Growth with job creation

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NEWS about the slowest rate of inflation in 20 months has a worrisome angle, because of what it suggests about unemployment. There is an economic concept that shows a historical inverse relationship between inflation and unemployment – the Phillips Curve. Basically, it says that the higher the inflation rate, the lower the unemployment rate. Conversely, the lower the inflation, the higher the joblessness.

Earlier, the central bank reported that the inflation rate in April was 2.2 percent. Generally, that is good. Anything below 4 percent is considered zero inflation. Inflation has been consistently low throughout President Aquino’s term thus far – regrettably, though, so has the employment rate.

The jobless rate was 7.5 percent in January, the latest figure reported by the Philippine Statistics Authority. That is higher than January 2014, when it was 6.6 percent. Worse, unemployment in the Philippines, according to the International Labor Organization (ILO), is the highest in Southeast Asia.

For its part, the Aquino government has a lopsided appreciation of our economic condition, focusing mainly on the GDP growth rate and citing that it is the highest in the region. However, a fast-growing economy with consistently high unemployment suggests that the benefits of economic progress are not evenly distributed. And if the Aquino government is to realize its promise of inclusive growth, then it should refine its economic development programs.


Even though President Aquino is approaching the last year of his term, it is not too late to do something. First, his economic team could ramp up public spending. The Department of Budget and Management (DBM) has not resolved the problem of slow public spending, despite claims it has already done something about it. Government spending is a large component of the aggregate economy. But in recent years, our economy has been led by consumption, which also suggests how remarkable the central bank has been in controlling inflation.

Second, the Aquino government should re-evaluate the Conditional Cash Transfer or CCT. The success of similar programs in other countries suggests that the government should not abandon it. But the CCT’s budget of P62 billion may be poorly targeted, lost to leakages, or both. The mere fact that is has not made a noticeable dent in the poverty rate implies that there is a problem. Policymakers should review it. Also, we have questioned whether dole outs are effective against poverty. It might be better policy to increase spending on programs that immediately create more jobs.

Last, the President should use his remaining political capital to attract more foreign direct investments. To his credit, President Aquino is trying to do that now in his visit to the United States and Canada. He should do more of this.

He should also be mindful about inviting the right kind of investments. If his government is to manage unemployment, the Philippines needs investments in labor-intensive fields. Despite our disadvantages as an investment destination, the country has notable competitive advantages. For instance, Filipinos speak English. Also, the Philippines is a gateway to Asean, a market of about 600 million.

We can track whether President Aquino is on the right path on job creation by monitoring inflation, and of course the unemployment rate itself. He should devote his last year to job creation. It may be unrealistic for him to address all our concerns, but if he can lower joblessness, that would resolve so many problems.

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5 Comments

  1. Venerando Desales on

    The Barangay Micro Business Enterprises Act of 2002 (R.A. 9178) could be the answer to unemployment in our country; yet, some Local Government Units have lackluster attitude in supporting this law because their revenues will lessen. No matter how a micro enterprise wishes to be registered, the Municipal Hall will discourage it and would insist on their own way of collecting fees, leaving no choice to a micro enterprise but to remain in the underground economy where they are susceptible to extortion from the unscrupulous agents of the B.I.R. and the Offices of the Municipal Treasurer. It seems that the mindset now of some LGU’s is to engage in business with profit as the motive no longer the creation of a protective atmosphere conducive to the creation of wealth which is the domain of the private sector. So, instead of concentrating on governance, the LGU’s compete in business with the private sector disregarding any principle of conflict of interest. It is an anomaly that the government, national and local, should engage in business directly or indirectly. The truth is, some of them are engaged in business clandestinely. That is why dynasties proliferate to protect these businesses.

  2. Aquino and the Liberal party are focused on wealth distribution(CCT, agrarian reform, etc.) rather than wealth generation. There’s just too much leftist thinking inside his administration. His party loves to spend other people’s money through taxes and bigger government. They think its theirs.

    The late Fmr. Prime Minister Magaret Thatcher spelled the problem very clearly. She said, “the problem with socialism is that eventually you run out of other people’s money(to spend).”

  3. your wish mr editor, i think, would not be implemented by boy sisi. he would be busy in making sure he does not land in jail like what he did to arroyo. instead, he would do all possible means, by hook or by crook, to land a president of his choice, not necessarily boy pick up. well, who knows, sabi nga nila may himala.

  4. Job creation would expand if more than 6 PPP projects were implemented…. With a PPP average rate of just over 1 PPP per year… it is understandable why we have the unemployment figures that are shown above. With poor infrastructure, unreliable power supply, port congestion, political infighting, high taxes and a Constitution that inhibits foreign investment…. we are stuck in our own rut!