THE Philippines placed 15th out of 63 countries in the world when it comes to income inequality, the international financial institution World Bank reported Thursday.
Income inequality is the uneven distribution of income throughout a population. The more unequal the distribution, the greater the income disparity would be in a population.
The World Bank said that in the Philippines, the top one percent of earners captured 17 percent of national income, while only 14 percent is shared by the bottom 50 percent.
“With an income Gini coefficient of 42.3 percent in 2018, the Philippines ranks 15th of 63 countries for which data on income inequality is available,” the World Bank report said
The World Bank’s 2022 report on “Overcoming Poverty and Inequality in the Philippines” said that of the countries in East and the Asia Pacific for which income inequality data are available from 2014 to 2019, only Thailand has income inequality greater than in the Philippines.
“Disparities in income and consumption continue to be higher in the Philippines than in neighboring countries,” it said.
Since the mid-2000s, the growth of secondary education and mobility to better-paying occupations, citizen ownership of more assets, and access to essential services and government social assistance have all contributed to the reduction of inequality.
On the other hand, the World Bank said unequal opportunities, lack of access to tertiary education, a lack of skills, unequal returns on college education, gendered cultural standards and childcare, and spatial gaps foster inequality.
“Inequality of opportunity and low mobility across generations wastes human potential and slow down innovation, which is crucial for building a competitive and prosperous economy that will, in turn, improve the well-being and quality of life of all Filipinos,” Ndiamé Diop, World Bank Country Director for Brunei, Malaysia, Philippines, and Thailand, said in a statement.
While access to essential utilities like power, safe drinking water, and school enrollment has improved, substantial disparities constrain human capital. Inequality and limited intergenerational mobility squander human capacity and misallocate human capital in the economy, the World Bank said.
COVID-19 contributed to inequality
The pandemic interrupted economic growth in 2020 and boosted unemployment in in-person industries. Despite government aid, poverty in the Philippines reached 18.1 percent in 2021.
The economy is rebounding, but evidence suggests it will be uneven, the World Bank noted.
Long-term income loss has hurt disadvantaged families. With rising food prices and poor coping techniques, underprivileged children’s health and nutrition are at stake.
According to the institution, there is a strong likelihood that the pandemic will permanently affect human capital growth. More than half of all households believe that their children have learned less than half as much through online education than they would have through traditional classroom instruction. In low-income homes, this percentage soars to 68 percent.
It is anticipated that the number of learning-adjusted years spent in school has been cut by more than one full year due to extended distance learning. Learning loss, when paired with the deskilling that comes with being unemployed for an extended time, could result in significant earnings losses in the future, it said.
The Role of Public Policy
The World Bank suggests that policy initiatives to reduce inequality in the Philippines be built around three themes: mending pandemic scars and developing resilience, laying the framework for a vibrant and inclusive recovery, and encouraging greater opportunity equality.
“Policy can reduce inequality by supporting employment and workers, improving education access and quality, promoting inclusive rural development, strengthening social protection mechanisms, and addressing inequality of opportunity,” the report noted.