in its website http://www.nscb.gov.ph/headlines/StatsSpeak/2010/061510_
rav_joe.asp#table1 posted a feature article on How Rich is Rich? One of tables as presented below can be compared to Table 17, with a significant
difference with respect to high income class.
This however compares with Pulse Asia
estimate of 0.3 percent of class AB in Table 10.
-
24
47
F. A DIGRESSION: CUT-OFF FOR
MIDDLE INCOME CLASS?
Table 18. Percent Share and Magnitude of Families, by Income Class:
2000, 2003, and 2006
Year
Income ClassEstimated
Total
Number of
Families
Low Income Middle Income High Income
Level Percent Level Percent Level Percent
2006 14,065,921 80.8 3,317,824 19.1 19,738 0.1 17,403,483
2003 13,182,297 79.9 3,286,010 19.9 25,849 0.2 16,494,156
2000 11,598,258 77 3,422,524 22.7 51,160 0.3 15,071,942
Source: Special computations made by the NSCB Technical Staff using the results
of the 2000, 2003, and 2006 Family Income and Expenditures Survey of the National
Statistics Office
48
G. SUMMARY
From the following data and
discussion we can surmise that
development efforts for the past
five (5) decades have failed to
effect an equitable/equal
distribution of income.
-
25
49
G. SUMMARY
The income split at the median has been at 82:18 to
80:20 in favor of the families
at the upper 50 percent over
the past 50 years.
50
G. SUMMARY
The top one (1) percent families earned income equivalent to income earned by 32
percent of the families at the bottom of the
income ladder in 1985. This peaked to 38
percent in 2000, was replicated in 2003,
and moved down to 30 percent in 2006 and
2009.
In twenty-five (25) years the top 1 percent gave up two (2) percent to the families at
the bottom rungs.
-
26
51
G. SUMMARY
The CVs show very little variation at the percentiles except those at
the extreme ends, indicating little
spread of income across the entire
distribution. (Sampling
implications?)
52
G. SUMMARY
The Gini coefficient, with its measure of inequality subject to
misinterpretation, had moved up
during the Baht financial crisis, and down from then on. The Gini ratio of
the Philippines is neither among the
highest nor the lowest in the world,
including ASEAN.
-
27
53
G. SUMMARY
The shares of income of class ABC ranged from 35-38%; class D, from
54-56%; and class E, from 8-9 %
percent the past 25 years, from 1985-
2009.
My computations and that of NSCB seem to agree on a very large low income class.
54
G. SUMMARY
Utter lack of information on distribution of family income which the government,
particularly the NSO and the statistical
system, need to address.
Perhaps one of reasons why the distribution has generally remained
unchanged is because even if many think
that this is so, there has been insufficient
empirical evidence to establish its extent
and chronicity
-
28
55
G. SUMMARY
I also urge the NSCB to come up with an official definition of the often-used ABCDE
socio-economic classification & the
generic low-middle-high income classes in cooperation with academe and private
sector. Many policy and decision-makers &
the general public have accepted & used
these rather than deciles, quintiles and
percentiles. These can also help improve
statistical literacy of society, in this case
understanding income distribution.
56