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PHL urged to focus economic policy on keeping middle class prosperous

PHILIPPINE STAR/ MICHAEL VARCAS

THE Philippines should manage the economy in a way that grows the middle class, to prevent members of that income category from falling back into poverty, participants at a conference discussing a World Bank report on inequality.

“If we manage to reduce poverty, we will have a large middle class that will become a stronger voice in politics and elections. The middle class is fragile and fall back into poverty with every shock or crisis they face, and that will shape the nature of politics,” IDinsight Southeast Asia Regional Director Ronald U. Mendoza told a panel discussion on Thursday, during which participants discussed the findings of a World Bank report, “Overcoming Poverty and Inequality in the Philippines: Past, Present, and Prospects for the Future.”

“And then on the political agency side, we need to give our emerging middle class and remaining poor a stronger voice in policy making, which will only happen if we reduce inequality,” he added.

Between 1985 and 2018, poverty fell by two-thirds, according to the World Bank report.

“However, income inequality did not begin to decline until 2012. It is still high: the top 1% of earners together capture 17% of national income, with only 14% being shared by the bottom 50%,” the report found.

Mr. Mendoza said reducing inequality should be a key policy focus.

“It’s no longer just economics. I think we need to open our eyes and focus on a bigger canvas, not just economic indicators, but most of the social, political, and other indicators of inequality that frustrate our efforts to build social cohesion and unite people around certain reforms,” he said.

Mr. Mendoza also noted the importance of private sector cooperation in generating more quality jobs and providing stability for the middle class.

“We (also) need to develop new markets for a recently-emancipated middle class that still faces many risks and can easily slide back to poverty if they don’t manage these risks well,” he said.

“We all agree that if you provide salaried jobs that tend to be more formal or attached to insurance mechanisms, you are more resilient to shocks and there is more stability,” he said.

Makati Business Club Director Francisco Alcuaz, Jr. said corporations should work together with micro, small and medium enterprises (MSMEs.)

“One of the keys is to help MSMEs generate more jobs. Larger businesses should make a greater effort to bring MSMEs into their supply chains so they can grow and generate more jobs,” he said.

Mr. Alcuaz said companies must also put in the effort to upskill workers.

“We need to do things at the employment level. One thing we are supportive of is adjusting rules for apprenticeship. There are safeguards that can be put in place to allow companies to bring in people, not at full minimum wage, just to get them into the system and teach them skills to become valuable workers,” he added. — Luisa Maria Jacinta C. Jocson

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