Sunday, December 24, 2006

Is the Philippine economy hollowing out?


FORGET about gross domestic product growth rates. Forget about export statistics. Forget about improving fiscal balance. Instead, focus attention on the latest labor force survey. If we want to understand how we really fared in 2006, and what we could do in 2007 to make a difference, the labor force survey is the one that could tell us the real score. The rest of the statistics would be a mirage.

The October labor force survey (LFS) says that unemployment rate has improved a little from 7.4 percent in October last year to 7.3 percent in the same period this year. That 0.1-percentage point improvement is nothing to sneeze at since it meant there were 312,000 more people with jobs. Also, the underemployment rate has improved from 21.2 percent to 20.4 percent. In absolute terms there were more than 200,000 workers less satisfied in their jobs.

These seem to be interesting statistics, except that when we look at the bigger picture we can see that the improvement in the jobless rate is significantly influenced by the fact that there were fewer people joining the labor force. In October last year, the labor force participation rate was almost 65 percent; it’s 64 percent in October this year. This seems to indicate that a significant number of Filipinos opted not to work either because they don’t expect to find work or that they don’t have the qualifications to meet industry requirements. In other words, the bus ride felt a little bit comfortable simply because more people did not take the ride.

Certainly, the drop in underemployment suggests that many of those who got better jobs this year are those who are already working. They simply moved to whatever better jobs the economy has created, thus crowding out fresh entrants and those who are less skilled.

This explains why there were only 310,000 incremental jobs created within the survey period, not even enough to soak up 312,000 more people who joined the labor force. The name of the game in the labor market these days is “qualification” and those who got the incremental jobs necessarily are those who are with skills and practical experience.

The labor force survey also showed certain distressing signals that government planners should look at carefully. For instance, in October this year, there were 64,000 less entrepreneurs while unpaid workers rose by an additional 167,000. That means some of those who were listed as “employed” when the National Statistics Office knocked on peoples’ doors were working—without pay.

In the last three quarters, agriculture and the manufacturing sectors were doing quite well. But it’s a surprise that these sectors have declining employment numbers. The farms had lost 7,000 jobs while the factories had 31,000 less jobs. About 79,000 artisans (trades and related jobs) lost their businesses while 20,000 operators of plants and machines, as well as 21,000 laborers, lost their jobs.

Is the Philippine economy hollowing out? These figures seem to suggest just that. Whatever incremental jobs were created within the survey period came largely from the services sector (a total of 305,000 jobs). Major contributors of incremental jobs are real estate (79,000 jobs), private households (67,000), government agencies, including public administration and defense (48,000), hotels and restaurants (42,000), and financial intermediation (35,000). What this trend suggests is that the jobs created are concentrated in the cities—specifically Metro Manila, Cebu, Davao and other major secondary urban areas—while the countryside is losing jobs! And these jobs are largely grabbed by the more educated or skilled people.

These trends should worry us all because we are seeing the worsening polarization of incomes, economic opportunities and wealth in the country. We could see this polarization at various levels.

First, the cities are economically expanding while the countryside is stagnating. With this trend we can only foresee that premature rural-urban migration will worsen, thus stretching urban services to the limits. Do we wonder why we can’t seem to address urban congestion?

Second, economic expansion is felt by the relatively well-off. Notice how the middle-class is largely grabbing whatever quality jobs were created during the survey period. This means that while government economic planners were yakking about the benefits of outsourcing and the booming electronics industry, the ranks of slum dwellers who can’t partake of the emerging economic bounty are swelling. Do we wonder why the numbers of those who say they experienced hunger are rising?

What’s happening right now is the result of government neglect in terms of providing crucial economic infrastructure. In an effort to produce better statistics on “fiscal balance,” the government deliberately withheld investments on roads, bridges and ports, among others. And yet, these government bureaucrats actually hired tens of thousands more of people despite the fact that government agencies were not implementing any major economic projects.

Naturally, the country’s farmers and factories suffered. Because of problems like lack of decent infrastructure, rising production costs forced them to lay off workers. Owner-cultivators also employed fewer farm hands. One is left to imagine how poverty in the countryside these days must be worsening.

The solution? This administration should start getting those social and economic infrastructure projects moving, as promised, in the last State of the Nation Address. There are so many other things to do but starting right there would be a big step in the right direction.

1 comment:

Little red dot said...

The implementation of the new POEA policy (see news www.sunweb.com.hk/Story.asp?hdnStoryCode=1813 )will see the OFW placement decrease significantly for the first half of 2007. Employment agencies overseas will definately turn to other resources. The repercussion will lead to a chain of domino effect.