Next year’s P506 billion ayuda budget, slashed by almost nine percent from this year’s allocation, will definitely amount to much less when appropriated to the 10 million Filipinos who make up half of the population living below the poverty line.
Worrying as this may be with today’s stubbornly elevated inflation, it is not just the poor and the poorest of the poor that are now among the most vulnerable sectors of Philippine society. Members of the middle class, especially those in the low-income segment, are increasingly being threatened.
More than ever, the Philippines needs a well-structured ayuda system that provides not just the barest in cash assistance to the country’s poorest, but also to help those in the low income class, numbering about 40 million, from getting dragged over to poverty.
Already, the pandemic has shrunk the middle class, with those who earn their living from wholesaling and retailing, menial labor, and entry- or low-level employment most affected by the past mobility restrictions in Metro Manila and other urban centers.
This time around, this extended inflation run, which will likely still be felt for the most part of next year, is something that many from the middle class are not yet fully aware of. If they have been burdened by the pandemic, next year will be much tougher with the high inflation we are experiencing.
Before things get worse, new measures must be put in place to protect the most vulnerable of the middle class from being squeezed further. Every one of them will be essential in speeding up economic recovery when this high inflation era is over.
Unavoidable circumstance
Constrained by our government’s decreasing appetite to borrow more money for dole outs amidst narrowing revenue streams and higher spending, what can be done?
For the poorest of the poor who live below the poverty line, dole outs like the conditional cash transfers under the government’s Pantawid Pamilyang Pilipino Program (4Ps) are necessary and can literally save them from going hungry while allowing beneficiary families to keep their children in school.
The middle class, on the other hand, has the ability to earn, although beset by unavoidable circumstances that has severely eroded savings. During the last two years, it was the pandemic; this year, it is higher priced goods, food, and fuel.
Different income levels segmented under the middle class have different priority needs. Low income families, over eight million, worry about rental payments and medical expenses, often of ailing parents who live with them.
Most of those who eke out a living from wholesaling and retailing, or manage a sari-sari store or carinderia have noted a drop in gross earnings as clients in their neighborhood experience tighter budgets. Drivers of public vehicles are burdened by a boundary system where the high cost of fuel eats up their daily income. Daily wage earners are forced to reduce their food budgets to compensate for higher transportation expenses. Informal short-term loans, often at high interest rates, are on the rise.
Lower middle income and middle middle class families, which represents roughly 31 million and 11 million people, respectively, worry about losing their social status as housing mortgages or vehicle installments force them to cut back on less essential expenses, including electronic gadgets, dining out, and entertainment. Education is a big burden, though, for those who send children to private schools.
Upper middle income families, about 1.2 million, have to contend with reduced savings, often put away for the future schooling of children in elite universities and colleges, or abroad. Money that has to be put away for retirement is often deferred when extraordinary expenses crop up.
Temporary measures
Overall, obviously those belonging to the lower income class will need the most help. The country’s struggling working class is peopled by a majority who have barely completed secondary education, hence the propensity for jobs that earn barely minimum wages or for self-employment or entrepreneurship of smaller-than-micro businesses.
Some temporary measures that government can introduce during this period of high inflation include a moratorium on any increases in home rents. Most welcome too would be new or enhanced benefits on medical treatment and medicine procurement for dependent parents. Bigger student fare discounts could be considered, especially on the metro trains.
A standardization of the boundary system for public vehicles that don’t employ on a set wage can be explored. This way, drivers are assured of take-home pays that can pay for their monthly rents, daily food, and other essential expenses.
It’s about time too, to consider setting up stricter licensing procedures for our tradesmen, such as electricians, plumbers, masons, and carpenters, which consequently will dictate how much they can charge. Not only will this guarantee quality work, but can also encourage them to upgrade their skills.
With many local governments receiving higher internal revenue allocations starting this year, business registration and operating license fees for micro businesses can be deferred, and payments resumed once inflation cools.
Job creation
Local governments would do best to initiate programs that create jobs to employ tradesmen whose work are mainly contractual and time-bound. The national government, on the other hand, should speed up infrastructure projects, thus creating more long-term jobs.
Job creation provides more benefits, both in the short term and longer term, than the easy way, and often politically tainted, dispensation of ayuda.
The middle class squeeze that will be more pronounced next year has some economists already worried on its effect on the gross domestic product (GDP). The good news is that this can be prevented if we just put our heads together to recognize the brewing crisis and find appropriate solutions.
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