Middle Class

Article excerpt

MANILA, Philippines - The phrase "middle class" is almost synonymous with the new exciting phrase in development economics, i.e., "emerging markets." Besides having large domestic markets, the attractive feature of emerging markets like China, India, or Indonesia (Chindonesia) is their rapidly growing middle class as their annual per capita income transitions from low levels below $3,000 to higher levels of $5,000 or more. Following Engel's Law, as consumers' incomes rise from levels at which they can only afford the barest necessities, their consumption pattern shifts to more sophisticated consumer goods and services such as higher quality education, health services, processed food products and beverages, consumer durables, cars, and entertainment, among others.

In a report entitled Mr. and Mr. Asia: Moving up the J-curves (Spring 2011) by Mr. Anirudha Dutta of CLSA Asia-Pacific Markets, some figures on the Asian middle class were presented: "The Asian middle class will continue to be the biggest investment story out of the region over the next decade...We project that by 2015, a billion people in Asia ex-Japan will join the middle-income category by earning an average per-capita disposable income of US$3000 annually. Asian Development Bank (ADB) has a more liberal definition of the middle class--those who spend US$ 2 - 20 daily--and estimates that the group comprised 1.2 billion people in Chindonesia in 2010. If we take away the lower US2-4 segment, then the number comes to 450 million." Because of the rising middle class in these populous countries (including the Philippines), consumption will increasingly drive the growth of the economy.

Even more than in the other Asian countries, the vast majority of the middle class in the Philippines falls in the $ 2 to 4 daily-spending range. For example, the households who have one or more members working abroad as OFWs belong to the lower range of the middle class. These

households can number close to 10 million and are no longer below the poverty line of $1.5 per person per day. They, however, are still quite vulnerable and can easily fall into poverty. If they maintain their incomes at the level of $ 2 to 4 per day, they can be lucrative targets of numerous

non-durable consumer goods like food and beverage, fast food, personal care, cell phones, pharmaceutical products, etc. as well as small-ticket durable goods like television sets, cell phones, motor cycles, etc. Only those who are at the $4 to 20 range (estimated by Mr. Duta to be about 15 per cent of the total population) can afford cars, low to middle-cost housing, personal computers and other high-value electronic products, quality private education, and domestic and foreign travel. Among these Filipino households are those who are the 600,000 employees of BPO and KPO enterprises. A good number of these individuals are single women and men in their early twenties, still living with their parents but earning P15,000 to P25,000 or more, making them large spenders on a host of consumer goods and services. Note, for example, the boom in restaurants and retailing outlets in the Metro Manila area, Cebu, and other regional sites of the BPO and KPO sector.

As the Philippine Government shifts its attention from capital-intensive industrialization to countryside and agricultural development, we can expect the middle class also to expand in the rural areas, or at least in what are called "rurban" areas such as Davao, Central Luzon, Southern Luzon, Central Visayas and Western Visayas. …