Why it will take some time for Filipinos to get their dream job

by Jose M. Galang

Posted at Feb 25 2013 10:51 AM | Updated as of Feb 26 2013 09:13 PM

MANILA, Philippines - Unemployment has remained a persistent problem that needs an urgent solution. Yet this is not felt in the campaign rhetoric of candidates in the May elections that now incredibly centers on gossip, bickering over lost party slates, and defense of dynastic ambitions.

One would think that the candidates would now be offering voters their intended programs to solve the nation’s ills, one of them being the lack of enough job opportunities.

For that matter, this problem was one of the reasons the Filipino people rose against a dictator more than a quarter century ago. Former president Fidel V. Ramos last weekend lamented that the country’s ills have persisted, long after that dramatic uprising.

While the economy was a mess in the years preceding 1986 owing to political turmoil, it has since turned around. But the rate of unemployment remains high. It was nearly 12 percent in 1986 and was at 6.8 percent in the fourth quarter of 2012. Another 19 percent of the labor force consider themselves underemployed — willing to take on more work but unable to find any.

If current trends do not change, the shortage of jobs will continue to force Filipinos to seek employment abroad. There are now more than 1,400 individuals who leave the country daily to seek jobs overseas, adding to the estimated 1.8 million already deployed around the globe.

Just before the People Power Revolt of February 1986, the number of OFWs was just over 372,000.

For the unemployed, a constant challenge is no income. Thus, unemployment is inextricably linked to poverty, which in the Philippines continues to be widespread despite the steady growth in the economy over the past years.

This “jobless economic growth” will be a phenomenon that is not expected to end soon. More industries are finding ways to become more efficient—increasing production volumes with the same number of workers, sometimes even after job cuts.

Despite all the noise about investment, the pace of growth in this area leaves much to be desired. Lately there is talk about new investors moving into manufacturing industries. Still, these industries have long gestation periods—on top of their capital-intensive nature—before they actually start operations so their impact on unemployment cannot be expected to be instant.

There is no shortage of ideas for attacking unemployment, to be sure. For instance, a recent study released by the International Finance Corp. noted a few bright spots in the Philippines.

Microfinance investments, said the report, have resulted in the creation of more enterprises, or higher rates of self-employment.

“Self-employment can be an important way out of poverty when few jobs exist in an economy. The study found that in agricultural villages that received financing,
households hired more people from outside the immediate family,” the report said.

The IFC study was actually batting for “better access to finance,” especially microfinance, which it said can boost employment generation and reduce poverty, because it decreases inequality and gives low-income people access to basic financial services.

In the Philippines, self-employed workers without any paid employee made up 28.5 percent of the total 37.7 million employed persons as of October last year, while employers in own family-operated farm or business comprised 3.6 percent share, according to latest labor statistics released by the National Statistical Coordination Board last December.

The same NSCB report also said that 57 percent of the total employed population were wage and salary workers, with the largest percentage—43.2 percent of the total employed—working for private establishments. In the year before, wage and salary workers comprised just below 55 percent of the labor force, which indicates a growth in that group over that period.

A point emphasized in the IFC report was that unemployment can be addressed faster if governments would remove obstacles that prevent private-sector companies from creating more jobs.

The study identified such “obstacles” as weak investment climate; inadequate infrastructure; limited access to finance for micro, small, and medium enterprises; and insufficient training and skills. It urged government policymakers and development institutions to give priority to the removal of these obstacles.

Another case cited in the report was a Mindanao banana project that the IFC supported. The project showed how the private sector can improve labor conditions in distribution networks and global supply chains.

It is “trickier” to track labor conditions in the distribution networks or supply chains associated with formal sector companies, said the report. However, the case of the Mindanao Banana project, showed the “potential to positively affect compliance in distribution networks and supply chains as well as in their respective industries.”

The Mindanao Banana project addressed systematic problems associated with banana farmers: low productivity, poor business management, and poor compliance with environmental and social standards, the IFC report noted.

The project’s outcome, it added, was improved income for the farmers and increased revenue for the lead company.

IFC has been working with an international banana export company and Rainforest Alliance to train small banana farmers in sustainable farming so they can earn international certification for their produce, expanding their export markets and raising their incomes.

There are other concerns that affect job creation in the Philippines. One of them is the perception that labor market regulations in the country are among the most rigid in Southeast Asia, where investors are now moving in large numbers.

While the labor market regulations were designed to protect workers, they end up “interfering with the labor market clearing process and artificially raising the cost of labor,” according to one World Bank study.

All of this simply points to the complexity of the unemployment problem in the Philippines. The sooner policymakers—and election candidates who want to be formulating policies soon—started seriously probing into this concern, the better are chances of coming up with appropriate strategies to solve it.