MoneySmart made a quick list of GMA’s promises for the economy in her recently concluded SONA. One item quickly caught my eye: stronger and wider social safety nets.
In my work for ADB, I have learned that one of the major obstacles to poverty reduction efforts is the vulnerability of the poor to socio-economic shocks. An illness, a layoff, a death in the family, a natural disaster… all these unexpected occurrences can make a middle income family suddenly part of the poor majority.
A young family of four I know, for example, recently experienced this. With both parents working, they were relatively well off. They were not rich, but they had a car, they had a maid and a nanny for their two kids, they were paying off loans for a recently purchased modest house. They had some savings and medical insurance, but all these proved to be not enough when the father was victimized in hit-and-run accident.
The hospital bills alone amounted to over P300,000. Their medical insurance – the government-sponsored one – covered some of this amount, but they still had to borrow P200,000 from the company he worked for to pay for the rest. Because of the injury on his legs, he can’t work for three months and has to go through expensive physical therapy. With their savings wiped out, credit card debts fast accumulating, and only one parent now working, they’re in danger of losing their middle income status.
There are many, many more stories similar to this. The reasons are different, but the results are the same. Dr. Noet has a post about this in his Money Advice column, encouraging people to continue saving even though the returns seem small at the start. That is a safety net by itself, but I suppose, only if it proves to be enough when you actually need it. Otherwise, will we be able to rely on the government to help keep us from falling into abject poverty when bad luck strikes?