Throughout Asia, the Philippines conspicuously stands out when it comes to social and economic inequalities.
The latest World Bank calculations place the Philippines at the highest level of inequality in the region (see Table 1). In a grouping of 27 Asian countries monitored by the World Bank, the Philippines ranks No. 1 in inequality with a Gini ratio of 42.3. Four other countries—Iran (42.0), Papua New Guinea (41.9), Malaysia (41.1), and Turkmenistan (40.8)—fall within the danger level of a 40 Gini ratio. Singapore (39.8). Sri Lanka (39.3), Lao PDR (38.8), China (38.5) and Indonesia (38.2) are at the borderline of the Gini index.
The Gini index is a statistical measure for determining levels of equality and inequality within a target population. The higher the number, the more unequal the distribution of income/wealth within a population; conversely, the lower the number, the less unequal is income/wealth distribution. A Gini index of below 40 is considered tolerable but above that, potentially hazardous. It is not, however, a perfect measure of income/wealth distribution as it has its limitations.
One expression that elucidates on the Gini index is how income is distributed among a target population. From the 2021 Family Income and Expenditures Survey (FIES) conducted by the Philippine Statistics Authority (PSA), a typology of seven income groups and three income classes was developed by the Philippine Institute for Development Studies (PIDS). In terms of the three income classes, 54.6% of households fall under the low classes category with earnings ranging from P12,082 a month to P22,833 a month. The middle classes comprise 40.8% with incomes from P23,834 to P307,189 a month. The upper class, on the other hand, is a mere 0.9% with incomes ranging from P307,189 and above per month.
These numbers reveal a highly skewed income distribution pattern (see Table 2).
Given the wide range of incomes for each of the three income classes, the PIDS further subdivided them into seven income groups. PSA data for individuals approximate the levels of inequality across families. At the very top of the income pyramid are the 350,000 individuals classified as “rich” with incomes above P595,834 a month and comprising a mere 0.3% of both families and individuals. Rich Filipino families, therefore, have incomes that are at least 49.5 times that of poor families, thus violating Plato’s ancient dictum that the rich should not have more than four times the income of the poor.
From these 350,000 individuals, Forbes has extracted a list of the Philippines’ 50 richest—the billionaire class. In 2022, Forbes reported the combined net worth of the 50 richest Filipinos at $80 billion or P4.5 trillion, which alone comprises 20% of the country’s 2022 gross domestic product (GDP) of P23 trillion ($404.28 billion).
The wealth of the richest 50 was also a staggering 90% of the Philippine government’s budget for 2022 of P5 trillion. The average net worth of this group of 50 is P90 billion ($1.6 billion). Of the top 10 richest in 2022, six belong to only one family—the children of the late Henry Sy Sr., with a combined wealth of $14.9 billion (P837 billion).
One can also comprehend the levels of inequality by utilizing Thomas Pikkety’s method as presented in his famous 2014 work, “Capital in the Twenty-First Century.” Looking at market-based economies characteristic of capitalist societies, Pikkety discovered that the average annual rate of return of capital (r) has consistently been greater than the rate of economic growth (g). He expressed this in his famous formula of “r > g.”
The result is that private wealth accumulates unequally over time and overwhelms society’s economic output. In other words, capitalist profits accumulate much faster than economic growth. The overall outcome is a concentration and unequal distribution of wealth.
To adopt Pikkety’s formula for the Philippines, in the 10-year period from 2013 to 2022, while the average rate of economic growth stood at 6.2%, the average rate of return to capital was 13.6%, or more than double the former (see Table 3). The data also show that while the rate of return to capital has been increasing from 12% in 2013 to 15 % in 2022, the economic growth rate has been declining from 7.2% in 2013 to only 5.7% in 2022—a 21% decrease.
Therein lies the source of inequality and how vast amounts of wealth have been concentrated in the hands of the very few while leaving morsels to the rest of society.
At this point, it is pertinent to recall the “Occupy Movement” of 2011-2012 that was a mass protest against US inequality between the 1% and the 99% that spread globally. In the Philippines, however, the PSA FIES data show that the 350,000 persons classified as “rich” comprise a mere 0.3% of the total population. So, if one were to reprise the Occupy Movement’s call for the Philippines, it would be the 99.7% versus the 0.3%.
The question is: Would such a “call to arms” reverberate across the Philippine population and ignite a similar protest movement of significant proportions?
This article is excerpted, revised and updated from Eduardo C. Tadem. 2023. Inequality, Tax Justice, and the Philippine Wealth Tax Campaign.” UP CIDS Monograph Series 2023-04. https://cids.up.edu.ph/wp-content/uploads/2023/06/Inequality-Tax-Justice-and-the-Philippine-Wealth-Tax-Campaign.pdf. The author is emeritus professor and professorial lecturer of Asian Studies, University of the Philippines, and convenor of the UP Center for Integrative and Development Studies, Program on Alternative Development (UP CIDS AltDev).