Technical Notes

Estimation of Official Poverty Statistics of the Philippines

Legal Basis

  • Section 3 of Republic Act 8425 of 1997 (Social Reform & Poverty Alleviation Act) defines the poor as individuals and families whose income fall below the poverty threshold as defined by the NEDA and/or cannot afford in a sustained manner to provide their minimum basic needs of food, health, education, housing and other essential amenities of life.
  • Executive Order 352 - Designation of Statistical Activities that will generate critical data for decision-making of the government and the private sector issued on July 1, 1996 (with regular updates from time to time).

Activities

Agency/Group Responsible

Development of the official poverty estimation METHODOLOGY

Technical Committee on Poverty Statistics

Compilation and estimation of the official poverty statistics

PSA Technical Staff

PSA Board Resolution No. 1, Series of 2017-171 - Approving the Refinements in the Official Poverty Estimation Methodology

Major Sources of Data Inputs

Data needed

Agency/Group Responsible

Provincial food bundles – nutritionally adequate (satisfying 100% Recommended Energy
and Nutrient Intake for Energy and Protein, and 80% for vitamins and other nutrients)

Food and Nutrition Research Institute (FNRI)

  • Price data (e.g. actual provincial prices of food items); in the case of Poverty Statistics for the
    first semester of 2018, the average of the prices for first semester 2018 were used. Note that 
    the prices vary from province to province
  • Food/Market Basket of 2012

Price Survey, PSA

Income (of families/per capita)

Family Income and Expenditure Survey,

PSA

Uses of Poverty Statistics

  • Poverty thresholds are used by the DSWD as input in the conduct of the National Household Targeting System for Poverty Reduction (NHTSPR)
  • Used in the SDG monitoring
  • Used by NEDA for planning and in PDP monitoring
  • Used by the National Wages and Productivity Commission as one of the references in minimum wage determination

Refinements of the Official Poverty Estimation Methodology

The first official methodology for the poverty assessment in the Philippines was adopted in 1987. Three major refinements in the official methodology for measuring poverty have been made – in 1992, 2003/2005/2006 and 2011.

One major feature of the first refinement in 1992 was the exclusion of alcohol, tobacco, recreation, durable furniture and equipment as well as other miscellaneous expenditures in the list of basic non-food requirements considered in the determination of the poverty line/threshold. Poverty line/threshold refers to the minimum income/expenditure required to meet the basic food and non-food requirements.

In 2003, another improvement was introduced in recognition of the need for poverty estimates with lower levels of disaggregation, specifically at the provincial level. Using the same regional food bundles in the 1987 and 1992 methodologies developed by the Food and Nutrition Research Institute (FNRI), provincial food thresholds were generated using actual provincial prices collected by the Philippine Statistics Authority (PSA).

The latest refinements in the official poverty estimation methodology were approved through the PSA Board Resolution No. 1, Series of 2017-171, Approving the Refinements in the Official Poverty Estimation Methodology, to address some issues/concerns raised on the estimation of food and poverty thresholds, incidence and other measures of poverty, the relevance of official poverty statistics and the comparability of poverty estimates across space and over time. The refinements were based on the recommendations of the Technical Committee on Poverty Statistics (TC PovStat), the group responsible for the development/formulation of the official poverty estimation methodology.

One of the major issues addressed in the latest estimates is the comparability of the poverty estimates across space and over time. It has been argued by many poverty analysts that it is important that the yardsticks be consistent across provinces for the estimates to be valid in targeting government beneficiaries.

