PH wealth gap narrowing–ADB

The rise in the number of wage earners was the biggest contributor to the narrowing wealth gap in the Philippines over the past two decades, as more poor Filipinos engaged in better-paying activities, the Asian Development Bank (ADB) said.

Such was also the case in Thailand and Vietnam based on a working paper published by the ADB, which examined the trends and drivers of income inequality in the three Southeast Asian economies.

The Manila-based multilateral lender estimated that the Philippines’ nationwide Gini coefficient—which measures income inequality using a scale from 0 to 1, where the higher number indicates bigger wealth gap—fell to 0.440 in 2018, from 0.499 in 2003.

Over two decades

The urban-rural income gap likewise narrowed in the Philippines over the past two decades, contributing to the smaller wealth disparity nationwide, the ADB said.

By sources of income, the ADB said wage was the largest source of income inequality in the Philippines and was responsible for 45.4 percent of the country’s Gini coefficient as of 2018.

The second biggest source of wealth inequality in 2018 was income from so-called “nonfarm” businesses or those involved in activities like retailing, manufacturing and construction. The ADB said this income source contributed 17 percent to the nationwide Gini coefficient.

Remittances from Filipinos abroad were the next main driver of inequality, accounting for 15.4 percent of the wealth gap in 2018.

Same in Vietnam, Thailand

“For all three countries, wages were the largest source of income and increased wage earners reduced income inequality,” the ADB said. “Less well-off households increasingly engage in better paying activities.”

As income inequality “remains high” in the Philippines despite the decline in recent years, the ADB said factors like progressive taxes and cash transfers to the poor can help further narrow the wealth gap.

“This recent trend of moderating income inequality might be the combined outcome of rising opportunities, government policies promoting social inclusion and positive impacts of structural transformation,” the ADB said.

“More policy efforts are still needed to make growth more inclusive,” it added.