Are you part of the Philippine middle-class?

MANILA, Philippines – The signs are everywhere. From more Filipinos buying iPhones and motorcycles and trying out imported premium liquor, the Philippines’ middle-class is clearly on the rise again after negative growth during the pandemic. 

A new study by the government think tank Philippine Institute for Development Studies (PIDS) points out the importance of the middle-class, saying its expansion has “significant implications” on a country’s “sustainable development and socio-political stability.” 

It attributed the growth of the middle-class to “urbanization, improving educational attainment, and the growth of the services sector,” but it also cautioned that despite the progress in reducing Philippine poverty, “income inequality remains high, which hinders the accelerated expansion of the middle-class.”

But who comprises the Philippine middle-class? Where do they live? How much do they earn? What are their spending priorities? 

The new study presented this month by PIDS gives insights into these questions, and provides an “updated profile” of the Philippine middle-class. It also said that there is no “single, universally accepted definition” of the middle-class. (Click here for an article, “Who are the Middle Class,” by Dr. Jose Ramon Albert, Raymond Gaspar, and Martin Joseph Raymund on the Philippine middle class published by Rappler nine years ago.)

In “Wealth Creation for Expanding the Middle Class in the Philippines,” PIDS Senior Fellows Jose Ramon Albert, Roehlano Briones, and John Paolo Rivera define middle-class as those with per capita incomes two to 15 times the official poverty line. 

This translates to a monthly family income range of P24,060 to P144,360 for a middle-class household at 2021 prices. The authors said this range “corresponds to the incomes of various middle-class occupations” in the country. 

The study also breaks down the middle-class into three clusters with corresponding household income ranges: 

• lower middle-income: P24,060 to P48,120 per month
• middle middle-income: P48,120 to P84,210 per month
• upper middle-income: P84,120 to P144,360 per month

In comparison, a low-income household had a monthly family income of less than P12,030 per month for the poor, and between P12,030 to P24,060 per month for the low-income but not poor. 

It considers the following as high-income households: 

• upper-income but not rich: P144,360 to P240,000 per month
• rich: at least P240,600 per month

How many are middle-class in the Philippines based on this definition?

The Philippine middle-class grew from 28.5% of the population in 1991 (five years after the 1986 People Power Revolution) to 39.8% of the population or 34.4 million in 2021, a span of three decades.

In the same period, the share of low-income persons declined by 11 points from 70.8% to 59.3%. This means majority of Philippine population was still poor in 2021. 

The growth of the middle-class, however, was severely impacted by the COVID-19 pandemic. Its size and share fell 3.7-percentage points from 43.5% in 2018 to 39.8% in 2021 as most economic activities were restricted.

In terms of magnitude, around 47.4% of Filipino families or 39.8% of population were middle-income in 2021. Only around 1.5% of Filipino families or 1% of population or were high-income in 2021. 

Low-income families comprised the majority in 2021 at 51.1% of families or 59.2% of persons. 

Where are the middle-class?

Of the 39.8% of the population who were middle-class in 2021, over half of them were in three regions: National Capital Region (NCR); CALABARZON or Southern Luzon; and Central Luzon. 

Metro Manila had the highest concentration with 62% of its population part of the middle-class. 

Other regions with a relatively large share of middle-class households were Central Visayas, which has Cebu City as its main economic hub; Western Visayas with Iloilo as its economic center; and Ilocos Region in northern Philippines. 

Family characteristics

While the average family size in the Philippines is 4.2, middle-class households had an average of 3.6 members. 

Low-income households had an average family size of 5 while high-income households had an average family size of 2.6. 

“The middle class also has a lower dependency ratio than the low-income class, with fewer children and elderly relative to working-age adults,” the study says. 

Simply put, middle-class workers generally have less children and fewer seniors to support compared to low-income households. 

Single-parent households are also more prevalent among low-income families, and upper-income households have a “higher presence of seniors.” 

Sources of income

Around four out of five employed middle-class individuals had permanent jobs while only 18.9% had casual employment. 

In contrast, nearly one-third of low-income individuals had casual jobs. 

Those in the middle-class and upper-income households also have longer hours at work, given that many in the low-income households are underemployed. 

For instance, females in the middle-class work for an average of 41.8 hours compared to 31 hours for women in low-income households.

The primary sources of income of middle-class households were wages and salaries (50.6%), followed by entrepreneurial activities (24%), and overseas remittances (8.3%). 

Spending patterns

Middle-class and high-income households were able to spend more on health, education, communication, and housing than low-income households. 

The share of health expenditures of middle-income households was 26.2% compared to 20.8% for low-income households. 

In contrast, the share of food spending of low-income households was 13-percentage points higher among low-income households at 54.7% compared to 41.9% among middle-income households. 

High-income households are able to spend much more than middle- and low-income households on non-essentials. 

Overseas Filipino workers

The study also cited the important role played by overseas migration in the growth of the Philippine middle-class. 

Out of 26,397,466 Filipino families in 2021, 1,358,510 or 5% had an overseas Filipino worker (OFW) in the family.

Of the 1.35 million families with an OFW, nearly 75% of them or 3 in every 4 were part of the middle-class. 

“The middle-class…benefits greatly from the presence of OFWs and the financial support they provide. Remittances from abroad not only contribute to the overall income  of families but also help in alleviating poverty and improving the standard of living for many households,” the authors said. 

They stressed, however, the social costs of migration from family separation as well as vulnerability of OFWs to economic shocks in their host countries. 

The authors of the study proposed four strategies to “harness the potential of the middle-class as a  driver of inclusive growth”:

• promoting social justice in natural resource management and climate change transition
• harnessing new opportunities in trade and investments for Micro Small and Medium Enterprises (MSMEs)
• ensuring a future-ready workforce and social protection
• improving digital governance and public service delivery

They added that “achieving the vision of a predominantly middle-class society will require bold and coordinated action in these priority areas,” and “will also necessitate effective leadership, coordination, and collaboration among the government, the private sector, civil society, and development partners.”

In his keynote speech at the 10th Annual Public Policy Conference on September 19 where the PIDS study was presented, National Economic and Development Authority Secretary Arsenio Balisacan said that in order “to achieve our long-term vision of a predominately middle-class society, we must have a just transition supported by strong and inclusive governance.” 

“We must prioritize the development of our people, align workforce skills with industry needs, and strengthen social protection systems to ensure that no one is left behind,” he added. 

The full PIDS study can be downloaded via this link: Wealth Creation for Expanding the Middle Class in the Philippines – Rappler.com

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