NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, May 5, 2014

With more severe poverty and inequality to begin with, worsening unemployment and lack of significant improvement in reducing poverty and inequality negate our otherwise impressive economic growth performance of late. Nowhere else in our neighborhood is the imperative for inclusive growth more urgent and more acute than in the Philippines. It requires getting the least endowed among us to participate more and benefit more in the economy’s growth. The lowest income groups, the so-called “Base of the Pyramid” (BoP), make up 42 percent of all Filipinos (38 million) if we count those who live on less than the internationally-applied threshold of $2 per day. They are the marginalized in our society, mostly dependent on economic activities in the informal sector marked by intermittent work and incomes from either nonregular jobs or unstable livelihoods. Their access to many goods and services that the rest of us take for granted is also limited.

Inclusive growth thus entails providing the opportunity for those at the BoP to have more regular jobs and more stable livelihoods. To do this, we need more growth to come from stable and geographically dispersed small and medium enterprises. We also need more growth coming from industries that inherently use more labor, hence able to create more jobs. Moreover, greater growth should come from industries with strong multiplier effects owing to inter-linkages with other domestic industries, either as sources of inputs or users of their products.