Social Welfare department working with PSA, NEDA for inflation indexing method for gov’t cash transfers
THE Social Welfare department said it is considering the method for indexing its cash transfer program payments to inflation with the support of government statisticians and economic planners.
Social Welfare Secretary Rexlon T. Gatchalian said the order to index payments made under the cash transfer program, known as the Pantawid Pamilyang Pilipino Program (4Ps), was issued by President Ferdinand R. Marcos, Jr. on Tuesday.
Mr. Gatchalian said at a Palace briefing that the Department of Social Welfare and Development (DSWD) has been tasked with creating a “self-indexing” mechanism to minimize the impact of inflation on the value of cash grants.
“We were tasked to work with Philippine Statistics Authority (PSA) and National Economic and Development Authority (NEDA) to find the best index,” Mr. Gatchalian said at the briefing, citing the need to protect the value of cash grants in the face of rising prices.
“We know that inflation hits the bottom 30% of our population more severely.”
The 4Ps are payments made to the most vulnerable families, with some requiring participants to keep children in school, subject women to health checks, and observe other practices thought to be crucial to development.
Asked to comment, an economist said robust safety nets will do away with the need to legislate wage hikes, in response to the slow pace of minimum wage increases, which labor organizations said have fallen far behind the cost of living.
Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila, said social protection programs like the 4Ps are vital to an economy that is being challenged both by internal and external dislocation.
“In a situation affected by changing technologies, international market reconfigurations and unstable environmental conditions, social protection is needed to protect social welfare especially for the poor,” he said in a Facebook Messenger chat.
The government needs to ensure that the 4Ps program is maintained and adjusted appropriately en route to industrialization, Mr. Lanzona said, adding that the payouts should form part of a broader social security plan.
“A viable manufacturing program requires a robust social security plan. It is the government’s responsibility to establish social security,” he said. “If we had a strong social security program, we would not need the legislated minimum wage policies.”
Inflation hit a 14-year high of 8.7% last year, though it has since receded.
Mr. Marcos had described the need for indexing as an “immediate” priority, Mr. Gatchalian said.
The 4Ps program provides conditional cash transfer to poor households for a maximum of seven years. A qualified child enrolled in daycare and elementary programs earn families a grant not lower than P300 per month for a maximum of 10 months per year.
Qualified beneficiaries with a child enrolled in junior high school are eligible for not less than P500 per month, while those in senior high school are to receive at least P700 monthly, according to the 4Ps law.
It also provides qualified households with a health and nutrition grant not lower than P750 per month yearly.
The program, which was patterned after conditional cash transfer programs in Latin America and Africa, was first implemented by former President Gloria Macapagal-Arroyo in 2006 and was made permanent by her successor, the late Benigno S.C. Aquino III, who assumed office in 2010. It became law in 2019 as Republic Act (RA) 11310, or the 4Ps Act.
Once the index approved by economic managers, it will be introduced to the Legislative Executive Development Advisory Council, Mr. Gatchalian said.
He said, noting that some of the items being considered for tracking in an index include the essential goods basket.
“There are many ways to do it but the most important thrust there is to make it responsive and protect its value against being diminished by shocks like inflation.”
He said the DSWD will also consider indexing schemes for other social grants such as the Assistance to Individuals in Crisis Situation, which is being implemented under a memorandum circular.
“Let’s protect the flagship (4Ps) first because that it’s most needed, but it doesn’t necessarily mean we’ll stop there.”
Every six years, the Philippine Institute Development Studies is tasked with recommending to the National Advisory Council whether the cash grants need to be adjusted based on movements of the consumer price index.
The council needs to ensure that the grant amounts are sufficient to “make a positive impact on the health, nutrition, and education,” according to the 2019 law.
Inflation hit a 14-year high of 8.7% year on year in January 2023. It declined to 3.9% in December, but the full-year average for 2023 was 6.0%, remaining above the central bank’s 2%-4% target.
The Senate on Monday approved on third and final reading a bill pushing for a P100 ($1.78) across-the-board minimum wage increase for workers in the private sector.
Sonny A. Africa, executive director of think tank Ibon Foundation, said the government should prioritize the creation of quality jobs and funding social services instead of focusing on cash assistance programs, which called “band-aid” solutions.
“The government should be institutionalizing quality job creation and publicly provided social services instead of focusing on the band-aid measure of cash assistance,” he said.
“The government should be looking more into why its economic strategy chronically leaves so many behind and fails to create enough decent formal work for so many Filipinos,” he added.
“The binding constraint to development is really how the economic team still refuses to accept that the country needs a long-term strategy of national industrialization to spur domestic job creation that progressively reduces the need for cash assistance for so many.”