Is growth really jobless?

Jose Ramon G. Albert

Philippine Institutefor Development StudiesSurian sa mga Pag-aaralPangkaunlaran ng Pilipinas No. 2014-16 (August 2014)No. 2014-16 (August 2014)No. 2014-16 (August 2014)No. 2014-16 (August 2014)No. 2014-16 (August 2014)ISSN 1656-5266ISSN 1656-5266ISSN 1656-5266ISSN 1656-5266ISSN 1656-5266

PIDS Policy Notes are observations/analyses written by PIDS researchers oncertain policy issues. The treatise is holistic in approach and aims to provide usefulinputs for decisionmaking.

The author is senior research fellow, PIDS. The views expressed are those of theauthor and do not necessarily reflect those of PIDS or any of the study’s sponsors.

Policy Notes

Many people have commented that thestellar economic growth in the country since2012 has not been subsequently accompaniedby a significant reduction in poverty or byincreased employment. At the 2013 PhilippineDevelopment Forum, the developmentcommunity suggested that the governmentshould focus its efforts on furtheraccelerating structural reforms to facilitatesustained and inclusive growth anddevelopment, which will create jobs andreduce poverty. Subsequently, the World Bank(2013) re-echoed the suggestion for a moreinclusive growth agenda. This Policy Note

examines whether or not it is fair tocharacterize the country’s economy as havingjobless growth, and discusses related issues.

Official statistics on unemploymentOfficial statistics on unemploymentOfficial statistics on unemploymentOfficial statistics on unemploymentOfficial statistics on unemploymentThere are no official statistics specifically onjobs. The Philippine Statistics Authority(PSA), like many national statistics offices in

many countries, collects information onemployment from its quarterly Labor ForceSurvey (LFS) by looking at persons employedrather than on the activities that they do fora living. The description about the Philippineeconomy being jobless stems from theseeming divergence in growth betweeneconomic growth and employment (Figure 1).

In 2008, 2012, and 2013, when the economyhad high growth rates, the correspondingemployment growth seemed to be low in theaggregate. Unemployment rates have alsohardly changed during those years. Whenthere was low growth in the gross domesticproduct (GDP), particularly in 2009, therewas, ironically, a surge in employment.

Such aggregate pictures can mask dynamics.When indicators such as official poverty rates

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or the self-rated poverty statistics of theSocial Weather Stations (SWS) have measlydifferences across time that are notstatistically significant, this does notnecessarily mean that no poor person exitspoverty as some areas/subpopulations/sectors

may be improving while some may bedeteriorating, which then would yield a netchange of zero. Similarly, when unemploymentrates are flat, does this mean no jobs arebeing created while the Filipino population,including our labor force,1 continues to grow?

Some might argue that the officialunemployment rates do not reflect the “true”joblessness in the country as the currentdefinition of unemployment2 effectivelyremoves those not available for work in boththe labor force and unemploymentaggregates. Unemployment is officiallydefined as people who do not have work inthe past week, have actively looked for work,and are available for work. Those who havenot looked for work and those who are notavailable for work are not counted among theunemployed; they are also removed from thelabor force. However, even people who wouldlike to work are excluded if they are notactively looking for work. Prior to 2004, theunemployed were those without jobs, andwho were actively seeking work. The adoptionof the availability criterion in the currentunemployment definition by the PhilippineStatistical System was based on internationalstandards. Historical data on unemploymentrates show that unemployment has been fairlystable across the years whether using thecurrent definition or the old definition ofunemployment that did not includeavailability for work (Figure 2).

Disaggregating output and employment dataaccording to sectors can be very revealing.

