FIES: the share of the informal sector in income is falling

ALTHOUGH more Filipinos have turned to the informal sector to cope with the pandemic, the share of entrepreneurial activities in overall family income has declined, the Family Income and Expenditure Survey (FIES) has shown.

First-half data from FIES showed that Filipinos’ income increased by 6% to 3.959 trillion pesos in 2021 from 3.736 trillion pesos in 2018. Of this amount, the bulk or 51.4% came from wages and salaries.

Another source of income, according to data from the Philippine Statistics Authority (PSA), is entrepreneurial activities with a share of 17.3% in 2021, a drop of 3.1 percentage points from the share 20.4% in 2018.

“(There has been) an expansion of the informal sector, especially during the pandemic. We’ve seen people start selling anything under the sun,” Maria Ella Oplas, an economist at De La Salle University, told BusinessMirror over the weekend. “These are activities (however are not) captured in the formal sector.”

Oplas said it is difficult to capture data on informal sector earnings as they do not issue official receipts. This is why the Bureau of Internal Revenue (BIR) encourages those with online businesses to register.

University of Asia and Pacific (UA&P) economist Cid L. Terosa said entrepreneurial activities as a share of revenue may also have declined due to mobility restrictions to curb Covid-19.

He said the restrictions also increase the importance of wages and salaries as a percentage of Filipino household income. PSA data showed wages and salaries had just a 49.5% share in 2018.

The increase in the share of wages and salaries in income rose with the decline in the share of other sources, according to Terosa. “As a result, salaries and wages became a bigger source of income because there were fewer funds from other sources,” Terosa told BusinessMirror.

“Although many have lost their jobs, the proportion of wages and salaries in income has increased because other sources of income have been more severely restricted during the pandemic. This is exemplified by the decline in corporate revenue share,” he added.

New companies

Mercedita A. Sombilla, head of the National Economic and Development Authority (Neda), told the newspaper that the share of wages and salaries in Filipino household income has increased due to the recovery.

Sombilla said that in follow-up surveys conducted by Neda, businesses were able to recover slowly as mobility restrictions began to ease. She added that new businesses related to the pandemic response have also been created.

“In the follow-up business surveys we conducted when the virus was slowly contained, new businesses emerged, particularly in areas where we were lacking, for example manufacturing PPE (protective equipment individual), transport services, etc.”, said Sombilla.

FIES data

The average income of Filipino families from January to June 2021 was estimated at 149,980 pesos, up 0.2% from 149,710 pesos in the same period of 2018.

From January to June 2021, the average family expenditure was 113,670 pesos, down 5.9% from 120,750 pesos in the same period of 2018.

PSA said the average income of families in the first income decile to eighth income decile increased in the first half of 2021, compared to the same period in 2018.

Based on the average income of families in the lowest income decile groups in the first half of 2021, the average income of families in the first and second income deciles increased by 5.5%.

In contrast, the average income of families in the ninth and tenth income deciles fell by 1.5% and 5.5%, respectively.

Meanwhile, PSA data also showed that across all income decile groups in the first half of 2021, average family spending fell compared to the first half of 2018.

In the first half of 2021, the average expenditure of families in the first income decile group was recorded at P47,190, a decrease of 14% compared to P54,880 during the same period of 2018.

The average spending of families in the 10th decile or the wealthiest Filipino families decreased by 7.2%.

The data also showed that the income disparity between the richest and poorest Filipinos narrowed in the first half of 2021.

“With the increase in average family income among low-income families and the decrease in average family income among high-income families in the first half of 2021, the gap between the upper income decile groups and the lower income decile groups lower income has contracted,” PSA said. .

The total income of the top 10% income group was 9.0 times that of the bottom 10% income group. This is narrower compared to the first half of 2018, where the gap was 10.1 times.

When it comes to the income disparity between the top 20% and the bottom 20% in the first half of 2021, the former earned 5.6 times the latter.

In the first half of 2018, the top 20% income group earned 6.2 times the income of the bottom 20% income group.

Lower income disparity was observed in the first half of 2021, implying a more equitable distribution of income. The Gini coefficient was recorded at 0.4414 in the first half of 2021 compared to 0.4596 in the same period of 2018.

The Gini coefficient is used to measure income inequality between families. It ranges from 0 to 1, with 0 indicating perfect income equality between families, while a value of 1 indicates absolute income inequality.

Julio V. Miller