NEDA’s P10K mistake

Ben D. Kritz

THE National Economic Development Authority’s (NEDA) statement this past week that suggested a family of five can live on an income of P10,000 per month made the agency the target of a barrage of derision, almost all of it squarely on target. It was an uncharacteristically stupid move on the part of a usually reliable government agency, and its attempts to walk back its statement when the public erupted in incredulity only made things worse.

To be accurate, the NEDA statement did not categorically state that “a family of five can live on P10,000 a month,” but that was clearly its implication, because the statement was obviously issued as a response to the sustained chorus of public discontent over higher prices. Met with outrage, NEDA’s attempt to clarify its statement only made the public angrier.

NEDA calculated that a family of five could budget P10,000 per month as follows: P3,834 for food and non-alcoholic beverages; P2,204 for housing and utilities; P1,259 for restaurants and miscellaneous goods and services; P806 for transport; P389 for health; P328 for education; P295 for furnishings, household equipment, and maintenance; P293 for communications; P293 for clothing and footwear; P158 for alcoholic beverages and tobacco; and P141 for recreation and culture.

When it was pointed out that the figures it provided were laughably unrealistic for any place in the Philippines, and for that matter, probably anywhere on the planet, NEDA began backpedaling. The numbers were “hypothetical,” the agency explained, meant to be an example of how a family earning P10,000 a month could budget its money, and not necessarily to suggest that a family could live decently on that amount.

That explanation was if anything even more callous than the original implication, because it was essentially a statement that, “If you are earning P10,000 a month, your family is most likely going to be homeless, starving, and naked at the end of 30 days.” A P3,834 monthly budget for food for five people, for example, breaks down to P25.56 per person per day.

For that amount, one could buy a single serving of rice (P10), one package of instant noodles (about P6), one egg (P6), and two pieces of pandesal (P2 each) – hardly enough for one meal, and certainly not at all adequate for an entire day. Likewise, the budget for housing and utilities is only sufficient for, at best, a small room and minimal utilities; perhaps enough for one person, but utterly unrealistic for a family of five.

None of those kinds of observations actually matter, however, because as it turns out, all NEDA really did was to take an arbitrary amount – P10,000 – and divide it according to the weights of various price groups in the consumer price index (CPI) basket. It was a meaningless arithmetic exercise, but NEDA made the grave error in judgment of trying to politicize it, using it to support the implied assertion that, “A family can manage on this modest amount under current economic conditions.” The data could not possibly support that argument, because the actual exercise did not have that intent; in fact, it had no real intent at all.

Likewise, the misapplied NEDA report is poor evidence to support arguments in favor of raising minimum wages or readjusting the poverty threshold. The only real value of the actual report, and then only subjectively, is that it may indicate the weights of items in the CPI basket should be reassessed. Disregarding the actual monetary amounts involved, the reactions to the report seem to indicate that the proportions of total income dedicated to various types of expenditures are not accurate; for example, most people seem to pay more than 22 percent of their income on housing and utilities. That may or may not actually be the case, but it is perhaps worth analyzing, which is a job for the Philippine Statistics Authority, not NEDA.

The bigger issue is the damage the unnecessary action by NEDA has done to the credibility of the government’s economic planning and strategy. NEDA’s ham-handed attempt to lend support with an empirical explanation for the perceived pinch much of the population is evidently feeling backfired spectacularly, and only reinforced suspicions that economic policymakers are not only grossly out of touch with reality, but are unsympathetic to the reality for most Filipinos.

That is unfortunate, because it is due more to appallingly poor communication than anything else. NEDA should not have characterized the P10,000 per month figure as an income for a family of five, for instance; that was completely unnecessary and put the report in a different context than the one in which it was originally created, all for the sake of making a political commentary of it. That NEDA thought making this harebrained move was a good idea may even betray a certain lack of confidence in its own economic program on the part of the government, and that perception will only further damage the credibility of its policies.

There is a certain point of view among some economic and political academics that a centralized economic planning agency has no place in what is supposed to be a market economy. That point of view is debatable, but it does have some formidable merits. Boneheaded moves like the “P10,000 budget” only strengthen that argument, and make justifying its existence that much harder for NEDA.

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