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Executive Summary

Unemployment has remained high in the Philippines, at almost twice the level of neighboring countries, despite relatively fast employment growth in the past decade. Employment growth was not sufficient to reduce unemployment because of rapid population growth and increased labor force participation. This paper shows that Philippine employment growth and unemployment declines were positively correlated with real GDP growth and, to a lesser extent, negatively with the real minimum wage. The ey policy implications are that higher economic growth and moderation of increases in the real minimum wage are re!uired to reduce unemployment. "abor is the most important asset of the poor. Unemployment and underemployment are thus ey determinants of poverty, as is the sector of employment. The official unemployment rate for #$$% was &&.'( of the labor force. The labor force participation rate in #$$% was )*.&( of the population aged &+ years and over ,-./0, #$$% Philippine .tatistical 1earboo 2. 3n the #$$$ 43E., %+.+( of family heads were employed in the agriculture sector, and close to half of those were classified as poor . The average income of the poor in the agriculture sector is about 5'.+( of the poverty line, according to the poverty gap measure. 3ne!uality is also highest among the families whose heads are in agriculture. To reduce the high poverty levels, the Government will need to give priority to raising the incomes of those in the agriculture, fishery, and forestry sectors. The !uestion of land reform is crucial, and is examined separately in this chapter. The other sectors where poverty incidence is relatively high include construction ,#5.+(2, transport ,&*.#(2 and services ,&&.'(2. The sectors with high poverty gap ratio other than agriculture include mining ,&#.)(2 and construction ,*.+(2. 6f the &).'( of families whose heads were unemployed in #$$$,&+.*( were poor. 6f the employed household heads, poverty rates were higher among the self7employed than the wage earners, %).+( and #%.)( respectively.

Scope of the problem

The causes and effects of unemployment in the Philippines.

Objective of the Study

Specific Objective The main ob8ective of the study is to now the causes and the effects of unemployment in the Philippines. General Objective To specify the meaning of unemployment To determine the causes of unemployment To view the effects of unemployment

Problem Statement

Unemployment is caused by many factors in a modern mar et economy. 3t can be caused by rapid technological change, business cycle or recessions, seasonal factors in some industries particularly such as changes in tastes and climatic conditions which affects demand for certain products and services, individual perceptions and willingness to wor and search for 8obs, their values and attitudes towards some 8obs and about employers, accessibility for retraining and ac!uisition of wor s ills, willingness and perception of unemployed of the benefits of training and the possibility for them to get a 8ob after the training even though they have a chance to get a 8ob, discrimination in the wor place based on race, color. religion, ethnicity, age and class.

3t can be seen from the above causes unemployment in a particular period can be a combination of caused by social factors and how the economy as a whole wor s and also due to the sub8ective individual factors. 3n a sociological point of view according to functionalist and conflict theorists the unemployment is caused primarily by the social factors than by the individual factors. 9owever according to :ax ;eber and symbolic interaction theories individuals construct their own social constructs and perception and they can be sub8ective in their behavior and there fore can become unemployed even though the actual condition they can get a 8ob in the 8ob mar et.

Unemployment in the Philippines <s the impact of the global financial crisis unravels, we find our country affected the most with the closure of companies and factories and the termination of 64; contracts. The Department of "abor ,D6"E2 reports that more than &+,$$$ wor ers have been retrenched over the past two months, while &=,$$$ others had their wor ing hours reduced. <s many as 5$$,$$$ people are expected to add to the swelling unemployment rate which presently stands at ).5 ( or about five million unemployed and underemployed adults. ;e have read of various efforts to address this problem of worsening unemployment. 0usiness and labor groups have banded with academe and the government to push for the creation of &.% million 8obs within the year, which will be sourced from both domestic and overseas establishments. <ctive players will be the government, business process outsourcing ,0P62 centers and the Philippine 6verseas Employment <dministration ,P6E<2. ;hile we read of these various solutions and wonder at the same time whether the wheels will turn in favor of the displaced wor ers, we are able to see a brighter future with actual programs already being done in :a ati. :ayor >e8omar 0inay reports that his Public .ervices Employment 6ffice ,PE.62 had successfully employed more than &+,$$$ 8ob see ers in multinational firms and local companies 8ust last year. <round ','== applicants were hired through a :ini >ob 4air held last year, while #,$&+ people were employed under the ?egular >ob Placement Program. PE.6 .atellite offices also reported that they were able to find 8obs for &,='$ 8ob applicants and &,5=) applicants who 8oined the :ega >ob 4air in :ay and -ovember last year. Under :a ati /ity@s Government 3nternship Program, %,#*+ young adults found wor , while another &,+)= became gainfully employed through the city government@s coordination with private companies who sponsored 8ob fairs. :ayor 0inay, whose great advantage over other mayors is the number of large establishments in a prime commercial city that is :a ati, certainly has a simple and

