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Statistically Speaking
Pinoy Middle Class Before the Crisis! ![]()
by Dr. Romulo A. Virola 1
Secretary General, NSCB
It is amazing how hidden sex videos consumed the consciousness of many Pinoys, including matrona friends who have pushed its selling price to, by Quiapo standards, a whopping 250 pesos! In another front, despite reported cases2 in the Asian Development Bank (ADB), La Salle - Taft and other places, it is good to know that the threat of the Influenza A virus in the country may have been overrated. And amidst the national preoccupation with Hayden and the fear of the H1N1 virus, in the wee hours of 3 June 2009, our Congressmen passed House Resolution 1109, A Resolution Calling Upon the Members of Congress to Convene For the Purpose of Considering Proposals to Amend or Revise the Constitution, Upon a Vote of Three-Fourths of All Members of Congress. The Con-Ass!
But, what have we better be concerned about?
Last December 2007, Statistically Speaking wrote3 about “Anti-Poverty? How about Pro-Middle Class?," which cited the collapsing middle class of the Philippine society. In the social spectrum, the middle class, with their knowledge, skills and work ethics, is of course generally believed to be the driver of development. Ergo, the middle class must expand!
And last 28 May, we announced the 0.4 % GDP year-on-year growth4 in the 1st quarter of 2009. This meager GDP growth, together with the four consecutive quarters of decline of the Leading Economic Indicators5 that breached into the negative territory in the second quarter of 2009, the negative 2.3 % GDP quarter-on-quarter growth, and of course the recession that has hit our major trading partners, paint dark clouds in the economic horizon that should be seeded out and away decisively. If, despite these statistics, you decide to call us prophets of doom, we give up! Go ahead, buy and enjoy the sex video! But for those who can look at these statistics more objectively, let me arouse you with the latest on the Pinoy middle class! Before the crisis came!
Our 2007 paper used cluster and regression analyses on the income and expenditure data of the Family Income and Expenditure Survey (FIES) for the period 1997-2003. The FIES is conducted by the National Statistics Office (NSO)6 every three years and is a rich source of information for those who believe in evidence-based decision-making. In our paper, we offered an income-based definition of the Pinoy middle class. We listed their non-income socio-economic characteristics and suggested that the Pinoy middle-income class included families with the following characteristics7:
By this definition, our boxing hero Pacquiao should be way above middle class; but dancing queen Aling Dionisia, probably still is! Come to think of it, how could mothers make super boxers out of their sons?
Notwithstanding data constraints, we heroically updated our study on the middle class. To prepare ourselves for an assessment of how the global economic meltdown that started in America affected us Pinoys. We extrapolated, using the Consumer Price Index (CPI), the income boundaries of the middle class as defined in our previous paper. Not the best approach8, but a reasonable approximation nonetheless, faced with time constraints for this article. We used the extrapolated income boundaries to count and characterize the Pinoy middle class.
This year is FIES year, and when the 2009 data come in, we would like to be able to answer the questions that should be in everyone’s mind. “As a result of the crisis, what happened to the nakararaming Pinoy? Were they able to cope with the crisis?” The middle class may have been able to purchase the hidden sex videos during the crisis; what can they buy after the crisis? To answer these questions, we need benchmark data. From the 2006 FIES. (Yes, I know what’s in your mind… 2006? We’re already in June 2009?!*#? But beggars cannot be choosers; one of the reasons why FIES is triennially conducted in the country is the fact that the resources given to the Philippine Statistical System (PSS) are insufficient.)
And so, who and how is the Pinoy middle class before the global crisis?
In 2006, the middle income class may be defined as those families with annual income ranging from P246,109 to P2,000,072. However, in 2008, a family needed an income that ranged from P276,626 to P2,251,551 to be considered middle class. And in 2009, you would need to earn close to half a million pesos (mean/median income) to be in the middle class. (Table 1)
Three of the twelve variables were also significant predictors of middle income in 1997, 2000, and 2003: ownership of air conditioning unit, squared value of family size, and total number of non-relative members of the household. The Population Commission may not like the positive coefficient of the squared family size ( large families associated with higher incomes) but not to worry, this model is only for the middle class.9 (Table 2)
3.1 Between 2000 and 2006, use of telephones/cellphones among the middle class families almost doubled from 51.0% to 95.3%. Didn’t you notice how the makulit tandem of Yaya and bratty Angelina enjoy texting each other “whatever!” or “’you’re such a loser, Yaya”?.
