Socioeconomic classes (SEC) ABCDE explained

Market researchers and brand marketers usually use five socioeconomic classes — Class A, B, C, D, E — when describing income segments of a population.

In the Philippines, it’s tough to describe who really comprise these segments and how big the segments are due to lack of credible and substantive researches.

Class A vs. Class B: What’s the distinction?

Actually, identifying the extreme segments of the population is easier to do than defining the rest of the segments.

For example, we can assume that residents of high-end, ultra-exclusive subdivisions such as Forbes Park, Dasmarinas Village, Ayala Alabang, and the like may be classified as members of Class A.

But what about multi-millionaires in the provinces with sprawling hectares of land and with large mansions? They appear to be very rich, too, but do they fall under Class A?

Can we also say that those living in expensive and posh subdivisions such as Valle Verde, La Vista, and Ayala Hillside Estates are in Class A? The market prices of land in those subdivisions typically range from P30,000 to P80,000 per square meter, so if you are to buy a 1,000-square meter house and lot inside these villages, you will have to shell out between P30 million and P80 million on average.

If you can afford that, does that mean you’re part of Class A? Or is that Class B? How do we make a distinction between Class A and Class B, in the first place?

Class E vs. Classes C and D

Now, the other extreme segment of the population, Class E, may also be easier to define.

Typically Class E people are those with no homes that they can call their own. They may reside in squatter areas (or, to use the more politically correct term, “informal settlements”).

They barely possess any property or asset and they usually live on a hand-to-mouth basis, meaning, they are not assured if they will have something to eat by the next meal time.

Meanwhile, the other remaining income classes, C and D, are vaguely known. One of them may be called the “middle class” and another, the “masa” segment but which one exactly? It’s even possible that the “middle class” and the “masa segment”  may be just one and the same.

If we look at the income pyramid identified in our previous article Social class structure: Income distribution between rich vs. poor, we can see that the income structure in the Philippines is Type 2, or a society “with a small elite at the top, more people in the middle, and most at the bottom.”

If majority of the population are said to be “at the bottom,” that is, below the poverty line, which class then does the “average Filipino” belong: Class C or D?

Rich vs. Poor vs. Middle class

We tried to do extensive research in order to answer the questions we posted above.

Interestingly, we came upon some relevant reports that can help us define the income classes.

For starters, the latest “Family Income and Expenditure Survey” (FIES) of the National Statistical Coordination Board (NSCB) offers some, albeit not that exhaustive, information about income classes in the country.

However, instead of dividing the Philippine population into Classes A, B, C, D or E, the NSCB simply grouped the country into three segments: the high income, middle income, and low income groups.

High vs. Middle vs. Low Income Groups  

High income segments are families/people earning an average of P200,000 a month or P2.4 million a year, as per the NSCB. Thus, they may be described as the “rich” segment of the population. They are very few, numbering only 0.1% of total families in the Philippines.

The middle income class is said to earn an average of P36,934 per month while the low income segment earns an average of P9,061 per month.

It is good to know that the FIES report has those details, unfortunately, it is still not detailed enough. For example, if a family’s monthly income is around P80,000 — can this be considered high income or middle income? What if the monthly income of a household is P20,000 — is this middle or low income?

Simply speaking, we want to know: When can we say if a family or a person belongs to the high income, middle income, or low income class? The FIES report, unfortunately, does not provide a concrete answer.

Population Percentages of Classes A, B, C, D, E

Another research we found that attempted to determine the number of Classes ABCDE in the Philippines is a Social Weather Stations (SWS) research report entitled “Family Income Distribution in the Philippines from 1985 to 2009”

This report offered insights regarding income classes but was also silent on the actual description of each class. Still the report is useful for those interested in knowing how many in the Philippine population belongs to Classes A, B, C, D or E.

Data from the report are summarized in this table.

Percentage Distribution of  Socioeconomic Classes in the Philippines

[TABLE=161]

This SWS survey shows that the high income AB classes represent only 1% of the families in the Philippine population. As expected, they are very, very few. If we are to translate this percentage into nominal terms, the AB classes number only 185,000 families.

If we assume that each family is comprised of five (5) people, the AB population of the Philippines is barely 1 million people!

The report warns, though, that this number may appear lower because most AB respondents refuse to participate in the survey.

Meanwhile Class C comprises 9%, with class D representing the largest bulk of families in the Philippines: 60%.

Therefore, six (6) out of every 10 Filipinos belong to Class D. Judging by this huge percentage, we can say that the “masa” population in the country is Class D.

The poorest segment, Class E, also comprises a big chunk. Around 30% of Filipino families are classified under this class, which undoubtedly confirms that poverty in the Philippines remains prevalent.

Conclusion

If we looked at income distribution, the results are alarming. Despite comprising only 1% of the Philippine population, income classes A and B own 9% of total incomes in the country.

Worse, their income is almost equivalent to the total income earned by 30% of the families in the Philippines. The income disparity is very obvious, indeed.

The reports we cited above may not be detailed and definitive enough for us to fully understand income segments in the country, but they provide a good foundation. We hope that in the future, more research will emerge that will give us a clear and complete picture of the income classes in the Philippines.

More importantly, we hope that these future reports will offer solutions on how to reduce income disparity in the Philippines and how to help more Filipinos move up the income pyramid.

Sources: NSCB, SWS