Profile and determinants of the middle-income class in the Philippines

The middle-income class plays a crucial role in socio-economic development and in achieving long-term aspirations articulated in Ambisyon 2040, which envisages a predominantly "middle class" society where no one is poor. However, there is no standard definition for the middle income class that can be used as a tool to monitor progress towards this long-term aspiration. This paper defines the middle-income class as those whose per capita incomes are within two- and twelve- times the (official) poverty line. Descriptive analyses show that the middle income households are largely found in urban areas, that their members who are of working age tend to be employed in stable jobs, and that they place high value on investing on human capital. The determinants of middle-income status are identified using a multinomial logistic model. Results of the empirical estimation are generally consistent with the findings of the descriptive analyses. The paper also provides policy discussions on unintended consequences arising from the growth of the middle-income and on the need for policy action to address the concerns. The study also performs a simulation exercise to assess whether the long-term goal of a predominantly "middle class" society can be achieved using the thresholds for defining the middle-income class.