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Why the rich becomes richer and the poor, poorer

/ 07:32 PM August 03, 2013

Ibon Databank in its 1980 studies recommended that “a Filipino family of five needed to work and be paid a minimum wage of P30,000 a month in order to survive” its daily grind. More than 30 years after, basic pay of ordinary Filipinos remained at an average P10,000 a month in the cities, and much less in the provinces.

Experts on political economy warned that the wide disparity in rural and urban wages remained a roadblock to achieving inclusive, broad-based development, despite the Philippines’ 7.8 percent economic growth on first quarter-2013, the highest since President Benigno  Aquino III took office in 2010.

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This was the essence of the first in a series of roundtable discussions organized by the Angara Centre for Law and Economics, dubbed as “Taking the Philippine Economy to the Next Level: Promoting Inclusive Regional Development” recently at Malcolm Hall, College of Law, University of the Philippines, Diliman, Quezon City.

The event was topbilled by internationally-recognized political economist, Dr John C. Nye, Frederic Bastiat, chair in Political Economy at the Mercatus Center, George Mason University, and research director at the Higher School of Economics in Moscow.

Dr. Nye’s study had observed that PH’s overall ratio of rural-urban wage gap at 67 percent remained constant over the last decade. There are higher ratios when skilled and unskilled workers are considered separately. Areas with a high share of agriculture have the lowest relative wages, the study revealed.

There is a pressing need to even out the rural-urban wage gap, which calls on the Aquino administration to take a hard look at differences in labor policies between commercial industries and rural labor.

The paper pointed out, urban workers actually earn slightly less in real terms than rural workers when relative prices are considered.  Despite the higher cost of living in urban centers, there are compensating factors that can explain why people flock to already-congested cities. These are unmeasured intangibles like better public services, improved networks, more educational opportunities, better urban amenities, and an expectation of social mobility.

Nye coauthored the study with respected political economists Jeffrey Williamson, Laird Bell professor emeritus of Economics, Harvard University;  Karl Chua, country economist for the Philippines, World Bank; and Louie Limkin, research analyst, Poverty Reduction and Economic Management. Arsenio Balisacan of the National Economic Development Authority and Rogier van den Brink, lead economist of PREM served as panel discussants.

This lecture kicks off the Angara Centre’s Andrew Tan Lecture Series, named after the real estate tycoon and Megaworld founder who is the Centre’s first patron.

It seemed like six Philippine administrations, past and present, had failed to stop the widening gap between the take home-pay of provincial and city workers? “Why and how come” are in themselves running stories that appear to be without end.  Marc Guerrero

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TAGS: economy, Growth, Income Gap
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