Understanding the TRENDS & Patterns In the Philippine Labor Market

1. Understanding the TRENDS & Patterns In the Philippine Labor Market 24 May 2014

2. (1) Serious disconnect between the structures of GDP and Employment • Often results in jobless growth • Underscores the structural nature of the unemployment problem

4. GDP AND EMPLOYMENT : Divergence in growth patterns Jobless growth: High GDP growth rate but low employment creation (i.e., 2008, 2012, 2013) Or the reverse: Low GDP growth rate but high employment creation (i.e., 2009 - part-time employment in services sector)

5. GDP AND EMPLOYMENT, 2013 GROWTH RATE (%) • High GDP growth rate with low employment creation (jobless growth) • Structural nature of employment problem

6. EMPLOYMENT STRUCTURE SECTORAL EMPLOYMENT SHARE (% to total employment) Selected ASEAN Countries, 2009 Source: Norio Usui, Taking the right road to inclusive growth, Asian Development Bank (2012). • Share of employment in industry lowest in the Philippines • Robust growth in industry output will not translate to more jobs and lower unemployment – because of low employment base in industry • For growth to make a dent on unemployment rate – growth should occur in agriculture with large employment base. But in the long-run the shift in labor resources should occur from agriculture to industry. This is where right policies and programs can make a difference as shown by the experiences of neighboring ASEAN countries.

7. OUTPUT STRUCTURE SECTORAL SHARE (% to GDP) Selected ASEAN Countries, 2009 Source: Norio Usui, Taking the right road to inclusive growth, Asian Development Bank (2012). • Share of industry output lowest in the Philippines

8. GDP PER CAPITA PPP (at constant 2011 international $) Selected ASEAN Countries Source: World Bank, World Development Indicators.

9. According to NEDA, it is not unusual for high unemployment even with economic growth. It is normal, as shown by experiences of other emerging economies. As the economy grows and its structure transforms, employment exhibits volatility as the labor market adjusts---optimism increases among the working age population resulting to more people looking for work. Further, in the course of structural change, jobs are destroyed and new ones are created. But the current skills of the labor force may not be able to match the growing and shifting demand for labor. This may result to increase in unemployment rates at certain points during the transformation process.

10. (2) Economic growth consumption led - fuelled by remittances Share of capital formation stagnant Share of trade (X-M) negligible

11. Gross National Income and Gross Domestic Product by Expenditure Share: 2000, 2005 and 2010 - 2013 (at constant 2000 prices) Percent distribution • Consumption - a main growth driver • Gov’t expenditure on the uptrend • Capital formation (Investment) the engine growth contributed less than one-fifth to GNI - its share to GNI erratic • Export-Import share low or negative – bad for employment • Share of remittances (net primary income from ROW) erratic– boosting consumption Danger of too much dependence on remittances

12. Annual Growth Rate in Capital Formation, Philippines: 2002 - 2013 (at constant 2000 prices) Source: Philippine Statistics Authority, National Accounts of the Philippines. • Trend in capital formation highly erratic • Declines occurred in 2003, 2004, 2006, 2009, 2011 and 2012 – this means lack or absence of investment, but significant upswing in 2013 • No investment >>> lower outputs and fewer jobs • Foreign direct investment lowest among original ASEAN

13. (3) Quality Employment - a function of GDP growth

14. Annual Growth Rates in GDP and Full-time Employment • Both move in almost identical direction - With few exception e.g., 2012 • Full-time employment expands in times of economic upturn/recovery and contracts during economic slowdown

15. Annual Growth Rates in GDP and Part-time Employment • Moved in opposite direction • Part-time employment expands during economic downturn/slowdown • but decline during economic upturn/recovery • With few exception e.g., 2008

16. (4) Employment grew in “Boom and Bust Pattern” • Monsoon economy - - - - - - - > Climate change • Economic crisis (Asian economic crisis/1988 and global financial crisis/2008-2009 • Political events

17. ANNUAL EMPLOYMENT GROWTH RATE (%) 2007 - 2013 • Employment trend characterized by erratic movement or “boom and bust” • May not be observed at all times

18. Boom & Bust - More pronounced year-on-year

19. (5) DUALISM IN THE LABOR MARKET Formal sector ---------------- Precarious employment Informal sector -------------- Vulnerable employment

20. In 2013 FORMAL SECTOR (Wage and salary) Precarious employment Private establishment 17.114 million Private household 1.969 million Own family-operated farm or business 0.127 million Gov’t/GOCC 3.037 million Employer 1.272 million INFORMAL SECTOR Vulnerable employment Self-employed 10.668 million Unpaid family workers 3.930 million

21. (6) Climate change and employment instability - agriculture, fishery and forestry sector employment a big drag in employment growth • El Nino phenomenon (1998, 2000, 2003 & 2005) • Destructive typhoons ( 1998, 2004,2006, 2009, 2012 & 2013)

22. Employment instability is often caused by fluctuations in agriculture, fishery and forestry sector due to extreme weather (climate change) • - Industry employment is small sector (15.6% of total employment) to make a dent on employment growth. Moreover, it has remained stagnant across time. • Service sector employment (53.4%) is generally stable and increasing overtime. • Agricultural sector employment (31%) subject to weather disturbances: steep/mark decline in recent years (2010, 2012,2013) a throwback of the 1998 and 2000 El Nino years

