• PH’s fragile economic “boom”

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    NEW YORK CITY: The notion that the Philippine economy is “booming” seems to have become conventional wisdom among the country’s economic cheerleaders.

    Consistently high economic growth numbers, plus highly publicized credit rating upgrades have some people believing that the good times have arrived and are here to stay.

    But go to that little restaurant at the street corner. It may surprise you that most of their waiters have college degrees. Waiters don’t need a bachelor’s degree. Why does someone spend four years in college only to end up making a pittance?

    This particular case of “over-education” is evidence of a larger economic trend that threatens to weigh down the country’s economy in the coming years.

    Let’s start with the facts. Recent research by the Asian Development Bank and
    University of California–Santa Barbara shows that the earnings gap (i.e. the pay rate) between high school graduates and elementary school graduates has fallen from 17.4 percent in the early 1990s to 10.1 percent during the last decade. This means that a high school diploma isn’t as valuable or advantageous as it used to be.

    Second, the country’s economy saw a sharp decline in low–skill manufacturing employment (a sewing machine operator, for instance) and a sharp increase in low–skill services jobs (think of fast food service crew).

    Third, the country is producing more college graduates and more high school graduates, which means that the supply of workers for both high and low-skilled jobs has increased.

    Finally, the supply of college-educated workers far exceeds the country’s demand for such workers. There are more college graduates than there are jobs needing a college-level education.

    As more Filipinos finished college, graduates moved out of the agriculture sector. The problem, however, is that high-skilled jobs in the manufacturing and services sectors did not keep pace with the increased supply of college graduates. There simply aren’t enough jobs for college graduates!

    Because of this demand-and-supply gap, companies can afford to be selective on who they hire, and if necessary, to raise salaries in order to attract qualified (i.e. highly-skilled) college graduates.

    This means that most college graduates end up going into low-skilled jobs and worse, those in the bottom rung of college graduates end up in even worse paying (i.e. menial) jobs.

    Since the problem is the stagnant demand for skilled labor, what is the solution?

    First, the country’s economic policy should focus not only on increasing the number of college graduates but also on increasing the demand for college graduates. The current government policy to churn out more college graduates is counterproductive. Adjustments to both supply and demand are needed.

    How do we do this? First, push firms to improve management practices and knowledge of building and growing businesses.

    According to Stanford economist Nicholas Bloom, poor management by developing country businesses leads to lower productivity and lower employment and slow business expansion. The difference in management skills alone, Bloom says, account for 15 to 20 percent of the difference in economic growth between rich and poor countries.

    To do this, the Aquino government should reduce protectionism in favored industries, allowing companies to compete with more efficient foreign enterprises. The passage of an honest-to-goodness antitrust law will also raise the productivity and quality of companies while weeding out inefficient ones.

    Second, career guidance for aspiring college students must be expanded, institutionalized and improved. No one really advises high school kids on the best courses to take based on their current skills, how much they can potentially earn, or even if college is the best path for them.

    Finally, the Aquino government should give incentives to qualified high school graduates to take courses that focus on analytical and technical skills such as science, technology, engineering or math (STEM), rather than taking courses that are easy or popular but with limited employment opportunities.

    Taking STEM courses has two advantages: First, the analytical and logical tools acquired in these courses leads to increased productivity and higher wages and are valuable in any economic environment – these skills will be useful even if the labor market evolves in unpredictable ways.

    Second, growth, innovation and job expansion are often due to both advances in technology or more efficient use of existing technologies. As persons trained in the use of technology and most aware of the potential of innovation, STEM graduates are also in the best place to be the entrepreneurs – the primary job creators.

    It is tempting to turn on the TV, listen to the economic statistic being touted by the government, and think that everything will turn out roses. Truth is, things are not as they seem.

    The Aquino government needs to respond to underlying trends in the economy. Otherwise, its touted economic gains will be nothing more than an overhyped fable, and its overly optimistic economic messiahs no more than false prophets.

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    7 Comments

    1. Family planning! Over population na tayo!ito ang dahilan!!pina-iikot pa natin!!

      REPLY: Hindi po overpopulation. Ang dahilan po ay ninakaw ang 40 percent or more ng pera para sa mga proyecto. Mas malaki pa nagyon sa ilalim ni Aquino kaysa nuong araw.

    2. Mariano Patalinjug on

      Yonkers, New York
      19 May 2015

      President Aquino and his Administration deserve full credit for the country’s Gross Domestic Product [GDP] having achieved the impressive average annual rate of growth of around 7 percent in last three years or so, which is one of the highest among Asian countries.

