Population and the economy

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Ben D. Kritz

Ben D. Kritz

THROUGH most of 2014, one oft-repeated theme of the Philippines’ economic narrative was the so-called “demographic sweet spot,” a period of economic advantage for the country because of its expanding working-age population.

By 2045, according to the Philippine Statistics Authority (PSA), about 67.5 percent of the population—which is estimated to increase to 142 million by that time—would be between the ages of 15 and 64.

In raw numbers, that would amount to an increase in the working-age population from about 58 million people in 2010 to about 96 million by 2045.

Investors, so the narrative went, would be attracted to the Philippines because the growing stockpile of live bodies could be tapped as a labor pool, and represented a potentially huge consumer market.


Now it seems the narrative may be changing. At the end of last week, the Commission on Population (PopCom) aired some concerns about the results of a study by the University of the Philippines Population Institute, entitled the “Future Aging in the Philippines: Demographic Trends, Human Capital and Health Status.” It showed that the population of older Filipinos (people aged 60 or older) is growing rapidly as well, actually much faster than the working-age population. From about 6.8 percent in 2010, this demographic segment will account for about 10 percent of the entire population by 2025.

From a “demographic sweet spot” half a year ago, we are now being told that the country is in the early stages of a “demographic transition to an aging population.” What concerns PopCom is the evidence that while Filipinos are living longer, their sunset years are being increasingly troubled by poor health and poor socioeconomic conditions; the stark warning offered is that the government has just 10 years to do something about it, before the graying of the population starts to drag on the country’s overall well-being.

None of this is actually news. At the time “demographic sweet spot” became such a self-promotional catchphrase for policymakers in the middle of last year, the thorough analysts at the PSA shared these statistics on aging as well. But this information didn’t fit the narrative that implied the Aquino Administration was so good at managing the economy that it somehow positively affected the birthrate last century, so it was given short shrift the few times it was even acknowledged at all.

All of this paints an interesting picture of the Philippine economy. The working class is expanding, but not as fast as the elderly that the working class supports, and considerably faster than the rate at which unemployment has gradually declined over the past several years. The country’s poverty rate has remained virtually unchanged at the same time, so the result is a growing population of people without some sort of economic safety net, whether stable employment, retirement income, family or government support.

Part of the reason poverty has stubbornly remained at something above 25 percent for more than a decade is that government efforts to address the rather complex problem are always only partial solutions at best. Providing the safety net for the entire population requires calibration of rates of population growth, job creation, wage growth, and increases in basic costs of living (food, housing, essential services, health care, education), but the government’s ability to directly influence all those variables is limited, to the extent that exercising what control it does have sometimes ends up being counterproductive.

For example, imposing control such as a minimum wage hypothetically extends the safety net by guaranteeing that employed citizens actually earn enough to support themselves and their families at something above a basic subsistence level. But it also tends to discourage job growth, thus, reducing or perhaps even canceling out its positive effects.

It is possible to construct a formula that describes an ideal economic state, one in which a population growing at some rate can maintain a given standard of living, which, in turn, can be expressed by some metric such as (but not necessarily) per capita income. Even government planners understand the basic economics and, or so we would like to believe, try to work toward positive results.

The reason why they never seem to quite succeed in moving the needle on negative indicators is that developing policy addressing the “population” side of the equation is either avoided or hopelessly bungled. Population management, however, is the key to success; not necessarily through contentious means, but more as a matter of perspective.

As the country begins shopping around for a replacement for President B.S. Aquino 3rd, the end of whose term should probably now be expressed as being “on or before” June 30 of next year, it ought to remember that 15 years of ‘trickle-down economics’ has achieved just about all it probably can, and that a new approach is needed.

ben.kritz@manilatimes.net

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4 Comments

  1. I am living a very good Philippines now. If I to compare, It is very far from a garbage government way back in 2009. I am seeing a very progressive Philippines. I really don’t know why few people blame Pnoy for everything, even their impoverished life. Whoever is poor, it’s his choice. The thing is, People who talk too much and throw stones and with disrespecting words are actually those people doing nothing but persecuting, not knowing they are worse than who they are accusing of something. I am Filipino, forget about my English. ^_^

  2. Sure, the economy is booming, thanks to cheap PH labor and the $26 billion yearly OFW remittances. But this boom in economy does not automatically translate to better living conditions for most Filipinos. The economic benefits do not filter down enough to the common people in the absence of free medicare and old age pensions in the country. Majority of Filipino workers work in the service and agricultural sectors which pay low incomes resulting to fifty four percent of Filipinos to live below the poverty line. Tens of thousands of children are out of schools and are malnourished. An estimated 20,000 or more children live in the streets of MM and about two million people live in slums of Metro Manila. Six out of ten Filipinos who succumbed to sickness die without being attended to by a physician,

    Yet, the Philippines has produced 4 Forbes-listed dollar billionaires and hundreds of multi-millionaires, most of whom pay their employees slave-rate wages. Most of Philippine politicians and their cronies are super corrupt and incompetent.

    Something is wrong, awfully sick, in this once beautiful country.

  3. Amnata Pundit on

    If an economic state is the “result of the decisions of all the HUMAN actors that affect that state” then how can mathematical equations apply to human behavior when it is a tool of the physical sciences? The reason economics is sometimes called the dismal science is because it uses the wrong analogy by comparing it to a machine, when it is more akin to biology as it behaves like an organic entity. What is needed is a revolution in economic theory, but the lending mafia will not allow anything to replace the current lender’s ideology. We should focus on food production, peace and order, health, education and jobs, as these address the peoples needs and you cannot think of more basic or fundamental things if the people’s prosperity is the real goal, not payment of debt which is what growth purely for growth’s sake is all about.

    • You are very correct Mr. Pundit, all the plus and minus regarding poverty in the Philippines comes down to a culture of whether each individual wants to better themselves or be self destructive.

      It is very amusing that with all the highly educated people running the government, most of their decisions have been self serving, destructive, and delusional.