23. ANNUAL EMPLOYMENT INCREMENTS (‘000) BY SECTOR

24. ANNUAL EMPLOYMENT GENERATION: 2007 – 2013 (‘000) Annual employment generation below 1 million - except in 2011 (largely part-time)

25. (7) Underemployment - more serious than unemployment problem (1 out of 5 employed is underemployed; its magnitude is 2x the unemployed) • Highly correlated with poverty • Variation most pronounced across regions (spatial)

26. UNDEREMPLOYMENT RATE : 2006 - 2013 (‘000) • Declining gradually from 2006 to 2010 • Relatively unchanged in the past three years

27. REGIONAL STATISTICS ON UNDEREMPLOYMENT: 2013

28. (8) Unemployment - structural – little change since 2006 (employment and labor force growing at the same pace, translates to unemployment rate unchanged) - largely a problem of the youth (48.5% of unemployed in 2013) Rate more than twice the national rate - Educated workforce – college graduates at around one-fifth of the unemployed

29. UNEMPLOYMENT RATE: 2006-2013 (%) • Unemployment rate moving within a very narrow band: 7-7.5% in 2007-2013 TOTAL UNEMPLOYED PERSON: 2006-2013 (‘000) • Total unemployed persons stagnant at less than three million since 2006

30. Annual growth rate (%) • Employment is barely catching up with the growth in labor force Unemployment rate (%) • Unemployment rate stays virtually stagnant. • UR down when E > LF • UR up when LF > E

31. REGIONAL STATISTICS ON UNEMPLOYMENT: 2013 (in percent)

32. As a general rule, high unemployment is associated with low underemployment and vice versa

33. (9) Flukes in the labor market

34. Flukes (blips) in the labor market • - Underemployment rate surged to 22.8% (+1.470 million) in July 2012 • - Part-time employment shot up by 18.4% (+2.514 million) in April 2012 and dipped by 18.9% • (-3.064 million ) in April 2013 • This phenomenon could be a “fluke” or temporary in nature that needs further validation in the next survey round - hence any attempt on conclusion could be premature (not conclusive).

35. (9) Bright spots in the labor market • - Sustained rise in private establishment employment • Vulnerable employment on the decline • - Strong growth in industry employment

36. (1) Employment in Private Establishments on the Steady Rise (in percent) (in ‘000) • Employment share of wage workers in private establishments rose steadily from 38.1% in 2006 to 44.9% in 2013 • This suggests that more jobs are now being created in the economy by the private sector in recent years

37. ………….on the back of strong growth in industry employment in recent years

38. Proportion of Vulnerable Employment on the Downtrend • Declining trend in the proportion of self-employed and unpaid family workers from 44.5% in 2006 to 38.3% in 2013 • A measure of vulnerable employment – one of the employment indicators in the Millennium Development Goals (MDGs)

39. Employment creation in BPO remained robust • Annual Employment Growth rate (%): 2007-2013 8.4 Note the change in in in industry classification of BPO 2007-2011 – Real estate, renting and business activities 2012 – Break in data series 2013 – Administrative and support service activities

40. DATA LIMITATIONS • Short reference period (snapshot or stock of economically active persons) • Absence of provincial data • Data reliability subject to proxy respondents • Break in the data series due to changes in reference period, coverage and population projection benchmark • Change in definition in April 2005 on unemployment

41. SOME GUIDELINES IN USING LFS DATA 1. Never use the term ”Job” as synonymous to EMPLOYMENT. The LFS is counting people at work and not number of “jobs”. • Comparison of data should be made on a “year-on-year” basis • not on monthly/“survey round” basis – note: LFS data series • is subject to seasonality. 3. Never use the term ”Quarter”. The LFS is based on a “past week” reference period not “QUARTER”. • Always bear in mind the “break” in the LFS data series, • the existing data series covers the period 2006 to present. 5. Be cautious in comparing LFS with other sources of data.

42. Employment: • Persons or individuals at work • the LFS counts person at work not jobs • in the LFS, a person can be counted only once regardless of the number of jobs he/she held • Job: • an activity that a person does for a living • aset of tasks and duties which are carried out by, or can be assigned to, one or moreperson(ILO definition) • in establishments (payroll –statistics), a person can be counted several times depending on the number of jobs held

43. The term job is really a misnomer. • - in practice, the generation of job statistics does not exactly involve the • counting of activities or tasks or duties • - counting is tedious and cumbersome • - it does not make sense to do this counting • The object of measurement in job statistics is the same with LFS i.e., “person at work” or “employed person”. But the difference lies on the statistical measurement or manner of counting. • In the LFS, a worker is counted only once during the reference week regardless of the jobs held –in accordance with mutually exclusive principle in the LFS. • In the job statistics, a worker is counted every timehis/her name appears in one payroll because he/she holds more than one job or changes jobs during the reference period.

44. THANK YOU! URL: http://www.psa.gov.ph