AN OUTSIDER'S VIEW
By Ken Fuller
Putting the finishing touches to a new book (currently entitled The Long Crisis: Gloria Macapagal Arroyo and Philippine Underdevelopment) a couple of weeks ago, I came across a most curious anomaly: The growth of the labor force appeared to have slowed dramatically in Mrs. Arroyo’s second period of government.
In her inaugural speech on June 30, 2004, Mrs. Arroyo pledged to create between six and 10 million new jobs by the end of her term in 2010. However, according to the Labor Force Surveys (LFS), the period between July 2004 and July 2010 saw the addition of only 4.7 million in the “employed” category, so this target was missed. Even so, I thought, this might be considered something of an achievement, as the labor force (employed and unemployed) grew by only 3.2 million, and so new jobs exceeded new labor-force entrants by 1.5 million.
But did this really happen? Is an average annual labor-force increase of merely 533,333 credible? When one considers that the labor force grew by 6.4 million over the whole nine years July 2001 to July 2010 (i.e. an average annual increase of 711,111), the former figure seems anomalous — and even more so when we compare it with the 2001-2004 annual average of 1.066 million (3.2 million for the three-year period). Why would the rate slow to just over half of that in the following six years?
One effect of this decline, of course, was to reduce the rate of unemployment from what it would have been had the previous rate of labor-force increase been maintained — and this, as we will see, explains the conundrum.
In June 2005, the government announced that in April that year unemployment had fallen to 8.3 percent (2.9 million), from the January figure of 11.3 percent (4.03 million). Had this been true, it would have been cause for celebration, but the government had merely amended the method of calculation. Using the previous formula, unemployment was 12.9 percent (4.786 million). This largely explains the anomaly regarding the labor-force growth-figures noted above: the growth-rate slowed, it is now apparent, for the simple reason that almost two million people (and rising) were no longer counted.
Thus, in fact, job-creation did not exceed labor-force growth. If the average annual rate of labor-force growth of 3.27 percent for the period July 2001-July 2004 is applied to the period July 2004-July 2010, we arrive at a labor force of 42.82 million as opposed to the officially-cited 39 million. Restoration of the hidden millions would mean that in the period July 2001-July 2010 the labor force would have grown by 10.2 million as opposed to the official 6.4 million, outstripping the additional number of “employed” of seven million.
But what of the “jobs” that were created? As Rene Ofreneo has pointed out, many of these were temporary or casual, or were “precarious,” i.e. subject to poor conditions. This was almost certainly bound to be the case, due to the fact that Mrs. Arroyo lifted the prohibition of labor-only subcontracting, known by workers the world over as a recipe for worsened wages and conditions.
In addition, it should be understood that under the LFS system a person need only have worked one hour in the reference week to qualify as employed. Mahar Mangahas of Social Weather Stations (SWS) believes that this innovation was introduced in 2005 (the same time, as we have seen, that the method of counting the unemployed was changed), and “shows excessive intent in classifying persons surveyed as employed.”
SWS’s own unemployment surveys, says Mangahas, did not differ greatly from the government’s until that same year, and then the divergence became dramatic. By way of illustration, the SWS survey conducted in March 2012 produced an unemployment figure of 34.4 percent, compared to the government’s January figure (the Aquino administration having declined to correct the sleight of hand introduced by its predecessor) of 7.2 percent. (“Is 1 hour a week a ‘job?” Philippine Daily Inquirer, May 25.)
A consideration of the status of the “employed” brings home the underdeveloped state of the Philippine economy.
In contrast to the six to 10 million jobs promised by Mrs. Arroyo in 2004, that six-year term saw the creation of, according to LFS data, just 2.6 million waged and salaried positions, an increase of 700,000 own-account workers (who can be anything from employers of labor to street peddlers) and 850,000 extra unpaid family workers. (The total of 4.15 million, it will be noted, falls rather short of the 4.7 million derived from the “employed” figures.)
Given the fact that 46.8 percent of “employed” in July 2010 were either own-account or unpaid family workers, it is apparent that even before the Arroyo government changed the LFS methodology in 2005 the unemployment rate had been grossly understated and that, excessive though they seem at first glance, the rates calculated by Mangahas’s SWS surveys might be much nearer the truth.
Moreover, according to the July 2010 LFS, no less than 35 percent of those “employed” worked less than 40 hours a week, indicating a significant underemployment problem. The same survey shows that in a country with a pressing need for the development of a manufacturing base, only 14.9 percent worked in industry (a mere 8.3 percent in manufacturing), while 33.9 percent were employed in agriculture and 51.2 percent in services.
Some economists like to claim that the Philippines has “by-passed” the industrialization stage and that the country is “developing” via the growth of the service sector. That is pure foolishness, because as we all know the growth of the service sector is fueled by overseas Filipino workers (OFWs) remittances. Is that a bad thing? Yes, because growth in the number of OFWs and their remittances is dependent upon domestic underdevelopment.
Distorting the figures doesn’t reduce the misery. But industrialization would.
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