      Unfortunately, such impressive growth has uniformly been JOBLESS!

      And that is the paradox or the conundrum which must confound or befuddle President Aquino and his economic “brain trust.”

      Pope Francis, however, is clear-minded on what’s behind this paradox. After his epochal January 15-19 visit to the Philippines, where he saw with his own merciful and compassionate eyes how truly “poor” poor Filipinos were–and there are now some 30 million of them who are caught in the sticky quagmire of widespread and chronic Poverty,living lives of extreme degradation and dehumanization–warned “CATHOLICS NOT TO MULTIPLY LIKE RABBITS!”

      MARIANO PATALINJUG
      Lapulapu1927@yahoo.com

      REPLY: The upward trajectory of Philippine GDP growth was set during the term of FVR and became more pronounced during the term of GMA. The GDP grwth is the resul;t most of all of the remittances made by our 10 to 11 million OFWs abroad. Aquino has contributed NOTYHING. He even scuttled the growth trajectory when he cancelled the ticket projects already funded by Congress so that he and Abad could have savings for their unconstitutional and illegal DAP.
      PLease, Mr. Patalinjug study our economy and the growth and development figures more carefully, sir. Ngil-ad kaaayo, sir, nga magpaggamit ka sa mga opisyales nga nagdaut sa atong nasud.

    3. this is nothing new we have been this way since I graduated in college in 1975 and we never improved and actually fall behind our neighbors like Malaysia, Thailand. South Korea, Singapore and even Vietnam and Myanmar soon will overtake the Philippines. Our economic policies and government are mismanaged with inept officials not mentioning again corruption. What we need as desperate is we elect Filipino Chinese or ethinc Chinese who are Filipino citizens into office. Because if you look at it the Chinese Filipinos are hardworking and successful. the top 10 billionaires in the country are mostly Chinese Filipinos. only 2 are native Filipinos. What does this tell us? that the Chinese are better managers and leaders. Just look at Singapore, a multi ethnic society with some Indians as minorities, the government is run by ethnic Chinese like late Lee Kwan Yew, Singapore is the wealthiest country in ASEAN followed by Taiwan another Chinese territory. What about communist China, since it adopted the market economy or capitalism in short they prospered and now is an emerging economic and military superpower. While most of the native Filipinos are mostly crooks, you put them into a position of power and they will steal.

      REPLY: Yours is a RACIST view of the Philippine condition, sir. The reason most of the brown Filipinos compared to the Chinoys are corrupt and undisciplined is they are mostly poor and uneducated. The Chinese are raised with the Confucian sense and culture of doping everything for the good of their families otherwise their ancestors will be unhappy. You are forgetting that the majority of the Chinese, who have become Chinese-Filipinos, collaborated with the colonial governments of Spain-Mexico and my own original country, the USA. They helped create the anti-native colonial structures. So don’t be racist. See, even the present de facto president is of Chinese blood. He is among the most corrupt and hypocritical president our country has ever had, sir.–Phylliss Quinn

    4. P.Akialamiro on

      High school graduates should be encouraged to gain some skills like those being offered by Tesda. There should be seminars for high school seniors stressing the importance of vocational education. Especially so, not everyone is into academic courses or suppose to have a four-year college course. Skilled workers are paid well in Europe and in North America.

      Many countries, especially in Europe, have very low birthrates and the lifespan of their population, particularly those retired are getting longer. In effect, these countries will need workers to man their factories and industrial complexes to shore up their economies and support their elderly population on social security.These countries will be forced to open their doors to foreigners, particularly from Asia, to fill the need for skilled workers..

    5. You wrote something that is the opposite of what you think or want. You said because of the over abundance of well educated workers & fewer vacancies companies can be selective & offer higher salaries to those it hires. It works just the opposite to that. They know when there is over supply of well educated manpower salaries go down as people are desperate for a job & will accept almost anything just to get employment.
      If you think it works different to that you are kidding yourself.
      Bosses mostly dont over pay people they prefer to underpay people thus leaving ore for themselves.

      • Good points dustin.

        I am wondering about this Atty Dulay’s claim that companies will “raise salaries in order to attract qualified college grad.”. Looks fictitious to me since companies here, even with lower salaries offered (compared to foreign counterpart), still have their applicants in long queue.

    6. Phylliss Quinn on

      You’re in my old area, Mr. Dulay. Congratulations on writing very good columns.