______________1 The labor force or economically active population refers tothe population 15 years old and over who contribute to theproduction of goods and services in the country, and whoare either employed or unemployed. Those who are not inthe labor force refers to the population 15 years old andover who are neither employed nor unemployed, e.g.,persons who are not working and are not available duringthe reference week and persons who are not available andare not looking for work because of reasons other thanthose previously mentioned. Examples are stay-homespouses, students, persons with disability, retired persons,and seasonal workers.2 Prior to 2004, the unemployed are persons 15 years oldand over as of their last birthday and are reported as: (1)without work, i.e., had no job or business during the basicsurvey reference period; and (2) seeking work, i.e., hadtaken specific steps to look for a job or establish businessduring the basic survey reference period; or not seekingwork due to the following reasons: (a) tried/believe nowork available, i.e., the discouraged workers who looked forwork within the last six months prior to the interview date;(b) awaiting results of previous job application; (c)temporary illness/disability; (d) bad weather; and (e)waiting for rehire/job recall. After 2004, the definition ofunemployment was changed. A third criterion must also besatisfied—aside from having no work and actively seekingwork—being available for work, i.e., these persons shouldbe available and willing to take up work in paid employmentor self-employment during the basic survey reference period,and/or would be available and willing to take up work inpaid employment or self-employment within two weeksafter the interview date. This change in definition of theunemployed was carried in fulfillment of the NationalStatistical Coordination Board (NCSB) Resolution No. 15,Series of 2004, issued on 20 October 2004. Internationalstandards on this matter have been laid down in ResolutionNo. 1 adopted by the 13th International Conference ofLabor Statisticians (ICLS) in October 1982 and expoundedin the 1990 publication of the International LabourOrganization (ILO), Surveys of economically active population,employment, unemployment, and underemployment: An ILOmanual on concepts and methods. It should be noted thatout of 88 countries regularly conducting labor forcesurveys, only 10 countries in 2004 did not include theavailability criterion. The Philippines was the only countryin Asia that did not use the availability criterion.

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Contrary to popular perception that thePhilippine economy is largely agricultural, theeconomy has always been dominated by theservices sector, which, as of 2013, has a shareof 57.7 percent of total output. The outputshare of agriculture to the economy has alwaysbeen relatively minimal, 15.4 percent in 1990and 11.2 percent in 2013. Tracing GDP shares ofmajor sectors all the way back to 1946, theshares of agriculture, industry, and servicessectors were 29.7 percent, 22.6 percent, and47.7 percent, respectively. The economy hasbecome less agricultural in recent times, withthe services and industry sectors getting moreof the share of the economy. The decreasingshare of agriculture can be seen in employmentas well, from 45.2 percent in 1990 to 31.0percent in 2013 (Figure 3). Conversely, theservices sector took increasing shares of totalemployment from 39.7 percent in 1990 to 53.4percent in 2013. Industry, which accounted for15.0 percent of aggregate employment in 1990,had its share go down slightly to 14.6 percentin 2009, and increase marginally to 15.6percent by 2013.

In 2013, the largest growth in output of 9.5percent came from industry, which had alsothe highest growth in employment (3.4%).Agriculture had a mere 1.1-percent growth inoutput and a deceleration in employmentfigures. A structural transformation in theeconomy may thus be arising, even if overallemployment rate has been relatively flat.

Historically, the share of employment inindustry has been lowest among the three

01

23

4E

mpl

oym

ent

Gro

wth

02

46

8G

DP

Gro

wth

2006 2008 2010 2012 2014year

GDP Growth Employment Growth

Figure 1.Figure 1.Figure 1.Figure 1.Figure 1. Annual growth rates in gross domestic productAnnual growth rates in gross domestic productAnnual growth rates in gross domestic productAnnual growth rates in gross domestic productAnnual growth rates in gross domestic productand employment, 2006–2013and employment, 2006–2013and employment, 2006–2013and employment, 2006–2013and employment, 2006–2013

Source: Philippine Statistics Authority (PSA)

6.5

77.

58

8.5

Un

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ate

(n

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ition

)

810

1214

Un

emp

loym

ent R

ate

(o

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efin

ition

)

1997q3 2001q3 2005q3 2009q3 2013q3qtr

old definition new definition

Figure 2.Figure 2.Figure 2.Figure 2.Figure 2. Trends in quarterly unemployment ratesTrends in quarterly unemployment ratesTrends in quarterly unemployment ratesTrends in quarterly unemployment ratesTrends in quarterly unemployment ratesin the Philippines (using old and current definitionsin the Philippines (using old and current definitionsin the Philippines (using old and current definitionsin the Philippines (using old and current definitionsin the Philippines (using old and current definitionsof unemployment), 1997–2013of unemployment), 1997–2013of unemployment), 1997–2013of unemployment), 1997–2013of unemployment), 1997–2013

Source: PSA

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major sectors. Even the current robust growthin output of the industry sector has nottranslated into more jobs (and lowerunemployment) because of the low basefigures of employment in the industry sector.In the short term, for unemployment rates todrop considerably, employment growth mustoccur in agriculture (which has the highestshare of employment). Volatility inemployment (as well as in output) inagriculture, however, has been observedespecially in times of extreme weather events.In the long run, employment should start

shifting from agriculture to industry, the samepath taken by many neighboring economiesthat are in better development conditions.

