Who are the people that can be considered as poor

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Society labels people who are below the poverty line collectively as, and almost condescendingly, as the "poor" people. Filipinos may even instantly characterize them as those living in squatter areas or makeshift homes, vendors on the street, or those individuals who have had low income jobs their whole lives. But some doesn't know that people who also live in some high buildings can be considered poor. So who are the people that can be considered as "poor" theoretically?

The idea of being poor or impoverished has a more formal definition that is not solely based on physical appearances. In fact, to understand it, we must first distinguish between its two possible interpretations - the first of which being the inability to purchase necessities (known as absolute poverty), and being poor due to a comparatively lower net value against another individual without necessarily being below the poverty line (known as relative poverty).

In this paper, our focus will be on individuals experiencing absolute poverty. By definition, this is the state of being poor wherein the individual lacks the income to sustain their daily needs and wants, leading to extended periods of "bankruptcy." When talking about cash or money, poor people will less likely to have some immediately at hand with them. If ever they do have some extra cash though, chances are they will use it to buy supplies (like canned foods) because during times of emergencies, these items are sure to have a higher utility value than cash itself. Some of them will use the extra money for gambling because they wanted to take the chances of becoming rich in the shortest time possible. These are however the conventional views on poor people. But what we learned from the literatures and theories prove to be the opposite though.

In the theoretical framework, we have seen some of the theories supporting the "poor can save" argument. In support to these theories, the review of related literature part of this paper also highlights that people who are under the poverty line have at least one of the two factors in savings, which are the capacity and willingness to save a part of their income for the future, or both. These two things give us a strong argument that the poor people do save.

Putting these things in the Philippine setting, as of the year 2006, the considered poor in the country makes up 32.9% of the whole population (CIA, 2010). Using what we learned from the literature and applying the theories, we know that there is at least some people in the 32.9% of the population who saves their income because they know that they will be needing it for future purposes. But using such theories and literature is not strong enough to completely disprove and eliminate the common notion that the poor cannot save. To further strengthen the argument, we must quantify this empirically.

With this, a new problem arises: "How do we put these words into action?" Knowing that the data for the poor in the Philippines is not that complete in terms of our topic, what can we do about it? Another problem is that how can we model our argument such that it can really show that the poor people do save?

In this part of the paper, we will be answering such problems. We will be explaining on the methods of how we are going to gather data that we will be using in the model. Also, we will discuss our model with greater detail and also outline our a-priori expectations of the independent variables.

METHODS OF DATA GATHERING

In this paper, we will be using primary data which means that we are going to conduct a survey in different poor households who are under the National Service Training Program - Civic Welfare Training Service (NSTP - CWTS) of De La Salle University-Manila (DLSU-Manila). In this way, we are going to find out what we really want to know and the questions will be "straight to the point".

The questions in our survey will be made in two languages, Filipino and English. We plan to use a bilingual questionnaire as the respondents may be able to better express their answers in Filipino. To ensure that the questions are clear and coherent, it will be checked by our panel of thesis advisors, and we plan to pilot-test it with our first few respondents, and should problems arise, we will revise the questionnaires before fully engaging ourselves in the data gathering process. Furthermore, the questions will be in multiple choice format, so that the respondents will not have a hard time writing their answers. This would also make it easier to collate our results and translate the survey responses into the econometric model.

SURVEY OBJECTIVES AND THE SCREENING PROCESS

Since the scope of our study is the saving behavior of the Filipino urban poor, our sample population will be limited to those currently residing in those communities that are under the NSTP-CWTS program. We characterize our respondents to be those under the poverty line, which as defined by the National Statistical Coordination Board (2006), are those who earn below PHP 15057 annually. Therefore, this will include individuals who are low income earners like public transport vehicle drivers, small-scale vendors, construction workers, among many others.

Given the time and resource constraints that our thesis group is faced, we are expecting to have approximately 500-700 respondents that will satisfy the qualifications stated earlier. We will be using a quota sampling method, wherein the survey areas are pre-selected depending on whether it is a below the poverty line community. Subsequently, the respondents per community are selected based on convenience, meaning that we will generally be surveying those who are actually willing to be surveyed.

We have two ways of how are we going to do our survey. First is that we are going to survey poor households throughout NCR because these are the poor people who we can see everyday in our life. Second is with the help of Center of Social Concern and Action (COSCA) and its partner organizations.

With the help of COSCA and its partner organizations in the NSTP-CWTS, we will be able to survey various poor households. Not only will this minimize the time needed to survey, but it will also allow us to reach poor communities that are relatively less accessible, expanding the variety and number of respondents in our sample population.

