ONCE upon a time, in kingdoms far, far away, there was a huge difference between how a prince and a pauper lived. Wealth and income inequality had since increased in many countries, including the Philippines.
On July 1, the World Bank announced that the Philippines has reached upper-middle-income country (UMIC) status.
The World Bank classifies countries into four groups — high income, upper-middle income, lower-middle income, and low income — based on gross national income (GNI) per capita.
The Philippine News Agency said, “In its latest income assessment... the World Bank reported that the Philippines’ gross national income (GNI) per capita was at $4,850, exceeding the $4,636 threshold. The Philippines joined Jordan, Micronesia, Sri Lanka, and Vietnam which also moved from low-middle to upper-middle-income country status.” (Anna Leah Gonzales, PNA, July 1, 2026)
Here’s the beauty of, or the problem with, statistics. If a person earns P1 billion and nine others earn P1 million each, their average earning is P100 million. Accolades and averages do not cure economic problems.
UP Diliman associate professor Dr. Rogelio Alicor Panao warned that crossing into a higher category “does not mean a country has become rich or that ordinary people suddenly feel richer. It simply means that, on average, the country’s income per person has passed a certain threshold. Do not go out expecting people’s lives to have changed all of a sudden. When you go out, prices may still be up and goods still feel unaffordable for many...” (Cristina Eloisa Baclig, inquirer.net, July 2, 2026)
The upgrade is probably good news for some, but it has unintended consequences – e.g., no more access to low-interest Official Development Assistance (ODA), which means the country shifts to market-rate loans with higher interest rates and shorter repayment windows.
Increase in inequality
Wealth and income inequality has risen in many countries after the so-called Belle Époque or Gilded Age, which stoked social discontent and populist nationalism and undermined trust in public institutions.
“The increase in inequality has been especially marked at the top end of the income distribution, with the income share of the top 10 percent (and even more so that of the top 1 percent) rising sharply in many countries,” reported Zia Qureshi in her Brookings article, using data from World Inequality Database.
In Singapore, the “wealthiest 1 percent hold 14 percent of total household wealth.”
A November 2024 Facebook post said that “the wealthiest 1 percent of Filipinos control 40 percent of the country’s wealth.”
On June 29, Vikram Khanna wrote in The Business Times, “The average wealth held by the top 20 percent of households (in Singapore) is about S$5.3 million, more than 18 times that of the bottom 20 percent, which is S$293,000.”
Khanna continued, “The mainstreaming of artificial intelligence since 2022 has accelerated a trend that was already underway: the returns on capital — financial assets in particular — are running far ahead of wage growth or even economic expansion. Since those who are already wealthy hold the lion’s share of financial assets, they are compounding their advantage compared with the rest of the population, which depends primarily on earned income.”
The economist Thomas Piketty opined, “When the rate of return on capital exceeds the rate of economic growth, inequality will inexorably rise.”
Khanna reported that from 2023 to 2025, the S&P 500 rose by 86 percent, nominal wage grew by 12.6 percent, while GDP grew a cumulative 8 percent.
In the Philippines, an outdated Wikipedia post showed that the wealth of the richest families comprised 76.5 percent of the GDP increase for 2010-2011. “Thus, the benefits of this economic growth has not trickled down to the poorer segments of the population, as seen with malnutrition, and poverty that continue to plague the country despite the fact that the economy seems to be growing... the poorest 20 percent of the population only had a share of 4.45 percent of the national income. This shows that the distribution of wealth is uneven in the Philippines...” (Wikipedia)
Why do the rich become richer, while the poor become poorer? Answer: It is easier for money to make more money than for people to work for money.
Shifting economic paradigms also change the distribution of wealth. Wealth consisted of land, factories and fixed assets. Now, wealth consists of ideas, information and relationships.
Transformative technologies reshape the markets, business models, and work itself. As technology shifts labor demand from low skills to higher levels, income tends to shift more to capital than to labor due to increasing automation using intelligent machines.
Increasing wages is not a sustainable solution, as it spurs more inflation. The solution is to bring down the cost of living.
Department of Economy, Planning, and Development Secretary Arsenio Balisacan seemed optimistic: “We acknowledge that income disparities persist, and many continue to face economic difficulties. Our priority is to ensure that growth becomes more inclusive and that its benefits reach all Filipinos.”
As Gen Zs say, “Sana all.”
Ernie Cecilia is chairman of the human capital committee and the publications committee of the American Chamber of Commerce of the Philippines; chairman of the Employers Confederation of the Philippines’ TWG on labor policy and social issues; and past president of the People Management of the Philippines. He can be reached at [email protected]