Relationship between poverty and unemployment in the philippines

Government may miss poverty incidence, unemployment goals | BusinessMirror

relationship between poverty and unemployment in the philippines

The Philippines is no longer the “Sick Man of Asia,” but there are still huge Philippines Economy: Booming, But Poverty and Unemployment Remain Problematic suggest that there is little correlation between acquiring an investment grade. The more probable cause of unemployment in the Philippines is the According to a study of urban poor in Metro Manila. modest fixed assets. . that about 2. involved itself minimally in labor relations. but some of the structures of the. Youth unemployment rose most quickly from % to % over the year, “ Labour Market Review: Employment and Poverty in the Philippines”, called for.

Unemployment and Poverty

A second feature of the rich is that much or most of their total income comes from capital. At best, that income is payment for savings, innovation, risk-taking and effective stewardship of resources under their control—the story emphasized by the classical economists and, among development economists, highlighted by Lewis At worst, a considerable share comes from illicit activities, the exercise of monopoly power usually legal, but not in the social interestspeculative gains often not in the social interest and so on.

Such lacks often characterize certain groups disproportionately. Poverty is also associated with ethnicity where colonized or otherwise less powerful groups are under the control of powerful oneswith gender, with age older people have less income and economic cloutand with various types of disability. Frequently it is the interaction between two features that creates serious vulnerability to poverty, as in the case of female members of an ethnic group which is both marginalized by the society as a whole and machistic.

Since the poor tend to have little chance to accumulate assets that could tide them over such downturns, a loss of current income is translated quickly into a crisis. The economics of inequality and poverty, and the possibly useful policy responses to them, thus involve also dealing with economic insecurity.

Measurement of such other aspects of inequality as opportunities favoured by Sen,discrimination, or failure to be appreciated Shaffer, is by nature more difficult, and has received correspondingly less attention. An important question is the degree of correlation between income or consumption the usual economic indicators of economic welfare and poverty and these other aspects of welfare; only if it is very strong can we assume that policies that address income and consumption inequality will also assure benefits in those other elements of personal and group welfare.

Unemployment in the Philippines

This is true in part because money buys the private goods people consume and in part because governments are often under the control of rich elites and thus favour these groups in the way they provide public goods. Other potentially important indirect effects of inequality involve the character of the society, in such dimensions as instability, violence and crime, which can form part of the vicious circle within which inequality and its correlates interact.

Another important correlation is between poverty and either not having a job or having an unsatisfactory one; both feed directly into low self-esteem. Improving access to decent employment thus constitutes a mechanism to facilitate group identity and inclusion.

This, together with the income generated and the self-esteem implicit in being able to carry out some socially valued activity, helps to explain why employment emerges as so important to so many people. Because relative income or consumption is a major determinant of welfare for many people Easterlin,income inequality can be seen as a form of economic exclusion. But since exclusion takes many other forms, inequality and exclusion are by no means the same thing.

For example, each member of a very inegalitarian society could nonetheless feel a strong sense of inclusion within her caste or social class. Psychologists are unambiguous in their view that group identity is central to the lives of most people. The overall societal implications of groups capable of providing a sense of personal or collective belonging thus depend on whether and to what degree that sense is defined in reference to an out-group or even an enemy.

A key mechanism of group exclusion—often referred to as structural inequality, is the attribution of an inferior status to a category of people. It is especially severe when the stronger group also dominates state institutions and is reproduced through a wide range of mechanisms, among which ethnicity plays a major role. For example, worker cohesion often raises group productivity Hall and Jones, Alternatively, association and interaction with others helps build social networks that may provide support when it is needed.

Very low income families are often precluded from participation in networks because they cannot reciprocate; at the limit their members may have only each other to rely on for support in difficult times Pahl, This fact has immense implications both for growth policy per se and for the environment.

If the environment is being despoiled to achieve growth that has only a modest societal payoff anyway, it should be slowed perhaps even stopped until societies have found ways to benefit more from it.