Another disaggregation of employment, byfull-time and part-time employment,3 isequally revealing. Full-time employmentappears to have increased during periods ofhigh economic growth (except for 2012) andcontracted during economic slowdown, whilepart-time employment has had reversedirections from those of economic growth(except in 2008 when the slowdown in theglobal economy started to take effect) [Figure4]. Thus, the economy is not really havingjobless growth! In recent times, the smallnet changes in the unemployment rates are

0 20 40 60 80 100

201320122011201020092008200720062005200420032002200120001999199819971996199519941993199219911990

Output Share

Agriculture Industry Services

0 20 40 60 80 100

201320122011201020092008200720062005200420032002200120001999199819971996199519941993199219911990

Employment Share

Agriculture Industry Services

Source: PSA

Figure 3.Figure 3.Figure 3.Figure 3.Figure 3. Output and employment shares in the economy, by major sector,Output and employment shares in the economy, by major sector,Output and employment shares in the economy, by major sector,Output and employment shares in the economy, by major sector,Output and employment shares in the economy, by major sector,1990–20131990–20131990–20131990–20131990–2013

______________3 Full-time employment refers to 40 hours of work or moreduring the reference week while part-time employmentrefers to less than 40 hours of work during the referenceweek.

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the result of full-time jobs being created inthe industry and services sectors and part-time jobs lost in the agricultural sector.

Statistics from the private sectorStatistics from the private sectorStatistics from the private sectorStatistics from the private sectorStatistics from the private sectorAside from official statistics, there arealternative data sources such as private sectororganizations (e.g., SWS) that collect datasystematically and regularly (sometimes evenmore frequently than counterpart officialstatistics). Adult joblessness rates are worseif based on the SWS surveys, as these figuresare at least three times the officialunemployment rates. A more careful readingwould, however, reveal that we are comparingapples and oranges here. Discrepancies instatistics may be explained by sampling errors(i.e., fluctuations in statistics arising fromthe random selection of sample respondents)and nonsampling errors (differences indefinitions, sampling designs, questionwording, coverage of respondents,nonresponses, among others). In terms ofunemployment rate, the discrepancies may beexplained by both types of error butespecially nonsampling errors. In a newsarticle (http://opinion.inquirer.net/63217/joblessness-versus-idleness), SWS PresidentMahar Mangahas explains that SWS asks

-50

510

2006 2008 2010 2012 2014year

GDP GrowthGrowth in Full-Time Employment Growth in Part-Time Employment

Figure 4.Figure 4.Figure 4.Figure 4.Figure 4. Annual growth rates in GDP, full-time employmentAnnual growth rates in GDP, full-time employmentAnnual growth rates in GDP, full-time employmentAnnual growth rates in GDP, full-time employmentAnnual growth rates in GDP, full-time employmentand part-time employment, 2007–2013and part-time employment, 2007–2013and part-time employment, 2007–2013and part-time employment, 2007–2013and part-time employment, 2007–2013

Source: PSA

Aside from official statistics, there are alternative data sources such as private sector organizations(e.g., SWS) that collect data systematically and regularly (sometimes even more frequently thancounterpart official statistics). Adult joblessness rates are worse if based on the SWS surveys, asthese figures are at least three times the official unemployment rates...Discrepancies in statisticsmay be explained by sampling errors (i.e., fluctuations in statistics arising from the randomselection of sample respondents) and nonsampling errors (differences in definitions, samplingdesigns, question wording, coverage of respondents, nonresponses, among others).

respondents if they have a job now, which isvery much unlike the way the question isphrased in the quarterly LFS of the PSA thathas the past week as its reference period. Healso points out that “if the jobless are furtherlimited, not only to jobseekers but also tothose who are ready to accept a jobopportunity in the next two weeks, then the“jobless-and-ready” in the June 2013 SWSsurvey would be 18.2 percent, or close to oneout of five” (rather than the nearly one infour they get for adult joblessness).