3.2 Likewise, computer ownership jumped from 10.6% in 2000 to 28.5% in 2006. Hopefully, not for downloading pirated videos.
3.3 Between 1997 and 2006, ownership by the Pinoy Middle Class of DVD/VCD/VTR/VCR and air conditioning unit rose from 48.7% to 86.2% and from 9.8% to 28.6%, respectively. (Is it the middle class that supports the proliferation of illegal, pirated videos in Quiapo?).
3.4 Radios are not as popular anymore: ownership decreased from 82.8% in 1997 to 72.0% in 2006.
3.5 The importance of education is highlighted by the increasing proportion of heads of middle class families who are college graduates: from 26.4% in 1997 to 34.4 % in 2006.
personal care and effects ( you should no longer wonder why spas, beauty parlors, and botox make good business sense!) but for the middle class it goes quite happily, to education!.
How do our OFWs figure in the socio-economic status equation? In 2000 and 2003, more than half of families with OFWs belonged to the middle class. In 2006, the number dropped dramatically by ten families per hundred! (Table 7)
7.1 Despite the fact that poverty worsened between 2003 and 2006, the count of middle class Pinoy families increased by 35,313 or almost 1.1% from 3,282,511 in 2003 to 3,317,824 in 2006. (Table 9 and Figure 1)
And the bad news:
7.2 The share of the middle class shrank from 19.9 % in 2003 to 19.1% in 2006. However, this pace of collapse of the middle class is not as sharp as it was between 2000 and 2003! (Table 9 and Figure 2)
7.3 In 2006, one more family per hundred is lost to the low income group from the middle and high income groups (Table 10). Our poverty statistics released in March 200810 of course showed that between 2 to 3 families per hundred were lost between 2003 and 2006 from the nonpoor to the poor!
So, yes, the Pinoy middle class remains vulnerable and has continued to shrink! And that is prior to the global crisis!
Indeed, our economic managers and development planners face great challenges. Statistics do stare us in the face. We do not want the Leading Economic Indicators to fall further; we want the seasonally-adjusted GDP growth to be positive; we want GDP to grow much faster than 0.4%; we do not want our middle class to shrink some more!
Of course, we are glad to hear that our economic team is working hard to wrestle with the challenges. And not just by lowering the growth targets! I am sure they are and will continue to be doing their best so that we will teeter away or walk away, or whatever, from recession!
We are also happy to note that the global market is now more optimistic about recovery. For one, the number of job losses in our most important trading partner, the United States, has decreased. There is much reason to hope for better times!
As we work and dream together to put our country back to our past glory, it may be good to remind everyone that 2009 is an FIES year, a year of reckoning in so far as poverty reduction is concerned. Thus, if we want good poverty numbers, our planners both at the national and subnational levels, have 7 months left to do their job. But the private sector must do their share.
Amidst all these trials that we face as a nation, aren’t we lucky to have Santino and Bro to inspire us and believe na “May Bukas Pa”?
Happy Independence Day!
Reactions and views are welcome thru email to the author at ra.virola@nscb.gov.ph.
_________________________
1 Secretary General of the National Statistical Coordination Board (NSCB) and Chairman of the Statistical Research and Training Center (SRTC). He holds a Ph. D. in Statistics from the University of Michigan in Ann Arbor, U.S.A. and has taught mathematics and statistics at the University of the Philippines. He is also a past president of the Philippine Statistical Association., This article is co-written by Mildred B. Addawe, Statistical Coordination Officer of the NSCB. The authors thank Jessamyn O. Encarnacion, Bernadette B. Balamban, Noel S. Nepomuceno, Albert A. Garcia, Jeffrey E. Enrado, Ma. Libertie V. Masculino and Candido J. Astrologo, Jr. of the NSCB for the assistance in the preparation of the article. The views expressed in the article are those of the authors and do not necessarily reflect those of the NSCB.
2 46 confirmed cases as of 8 June 2009 (Source: www.doh.gov.ph)
3 The authors, with Ma. Ivy T. Querubin, also presented a paper entitled “Trends and Characteristics of the Middle-Income Class in the Philippines: Is It Expanding or Shrinking?” during the 10th National Convention on Statistics on 1-2 October 2007.