The importance of relative income to welfare also poses a number of challenges for social policy, including: One is knowing the details of how economies function, such as how the labour market worksand the cross-section evidence on what features of an economy are correlated with inequality at a point of time.

A second is the historical record on inequality in the developing countries, which however suffers from two great weaknesses: As a result, the record of the now industrial countries, which suffers from neither of those weaknesses, takes on more importance. Among the developing countries there are many examples of increasing inequality, especially over the last two or three decades, though in a number of Latin American countries recent evidence reveals declines in the inequality of reported income made up mainly of labour income and transfers but typically missing the bulk of the capital income of richer people.

How Inequality Changes Over Time 15The first notable feature of the pattern of inequality over time is its remarkable inertia under all but very extreme circumstances.

Behind this pattern of relative constancy over time are two underlying types of stability. One involves the major determinants of inequality discussed in more detail belowespecially the distribution of factors of production; the distribution of land, physical capital and human capital never change quickly, absent some extreme event; in the case of human capital even an extreme event does not affect it much.

Second, the policies and the politics and administrative systems that underlie them also tend to change gradually—there is a heavy dose of path dependency in this respect as well. The Record of the Industrial Countries 16The overall trajectory of pre-fisc inequality inequality prior to the effects of taxes and public spending has been strikingly similar across the now industrial countries, typically involving a preth century increase, a decline during some or much of the 20th century and a levelling off or increase during the last several decades.

The 20th century upsurge in transfer payments like pensions and in social spending more generally has meant that post-fisc inequality has fallen more than its pre-fisc counterpart, and that the former is probably now less in all or nearly all countries than was the case a century or more ago.

Another frequently significant source of inequality in the 18th century and much of the 19th was the ability of well-placed groups to derive rents from an institutional framework that biased markets in their favour; 4 by contrast, the wages of the unskilled were set in a competitive market.

Many of the guaranteed incomes benefiting the middle class or the well to do in the 18th century had disappeared by in the industrial countries Morrisson, The state had by then intervened on behalf of the lower strata to fix a minimum wage, provide unemployment compensation, etc.

The concentration of human and physical capital decreased substantially over the 19th and 20th centuries due to the diffusion of education and of savings as incomes rose. There has also been increasing access to family housing ownership. Notable declines in the pre-fisc income shares of those at the top were usually linked to the trauma of war or economic crisis - in all cases, inequality fell either during or after each World War Piketty and Saez, Meanwhile, both tax and social spending patterns in the industrial countries went through dramatic alterations over the 20th century, leaving the post-fisc distribution of disposable income quite different from the pre-fisc one in nearly all cases.

Typically the greater redistributive effect came from the spending side. Until nearly the end of the 19th century there were only two forms of social spending 5 —poor relief and public schools. The rise in social spending accelerated between and WW11 and then boomed between WW11 and aboutafter which its share of GDP has levelled off.

At the end of WWII the threat of communism frightened both the Church and the Christian Democratic parties into acceptance of social democracy. The big increase in social spending took place in the s and s. Post-fisc inequality was also lowered by more progressive tax systems, usually built around the income tax. Before WW1 this effect was absent or unimportant, but by the s and s it was significant in Scandinavian countries and the UK.

After the Second War political factors greatly raised tax progressivity, with the British tax structure being copied in a number of European countries. Still, the welfare state with its greatly increased public social expenditures lowered inequality much more than did the tax system.

Its large decline in inequality, entirely concentrated in the Great Depression and World War II years, saw capital owners sustain severe shocks to their assets and permanent declines in their shares of wealth and national income.

Japan then soon embarked on a dramatic post-war burst of growth which allowed it to catch and surpass many of the earlier industrializing countries. Dell, reports that top incomes in Germany quickly reconcentrated after the second war, and attributes this to the much lower inheritance taxes there.