To maintain the reliability and validity of our survey results however, we plan to communicate extensively with COSCA's partner organizations. Upon their acceptance of our request, we will further explain to them the objectives of our study, what we want to know, and our proposed sampling process. To minimize the resource costs to the partner organizations, we are going to provide the questionnaires which will be distributed to selected respondents in the community, and ensure that no other financial costs will arise from surveying. Subsequently, given COSCA's approval as well, the survey questionnaires can be distributed to the respective organizations in the community during the NSTP-CWTS exposure trips which happens every Saturday on the 2nd and 3rd terms of the academic year in DLSU-Manila.

We will also ask for COSCA's assistance about what incentives we can give to these organizations to entice them to survey different households within their communities, as well as to show them our gratitude for granting our request. For now, we are expecting that these incentives will come in the form of donations in terms of goods and/or cash.

After two weeks to one month, the results of the survey that the different partner organizations have gathered will be given to us. After that, we will tabulate and collate the results, and subsequently utilize the data for our model.

In summary, this is our proposed survey process for our study. First, we will prepare the questions that we are going to ask in the different households. After approval by our panel, it will be given to COSCA. With the help of different coordinators of COSCA, it will be distributed to the partner organizations which will hand out and receive our surveys. After two to four weeks, the survey will be given back to us by COSCA and we tabulate the results.

Using the data we have gathered, we can now eliminate our first problem about data availability in our country. Now, the next problem is how to make a model that can show what we want to know.

MODEL SPECIFICATION AND DISCUSSION

The primary data we have gathered will allow us to develop a model that will bridge saving and the poor. But first, let us review the objectives of this study. In this paper, we want to know what affects the decision of the poor households to save in the form of financial assets (like money) and/or in the form of goods (like canned goods) and in this way, we may be able to determine the incentives the poor people have to save. In order for us to come up with a good model that can quantify this goal, we will be using a qualitative response model or more specifically, the multinomial logit model.

After showing all of these independent variables, we can now come up with a final model which is:

ln (Pi / 1-Pi) = Si = β0 + β1 Σ SDVi + β2 Σ EEMi + β3 Σ RAi

where

P = Probability of being a Saver

I = Respondent Number

S = Saver [1 = Not Saver; 2 = Financial Saver; 3 = Goods Saver; 4 = Both]

SDV = Socioeconomics and Demographic Variable

EEM = Experiences, Expectations and Motivations

RA = Resources and Assets

As we have discussed in the theoretical framework, our independent variables are divided into three main categories, namely: (1) Socioeconomic and Demographic Variables; (2) Experiences, Expectations and Motivations; and (3) Resources and Assets.

Using these categories, we came up with different independent variables and in the succeeding paragraphs we will be explaining our expected relation between these variables and the model's dependent variable,

Table 1.

A-Priori expectations

Variable

A-Priori expectation

Rationale

Socioeconomic and Demographics Variable

Income

+

As we have seen in the related literature, it was explained that the higher the income of the person, the higher is the probability or the likelihood of the individual to save. It is because of the fact that the capacity to save of a person increases as income increases, provided that consumption levels do not change

Highest Educational Attainment

Less than High School

[BASE VARIABLE]

+

In the literature, there are several sources that attempt to explain the relation between education and savings. Education is known to have a positive effect to the income of the individuals, as it increases one's value in the labor market. With this explanation in mind, we can say that the differences of the savings (due to the increase in income) of a person can be explained by the different educational attainment of each individual.

High School

[1 = Yes ;

0 = Otherwise]

+

College

[1 = Yes ;

0 = Otherwise]

+

Graduate School

[1 = Yes ;

0 = Otherwise]

+

Age

+/-

In the theory of Life Cycle Hypothesis, age is known to have an inverted U relationship with savings. When a person is young, he/she will have a negative savings because he/she doesn't have any means of gaining income; but while the person is becoming old, he/she will have a means to gain income. With this increase in income of the person, the savings of a person willincrease up to a certain age. After he/she reached that certain age, there will be a downfall again of the savings of the person.

Employment Status

Full Time Employees

[1 = Full Time Worker ;

0 = Otherwise]

+

As Beverly (1997) stated, the employment status of a person is more likely to have an indirect effect in the savings. It was stated that employees are more likely to have access to some of the institutionalized saving mechanisms (like SSS), which is a form of formal savings.

On the other hand, there are also people who are unemployed who want to have a secure future because they don't have a job. With his/her limited money, he/she must control all of the expenses he/she will be incurring in the future.

