For the Record
On measuring income inequality between the rich and the poor
This article seeks to clarify some of the points raised in the news feature entitled “RP income gap shows wide rich-poor divide” that appeared in the December 13 issue of the Business World (BW, page B-7) following the publication of the article by Dr. Romulo A. Virola on “The FIES of the Rich: Truth or Consequence?” in the Statistically Speaking page of the NSCB website (http://www.nscb.gov.ph/headlines/StatsSpeak/121205_rav_fies.asp).
The Business World news article
The BW article wrote:
The income gap between the rich and the poor is wider in the Philippines than in Indonesia and Thailand, indicating serious inequality in the distribution of the country’s economic gains, the National Statistical Coordination Board said in a statement.
NSCB director general Romula A. Virola said the government’s latest Family Income and Expenditure Survey, conducted two years ago, showed income inequality, as measured by the Gini coefficient, was at 0.48. The Gini coefficient takes on values between 0 and 1. The higher the number, the more unequal income distribution is. Mr. Virola said the latest Gini coefficient in Thailand was at 0.433, while in Indonesia, the Gini was 0.343. He added that economic giants such as Japan has a Gini coefficient of 0.312, while the United States has a Gini of 0.362. “What this means is that the rich are much richer than the poor in the Philippines compared to all the countries mentioned,” Mr. Virola said.
In the Business World article, the author stated that the “income gap between the rich and the poor is wider in the Philippines than in Indonesia and Thailand…”, implying that the difference between the income of the rich and the poor is wider in the Philippines than in the two other countries he mentioned. This is essentially in agreement with Dr. Virola’s statement in the Statistically Speaking article that “the rich are much richer than the poor in the Philippines compared to all the countries mentioned” in reference to the higher Gini coefficient of the Philippines than those of Japan, the USA, Singapore, Thailand, and Indonesia. We would like to clarify, however, that the term “income gap” has an existing technical definition, which is different from the one used in the BW article. In the official poverty statistics, income gap refers to the "average income shortfall (expressed in proportion to the poverty line) of families with income below the poverty threshold". Data on income gap is released by the NSCB every three years together with poverty incidence and other poverty indicators like poverty gap and severity of poverty.
The author also reported that the wider difference between the income of the rich and the poor in the Philippines (compared with other countries) indicated “serious inequality in the distribution of the country’s economic gains.” It must be pointed out that the term “economic gains”, as used in the analysis of national accounts, refers to improvements in the GNP, GDP, or per capita GNP/GDP. It should likewise be stressed that the Gini coefficient, the measure used in comparing the income distribution of the Philippines with those of other countries, reflects the degree of inequality in the distribution of income, not in the distribution of the country’s economic gains.
The NSCB would also like to mention the following errors. Dr. Virola’s first name is Romulo and he is designated as NSCB Secretary General. On the Gini coefficients of other countries, the BW article included as the last/third digit of each coefficient the footnote number indicated in Dr. Virola’s article.
The NSCB would like to thank the Business World for its sustained interest in our statistics and for its contribution in the dissemination of official statistics.
Tables and technical notes on poverty statistics as well as technical papers and articles on official statistics are posted in the poverty page of the NSCB website (http://www.nscb.gov.ph/poverty/default.asp).
For further inquiries, please contact Ms. Didi Ignacio, Ms. Glennie Amoranto, or Ms. Dette Balamban of the NSCB Social Sectors B Division at telephone numbered (632) 896-53-90 or through e-mail addresses firstname.lastname@example.org, email@example.com, and firstname.lastname@example.org.
Posted 21 December 2005