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Why exclude the middle class for emergency assistance?

By: Fernando Fajardo - Columnist/CDN Digital | April 08,2020 - 07:19 AM

 

The “Bayanihan to Heal as One Act” grants emergency power to the President to tackle the current crisis caused by COVID-19. This power included a provision to provide emergency assistance amounting from 5,000 pesos to 8,000 pesos per household for two months to 18 million low-income households affected by the lockdown. 

The final amount, however, is computed based on the prevailing minimum wage rates in the region and after taking into consideration the current conditional cash transfer program and rice subsidy program under the Pantawid Pamilya Pilipino Program or 4Ps. In Metro Manila, which has the highest minimum wage rate in the country, the maximum amount is given. In Cebu, the estimate is about 6 thousand pesos to 7 thousand pesos per household per month for two months. 

When the Act was passed, many of our high government officials were competing with one another to announce the availability of 275 billion pesos to fight the virus and for assistance to affected households because of the lockdown. Out of this amount, 200 billion pesos are intended for emergency assistance. The President when he discussed his first week report to Congress in the implementation of the Act mentioned that the 200 billion pesos intended for emergency assistance was already available. Last Monday, however, the President said that the 275 billion pesos might not be enough to cover all the expenses to fight the virus.

Now, two controversial issues are boiling. The first is whether there are enough funds to cover all the 18 million low-income households targeted for assistance. The second is whether the middle class are included in the distribution of emergency assistance.

I will not dwell anymore with the first issue on the availability of funds. The power granted by the Act to the President to generate funds from the 2020 General Appropriations Act (GAA) and what remains of the 2019 GAA to support the measures to address the crisis caused by   COVID-19 is so wide that I find no reason why money is a problem. In fact, when really needed, Congress, which is in complete control of the President, can easily pass a supplementary budget.

The question whether those belonging to the middle class are included for emergency assistance arose because while the middle class are also affected by the lockdown, only the low income households are mentioned in the Act to be given emergency assistance. 

However, I think there is a misunderstanding on this point.

Firstly, if the target is 18 million household, then the middle class is already included. I defined the middle class as the segment of our total number of households above the bottom 30 percent and below the uppermost 30 percent when we group our total number of households into 10 groups according to the size of their income and arrange the group from the lowest income group to the highest income group.

The middle class consisting of the fourth, fifth, sixth, and seventh group, are already included because the 18 million target households already comprised 72 percent out of the 25 million estimated total number of households this year.

The 25 million households this year is arrived at by dividing our estimated 110 million population this year by 4.4 persons in average household size as determined in the 2015 census. The 110 million present population is arrived at by the allowing our 2015 population (101 million) to grow at the same rate of population growth (1.72 percent) that we experienced from 2010 to 2015.

Furthermore, the Act neither defined low-income household nor set the level of household income below which a particular household is considered to belong to the low-income group. To identify the low-income group, the best that could be done here is to use the poverty threshold in 2018 (P10,727 monthly per family) and project to 2020 using the inflation rate (about 5 percent since 2018 up to now). Below the poverty line is the low-income group. 

In 2018, poverty incidence or the number of families or household in poverty went down to 12.1 percent from 17.9 percent in 2015, that is, from 4.111 million of our total number households in 2015 to 2.986  million in 2018.

 Applying the same 2015 poverty incidence rate to the estimated 25 million total households this year, about 3.025 million households will qualify for emergency assistance. That is too far away from the 18 million target. 

Thus, there is no reason why the middle class will not be included. But not all because of financial constraints. Perhaps we can go only up to the fourth and fifth group, the lower middle class. This now results in 12.5 million households being assisted representing the bottom half or 50 percent of our total number of households. /dbs

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