4 Source: http://www.nscb.gov.ph/sna/2009/1stQ2009/2009qpr1.asp
5 http://www.nscb.gov.ph/pressreleases/2009/PR-200905-ES4-02_LEI_Q2.asp
6 This year, the 2009 FIES will be conducted by the NSO in July 2009 (1st visit of sampled families) and January 2010 (2nd visit of same sampled families).
7 The identified characteristics were constrained by the list included in the FIES questionnaire.
8 In our paper, we used cluster analysis to identify the middle class and determined the income boundaries of the families that belonged to the cluster.
9 In the small area estimation models of NSCB for the general population, squared family size also has a positive coefficient, but family size has a negative coefficent resulting in lower incomes associated with large family sizes.
10 http://www.nscb.gov.ph/poverty/2006_05mar08/default.asp
Table 1.
Annual Family Income of the Middle Class:
1997, 2000, 2003, 2006, 2008 and 2009
Year |
Annual Family Income (in PhP) | |||
| Mean | Median | Minimum | Maximum | |
1997 |
278,305 |
226,398 |
148,307 |
1,207,122 |
2000 |
331,646 |
268,700 |
178,468 |
1,449,295 |
2003 |
366,329 |
298,380 |
203,109 |
1,651,632 |
2006 |
451,174 |
367,460 |
246,109 |
2,000,072 |
2008 |
519,101 |
422,283 |
276,626 |
2,251,551 |
2009 |
529,483 |
430,728 |
282,158 |
2,296,582 |
Notes: CPI (2000=100): 1997 - 83.1; 2000 - 100; 2003 - 113.8; 2006 - 137.9;
2008 - 155.0; 2009 (Average from January to April) - 158.1
Sources of basic data:
1. 1997, 2000, 2003 and 2006 Family Income and Expenditures Survey, NSO
2.
1997, 2000, 2003, 2006, 2008 and 2009 (January to April) Consumer Price Index, NSO
Table 2.
Significant Predictors of the Annual Family Income of the Middle Class:
1997, 2000, 2003, and 2006
| Variable | Variable Label | 1997 (Adj. R-square= 0.38) |
2000 (Adj. R-square= 0.44) |
2003 (Adj. R-square= 0.53) |
2006 (Adj. R- square= 0.42) |
||||
| Coef. | P>t | Coef. | P>t | Coef. | P>t | Coef. | P>t | ||
hea_post |
a dummy variable for whether the head has postgraduate degree |
0.255 |
0.0 |
0.173 |
0.0 |
|
|
|
|
hea_coll |
a dummy variable for whether the head has college degree |
0.108 |
0.0 |
0.105 |
0.0 |
|
|
0.112 |
0.0 |
hea_admi a |
a dummy variable for whether the head works as administrative, executive and managerial workers |
0.107 |
0.0 |
|
|
|
|
|
|
hea_sale a |
a dummy variable for whether the head works as sales workers |
0.046 |
0.0 |
|
|
|
|
|
|
hea_gov b |
a dummy variable for whether the head works as official of government, corporate executive, managers and supervisors |
|
|
0.067 |
0.0 |
0.316 |
0.0 |
0.055 |
0.0 |
hea_prof b |
a dummy variable for whether the head works as professionals |
|
|
0.058 |
0.0 |
|
|
|
|
hea_trad b |
a dummy variable for whether the head works as trades and related workers |
|
|
-0.036 |
0.0 |
|
|
|
|
fac_rad |
a dummy variable for whether the household has radio |
0.042 |
