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By Rene Q. Bas, Editor in Chief
ECONOMISTS and the head of the largest
association of employers in the country are worried that the formal
sector of the economy has shrunk and the informal sector (IS) has
grown despite the spectacular economic growth the Philippines has
enjoyed these past years. 2007 posted the highest growth—7.3
percent—in 30 years.
Employers Confederation of the Philippines (ECOP)
President Sergio Ortiz-Luis last week told GMANews.TV that the
formal sector in 2007 had shrunk to 4.7 million from 6.3 million
members in 2003, while the informal sector in 2007 has grown to 27
million from 21 million in 2003.
Wage hike losers
Labor groups have been asking for an across the
board wage increase. He told GMANews.TV that a wage hike will make
people in the informal sector, like public utility jeepney (PUJ) and
tricycle drivers, sidewalk vendors and self-employed smalltime
traders, “the losers.”
A wage hike will most likely push prices of food
and other basic goods higher. The informal sector members—with no
wage hike and some of them not even receiving wages from their
mom-and-pop employers—would find those goods more prohibitive than
they already are.
“Paano mo bibigyan ng biyaya ang
self-employed? Mabibitbit mo lang kung ang ekonomiya ay lumalakas na
at ang trickle-down effect ay bababa sa informal sector pero ‘yan
ay nangangailangan ng ilang taong sunud-sunod na pagtaas ng
ekonomiya (How will you benefit the self-employed with a wage hike?
You can do that only if the economy strengthens and if they feel the
benefits trickling down to them. But that will take many years of
constant economic growth),” Ortiz-Luis told GMANews.TV
P100B revenues lost
The domestic economy continues to grow but the
number of informal sector workers and operators is rising. This
costs the government about P100 billion of forgone revenues
annually, economists told The Manila Times.
Dr. Victor Abola, economist at the University of
Asia and the Pacific (UA&P), estimated that the government loses
at least P70 billion annually from revenues uncollected as taxes
from the informal sector.
Abola said another P20 billion to P30 billion in
missed revenues are in the unpaid value added taxes, business
permits, etc.
The informal sector includes vendors, household
helpers, neighborhood handymen, PUJ and tricycle drivers,
self-employed entrepreneurs, agricultural and rural area workers,
and small traders, among others.
“These [informal sector businessmen] are
people who have the capability to do business but don’t want the
hassle in getting permits,” Abola said.
“These are people are creating value and
should be praised. But they are not paying taxes,” he added.
Abola said the informal sector is important to
the economy. It contributes about 20 percent to 30 percent annually
to the GDP.
The UA&P economist said the government
should entice this sector to go formal.
Allergic to government
“The government should make it easy for them
to get permits. Too much bureaucracy should be avoided,” Abola
said.
Unmentioned in the conversation was the common
fear of having to do with government units where there are fixers
and “kotong” people who intimidate simple folk. This makes most
people—even professionals and the rich—allergic to government
offices.
The National Statistics Office (NSO) reported in
January that 32.3 percent of total employed were self employed,
higher than the 30.4 percent in the same period in 2007.
Unpaid family workers were estimated at 12.2
percent.
In 2007, there were 33.7 million employed
persons, of which, 50.2 percent were in the services sector, more
than 35 percent were in the agriculture sector and 14.8 percent were
in the industry sector.
The number of persons in the labor force in
January 2008 was estimated at 36.4 million out of the estimated
57.4-million population 15 years and over.
Industrial jobs down
Benjamin Diokno, economist at the University of
the Philippines and Budget secretary of the Estrada administration,
said the growing informal sector of the economy is caused by the
unemployment rate which continues to rise despite the growth of the
economy.
“The quality of [economic] growth is very
low,” Diokno said, which is why it is not creating more jobs for
Filipinos.
Diokno said the manufacturing sector is
employing less and less. There were only 880,000 manufacturing jobs
in January 2008, lower than the 910,000 employment figure in January
2007.
The UP economist said the government should
improve the quality of economic growth to increase employment in the
formal sector.
Informal sector statistics
Are these figures right?
These are just estimates. But their basis is
ECOP’s wide range of sources. It is a close cousin to the
Philippine Chamber of Commerce and Industry (PCCI). ECOP and PCCI
both have regular surveys among their members nationwide.
In any case, the Asian Development Bank and the
NSO are now embarked on a study to come up once and for all with a
correct measure of just how many people are in the informal economic
sector and what the sector’s share is in the gross domestic
product (GDP). Both studies will probably be ready next year.
In 2005, then Labor and Employment Secretary
Patricia Sto. Tomas said that in the 10-year period from 1994 to
2003, the informal economic sector accounted for one-third of the
country’s nonagricultural GDP. The sector’s employment share,
likewise, was “on the rise.” Estimates indicate the IS sector
accounted for some 15.520 million employed persons as of January
2005.
Using those old 2005 data as our basis for
today’s figures, the informal sector must have been responsible
for 28 percent to 29 percent of total GDP in 2007. For the industry
and services (non-agriculture) contribution to GDP in 2007 was 85.9
percent.
Informal sector defined
What is the informal sector anyway? The
International Labor Organization defines the IS as the sector
“composed of very small-scale units producing and distributing
goods and services, and consisting largely of independent,
self-employed producers, some of whom also employ family labor
and/or a few hired workers or apprentices; which utilize a low level
of productivity; and which generally provide very low and irregular
incomes and highly unstable employment to those who work in it.”
People in the informal sector have no health
insurance. Some receive no wages. They have not much of a future
really—except the bliss of heaven.
IS hardship alleviation
Meanwhile, the government, the Trade Union
Congress of the Philippines and various NGOs and Church charities
are doing something to raise the quality of life—and the hopes for
a better life—of the members of the informal sector. (See
“Gov’t programs to raise IS will reduce poverty” and “Panibagong
Paraan model for gov’t civil society partnership.”)
These programs are even more necessary now that
we have a looming global food crisis and a domestic rice-price and
oil-price crisis.
True solution
Is there a true and long-term solution to the
problem of uplifting our expanding informal economic sector? Some
believe is it to revive our moribund industrialization and to
reinvigorate our agriculture and enrich the rural areas. It is also
proposed as the solution to the problem of food security and massive
poverty. (See “Social protection for informals is a fair trade
issue—Tańada”).
But that will take a new outlook. And something
that our present leadership considers a step backward from the
promised bliss of free trade and globalization.
-- With Darwin G. Amojelar
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