Measuring economic ill-being using objective and subjective indicators: evidence for the Philippines

Abstract

The mismatch between a country’s macroeconomic performance and the people’s economic well-being represents the overall economic ill-being in a society. This mismatch is measurable using objective indicators such as the inflation rate and the joblessness rate as well as subjective indicators such as personal evaluations on the inflation and joblessness rates. That is, the inflation rate shows the affordability of goods and services; and the subjective evaluation indicates whether people see the goods and services as affordable or not. In addition, the joblessness rate indicates the portion of the labor force that does not enjoy gainful employment; and the subjective evaluation indicates whether people see themselves as jobless or not. The results for the Philippines show a high-level of overall economic ill-being especially in the decade covering 2005 to 2014. This finding unveils a different scene from what the mainstream discourses are portraying as the current state of the Philippine society.

Keywords:

• economic ill-being
• objective indicators
• subjective indicators
• Philippines

JEL Classifications:

• C43
• D60
• E24
• E31
• I31

Acknowledgement

I thank an anonymous referee for the insightful comments and suggestions. The usual disclaimer applies.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. The economy had an average economic growth rate of 5.3% in the decade covering 2005 to 2014.

2. The procedure is similar to the ‘Okun misery index’. The attribution to Arthur Okun was first made by the Wall Street Journal in 1971 (Lovell and Tien 2000). I use joblessness rate because I consider both the unemployment and underemployment rates. Extensions to the Okun misery index include the interest rate and the gap between long run and actual economic growth rates. The ‘Barro misery index’ uses the changes in the rates (Barro 1996) but the ‘Hanke misery index’ uses the actual rates (Hanke 1999). The Barro and Hanke indices exclude the underemployment rate.

3. Notice the setup of the PMI has a one-to-one matching of its ingredients for the objective and subjective measures of economic ill-being.

4. Taking the geometric mean is in line with the recent developments in computing the HDI (see, for example, Klugman, Rodriguez, and Choi 2011; Herrero, Martinez, and Villar 2012). Desai (1991) is an early articulation on the matter. An alternative procedure to the one I present is to replace the inflation rate with objective measures for poverty and hunger. If this is done, the objective measures for poverty and hunger are matched with the subjective measures for poverty and hunger. Notice that a one-to-one matching across the ingredients is maintained. But the constraint in this case is that the official statistics may not be available in the same frequency as the self-rated statistics. For the Philippines, poverty statistics are available every three years (the latest information is 2012); and hunger statistics are available every five years (the latest information is 2013).

5. The coverage in the previous series of the Philippine CPI (base year of 2000) included 77 provinces and 11 selected cities. There are currently 144 cities in the country: highly urbanized city (35), independent component city (5), and component city (104). Highly urbanized and independent component cities are autonomous to provincial governments. Provinces are comprised of municipalities and component cities.

6. ‘Barangay’ is the smallest administrative unit in the Philippines. There are currently 42,027 barangays in the country.

7. ‘Work’ is an economic activity that a person does in order to obtain (a type of) remuneration. ‘Job’ is an economic activity that a person does for a living. For the PSA, a person who has the job can be someone who does the work as well (for example, a self-employed businessperson operating one’s business).

8. Established in 1985, the Social Weather Stations (SWS) is a private, non-stock, and not-for-profit survey and research institution in the Philippines. The SWS is a self-supporting institution. It describes its operations as neutral and non-partisan. Mangahas (1994), Guerrero (2003), and Mangahas and Guerrero (2008) trace the genesis of the SWS to three research initiatives in the mid-1970s to the mid-1980s: the Social Indicators Project (1974–1975), Social Weather Stations Project (1981–1984), and Bishops-Businessmen’s Conference on Socio-Political Opinion Surveys (1984–1985). In the Philippines, the SWS pioneered the collection of primary data on, among others, the quality of life and well-being and contemporary social issues such as governance, elections, etc. The SWS is the local partner of international survey programs such as the Gallup World Poll, the International Social Survey Program, and the World Values Survey.

9. Luzon, Visayas, and Mindanao represent the three island groups of the Philippines.

10. The broad categories of food and non-alcoholic beverages (41.5%), housing, water, electricity, gas, and other fuels (23.7%), and transport (5.6%) constitute about 71% of the Philippine CPI. Items such as rice and corn, fruits and vegetables, meat, and natural gas and petroleum account for 20% of the Philippine CPI.