The jump in the shares of the very rich is of concern to the developing countries if there is reason to believe that it might be occurring in them contemporaneously or might appear soon. If further evidence demonstrates that the patterns are similar to those of the rich countries, one hypothesis will relate to globalization and its tendency to raise upper-range incomes of developing country professionals and capitalists who can become part of lucrative world markets; another will relate it to the spread of capital and skills intensive technologies around the world.

The Record in the Developing Countries 22Useful, albeit incomplete, statistical information on income inequality started to become available in the developing countries just a few decades ago with the appearance of periodic household surveys. Apart from the already noted inertia of income distribution over time under normal conditions, the main conclusions to emerge to date are that: Measured by the Gini coefficient, the range for pre-fisc income is roughly from 0.

If true, may these initial albeit thus far modest declines be the beginning of a significant downward trend of inequality in the developing world, perhaps first in Latin America, a relatively rich region by developing country standards? Similarly, it appears that the inequality of health outcomes has been falling. That gap widened markedly during a period beginning in the early nineteenth century or probably earlier 10 and continuing until at least the middle of the twentieth; the bulk of this widening had taken place by the early 20th century and thus substantially coincided with the period during which the Industrial Revolution saw the now industrial countries create and greatly widen the gap in average income between them and the rest of the world.

The bottom three quintiles of the world population lost systematically until from At the world level this, then, was a long period of highly exclusive growth. First, that inequality comes mainly from inter-country income differences rather than intra-country ones. As for the s and s, although there has been some disagreement about the trends most studies conclude that i changes in the standard indicators, in whichever direction, were not large relative either to the absolute level of inequality or to the changes over the preceding couple of centuries, but that ii the bottom three quintiles and the top one gained at the expense of the upper-middle group, especially deciles 8 and 9.

relationship between poverty and unemployment in the philippines

For the bottom three quintiles, therefore, their long decline in the share of world income was reversed, growing from Meanwhile the share of the top decile continued an upward trend that appears to have been in evidence for upwards of two centuries. Expressed in terms of the Theil index, which can be decomposed in a straightforward way, inter-country inequality accounted for over three-quarters Poverty incidence naturally depends on where poverty lines are drawn, and it is now customary for analysts to present at least two.

By the Bourguignon-Morrisson lines for poverty and extreme poverty showed only a small decline from their levels of Berry-Serieux93 estimate poverty incidence inand for and for international dollars of per year Table 112 and report that extreme poverty continued to decline rapidly during the s, after which the pace slackened markedly in the s.

Agrandir Original png, 25k 28During the s, the share of people in this category fell sharply in East Asia, mainly reflecting the growth of China and also in South Asia, while remaining about constant in Africa Table 2. In the s, such extreme poverty was again roughly halved in East Asia, though the rate of decline slowed sharply in South Asia due to increasing inequality in India, and incidence rose markedly in Sub-Saharan Africa. These two decades saw only a modest reduction of extreme poverty in the world outside China and none at all in the world outside China and India.

The experience of the s and the s is dramatically different with respect to poverty. For the world as a whole and for the world minus China, the percentage point decline was considerably greater in the s Table 2.

In summary, East Asia and South Asia, the two regions with the largest poor populations, reduced poverty rapidly during these two decades while the third one sub-Saharan Africa was going in the opposite direction. From the fact that developing country growth has been faster than that of the leading countries, it is clear that by some criteria inter-country inequality has diminished.

Unemployment and Poverty | Economy Watch

The main cause of pessimism about what is happening at the bottom is that many of the countries with low average incomes are now found in sub-Saharan Africa. Failure of the statistics to capture income from asset appreciation, which at times can constitute a quite substantial share of total capital income, especially that concentrated at the top of the distribution, could also constitute a downward biasing element in the estimated trend of concentration at the top.

