Core
Business World, 17 September 2013

 

While the  entire nation is horrified by the pork barrel scandal and the ongoing Mindanao crisis, a recent World Bank report has reminded us of an old, persistent, and “dehumanizing” problem: joblessness.

True, the economy has shown some signs of strong growth in the recent year and a half. Yet, the number of unemployed and underemployed kept on rising. Last week, Dr. Karl Kendrick Chua, senior economist of the World Bank in Manila, said Aquino steps down from the presidency in 2016, the state of unemployment in the country will be equally dismal, if not worse.

Dr. Chua forecasts that 12.4 million Filipinos, or 11.5% of projected population by then, “would still be unemployed, underemployed, or would have to work in the informal sector where moving up the job ladder is difficult.”

Recent jobs numbers show a disturbing disconnect between strong GDP growth (7.7% and 7.5% in the first and second quarter, respectively) and high unemployment rate (7.5% and 7.3% in the same period, respectively).

As of July 2013, 3 million Filipinos were unemployed and 7.3 million others were underemployed.

CHALLENGE: 14.6 MILLION NEW JOBS IN NEXT 4 YEARS

Given the current state of joblessness and that some 1.2 million new workers join the labor force every year, the challenge for government authorities is to create around 14.6 million jobs in the next four years.

In addition, they should also make available better jobs for the other 21 million Filipinos who are informally employed — those who are self-employed, unpaid family workers, and wage workers with no written contract, social insurance or protection from dismissal.

How does the country’s unemployment rate compare with its ASEAN-5 neighbors? The Philippines has the highest rate among its peers. In 2010, as an aftermath of the global economic crisis, the unemployment rate was 7.4%; the unemployment rate has not budged since then.

And with a growing population, the actual number of workers who are jobless has grown. By contrast, the unemployment situation in other ASEAN-5 countries has improved significantly. The labor markets in Singapore and Thailand are close to full employment.

But it would be a mistake to simply focus on the unemployed alone. Policy makers should also worry about the underemployed and those who are informally employed.

WHAT NEEDS TO BE DONE?

Clearly, the present economic strategy is not working. It cannot be relied upon to create much needed decent jobs. First, manufacturing, especially the labor-intensive variety, should be revived. But this is easier said than done. A major physical constraint is the dwindling and unreliable power supply, and this constraint cannot be addressed overnight.

Second, investment in public infrastructure should be stepped up. The Philippines ranked the poorest among ASEAN-5 economies in terms of quality of public infrastructure. By investing in public infrastructure a lot of jobs in construction and related activities will be created, the infrastructure gap will be narrowed, and other labor-creating sectors of the economy, such as, for example, manufacturing, agriculture, and tourism, will be stimulated.

The Philippine government has to invest annually the equivalent of 5% of the economy’s output — between P500 and P600 billion — in public infrastructure. Where will the government get the money to finance such an ambitious infrastructure program? Borrow. At today’s interest rates, there should exist a long list of worthwhile public infrastructure projects that would give a rate of return much higher than the cost of borrowing.

The government should change the way it is implementing projects in order to maximize the public construction’s job-creating potential. It should improve the ability of the bureaucracy to get things done — with minimal leakages. Nothing is more frustrating than seeing that the limited infrastructure budget has remained unspent year after year. Project delays have economic costs too.

It should have a balanced approach to public infrastructure spending. The government should invest in labor-intensive, rural-based public infrastructure hand-in-hand with capital-intensive, urban-based public-private partnership (PPP) projects.

The labor-intensive projects are quick-disbursing and would benefit the poor, a great majority of whom reside in the rural areas.

The PPP projects are slow-moving and are mostly concentrated in urban centers. While they might have positive long-term contributions to growth, all PPP projects, except for three, have yet to take off.

The window of opportunity for creating lots of decent jobs is fast closing. Time to act, Mr. President.