Thursday, March 16, 2006

Outsourcing is great but the farms and factories still matter

It seems like the services sector alone couldn’t yet lick poverty and joblessness in the Philippines, contrary to the assumptions of a service-sector driven growth strategy being peddled by economists from the academe. Producing more graduates with smooth American accents is cool but not enough. Please read the rest of the post.

They are there—those glamorous workers in business process outsourcing including call centers and medical transcription, information industry-enabled services and telecommunications who are transforming the urban landscape of Metro Manila and the secondary urban centers of Cebu, and Davao City. And yet, they hardly make their presence felt in the latest labor force survey.

Supposedly, these jobs that mushroomed in the last five years, are part of the “transport, storage and communication” component of the survey. In the January 2006 labor force survey, workers under this category numbered 2.547 million, indicating an incremental 21,000 jobs from its January 2005 figure of 2.526 million. That’s a significant figure but it hardly changed the whole picture of rising joblessness in the country. Joblessness—which under the new definition refers to those people 15 years of age without work, currently available for work, seeking work or nor seeking work for some valid reasons—rose to 8.1 percent from 7.4 percent in October 2005. That percentage translates to 2.84 million Filipinos unproductive Filipinos.

Why this minimal contribution? First, we suspect the survey doesn’t capture yet extent of the employment in the ICT, but that’s a wild guess given the fact that we don’t have access to the sampling design as of this writing. Second, and most probably, employment in outsourcing, information technology-enabled services are still in its embryonic stage to make a difference in the labor force picture. And third, the high rates of job creation in the said industries are whittled down also by high turnover rates particularly in high pressure jobs like customer care services.

Services sector in general did a good job of generating a lot of work opportunities. Overall, the sector produced 373,000 incremental jobs, contributed mainly by transportation, storage and communications; education; hotels and restaurants; real estate, renting; and private households with employed persons.

Surprise, surprise!—private households actually accounted for a hundred thousand of the total service sector incremental jobs. That’s a lot of house maids being hired by urban dwellers. Why? The reason is reflected in higher underemployment this survey: 6.9 million workers as against 5.1 million in January last year. Take note that 4.2 million out of the 6.9 million are part-time workers. That means that—due to the rising cost of living (i.e. higher transport fare, high inflation rate, higher utility rates)—more people are hiring house maids so they would have time to seek for full-time or more productive work that should cover for their lost purchasing power as a result of high inflation rates.

The labor force survey say the entire economy has produced 750,000 incremental jobs. The bulk really of that figure comes from the farm sector that produced 475 incremental jobs. That’s because of the mild La Niña phenomenon that produced more rains. Farmers are simply taking advantage of the good soil moisture to plant their third crop. They were busy preparing the land and planting rice and other crops when the enumerators from the National Statistics Office came. That explains the higher job figure from the farms. But these jobs are seasonal.

Why the rise in unemployment despite the increase in the absolute number of jobs? It’s primarily because of the loss of 95,000 jobs from the industry sector, coming particularly from manufacturing and construction. The average capacity utilization of the manufacturing firms has stayed close to 80 percent so the sector is not in bad shape. The loss of these jobs could probably be attributed to the continuing downsizing and computerization to improve efficiency as managers respond to the competitive pressures of globalization.

There are moral lessons from this labor force survey. First, the services sector alone couldn’t yet lick poverty and joblessness in this country, contrary to the assumptions of a service-sector driven growth strategy being advocated by economists from the academe. Producing more graduates with smooth American accents for our outsourcing companies is very important but not enough. Second, the Promise Land for Filipinos still hinge on broad-based growth. Agriculture and industry will have to continue an important role. That means government will still have to invest more in strategic economic infrastructure and capabilities including strategic roads, bridges, research and development.


Anonymous said...

Outsourcing is an elitist industry - it needs specialized skills, which are expensive to learn. And yes, it is still in its infancy.

However, I think in the long term this is not healthy for us. We are at the mercy of the companies who invest in these businesses. The customers of the services rendered are foreigners, and local use is almost nil.

It employs Pinoys, but it employs those with the skills, which I believe comprises a small slice of pie in the unemployment numbers. How about those who comprise the larger pie?

Dave Llorito said...

thanks for the visit arbet. outsourcing indeed is "elitist". so is college education. but i do take exception to the idea that "not healthy for us." every legal and formal economic activity that generates jobs are fine no matter who puts the investments. and every additional purchasing power boosts the economy as it translates to demand for other goods and services. its a global world and we need to live and carve our niche within this exciting era. but you are right, we need to develop more economic activities not only in services but also in agribusiness and industry.

Anonymous said...

People are now on the trend where innovation made its way to development. It is a matter of fact that business sectors nowadays are more likely on outsourcing than any other.

However, this kind of job needed skilled applicants who are knowledgeable in computers and can speak English well. how about those people who are not that good when it comes to computer innovation?