Introduction
The Philippine middle class refers to a socioeconomic group that falls between the lower-income group and the upper-income group. They typically have a moderate level of income, education, and consumption patterns. These allow them to pay for a relatively comfortable lifestyle. As with other middle classes in the world, the Philippine middle class is composed of professionals, skilled workers, and individuals in managerial or administrative positions.
What Constitutes a “Big” Middle Class?
Depending on the context and the country, the definition of a "big" middle class might vary. Affluence, financial stability, and financial independence are unmistakable hallmarks of the middle class. However, owing to differences in economic growth, cost of living, and cultural standards, the precise income or wealth criteria that constitute the middle class might vary considerably across nations.
A person or family in a developing country may enter the middle class with a relatively modest increase in income or wealth. On the other side, bigger incomes or wealth may be needed to maintain the same level of life in countries where the cost of living is higher, like in developed countries.
Also, being middle class isn't only about money; it also includes things like education, employment, social standing, and conveniences. Examples of people who are often regarded as part of the middle class include those who have secure employment, access to high-quality healthcare and education, and the ability to advance economically.
The size of the middle class is relative and depends on the specific circumstances. It depends on the unique economic and social circumstances of a country or area, as well as on elements such as income, wealth, lifestyle, and society.
Is the Philippine Middle Class Considered Big by World Standards?
Compared to other countries, the Philippines has a sizable middle class. When compared to other Southeast Asian nations, the size of the Philippine middle class becomes even more striking. In Indonesia, for instance, the middle class accounts for about 29% of the population, while in Vietnam it accounts for just 15%.
Increasing economic prosperity, higher wages, overseas employment, and an expanding pool of educated employees have all contributed to the emergence of a sizable middle class in the Philippines. The economy has risen at a pace of 6% annually over the last decade, resulting in the creation of millions of new employees. More on this later.
Since rising salaries have enabled more and more Filipinos to buy food, shelter, and other essentials, the size of the Philippine middle class has expanded. The country also boasts a high number of educated citizens; the literacy rate in the Philippines is 92%.
Estimating the exact size and percentage of the Philippine middle class can be challenging due to varying methodologies and data sources.
The Bangko Sentral's Consumer Expectations Survey (CES) categorizes monthly income into three groups: low income (below P10,000), middle income (between P10,000 and P29,999), and high income (at least P30,000). According to the first quarter of the 2022 CES report, 26 percent of households fall under the low-income category, 40 percent under middle-income, and 34 percent under high-income.
In an article written by Alyssa Divina and titled “Middle Class in the Philippines: Defining and Income Ranges”, on the website Digido, Ms. Divina said:
1. The average yearly income of a family in the Philippines as of 2021: PHP 307,190 while the average yearly expenditure was PHP 228,800.
2. In the Philippines, the middle class is defined as individuals who earn a monthly income between PHP18,000 and PHP109,200.
3. This group makes up almost 45% of the population.
4. Ideally, middle-class families in the Philippines should have 20% of their income remaining after paying expenses.
The abovementioned article also defined the economic significance of the Philippine middle class namely: nearly half of all Filipinos are considered middle-income earners. These are the people whose taxes finance the government. They are the main consumers of goods and services, and they contribute significantly to tax revenue. The growth of the middle class is seen as a sign of economic progress, and the Philippine economy depends heavily on their work.
John Mangun wrote, in an article titled “The Middle Class”, published in the online edition of BusinessMirror, last February 21, 2023, that:
“The latest Family Income and Expenditure Survey by the Philippine Statistics Authority (PSA) shows that the majority (58.4 percent) of Filipinos belong to the low-income class, while the middle class comprises around 40 percent of the population. Only 1.4 percent of Filipinos are in the high-income class."
According to an article by Raymond E. Gaspar, Mj Raymundo, Jose, and Ramon G. Albert, titled “Who are the Middle Class?” which was published by Rappler, the majority of the middle class lives on the island of Luzon, with the largest concentrations found in Metro Manila (where 25 % of them live) and the provinces of CALABARZON and Central Luzon.
World Bank
As with our own Bangko Sentral, the World Bank (WB) tends to be a bit conservative about the size of the Philippine middle class. It estimates that 44 million Filipinos fall into the middle class. Even at this size, the Philippine middle class is the 10th biggest in the world. This amounts to almost 40% of the total population.
Here are some of the factors that have contributed to the growth of the Philippine middle class:
1. Economic growth: The Philippine economy has grown steadily in recent years, creating jobs and opportunities for the middle class.
2. Increased education: More Filipinos are now graduating from college, This equips them with the information and abilities needed to secure fulfilling employment.