0.0 |
|
|
|
|
|
|
fac_vtr |
a dummy variable for whether the household has vcr/vtr,vcd/dvd |
0.092 |
0.0 |
0.057 |
0.0 |
|
|
|
|
fac_pho c |
a dummy variable for whether the household has telephone/cellphone |
|
|
0.143 |
0.0 |
|
|
|
|
fac_mic c |
a dummy variable for whether the household has computer |
|
|
0.148 |
0.0 |
|
|
|
|
fac_ove c |
a dummy variable for whether the household has oven |
|
|
0.117 |
0.0 |
0.300 |
0.0 |
0.158 |
0.0 |
fac_ste |
a dummy variable for whether the household has stereo |
0.077 |
0.0 |
0.041 |
0.0 |
0.264 |
0.0 |
|
|
fac_ref |
a dummy variable for whether the household has refrigerator |
0.090 |
0.0 |
0.053 |
0.0 |
|
|
|
|
fac_fre d |
a dummy variable for whether the household has freezer |
0.146 |
0.0 |
|
|
|
|
|
|
fac_air |
a dummy variable for whether the household has air conditioning unit |
0.269 |
0.0 |
0.159 |
0.0 |
0.220 |
0.0 |
0.215 |
0.0 |
fac_car |
a dummy variable for whether the household has car |
0.204 |
0.0 |
0.168 |
0.0 |
|
|
0.206 |
0.0 |
hou_rost |
a dummy variable for whether the roof is made of strong materials |
0.073 |
0.0 |
0.038 |
0.0 |
|
|
0.303 |
0.0 |
hou_own |
a dummy variable for whether the house and lot is own |
|
|
0.035 |
0.0 |
|
|
|
|
fsizesq |
squared value of family size variable |
0.107 |
0.0 |
0.154 |
0.0 |
0.120 |
0.0 |
0.133 |
0.0 |
less1 |
total number of household member with age less than 1 year old |
-0.029 |
0.0 |
|
|
|
|
|
|
less7 |
total number of household member with age less than 7 years old |
-0.017 |
0.0 |
|
|
|
|
|
|
s1121age |
total number of household member with age 1 to 6 years old |
|
|
-0.033 |
0.0 |
|
|
|
|
s1131age |
total number of household member with age 7-14 years old |
|
|
-0.026 |
0.0 |
|
|
|
|
s1141age |
total number of household member with age 15-24 years old |
|
|
-0.010 |
0.0 |
|
|
|
|
hea_male |
a dummy variable for whether the sex of the head is male |
-0.055 |
0.0 |
-0.044 |
0.0 |
|
|
|
|
non_rel |
total number of non-relative member |
0.054 |
0.0 |
0.076 |
0.0 |
0.114 |
0.0 |
0.048 |
0.0 |
emp_mem |
total number of employed household member |
0.048 |
0.0 |
0.042 |
0.0 |
|
|
0.072 |
0.0 |
floor_area |
floor area of the housing unit |
|
|
|
|
|
|
0.000 |
0.0 |
hou_sow |
main source of water is own use, faucet or community water system |
|
|
|
|
|
|
0.096 |
0.0 |
urb |
a dummy variable for whether the household lives in urban area |
0.061 |
0.0 |
0.057 |
0.0 |
|
|
0.12692 |
0.0 |
_cons |
|
11.680 |
0.0 |
11.806 |
0.0 |
11.401 |
0.0 |
11.799 |
0.0 |
a categories for household head occupation in the 1997 FIES, which is based on the 1977 PSOC
b categories for household head occupation in the 2000, 2003 and 2006 FIES, which is based on the 1992 PSOC
c new household facilities introduced starting in the 2000 FIES
d facility included in the 1997 FIES only
Sources of basic data: 1997, 2000, 2003 and 2006 FIES, NSO
Table 3.