practical example to ensure that services are delivered directly to people. ;hat he does is simply match the wealth of available resources and opportunities in his city with the most urgent need of his constituents. 9is PE.6 is an effective vehicle that ma es plans happen, ensuring that ob8ectives are met. The important thing is he wor s on hand and stays on top of the situation. Progress is monitored and evaluated and the numbers are recorded so that a sense of achievement permeates his whole organiAation, with each member nowing that they have contributed meaningfully to solving a problem. "est we become engulfed in the technical 8argon of economics, having to figure out their meaning and impact on our common problems before being able to formulate a solution, let us get down on ground and deal with the problems directly. ;e need not be or pretend to be economic experts to do this. -owadays, there are two inds of leaders those who are interested in the fleece and those who care about the floc . ;e challenge our local leaders to become true leaders in these trying times. Their being in the grassroots is an advantageB they can develop the potentials in their respective areas and create new opportunities for their people. /ollectively, their efforts will push the nation forward even in hard times. 3f they 8ust eep the needs of the people in mind, they will not miss nowing the best and most practical solution. This is a simple formula that cannot go wrong.

Alternative Solutions The lac of opportunities in the Philippines will force most 4ilipinos to see greener pastures abroad. Every year, around one million 4ilipinos go overseas, mostly forced to leave their families to provide them with a better life. 4ather /orros said most of the retrenched migrant wor ers that the Episcopal /ommission on :igrants and 3tinerants has been assisting in the past few months still prefer to wor overseas instead of 8ust staying in their own country. C:igrating is the only option for them because they canDt find 8obs here,C he said, adding that Cwe go bac to the same problem. They go abroad because itDs difficult to loo for 8obs here.C The Philippines is one of the worldDs biggest labor exporters, with &$ percent of its over 5$ million population living abroad. :igration has long been part of the Philippine governmentDs strategy to solve the unemployment problem. This policy started in the &=*$s when then Philippine President 4erdinand :arcos, faced with huge levels of foreign debt and the oil crisis, sent construction wor ers to the :iddle East. This was done to rein in the rising unemployment levels and avoid growing social unrest. Thirty years later, 4ilipinos continue to leave in droves 77 wor ing as entertainers, domestic helpers, nurses, caregivers, seafarers and programmers. The global crisis may have slowed businesses and even retrenched more than +,$$$ 4ilipino migrant wor ers but analysts and government officials believed that there will be demand for Philippine labor abroad. Philippine President Gloria :acapagal7<rroyo directed the Philippine 6verseas Employment <dministration to aggressively mar et 4ilipino labor and expertise abroad.

This ind of policy has long been criticiAed by migrant rights advocates, explaining that migration, although it brought in the much needed remittances, also caused social problems. -umerous migrant wor ers have been physically and sexually abused and have to endure exploitative wor ing conditions. The separation also brea s family ties and hurt the children who were left behind by their parents. ;hat is needed, they said, is for the government to develop an economy that will provide decent 8obs and will ma e migration a choice, not a necessity, for most of the countryDs labor force. The current global economic crisis, however, doesnDt offer such option. The countryDs economic managers said one of the factors that will support the consumption7 driven economy is the steady inflow of remittances. "abor deployment will therefore remain a ey government policy. C;e see a steady labor demand in the :iddle East, <ustralia and elsewhere which are responding to the crisis by embar ing on infrastructure pro8ects with their own stimulus pac ages,C ?ecto said in last wee Ds economic briefing. <nalysts said most 4ilipinos in the United .tates 77 one of the top destination countries for 4ilipino migrants 77 will eep their 8obs as theyDre usually employed in the recession7proof healthcare sectors. 3ndustrialiAed economies with aging populations will continue to see cheap, English7proficient and s illed nurses and caregivers from countries li e the Philippines. The Philippines is one of the worldDs biggest exporters of health care wor ers. Every year, over 5,$$$ 4ilipino nurses and &',$$$ caregivers were deployed. There are some bright spots in the domestic labor mar et. The business process outsourcing ,0P62 industry is expected to remain bullish. 0P6 revenues are forecasted to grow by #$ percent to %$ percent this year and companies expected to hire &$$,$$$ new wor ers.

