Which industry can provide more jobs for Filipinos?

by Jose M. Galang

Posted at May 01 2014 09:10 AM | Updated as of May 02 2014 04:50 PM

MANILA, Philippines - Labor Day in the Philippines is really more about the travails of the 2.67 million unemployed Filipinos than the good fortune of the 36.4 million who have regular jobs. But even among the ranks of the employed, there is a large number of underemployed—7.1 million—who feel they can do more and accomplish more than what their present jobs allow.

Despite the high rates of economic growth of recent years, unemployment has continued to expand—there were 193,000 more Filipinos without jobs as of January this year compared to the same month last year, according to government data. This has been a key factor behind the high incidence of poverty in the country.

Policymakers continue to pin their hopes on growing the manufacturing sector to create more employment opportunities. Economists support that strategy, arguing that manufacturing industries offer better-paying jobs that also exist longer than other sectors.

Precisely what kind of manufacturing jobs are in the economic managers’ minds remains unclear. To be sure, the Philippines has had its share of major manufacturing industries that subsequently ceased operations for various reasons.

For instance, the giant electronics Intel Corp. used to run a major semiconductors plant in the country that at one point employed some 5,000 workers, but decided to close it down in 2009 after the economics of producing the product in the country weakened. It moved its operations to such lower-cost locations as China and Vietnam.

Before that, a couple of high-investment automotive parts industries were established in the Philippines by big international firms during the 1970s. Those manufacturing activities were later halted and the facilities moved out as soon as they encountered poor business prospects. The local automotive industry today is engaged mainly in vehicle assembly and importation of units produced elsewhere.

There are many other examples. For that matter, the share of manufacturing in the total value of all economic activity in the country has declined over the years to less than a quarter now. As a result, employment numbers in the local manufacturing sector have also shrunk to below 10 percent of total number of employed citizens across the nation.

How the new manufacturing industries now being targeted by the government will be different—in the sense that they will stay on and sustain local operations and jobs when economic conditions change—remains unclear.

Manufacturing enterprises apparently are not what they used to be. New factories tend to employ far fewer people than their predecessors using old technology. Modern plants, according to recent studies, are being designed for increased productivity and value of output without having to hire more people.

The old assembly lines crowded with workers have given way to “lean production” systems that involve much fewer workers and automated stages in the manufacturing process. In their more recent renditions, these lean systems involve not just manufacturing operations but also product development and marketing, according to analysts at the business and economics research group McKinsey Global Institute.

In the Philippines, the dramatic surge in dollar remittances from the ever-growing number of Filipinos working abroad has also propelled the local services sector more than the manufacturing and agriculture industries.

The services sector now accounts for 54.1 percent of the country’s employed individuals, with industry sharing a minority 15.9 percent. Agriculture, the traditional linchpin of the Philippine economy, accounts for a still sizeable 30 percent of the country’s workforce.

In recent years, the services sector has maintained the biggest contribution to the total value of economic activity in the country, aided mainly by robust domestic consumption. Industry, which includes manufacturing and property development, chalks in a poor second and agriculture languishes at the bottom.

Unless this pattern of consumption-led economic activity triggers substantive growth in the production sector, growth will be vulnerable to negative factors in the country and abroad. Thus, the need to build a sustainable manufacturing base.

Given that manufacturing enterprises can no longer create the number of jobs that the Philippines needs for its unemployed—which is made more serious by the fact that 78 percent of the jobless are in the 15-34 age bracket—the Aquino government will now have to opt for more creative strategies.

Economists contend that economic development that leapfrogs from agriculture to services cannot possibly be sustainable. There has to be a stable anchor in the production sector that will support the natural growth into services as people’s incomes rise, they say.

If that is the case, then the Philippines should now move to establish firm linkages between its struggling agriculture sector and its newly revived manufacturing industry. Such an economic expansion can also be expected to spread its benefits to the rural areas where most of the nation’s poor live.

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