Percentage Share of the Middle Class on Significant Socio-Economic Characteristics:
1997, 2000, 2003 and 2006
| Variable | Percentage of Middle Class | |||
| 1997 | 2000 | 2003 | 2006 | |
Head has postgraduate degree |
2.9 |
3.2 |
0.9 |
0.8 |
head has college degree |
26.4 |
29.1 |
33.9 |
34.4 |
Head works as administrative, executive and managerial workers a |
6.8 |
|
|
|
Head works as sales workers a |
37.3 |
|
|
|
Head works as official of government, corporate executive, managers and supervisors b |
|
18.2 |
22.9 |
23.3 |
Head works as professionals |
10.9 |
8.9 |
9.0 |
8.4 |
Head works as trades and related workers b |
|
7.7 |
6.3 |
5.8 |
Own radio |
82.8 |
83.0 |
75.7 |
72.0 |
Own vcr/vtr,vcd/dvd |
48.7 |
64.6 |
79.9 |
86.2 |
Own telephone/cellphone c |
|
51.0 |
82.7 |
95.3 |
Own computer c |
|
10.6 |
18.3 |
28.5 |
Own oven c |
|
15.6 |
21.2 |
24.4 |
Own stereo |
55.7 |
56.4 |
56.9 |
56.7 |
Own refrigerator |
80.7 |
86.7 |
87.9 |
88.6 |
Own freezer d |
4.5 |
|
|
|
Own air conditioning unit |
9.8 |
16.6 |
22.6 |
28.6 |
Own car |
|
20.7 |
23.4 |
27.5 |
Roof of house is made of strong materials |
83.6 |
88.5 |
91.1 |
93.0 |
House and lot is own |
74.1 |
77.6 |
79.2 |
78.2 |
Sex of the head is male |
81.4 |
78.5 |
77.9 |
75.3 |
Household lives in urban area |
84.3 |
84.5 |
75.3 |
79.6 |
a categories for household head occupation in the 1997 FIES, which is based on the 1977 PSOC
b categories for household head occupation in the 2000, 2003 and 2006 FIES, which is based on the 1992 PSOC
c new household facilities introduced in the 2000 FIES
d facility included in the 1997 FIES only
Sources of basic data: 1997, 2000, 2003 and 2006 FIES, NSO
Table 4.
Top and Bottom 5 Major Expenditure Items
Top 5 |
||||||||
Rank |
General Population |
Middle Class |
||||||
2003 |
2006 |
2003 |
2006 |
|||||
Item |
Share |
Item |
Share |
Item |
Share |
Item |
Share |
|
1 |
Food |
51.4 |
Food |
49.8 |
Food |
36.9 |
Food |
34.8 |
2 |
House rental |
11.3 |
House rental |
11.3 |
House rental |
14.1 |
House rental |
13.9 |
3 |
Fuel. light and water |
6.8 |
Fuel. light and water |
7.7 |
Transportation and communication |
8.9 |
Transportation and communication |
9.8 |
4 |
Transportation and communication |
5.4 |
Transportation and communication |
6.2 |
Fuel. light and water |
6.5 |
Fuel. light and water |
7.7 |
5 |
Personal care and effects expenditure |
4.0 |
Personal care and effects expenditure |
3.9 |
Education |
5.1 |
Education |
5.9 |
Bottom 5 |
||||||||
Rank |
General Population |
Middle Class |
||||||
2003 |
2006 |
2003 |
2006 |
|||||
Item |
Share |
Item |
Share |
Item |
Share |
Item |
Share |
|
1 |
Non durable furnishings |
0.2 |
Non durable furnishings |
0.2 |
Non durable furnishings |
0.2 |
Non durable furnishings |
0.2 |
2 |
Recreation |
0.3 |
Recreation |
0.3 |
Alcoholic beverage |
0.5 |
Alcoholic beverage |
0.5 |
3 |
House repair and maintenance |
0.6 |
House repair and maintenance |
0.5 |
Recreation |
0.6 |
House repair and maintenance |
0.5 |
4 |
Taxes |
1.0 |
Taxes |
0.9 |
Tobacco |
0.7 |
Tobacco |
0.6 |
5 |
Alcoholic beverage |
1.0 |
Alcoholic beverage |
0.9 |
House repair and maintenance |
0.8 |
Recreation |
0.6 |
Sources of basic data: 2003 and 2006 FIES, NSO
Table 5.
Savings pattern of the Middle Class: 1997, 2000, 2003 and 2006
Income Class |
Mean Family Savings (in PhP) |
Increase/Decrease in Savings |
||||||
2003-2006 |
1997-2006 |
|||||||
1997 |
2000 |
2003 |
2006 |
Level |
Percent |
Level |
Percent |
|
Low |
5,236 |
6,343 |
6,171 |
5,997 |
(174) |
(2.8) |
761 |
14.5 |
Middle |
67,623 |
80,336 |
80,114 |
100,047 |
19,933 |
24.9 |
32,424 |
48.0 |
High |
1,156,815 |
930,281 |
2,109,189 |
1,435,053 |
(674,136) |
(32.0) |
278,238 |
24.0 |
Sources of basic data: 1997, 2000, 2003 and 2006 FIES, NSO
Table 6.
