PIDS warns middle class faces shocks

Middle-class Filipinos are more susceptible to poverty than previously believed, according to the Philippine Institute for Development Studies (PIDS).

In a recent report, PIDS said vulnerability to income poverty affects 30 percent of Filipino households—nearly three times higher than the official poverty incidence in 2023.

“A substantial share of households above the poverty line faces a high probability of falling into poverty due to income volatility, health shocks, labor market instability, and climate-related risks,” the report said.

PIDS defines the middle class as having a monthly income threshold ranging from about P21,000 to P131,000. The report found that inconsistent or unreliable income sources affect 86 percent of vulnerable households. Those at the lower end of the middle-income bracket are considered most susceptible to falling into poverty, particularly during economic shocks such as the COVID-19 pandemic and natural disasters.

Another key finding indicates that vulnerability is closely linked to the quality and stability of employment. PIDS said households dependent on informal, seasonal, or low-productivity jobs face significantly higher vulnerability—even when their incomes place them above the poverty line.

Regional disparities are stark, with vulnerability incidence at 9 percent in Metro Manila compared with 76 percent in the rural Bangsamoro Autonomous Region in Muslim Mindanao. PIDS attributed this gap to unequal access to infrastructure, markets, services, and productive opportunities that constrain income stability and upward mobility.

Agriculture emerged as the most at-risk sector. While agriculture-dependent households comprise 19 percent of the population, they account for 44 percent of poor households, 39 percent of the vulnerable, and 61 percent of the highly vulnerable.

“For this reason, transitioning more of the labor force to services, industry, and manufacturing—which offer higher productivity and value-added—is crucial in addressing poverty and vulnerability, especially in rural areas and regions distant from economic centers,” the report said.

Last year, Finance Secretary Frederick Go said elevating the Philippines to upper-middle-income status by 2026 remains a key goal. Latest World Bank data place the country’s gross national income (GNI) per capita at $4,470 (around P261,942), just $46—or roughly P2,656—short of the lower threshold for upper-middle-income classification.

PIDS stressed that enhanced social protection systems are imperative to prevent more Filipinos from slipping below the poverty line as the country approaches upper-middle-income status.

“The vision of a predominantly middle-class Philippines by 2040 remains achievable but requires sustained commitment to policies that promote inclusive growth, reduce vulnerability, and build resilience,” the report said.

The study recommends a comprehensive strategy to reduce household vulnerability by strengthening financial resilience and protection systems. This includes expanding access to savings, credit, and insurance; improving health systems and financial coverage to prevent catastrophic medical expenses; enhancing disaster preparedness and recovery mechanisms; and promoting asset building—such as secure land tenure, housing, and business capital—particularly for vulnerable and near-poor families.