Why Inequality Matters in Poverty Reduction and Why the Middle Class Needs Policy Attention

While the Philippines has had a new economic growth trajectory in recent years, the country has had little progress in reducing poverty and in making growth more inclusive. In this paper, the authors examine trends in macroeconomic statistics, and the progress government has had in its Philippine Development Plan and in achieving the Millennium Development Goals. The authors look into income distribution and income inequality; they proposes a definition of the middle income class, laying down seven income classes based on the national poverty lines. They also profile the middle income class vis a vis other income classes given the potential of the middle income class to sustain economic growth. They argue that government need not only on focus its attention to the poor, but also strengthen the middle class toward improving opportunities and reducing inequalities.