Investments pattern of the Middle Class: 1997, 2000, 2003 and 2006
Income Class |
Mean Family Investments (in PhP) a |
Increase/Decrease in Mean Investments |
||||||
1997 |
2000 |
2003 |
2006 |
2003-2006 |
1997-2006 |
|||
Level |
Percent |
Level |
Percent |
|||||
Low |
832 |
907 |
1,202 |
1,203 |
1 |
0.1 |
371 |
44.64 |
Middle |
15,745 |
16,567 |
22,644 |
25,011 |
2,367 |
10.5 |
9,266 |
58.85 |
High |
417,727 |
343,139 |
1,381,733 |
722,981 |
(658,752) |
(47.7) |
305,255 |
73.08 |
a Include amount deposited in banks/investment and dividends/investments.
Sources of basic data: 1997, 2000, 2003 and 2006 FIES, NSO
Table 7.
Share of Middle Class Families with OFWs to Families with OFWs:
2000, 2003 and 2006
Year |
Middle Class Families with OFWs |
Families with OFWs |
% Share |
2000 |
539,799 |
954,667 |
56.5 |
2003 |
515,056 |
903,831 |
57.0 |
2006 |
577,110 |
1,226,867 |
47.0 |
Sources of basic data:
1. 2000, 2003 and 2006 FIES, NSO
2. January 2001, 2004 and 2007 Labor Force Survey, NSO
Table 8.
Annual Family Income of Middle Class Families with OFWs vis-à-vis All Families, Middle Class Families and Families with OFWs:
2000, 2003 and 2006
|
Annual Family Income |
|||||||||||
2000 |
2003 |
2006 |
||||||||||
Mean |
Median |
Minimum |
Maximum |
Mean |
Median |
Minimum |
Maximum |
Mean |
Median |
Minimum |
Maximum |
|
All Families (A) |
145,121 |
89,810 |
4,273 |
8,441,242 |
147,888 |
95,291 |
3,086 |
32,256,048 |
172,737 |
110,650 |
5,295 |
7,919,100 |
Middle Class Families (B) |
331,646 |
268,700 |
178,468 |
1,449,295 |
366,329 |
298,380 |
203,109 |
1,651,632 |
451,174 |
367,460 |
246,109 |
2,000,072 |
Families with OFWs (C) |
254,493 |
199,947 |
12,223 |
2,014,196 |
282,846 |
227,521 |
12,595 |
2,317,360 |
306,867 |
231,614 |
15,677 |
3,322,468 |
Middle Class Families with OFWs (D) |
357,782 |
295,883 |
178,476 |
1,392,000 |
391,768 |
324,338 |
203,248 |
1,651,632 |
472,149 |
398,641 |
246,109 |
2,000,072 |
Ratio of C over A |
1.75 |
2.23 |
|
|
1.91 |
2.39 |
|
|
1.78 |
2.09 |
|
|
Ratio of D over B |
1.08 |
1.10 |
|
|
1.07 |
1.09 |
|
|
1.05 |
1.08 |
|
|
Sources of basic data:
1. 2000, 2003 and 2006 FIES, NSO
2.
January 2001, 2004 and 2007 LFS, NSO
Table 9.
Magnitude and Percentage of the Middle Class : 1997, 2000, 2003, and 2006
Year |
Middle Class |
|
Magnitude |
Percent |
|
1997 |
3,260,474 |
23.0 |
2000 |
3,422,524 |
22.7 |
2003 |
3,282,511 |
19.9 |
2006 |
3,317,824 |
19.1 |
Sources of basic data: 1997, 2000, 2003 and 2006 FIES, NSO
Table 10.
Share of Families by Income Class: 2000, 2003 and 2006
Year |
Family |
|||
Low Class |
Middle Class |
High Class |
||
Poor |
Not Poor |
|||
2000 |
27.5 |
49.6 |
22.7 |
0.3 |
2003 |
24.4 |
55.5 |
19.9 |
0.2 |
2006 |
26.9 |
54.0 |
19.1 |
0.1 |
Sources of basic data: 2000, 2003 and 2006 FIES, NSO
Figure 1.
Magnitude of the Middle Class: 1997, 2000, 2003 and 2006

Sources of basic data: 1997, 2000, 2003 and 2006 FIES, NSO
Figure 2.
Percentage of the Middle Class: 1997, 2000, 2003 and 2006

Sources of basic data: 1997, 2000, 2003 and 2006 FIES, NSO