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Official unemployment rates have largely beenflat especially in recent years. The same goesgenerally for adult joblessness rates especiallyafter 2004 (Figure 5). One might notice aclear structural break in 2004 for SWS adultjoblessness, and it may be worth pointing out

that this was exactly the period4 when SWSdecided to have its own field staff for datacollection.

Moreover, SWS adult joblessness figurespertain to adults (18 years and above) whilethe labor force and unemployed populationsconsider those 15 years old and above. Moreimportantly, SWS surveys result from 1,600respondents whereas the LFS of the PSAtargets 50 thousand respondents or 32 timesmore than the SWS surveys. This suggeststhat even if indicators are comparable, theresults from the LFS would be about 6 timesmore precise than those from the SWS.Whereas the SWS has a margin of error of 3percentage points for their quarterly surveys(and consequently only 6 percentage pointchanges from quarter to quarter should bestatistically significant in the SWS results),the LFS margin of error is about 0.5percentage point (and thus, a change of 1percentage point or more on a quarterly basisin the LFS would be real, but below that mayjust be noise).

Unemployment and underemploymentComparing our unemployment figures withthose of other Southeast Asian countries, thePhilippines has the highest unemploymentrates (Table 1). However, the case ofCambodia and Lao PDR has to be interpretedwith caution. Although they have very lowunemployment rates, a considerable portionof their employed population works in theinformal sector and in vulnerable employment(ADB 2012).

Table 1.Table 1.Table 1.Table 1.Table 1. Unemployment rates in Southeast Asian economies,Unemployment rates in Southeast Asian economies,Unemployment rates in Southeast Asian economies,Unemployment rates in Southeast Asian economies,Unemployment rates in Southeast Asian economies,selected years from 1990 to 2012selected years from 1990 to 2012selected years from 1990 to 2012selected years from 1990 to 2012selected years from 1990 to 2012

Country 1990 1995 2000 2005 2010 2011 2012

Indonesia 6.1 11.2 7.1 6.6 6.1Cambodia 2.5 0.4 0.2 0.2Lao PDR 2.6 1.4Malaysia 4.5 3.1 3.0 3.5 3.4 3.1 3.0Philippines 8.1 8.4 11.2 7.7 7.3 7.0 7.0Singapore 2.2 3.7 4.1 3.1 2.9 2.8Thailand 2.2 2.4 1.3 1.0 0.7 0.7Timor-Leste 3.9Viet Nam 2.3 2.0 1.8

Source: World Bank

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1995q1 2000q1 2005q1 2010q1 2015q1qtr

Figure 5.Figure 5.Figure 5.Figure 5.Figure 5. Adult joblessness rate from SWS surveys, 1993–2014Adult joblessness rate from SWS surveys, 1993–2014Adult joblessness rate from SWS surveys, 1993–2014Adult joblessness rate from SWS surveys, 1993–2014Adult joblessness rate from SWS surveys, 1993–2014

Source: Social Weather Stations

______________4 Prior to 2004, both SWS and its main competitor, PulseAsia, employed TNS-Trends as their data collection arm.

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Poverty incidence among the unemployed isconsistently lower than those employed,whether in 2006, 2009, or 2012 (Table 2).Unemployment is more of a middle-classissue. Many of the poor are not unemployedbecause they cannot afford not to engage ineconomic activities. The majority of theunemployed in 2012 (81%) are not poor. Theymay be unemployed by choice or they mayjust be choosy in finding jobs. The PSA alsosuggests that among the self-employed andunpaid family workers (engaged in vulnerableemployment), poverty incidence is estimatedat 29 percent in 2012.

Figure 6 shows that the educational attainmentsof the unemployed are quite high, confirmingthat unemployment is not an issue with thepoor. However, the unemployed poor havesimilar characteristics as the underemployedpoor (for details, see Albert 2012).

