Solving the unemployment problem

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The latest labor statistics show the stubbornness of the unemployment problem in this country in the face of a respectable growth rate. This has forced the country’s Chief Executive to call for a meeting of his official family to discuss the issue. Indeed the level of unemployment and under-employment in this country which involves no less than a quarter of the working force rooted in underperforming sectors of the economy is the primary cause of the income maldistribution and high poverty rates.
The consensus of most economists here and abroad with regard to the local unemployment situation appears to have the following key features:

The Need To Promote A More Appropriate Balance Between Rural And Urban Economic Opportunities

The main thrust of this activity is the need for the integrated development of the rural sector, the spread of small-scale industries throughout the countryside, and the reorientation of economic activity and social investments toward the rural areas.

Full development of small-scale, labor-intensive industries


The expansion of these mostly small-scale and labor-intensive industries in both urban and rural areas can be accomplished in two ways: directly, through government intervention and indirectly through investment incentives for the private sector. This is because the consumption activities of barrio folk demand less import-intensive and more labor-intensive than that of the rich (there are less import-oriented shopping malls in the provinces!)

Choosing appropriate labor -intensive technologies of production

One of the principal factors inhibiting the success of any long-run program of employment creation both in urban industry and rural agriculture is the almost complete technological dependence of Third World nations on imported (typically labor saving) machinery and equipment from the developed countries. Both domestic and international efforts must be made reduce this dependence by developing technological research and adaptation capacities in the developing countries themselves. Such efforts might first be linked to the development of small-scale, labor-intensive rural and urban enterprises. They could also focus on the development of low-cost, labor-intensive methods of meeting rural infrastructure needs, including roads, irrigation and drainage system, and essential health and educational services.

This is an area where scientific and technological assistance from the developed countries could prove extremely fruitful.

Creating a more direct link between education and employment

The phenomenon of the educated unemployed calls into question the appropriateness and relevance of the educational system, especially at the higher levels in this country.

The creation of attractive economic opportunities in rural areas would make it easier to redirect educational system toward the needs of rural development. The present educational systems, being transplant of Western systems, are oriented toward preparing students to function in a small modern sector which can absorb only so much of school-leavers. Many of the necessary skills for development therefore remain largely neglected.

Reduce rural migration

The last half-century in this country has been associated with urbanization which in turn has attracted migration from thru province bringing down the total population in agriculture.

The arrival of these urban migrants has not only helped to exercise a continuous downward pressure on real wages but also contributed to the problem of urban unemployment if not social problems.

Remove capital intensive bias

The failure of the urban industrial sector to provide more jobs (i.e. to absorb more from the swelling pool of the available urban labor force) may be attributed to the over-all scarcity of capital and to its increasingly excessive concentration in large-scale industries using increasingly capital-intensive technologies. The consequently slow expansion in the demand for labor was caused partly by policies which biased industrialization in capital-intensive directions and the consequent benign neglect of agriculture specifically the food sector which could have been fertile grounds for employment given an enlightened rural mobilization policies and agrarian reforms.

Employment strategy package

Post-war growth in the Philippines, dominated by a capital intensive consumer import substitution strategy with its bias further against labour-using technology quickly ran aground in the mid-nineties. Unfortunately the failed strategy did not pay sufficient attention to the mobilization of resources in the traditional rural sector. Consequently, the demand by the urban industrial sector for labour failed to expand quickly enough to absorb the increasing supply, continuously augmented as it was by the “premature” migration of a rural population seeking more remunerative job opportunities not available in the provinces. This led not only to real wage stagnation, but more importantly to the persistence of open and disguised unemployment, and the worsening income distribution. Had it not been for the safety valve of overseas employment the poverty situation in this country would have entered serious proportions.

This lead us to a two-pronged strategy package as essential to eradicating the pesky unemployment problem – the full mobilization of the preponderant rural sector, and a labour-intensive industrial diversification drive for a more dynamic industrial sector.

The diversification drive must emphasis the move towards labor-intensive industrialization to service the burgeoning domestic market of close to a 100 million people and the export market export. For such a non-traditional export drive to be successful, past biases against the use of labour must be corrected so that international markets can be penetrated with wider participation by medium- and small-scale entrepreneurs.

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5 Comments

  1. One reason left out in the above article as to why so many Filipinos are unemployed, and thus poor, is the unsustainable rapid population growth in our country. The number of Filipinos of working ages entering the job market every year far out-strips the number of jobs our economy could produce resulting therefore in high unemployment.

    We have to slow down our birth rate to reduce unemployment and poverty.

  2. In this country it is unfortunate that the studies, conclusions, and suggestions of economists and experts in their respective fields take a backseat to our politics and our ideologies.

    Take the case of agriculture. Aside from graft and corruption, some government policies and programs are anti-farmer resulting in the state of agriculture today which is last place amongst our Asian neighbors and an aging farmer. The average age of the farmer is 55 and 59 for our rice farmers. The government has instituted a Cheap Food Policy that favors the consumer over the farmer-producer. The government caps the profit of the farmer but doesnt give any support when prices go below his cost of production. CARP has also made sure that the farmer will forever be poor by restricting him to 0-3 hectare limit and prevented from using his land as collateral. Not to mention that plantation crops are applied a flower pot sized area.

    Unless and until we learn to solve our economic problems with economic solutions(not political) we will always be backward or extinct.

  3. Claro Apolinar on

    Mr. Romero, all your proposals are needed to make ours a more prosperous and less poverty-stricken country.
    My question is this–Why did you and your friends in the media, in the administration of the late Cory Aquino, Fidel Ramos, Joseph Estrada, Gloria Arroyo and in the first three years of Benigno Aquino NOT FIGHT FOR THESE.
    Why did you and the great economists of the UP, La Salle, Ateneo and UA&P allow our industrializetion to be destroyed by the polcymakers of these presidents and our agriculture and agri-business to be abandoned?

  4. How can you solve this kind of problem if our government now is very biased towards favoring the businesses of the rich few oligarchs in our country. Take the case of power industry (controlled by the Salim Group, Aboitiz, SM, Lopez), water utilities (Salim Group, Ayala, Lopez), DOTC projects (DMCI, SM, Gokongwei) and even the PPP for school bldgs awarded to large group of conglomerates not to mention also the prime hospitals where our poor patients go are sold to private companies. No more money and time to help our farmers and skilled and ordinary laborers. Our GOCC’s and NGO’s that should deliver the necessities to our poor populace are being corrupted by our politicians and are now destined to be phased-out.

  5. Ricardo Harina on

    The simple solution for the Philippines after amending EPIRA LAW is to invest in State of the Art Combined Cycle Power Plants in Luzon, Visayas and Mindanao that will provide STABLE, CHEAP and ENVIRONMENT friendly POWER that will encourage Foreign and Local Investors to invest which will generate employment, prevent migration here and abroad and provide fast economic activity. This may take 2 to 3 years to build once started.
    Our present and future plans on energy as envisioned by Sec. Petilla for this country is hopeless because it will not provide STABLE, CHEAP and ENVIRONMENT friendly POWER.