In response to the demand for official statistics on the poverty situation in the country, the National Statistical Coordination Board (NSCB) created the Technical Working Group (TWG) on Poverty Determination (later changed to TWG on Income Statistics) under the Inter-Agency Committee (IAC) on Labor Employment and Income Statistics (also recently changed to IAC on Labor, Income and Productivity Statistics). The TWG was initially composed of representatives from:

• NSCB
• Food and Nutrition Research Institute (FNRI)
• National Statistics Office (NSO)
• National Economic and Development Authority (NEDA)
• Department of Trade and Industry (DTI) and
• Department of Labor and Employment (DOLE).

Later on, representatives from the

• Department of Social Welfare and Development (DSWD) and
• National Wages Commission (NWC)

were added to the group. 

The TWG compiled the first estimate of official statistics on poverty with 1985 as the reference year and using a methodology which was menu-based and which adopted a basic-needs approach. The same methodology was used in 1988. In 1992, as a result of the efforts of the Philippine Statistical System (PSS) to improve the methodology of estimating poverty in the Philippines, the NSCB approved a new methodology.

The major difference between the old and the new method logy was on the requirements for the non-food component of the poverty threshold. Under the new methodology, non-food requirements for items that were not considered basic such as alcohol beverages, tobacco, recreation, durable furniture and equipment, and miscellaneous expenditures were excluded. The 1992 method logy was used to re-estimate the poverty statistics for 1985 and 1988, and to generate poverty statistics for 1991 and 1994.

BASIC CONCEPT/DEFINITIONS

Food Threshold refers to the annual per capita cost of basic food requirements which meet 100% adequacy of the recommended dietary allowance (RDA) for protein and energy (2,000 calories) and 80% adequacy of other nutrients.

TECHNICAL NOTES

Data for analysis on poverty statistics were drawn mainly from the Family Income and Expenditure Survey (FIES) of the National Statistics Office (NSO). The FIES were tabulated and prepared by the TWG on Income Statistics under the IAC on Labor, Income and Productivity Statistics administered by the NSCB.

• Determination of Low Costs Diets
  Low cost diets on a per capita basis are constructed for the regions of the Philippines, subdivided into rural and urban. One-day sample menus for each urban/rural area of a region are provided by the FNRI taking into consideration the nutrient requirements, food commonly eaten in the areas, and the generally cheap foods. These menus are being based on per capita Recommended Daily Allowance (RDA) and are generally applicable to the average healthy Filipino performing moderate activities.
  
• Nutrient Requirement
  The dietary goal of the menu plans is to meet 100% of the per capita RDA for energy and protein and 80% of the per capita RDA for vitamins, minerals and other nutrients. The RDA for energy is 2,000 calories.
  
• Food Commonly Eaten in the Area
  The menus are typical of a Filipino diet and representative of the region. The typical Filipino pattern is composed of three meals and one snack and usual food combinations are followed, like having rice with viand. Variation in food preference across regions has been reflected in the menus. The consumption patterns are based on the results of the latest Food Consumption survey of the FNRI.
  
• Cheap Foods
  The term "low cost" implies the utilization of cheap food for the construction of the sample menus. thus, nutritionally economical food are considered to comprise the menu. This means that an additional quantity of such food items entails comparatively lower cost but has the same nutritional contribution as the other more costly foods. On the other hand, some foods, although a little more costly, are included in the menu because they are the only source of the nutrient required.
  
• Determination of Own-Produced Components
  For the purpose of costing the menus, the proportion of food bought and not bought are determined. These are based on the results of the National Nutrition Survey of the Philippines conducted by the FNRI.
  
• Derivation of Costs
  The menus are valued using average actual prices, but applying different prices for the bought and not bought components. For the bought component, the following set of prices are used: a) NSO Retail Prices; b) the composite prices derived from the NSO urban-provincial retail prices; and c) prices paid by farmers for rural regions. For the own-produced commodities, prices received by farmers as gathered by BAS are used in cases where price data are available. In cases where data are not available, a price value is computed based on the price of more or less similar commodities and/on average value of commodities for which price data are available.
  
• Computation of Food Threshold
  The per capita per day food cost is multiplied by 30.4 (approximate number of days per month) to get the monthly food threshold or by 365 days (30.4 days/month x 12 months) to get the annual food threshold.
  
  The monthly/annual food threshold or food line derived is thus interpreted as the subsistence line - the monthly/annual income necessary to meet nutritional requirements.
  
• Poverty Threshold
  In order to estimate the total poverty threshold (food plus non-food basic needs), the food threshold is divided by the proportion of the food expenditures to total basic expenditures (TBE) derived from the recent FIES using the computation resulting to families with expenditure within ten percentile of the food threshold.
  
• Poverty Incidence
  To get the magnitude of poverty, the per capita annual income of each sample family of the FIES is computed and compared to the respective annual per capita poverty threshold of the region (urban/rural) where the sample family resides. Those with incomes below or above the poverty threshold are identified. The number of sample families falling below the poverty threshold is blown up to estimate the total number of poor families.
  
• Subsistence Incidence
  The subsistence incidence is measured by determining the number of families with income below the food threshold. The per capita annual income of each sample household in the FIES is compared to the food threshold to determine whether it is above or below the threshold. The magnitude of sample families determined to be poor is then blown up by the appropriate raising factors of the survey.

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