Compilation Methodology

A. Unit of Measure

1. Food threshold – in current pesos (usually, per capita per year)

2. Subsistence incidence – in percent for a reference year

3. Poverty threshold – in current pesos (usually, per capita per year)

4. Poverty incidence – in percent for a reference year

 

B. Coverage

1. Food threshold – national and regional and provincial (with urban/rural)

2. Subsistence incidence – national, regional, provincial, HUC

3. Poverty threshold - national and regional and provincial (with urban/rural)

4. Poverty incidence - national, regional, provincial, HUC

5. Other measures of poverty (poverty gap, income gap, severity of poverty) - national, regional, provincial, HUC

C. Estimation and Compilation Methodology

1. Computation of Food Threshold

a) The use of a national reference food bundle as starting point – to enhance comparability across space.

b) The national reference food bundle was converted to province-specific food bundles, which were used to estimate provincial food thresholds to capture province-specific characteristics in the estimation of provincial poverty statistics. These provincial food bundles were developed based on an indicative nationally-representative food bundle formulated by nutritionists from the Food and Nutrition Research Institute and were subjected to the Test of Revealed Preferences such that the food bundle of a province will be the cheapest in comparison with the bundles of other provinces. The provincial food bundles have the following characteristics:

i. Nutritionally adequate, i.e., it satisfies the 100% Recommended Energy and Nutrient Intakes (RENI) for energy and protein and 80% RENI for other vitamins and minerals;

ii. Food items in the food bundle are locally available and eaten in the area (in the province);

iii. Least cost in the province; and

iv. Visualizable (i.e., can be cooked together and fit for human consumption) Sources of data:

  • Provincial food bundle (100% adequate for energy and protein and 80% adequate for vitamins and minerals) developed by the FNRI
  • Agricultural commodities retail and farm gate price data, by province, PSA
  • Non-agricultural commodities retail price data, by province, PSA
  • Proportion of food bought and own-produced components: Food Consumption Survey, FNRI

General Procedures

  • Each of the ingredients in the food bundle is priced using the available price data
  • The urban and rural food thresholds are computed, each with bought and own-produced components.
  • The provincial urban/rural annual per capita food threshold is computed as: FT = (cost per capita of the one-day food bundle) x (30.4 days/month) x 12 month

2. Computation of Subsistence Incidence

  • Given the food threshold, the subsistence incidence is computed as:

where:

F = number of families (individuals) with per capita annual income less than the per capita annual food threshold/line

n = total number of families (individuals)

3. Computation of Poverty Thresholds

a) As common practice in most countries, the non-food component is measured indirectly, due to the difficulty of determining the required bundle for the non-food items.

b) To enhance comparability across space and over time, the ratio of food expenditures (FE) to total basic expenditures (TBE) is held constant instead of generating the FE/TBE ratio every FIES year, the average of the nationally determined FE/TBE ratio from 2003, 2006 and 2009 FIES shall be used for 12 years starting 2009 which is equivalent to 0.6983.

Sources of data:

  • Average FE/TBE of 2000, 2003, 2006 and 2009 FIES= 0.6983
  • Urban/Rural Food thresholds

General Procedures:

  • The urban/rural provincial poverty threshold was computed by dividing the food threshold with the FE/TBE ratio.

FE = actual food expenditure of families within the +/-ten percentile band of the subsistence incidence among families

TBE = total basic expenditure of families within the +/- ten percentile band of the subsistence incidence among families.

TBE is an aggregate of expenditures on

  • food;
  • clothing and footwear;
  • fuel; light and water;
  • housing maintenance and other minor repairs;
  • rental or occupied dwelling units;
  • medical care;
  • education;
  • transportation and communications;
  • non-durable furnishing; household operations and personal care and effects

However, instead of generating the FE/TBE ratio every FIES year, the average of the nationally determined FE/TBE ratio from the 2000, 2003, 2006 and 2009 FIES shall be used for twelve (12) years starting 2009 to ensure consistency across space and over time. This is equivalent to 0.6983.

4. Computation of Poverty Incidence

  • Given the poverty threshold, the poverty incidence is computed as:

where:

Q = number of families (individuals) with per capita annual income less than the per capita poverty threshold/line

n = total number of families (individuals)

Press Releases

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Contact Us

Social Sector Statistics Service
ssss.oans@gmail.com +632 376 1883
Poverty and Human Development Statistics Division
phdsd.staff@psa.gov.ph +632 376 1991