Personal Correlates of Pre-Fisc Inequality: First, human capital, as approximated by level of education and degree of work experience, explains much of the earnings differentials across people that show up in household surveys. Average income of university graduates can be as much as times that of illiterates.

The traditionally high estimates of the payoff to education in developing countries may be seen as the other side of the coin from its high correlation with income. Recent studies Rosenzveig, ; Pritchett, point to probably serious upward biases in most estimates of the true causal impact of education on income, as opposed to that of other personal characteristics linked to the level of education e. Second, differences in physical and financial capital are the other main direct determinant of inequality, in particular inequality at the top of the income hierarchy.

This percent of income excluding that from asset appreciation is quite concentrated at the top, but its precise distribution is not yet known. That such characteristics should be related to income usually suggests either discrimination or some other form of market imperfection. Since there are many intercorrelations among these variables and between each of them and level of education or human capital, average income or gross differences between categories of people defined by differences in these variables typically overstate their net causal contribution to inequality.

Whereas the gross differentials can be 2: No one doubts its role, together with that of hard work, in determining who gets high incomes from sports, the arts and a few other activities where performance is relatively easy to measure.

But attempts to ascertain whether it plays a significant role in the creation of population-wide income differentials have thus far come up with little. Taken literately, most suggest a very small role for native ability in explaining income differentials within a population Boissiere et al, This may reflect the difficulty of measuring native skills in an adequate way; further, the fact that success in different areas may rely on different skills suggests than any native ability test needs to be geared differently for different people.

relationship between poverty and unemployment in the philippines

Structural and Policy Determinants 34Many aspects of the setting within which the personal differences among people play themselves out also have an impact on the level of inequality. We here consider four—the extent and pattern of technological change, population level and growth, market imperfections and the degree of openness of an economy. Technology Choice and Biased Technological Change 35Technology choice and biased technological change i. There is no doubt of its relevance but the magnitude of its impact is hard to measure precisely and, since technological advance is essential to growth, there is a possible trade-off between growth and labour demand.

How often policy and structure can be combined to produce this sort of result is the key empirical question. At the pessimistic end of the spectrum of possibilities, it may be that larger-scale capital intensive firms will continue to raise their share of output but not of employment and will squeeze the micro, small and medium enterprise MSME sector with the result that the generation of decent employment remains weak, wages low and inequality high. Such empirical evidence is consistent with the theoretical prediction that the shift towards more capital intensive technologies would raise capital incomes and hold wages down.

But the magnitude of the effect, what variables that magnitude depends on, and the extent of any trade-off between achieving a high rate of economic growth and a low aggregate level of labour displacement remain open to discussion. Reasonable guesses are that technological change is the most important single factor in raising inequality or keeping it high and that it takes quite good policy to avoid a significant trade-off between such displacement and growth.

As per the World Bank definition, poverty implies a financial condition where people are unable to maintain the minimum standard of living. Poverty can be of different types like absolute poverty and relative poverty. There may be many other classifications like urban poverty, rural poverty, primary poverty, secondary poverty and many more. Whatever be the type of poverty, the basic reason has always been lack of adequate income.

Here comes the role of unemployment behind poverty. Lack of employment opportunities and the consequential income disparity bring about mass poverty in most of the developing and under developed economies of the world. Sources of Unemployment Lack of effective aggregate demand of labor is one of the principal reasons for unemployment. In the less developed economies a substantial portion of the total workforce works as surplus labor.

This problem is particularly prevalent in the agricultural sector. Due to excess labor, the marginal productivity of the workforce may be zero or even negative. This excess pool of labor is the first to become unemployed during the period of economic or social crisis. When a capitalist economy undergoes some dynamic changes in its organizational structure, it results in structural unemployment.

This type of unemployment may also emerge if the lack of aggregate demand continues for a substantially long period of time.

In case of frictional unemployment, workers are temporarily unemployed. There may be cases of hidden unemployment where workers restrain themselves from working due to absence of appropriate facilities.