De Dios (2013) points out that the biggerchallenge in the jobs agenda is addressingunderemployment. The underemployedconsists of employed persons who wantadditional hours of work in their present jobor who desire to have an additional job, or anew job with longer working hours. Of theunderemployed, they are either visiblyunderemployed (those who work less than 40hours in the reference week of the LFS) orinvisibly underemployed (those who work 40hours or more in the reference week). But aspointed out earlier, there is evidencesuggesting that structural change ishappening for the visibly underemployed

020

4060

8010

0

perc

ent

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Unemployed with Primary Education

Unemployed with Secondary EducationUnemployed with Tertiary Education

Source: PSA-LFS

Figure 6.Figure 6.Figure 6.Figure 6.Figure 6. Unemployed by educational attainment, 1998–2012Unemployed by educational attainment, 1998–2012Unemployed by educational attainment, 1998–2012Unemployed by educational attainment, 1998–2012Unemployed by educational attainment, 1998–2012

Table 2.Table 2.Table 2.Table 2.Table 2. Poverty incidence among the employedPoverty incidence among the employedPoverty incidence among the employedPoverty incidence among the employedPoverty incidence among the employedand unemployed: 2006, 2009, 2012and unemployed: 2006, 2009, 2012and unemployed: 2006, 2009, 2012and unemployed: 2006, 2009, 2012and unemployed: 2006, 2009, 2012

2006 2009 2012

Employed 22.9 22.8 21.9Unemployed 16.5 16.8 18.7

Source: PSA

(with part-time employment reducing, andfull-time employment on the rise). Theultimate focus of government, and moreimportantly the private sector, should be thecreation of more quality jobs to sustain thegrowth momentum in the economy.

Final wordsFinal wordsFinal wordsFinal wordsFinal wordsIn the past two years, statistics oninvestment and full-time employment inindustry are rising. However, unlike otherSoutheast Asian countries, the Philippinesdoes not produce oil, and the response of

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For further information, please contact

The Research Information StaffPhilippine Institute for Development StudiesNEDA sa Makati Building, 106 Amorsolo Street, Legaspi Village, 1229 Makati CityTelephone Nos: (63-2) 894-2584 and 893-5705Fax Nos: (63-2) 893-9589 and 816-1091E-mail: jalbert@mail.pids.gov.ph; publications@pids.gov.ph

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government on the monetary and fiscal sidesmay be very limited. There are only a few jobsthat government can directly create, evenwith public works projects. But government isshowing everyone that the rules of the gameare getting fair through its promotion of goodgovernance and accountability. Some of thecurrently unemployed and underemployedsegments of society will eventually try to findjobs overseas or in the unorganized (orinformal) sector, or create their own jobs.Government will need to assist them in oneway or another, within its limited resources,but it will need effective partnerships.

Ultimately though, the private sector is themain engine of the economy. Our taipans

should practice employment policies thatfavor the hiring of more permanent workersrather than temporary ones who will work forfive or six months only. Wealthy businessmenshould put their money into long-termproductive investments. All Filipinos haveroles to play, especially as the Philippinescontinues to work on the MillenniumDevelopment Goals whose target year (2015)is fast approaching, and as the world startscrafting a post-2015 agenda that will ensurethat no one—poor or nonpoor, male orfemale, Christian or Muslim, employed orunemployed—is left behind in development.

ReferencesReferencesReferencesReferencesReferencesAlbert, J.R.G. 2012. May trabaho na nga, mahirap

pa ren… JEP jobs, earnings, prices para sakanila. Sexy Statistics Series, October 22.Makati City: NSCB. http://www.nscb.gov.ph/sexystats/2012/SS20121022 _joblessness.asp(accessed July 31, 2014).

Asian Development Bank (ADB). 2012. Frameworkof inclusive growth indicators 2012. Keyindicators for Asia and the Pacific, SpecialSupplement, 3rd Edition. Manila: ADB.

De Dios, E. 2013. Unemployment has no welfaresignificance. Introspective. BusinessWorld,September 30. http://www.econ.upd.edu.ph/perse/?p=3178 (accessed July 31, 2014).

Mangahas, M. 2013. Joblessness versus idleness.Social Climate. Philippine Daily Inquirer,October 11. http://opinion.inquirer.net/63217/joblessness-versus-idleness (accessedJuly 31, 2014).

World Bank. 2013. Philippine economic update:Accelerating reforms to meet the jobschallenge. http://www.worldbank.org/content/dam/Worldbank/document/EAP/Philippines/Philippine_Economic_Update_May2013.pdf (accessed July 31, 2014).

Government is showing everyone that the rules of thegame are getting fair through its promotion of goodgovernance and accountability. Some of the currentlyunemployed and underemployed segments of societywill eventually try to find jobs overseas or in theunorganized (or informal) sector, or create their ownjobs. Government will need to assist them in one wayor another, within its limited resources, but it willneed effective partnerships.