• Redefining ‘jobless growth’

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    One of the common knocks against “Aquinomics” is that there is a painfully obvious hollowness to it – yes, the economy is growing at an impressive rate from a certain point of view, but the results of this growth are not being felt, the evidence for which is the persistence of three negative indicators: Unemployment, poverty, and income inequality which have remained at fairly consistent levels and perhaps even increased a bit during the Philippines’ ‘remarkable’ positive economic run.

    One of those indicators, however, may be a little more complicated than it appears. In a just-released policy note, Jose Ramon G. Albert, a senior research fellow at the Philippine Institute for Development Studies (PIDS), makes a strong case that the Philippines is not really experiencing “jobless growth.”

    If you think about it, the assertion makes sense in a very general way. Given that the size of the workforce constantly increases at a rate similar to the growth in the overall population, the persistence of the unemployment rate at about 7 percent—the official rate has ranged between 6.4 percent and 7.5 percent throughout President Aquino’s term so far—means that some jobs have indeed been created, at least enough to absorb the increase in labor force.

    Dr. Albert—who knows a thing or two about statistics, having obtained a doctorate in this particularly mind-bending discipline and serving as the Secretary General of the National Statistical Coordination Board (NSCB)—presents a variety of data to bolster his argument that economic growth in the Philippines is not really “jobless,” and that the conventional way of looking at common indicators may tend to camouflage the actual reality.

    For instance, the correlation between poverty and joblessness does not exist in quite the way we think it does, something which other PIDS researchers have picked up on as well. In all three of the most recent Family Income and Expenditure Surveys (FIES)—2006, 2009, and 2012—poverty incidence was higher among employed people than among the unemployed, roughly 6 percent higher in 2006 and 2009, with the gap narrowing to about 3 percent in 2012. That bit of information squares with other research results that have found that unemployment is significantly lower among the poor than other income classes. The simple explanation for that is the poor do not have the luxury of not working for an extended period of time; survival depends on engaging in some kind of productive activity.

    Another important relationship is between economic growth (measured by GDP) and employment growth. Albert presents data that shows that since at least 2007, growth in full-time employment has paralleled GDP growth, while part-time employment has the opposite pattern (grows when the economy declines). The only exceptions were in 2008, when part-time employment declined along with full-time employment and GDP as a result of the global financial crisis; and 2012, when full-time employment growth eased as GDP growth improved, for reasons that are not explained. The data suggests that the opposite movements of full- and part-time employment partly explain why changes in the unemployment rate are consistently incremental; the net of part-time, mostly agricultural jobs lost and full-time jobs gained in the industry or services sectors (or vice versa), tends to be small.

    Albert’s study in toto leads to a couple of important conclusions. First, while the country’s economic growth trend cannot be accurately described as jobless, the rate of job growth is nevertheless too slow, and more importantly, not enough of the right kinds of jobs are being created. Albert makes the recommendation that in order to reduce unemployment in the short term, employment growth in agriculture should be encouraged, but because the agricultural sector is highly volatile, the long-term goal should be to expand industrial employment—the same path followed by the Philippines’ regional neighbors that are continuing to outpace this country in development.

    The second conclusion that comes out of the report is that there is probably very little that the government can do to “create jobs,” apart from large public works projects, which the current government does not directly engage in anyway, and which, in any case, are only a temporary solution. Policy actions to encourage job creation can help, but since their effect is indirect, they should be planned appropriately.

    The thrust of the present government’s efforts are not, in view of the foregoing, appropriate at all. Because of the mistaken belief in the mantra “create jobs to relieve poverty” most of the government’s efforts are directed toward the poor in the population, i.e., through “skills enhancement” and “livelihood programs,” rather than toward specific economic sectors, particularly manufacturing and industry. This may, as Albert’s data suggests, actually work in the opposite direction, entrenching poverty more deeply by expanding the class of the “working poor.”

    Albert makes the pointed recommendation that the private sector, particularly that part controlled by the taipan class that serves as the primary engine of the economy, do its part to improve the employment landscape by shifting away from contractual labor and focusing on more productive long-term investments, but he leaves the implications of those suggestions open to interpretation. The basic point, however, is perfectly obvious: Job quality, not quantity, is the bigger economic issue.

