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September 17, 2013

It’s the Lack of Jobs, Stupid!

The economy is growing once again, yet the number of unemployed and underemployed keep on rising. Last week, Karl Kendrick Chua, senior economist of the World Bank in Manila, said that by the time President Aquino steps down from the presidency in 2016, joblessness will be equally dismal, if not worse.

By 2016, Dr. Chua forecasts that 12.4 million Filipinos, or 11.5% of the 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.”

As of July 2013, 3.0 million Filipinos were unemployed and 7.3 million others were underemployed.


The challenge for government authorities is to create around 14.6 million jobs in the next four years given that 1.2 million new workers enter the labor force every year. They should also make available better jobs for the other 21 million Filipinos who are informally employed―the self-employed, unpaid family workers, and wage workers with no written contract, social insurance, or protection from dismissal.

How do these numbers compare with our neighbors’? Philippines has the highest unemployment rate among ASEAN-5 economies. Unemployment was quite high at 7.4% in 2010, as an aftermath of the global financial crisis. But it has barely improved since then. And with the growing population, the actual number of workers who are idle has grown. By contrast, the unemployment situation in other ASEAN-5 countries has shrunk significantly.

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 continuation of the present economic strategy cannot be relied upon to create the much-needed jobs. First, manufacturing, especially the labor-intensive variety, should be revived. But here the major constraint is the dwindling and unreliable power supply.

Second, investment in public infrastructure should be stepped up. But there needs to a balanced approach. 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 former are quick-disbursing and would benefit the poor, a great majority of whom are in the rural areas. The PPP projects now are slow-moving and are mostly concentrated in Metro Manila.

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 manufacturing, agriculture, and tourism, will be stimulated.

The Philippine government has to invest an equivalent of 5% of the economy’s output  annually―between P500 to P600 billion―in public infrastructure. If need be, it may borrow money to fund the country’s infrastructure needs. It should prepare a list of feasible, worthwhile projects. But at the same time, it should improve the ability of the bureaucracy to get things done.

The window of opportunity for creating lots of jobs is fast closing.


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