Part Time Worker

[1 = Part Time Worker ;

0 = Otherwise]

+

Retired

[1 = Retired ;

0 = Otherwise]

+

Unemployed

[1 = Unemployed Worker ;

0 = Otherwise

+

Discouraged Worker

[BASE VARIABLE]

+

Status

Single Male

+/-

People who are single may save or not save depending on their behavior towards saving. In the case of a married person, he will surely save because he/she will think of the future of his/her child rather than one's self.

Single Female

+/-

Married

[BASED VARIABLE]

+

Widowed

+/-

Number of dependent members of the households

-

From what we have read in the literature, it was said that as the number of dependent household members increase, the capability of the household to save will decrease due to expenses that the dependent household members incur.

Amount spent on vices/ luxuries (Food)

-

The literature have shown that as income increases the amount of calories that a household consumes varies little and one of the explanations for this phenomenon is that these households buy other goods that are a more expensive sources of calories - meaning that the household spends more on these goods but they do not necessarily acquire more calories (i.e. normal goods). Vices like smoking, drinking and gambling are also considered as part of our independent variables due to fact that these are unnecessary expenses that decreases the capability of households to save and which could even result to more expenses due to the health hazards that these goods would result to if not regulated.

Sex of the household head

[1 = Male ;

0 = otherwise]

-

Studies have shown that the majority of the poor households in the Philippines are headed by women and have been seen to be better of compared to those headed by men. One of the assumptions that we can make for this occurrence is that men in general are more exposed to vices, and are therefore more likely to spend on unnecessary expenses.

Experiences, Expectations and Motivations

Increase in Income is more than the increase in Price

[1 = Happened ;

0 = Otherwise]

+/-

Literature stated that when a person is expecting that there will be good times ahead (better than what he/she have today), then he/she will not save today. It is because he/she knows that he can just save in the future rather than saving today.

Expect Income to increase more than the Price

[1 = Expect ;

0 = Not Expecting]

-

Expect the Economy of the Philippines will be better in the Future

[1 = Expect ;

0 = Not Expecting]

-

Expect a Major Expense in the Future

[1 = Expect ;

0 = Not Expecting]

+

When people are expecting a big expense that they will be incurring in the future, people will try to save as much money as they have now. People don't want to be in the state of bankruptcy when the time comes.

Lack of Money in the Past

[1 = Happened ;

0 = Otherwise]

+

Other Reasons to Save

[1 = Expect ;

0 = Not Expecting]

+

People will really save when they have a reason and motivation to do so. This variable aims to account for these other reasons that were not previously mentioned.

Planning Horizon

Short Term (≥ 1 year)

[BASED VARIABLE]

+

If the respondent is a future-oriented person, he/she will have a high chance that he/she will save. Studies made by Hogarth and Anguelov showed that the longer the year in the respondent's plans, the higher the probability of the respondent to save money.

Medium Term (2 - 10 years)

[1 = Yes ;

0 = Otherwise]

+

Long Term (<10 years)

[1 = Yes ;

0 = Otherwise]

+

Resources and Assets

Home Ownership

Owned

[1 = Yes;

0 = Otherwise]

+

The literature showed that when the respondent has a house, he will have more capacity to save because the money that must be saved for buying the house will not be lost. On the other hand, the people who live in houses under lease or rent and/or people who are "nomads" (those who don't have their own house or rented home) will save money so that they can own a house in the future.

Rent

[1 = Yes;

0 = Otherwise]

+

"Nomads"

[BASED VARIABLE]

+

Pensions / Educational Plan / Health Plan / Insurance

[1 = Own at least one of them ;

0 = Own nothing]

-

From the literature that we have read it was said that as the amount of the money households receive from pensions increase, the amount that the people will save decreases and one of the reasons for this is that as people gain a more secure future through the money they expect to gain from these pensions, and hence they start to be more confident, resulting to less incentive to save.

Relatives Lived Nearby

[1 = There is at least one ;

0 = None]

-

Our A-priori expectation for this variable is that people will have less incentive to save because they think that they are secure and that they think that there are people who will be able to help them financially in times of emergencies.

Animals or agricultural produce

Appliances

Cell Phones

Vehicle

Jewelry or other valuables tradable in pawnshops

[1 = Owned ;

0 = Otherwise]

+/-

We think that these assets of the people would contribute to decreasing the amount people are setting aside because we think that most people would assume these assets to be as good as cash. The ownership of these "substitutes" may therefore make them less prudent.On the other hand, people may considered these things as their savings where they can consume for the future.

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