    * * *

    A small personal note: I would like to wish my parents, Lou and Loraine Kritz, who are enjoying their retirement in sunny Florida, a very happy 49th wedding anniversary.

    ben.kritz@manilatimes.net.

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    8 Comments

    1. Many thanks Ben for featuring my policy note at PIDS… As I kept saying all along, Statistics tell a story and it is up to us if we want to listen to the story, or if we
      want to hear only what we want to hear. I hope we listen more —- and examine carefully disaggregated data to understand why unemployment rate has not changed much, and what we need to do to truly push for inclusive growth. Cheers!

      http://dirp3.pids.gov.ph/webportal/CDN/PUBLICATIONS/pidspn1416.pdf

    2. victor m. hernandez on

      Dr. Albert of the NSCB and PSAn gives us a very good analysis of eonomic growth and low growth in employment, His policy recommendation provides a good guide how the country can further address grwoth with more employment, and eventually will address the inclusivity of growth. Yes, the modernization of the agricultural sector, and the strengthening of the manufacturing sector will provide the venues for more employment . This can happen and happen fast when we put our acts together by including the educational institutions to focus their efforts to educate and train the youth, farmers, fisherfolks, and workers, and let them acquire skills and competencies for a modernize agriculture & fishery, manufacturing, and service sectors. This will take sometime, and will need good plans and programs, and funds to implment them.

    3. The jobless statistics of 6.5 to 7% presented is fact? Do this figure represents the whole country? I don’t think so. When was the last time this census was done? Nobody in the government could give an accurate figure of the OFW’S in 2013 much more the unemployed mature Filipinos in the rural areas.

    4. The writer is very near to the reality. This government is trying to paint a picture of improved economy by referring to GDP growth which is actually not accurate. To those in the know, GDP means – activity in economy since it is measured on the sum total of sales activity of private and public consumers and the difference of export and import sales of which the import is the negative. First, to the ordinary man our economy is like a fiesta, much have been bought and sold, so much activity in terms of sales but the people who are buying have gotten their money from loans with high interest rates so after the fiesta, the people are deep in debt. Secondly the temporary economic growth produces inflation and, unfortunately irreversible to the Philippine setting, if in the long run the people do not have the money to sustain due to unemployment then poverty ensues. Third, the growth that we are experiencing is not based on products produced by the population as a whole but from other sources especially from sales of privately owned basic utility products such as the water and electric utility. This does not constitute growth because it does not promote employment and it lessen family’s budget. Other parameter which gives the mirages of high GDP is the export/import factor. As we know exports give us positive GDP while imports are negative. We seems to export more because of high GDP but in reality the imports were not quantified because of smuggling and therefore if added to GDP will subsequently lower it. Another thing, the temporary economic activity due to government spending through projects which does not constitute continues job and product creation will only make the matter worse since such projects will be stand still monument. There are many things which could be discuss here but essentially these I mentioned above are the main thing that proved that we are still not as the government says growing economically. Right now, we are on false economic growth.

    5. Anima A. Agrava on

      Thanks, Mr. Ben Kritz, for again a very well-written and clear exposition. And congratulations to your parents.

    6. Andres R. Samson on

      The highest multiplier effect in the creation of employment is in real estate, about 17 times. But property development also requires tons of money to initiate. GDP is always measured in terms of obligation of funds in the GAA, and once the SARO has been done and signed, that figure, whatever it is counts in the measurement of economic growth. PPP projects have a finite number of jobs that can be created over the time horizon over which it is started and completed. Relating GDP to the other desirable improvements in the quality of life, though correlated, does not immediately translate into job creation in other sectors of the economy or even alleviation of poverty incidence. The yardstick of measurements is not one and the same.

    7. Horacio B. Freires on

      This is one of the legal govt processes that keeps the Republic of the Philippines deeply as an under-developed third world country. . NO INTELLIGENT INTELLECTUAL MORAL DISCUSSIONS ON THE PROS & CONS OF THE HOT ISSUES IN THE PUBLIC MIND. . FOR US TO MOVE CIVILIZATION FORWARD IN THIS PART OF THE PLANET. .

      The government represented by CONGRESS IS CORRUPT. . WHICH INSTITUTION WILL IMPEACH CONGRESS?…

      • Nothing else can be done about reforming the congress unless we get rid of these political dynasts in our society. Political patronage is their game to sustain their greedy nature. We are always a third country if there is no real system change in our style of government.