Business World, 15 December 2015

First, the inconvenient truth: despite the much-touted strong growth of the Philippine economy in the last four years, the country’s unemployment rate remains the highest among the more advanced ASEAN-6 (Association of Southeast Asian Nations) economies (Indonesia, Malaysia, Philippines, Thailand, Singapore and Vietnam). (See Table 1)


By contrast, Thailand has the lowest unemployment rate, almost full employment level in fact, at 0.95%. Vietnam’s unemployment was 2.4%; Singapore, 2.6%; Malaysia, 3.05%: and Indonesia, 6.2%.

The Aquino administration is making a big deal of the declining unemployment rate, which is suspect on two counts. First, the labor force participation rate is falling. Second, there are doubts on the comparability of recent numbers to previous ones as a result of the devastation of Region VIII owing to the destructive typhoon Yolanda two years ago. The labor force surveys sometimes omit Region VIII data, the Leyte data, but sometimes they include them.

The brutal truth is that job creation has not kept pace with an ever-expanding population, which means burgeoning labor force. The World Bank estimates that 1.1 million new workers join the labor force every year, yet the economy creates much fewer new jobs.

So, why is the unemployment rate falling? Is it really because the economy has created more jobs than those joining the work force? Or is it simply because many more workers have stopped looking for a job.

Or in technical terms, is the labor force participation rate (LFPR) is shrinking? Perhaps the number of “discouraged” workers, those who have given up in looking for a job out of frustration, is rising. The army of frustrated, alienated, and angry idle workers is increasing.

On the other hand, administration officials have a feel good explanation for this phenomenon of falling participation in the labor force, and that is that more young workers have decided not to look for a job because they want to remain in school or undergo training. Seriously?

This is the explanation given by Economic Planning Secretary Arsenio M. Balisacan. “The decision among the 15- to 24-year-old population not to look for work during the period could be because they chose to pursue higher education or undergo training, as indicated by the increase in tertiary education enrolment rate, as well as the increase in technical vocational engagements among the youth,” he argued.

But that’s speculative. Based on the labor force survey results, one cannot categorically conclude why workers have chosen not to work. Is it because people are discouraged because looking for a decent job has been frustrating? Or is it because they now have the financial resources to stay longer at school? Or is it because recipients of government assistance (say in the form of conditional cash transfers) don’t find it necessary to look for a job because finding a job might jeopardize their continuing financial aid from the Government?

But all these speculations could be laid to rest simply by asking a follow-up survey question for those who are not actively looking for a job: why choose not to work? I think this is one question that may provide a meaningful guide to policy makers on the appropriate design of employment, transfers, and social insurance policies in the future.

The Philippines’ LFPR is the lowest in the region. And it has gone down from a high of 64.6% (2011) to as low as 62.9% (July 2015). If I were a policy maker, I would find this fact disturbing. I would see it as a problem to solved, not as a virtue. (See Table 2)

The Philippines’ 63.3% LFPR in the fourth quarter of 2015 is the lowest in the region. This compares poorly with 70.3% in Thailand, 67.5% in Malaysia and Vietnam, 67% in Singapore, and 66.9% in Indonesia.

It boggles my mind what the unemployment situation would be if the Philippines’s participation rate were at the level of Thailand (63.3% versus 70.3%). A one-percentage point difference in the LFPR, say 64.3% instead of 63.3%, is an additional 666,320 workers in the work force. Hence, a seven-percentage point increase in LFPR would bloat the labor force by 4.7 million.

Finally, for a labor-surplus economy like the Philippines, where joblessness is one of its most serious challenges, it maybe worthwhile for the government to gather monthly, instead of quarterly, labor force survey data. Knowing more accurately and more frequently the real state of the jobs market could put pressure on public authorities to act more responsibly and decisively.