3. Overseas Filipino workers (OFWs): OFWs send billions of dollars in remittances to their families in the Philippines, which helps to boost the economy and the incomes of the middle class.
4. Government programs: The government has implemented a number of programs to help the poor and the middle class, such as the Pantawid Pamilyang Pilipino Program (4Ps) and the Build, Build, Build program.
Benefits of a Big Middle Class
The Philippine middle class is expected to continue growing in the coming years and is a source of stability and hope for the country. Here are the benefits a large middle class brings that are true universally:
1. Economic growth: The middle class is often considered the engine of economic growth. They have purchasing power and demand goods and services, which drives consumer spending and stimulates economic activity. Their consumption patterns contribute to the expansion of industries, job creation, and overall economic development.
2. Increased tax revenue: A substantial middle-class population typically generates higher tax revenues for the government. As the middle class earns more income, they contribute more tax dollars through income taxes, sales taxes, property taxes, and other forms of taxation. This increased revenue can be used to fund public services and infrastructure development.
3. Social stability: A large middle class can contribute to social and political stability. Middle-class individuals generally have a stake in society, and they are more likely to support democratic institutions, the rule of law, and social cohesion. They often have aspirations for a better quality of life and are motivated to work towards societal progress.
4. Reduced income inequality: A significant middle class can help to reduce income inequality within a country. They act as a buffer between the rich and the poor and play a crucial role in reducing extreme disparities. When the middle class is sizable and thriving, it helps to bridge the wealth gap by providing upward mobility opportunities for those in lower-income brackets.
5. Human capital development: The middle class tends to invest in education and skills development for themselves and their children. This focus on human capital development can lead to a more skilled and productive workforce, which is essential for technological innovation, competitiveness, and economic diversification.
6. Social mobility: A robust middle class often provides greater social mobility opportunities. It offers individuals from lower-income backgrounds a chance to improve their economic status through education, hard work, and upward mobility. This upward mobility can help create a more inclusive society and reduce intergenerational poverty.
7. Consumer demand and market stability: The middle class represents a significant consumer base with stable purchasing power. Their demand for goods and services provides stability to the market, encourages business growth, and attracts investment. This stability can help shield the economy from extreme fluctuations and recessions. The middle class is more likely to spend money on education, which can lead to a more skilled workforce.
8. Entrepreneurship and Innovation: A strong middle class often consists of individuals with the education, skills, and resources necessary for entrepreneurship. They can start small businesses, promote innovation, and drive competition, leading to economic diversification and overall development.
9. Social Cohesion: A prosperous middle class tends to have better access to education, healthcare, and social services. This can lead to improved social mobility and reduced income inequality, promoting social cohesion and reducing social tensions. A strong middle class can also act as a social buffer, reducing the potential for social unrest or instability.
10. Political Stability: A significant middle class can contribute to political stability by demanding transparency, accountability, and good governance from the government. Their social and economic status allows them to play a crucial role in shaping public policies and participating in democratic processes.
12. Increased Tax Revenue: The middle class also pays a significant amount of tax revenue. This tax revenue can be used to fund government programs, such as education, healthcare, and infrastructure. These programs benefit everyone in society, not just the middle class.
13. Innovation: A large middle class provides a pool of educated and skilled workers. These workers are essential for innovation and economic growth. They are also more likely to start their own businesses, which creates new jobs and opportunities.
14. Reduced Poverty: A strong middle class acts as a buffer against poverty. As more people move into the middle class, income inequality tends to decrease, and poverty rates decline. The middle class typically enjoys better access to education, healthcare, and other essential services, improving overall living standards and reducing the income gap between the wealthy and the poor.
It's important to note that a strong middle class alone is not sufficient for sustainable development and societal well-being. Other factors such as good governance, access to quality healthcare and education, social safety nets, and equal opportunities are also crucial for maximizing the benefits of a large middle-class population.
Conclusion
To conclude, a big middle class is beneficial to the Philippines in a number of ways. It is a sign of economic progress, it provides tax revenue, it creates political stability, it promotes social mobility, it drives consumer demand, and it fosters innovation. A country with a large middle class is a country that is on the path to prosperity.
A big middle class is a key ingredient for a prosperous and happy Philippines. The government should focus on policies that will help to grow and sustain the middle class, such as investing in education, creating jobs, and providing affordable healthcare.
A vibrant Philippine middle class has the potential to make the Philippines a more desirable location to live and work by contributing to the achievement of a globally dynamic Philippine cultural and cosmopolitan milieu. The government should foster economic growth and development and provide avenues for Filipinos to improve their economic, educational, and cultural standing, thus further expanding the Philippine middle class.
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