C< lot of companies are under a lot of pressure to cut cost so 3 thin it will accelerate outsourcing,C said <lfredo <yala, /E6 of "ive 3t .olutions, 3nc., the holding company for <yala /orporationDs investments in business process outsourcing. /all centers will remain the biggest revenue earner and employer in the 0P6 sector. 0ut 0P6 executives believe that the growing demand for the high7value non7 voice outsourcing sectors such as animation, software development and bac office will offer opportunities to the countryDs programmers, graphic designers and accountants. C?ight now, weDre really leading in the contact center sector. 0ut now weDre trying to change that. ;eDre trying to expand to the higher value non7voice services,C said :a. /ristina /oronel, president of the Philippine .oftware 3ndustry <ssociation. >ob openings, however, will not necessarily translate into full7time employment. 0P6s offer a lot of per s and benefits to its employees but very few are !ualified to wor in the industry. To solve this problem, 0P6s are offering wor shops and scholarships to expand its talent pool. Dennis Posadas, deputy executive director of the Philippine /ongressional /ommission on .cience, Technology and Engineering, said that as far as outsourcing in the information technology sector is concerned, very few are !ualified to ta e the 8obs because many are not ade!uately trained. C;e still need to improve basic education in our pubic schools. They need to emphasiAe on science and math education,C he said.

Policy Recommendations <s the impact of the global financial crisis unravels, we find our country affected the most with the closure of companies and factories and the termination of 64; contracts. The Department of "abor ,D6"E2 reports that more than &+,$$$ wor ers have been retrenched over the past two months, while &=,$$$ others had their wor ing hours reduced. <s many as 5$$,$$$ people are expected to add to the swelling unemployment rate which presently stands at ).5 ( or about five million unemployed and underemployed adults. ;e have read of various efforts to address this problem of worsening unemployment. 0usiness and labor groups have banded with academe and the government to push for the creation of &.% million 8obs within the year, which will be sourced from both domestic and overseas establishments. <ctive players will be the government, business process outsourcing ,0P62 centers and the Philippine 6verseas Employment <dministration ,P6E<2. ;hile we read of these various solutions and wonder at the same time whether the wheels will turn in favor of the displaced wor ers, we are able to see a brighter future with actual programs already being done in :a ati. :ayor >e8omar 0inay reports that his Public .ervices Employment 6ffice ,PE.62 had successfully employed more than &+,$$$ 8ob see ers in multinational firms and local companies 8ust last year. <round ','== applicants were hired through a :ini >ob 4air held last year, while #,$&+ people were employed under the ?egular >ob Placement Program. PE.6 .atellite offices also reported that they were able to find 8obs for &,='$ 8ob applicants and &,5=) applicants who 8oined the :ega >ob 4air in :ay and -ovember last year. Under :a ati /ity@s Government 3nternship Program, %,#*+ young adults found wor , while another &,+)= became gainfully employed through the city government@s coordination with private companies who sponsored 8ob fairs. :ayor 0inay, whose great advantage over other mayors is the number of large establishments in a prime commercial city that is :a ati, certainly has a simple and

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practical example to ensure that services are delivered directly to people. ;hat he does is simply match the wealth of available resources and opportunities in his city with the most urgent need of his constituents. 9is PE.6 is an effective vehicle that ma es plans happen, ensuring that ob8ectives are met. The important thing is he wor s on hand and stays on top of the situation. Progress is monitored and evaluated and the numbers are recorded so that a sense of achievement permeates his whole organiAation, with each member nowing that they have contributed meaningfully to solving a problem. "est we become engulfed in the technical 8argon of economics, having to figure out their meaning and impact on our common problems before being able to formulate a solution, let us get down on ground and deal with the problems directly. ;e need not be or pretend to be economic experts to do this. -owadays, there are two inds of leaders those who are interested in the fleece and those who care about the floc . ;e challenge our local leaders to become true leaders in these trying times. Their being in the grassroots is an advantageB they can develop the potentials in their respective areas and create new opportunities for their people. /ollectively, their efforts will push the nation forward even in hard times. 3f they 8ust eep the needs of the people in mind, they will not miss nowing the best and most practical solution. This is a simple formula that cannot go wrong. Development of the mplementation Plan of Policy ?apid and sustained economic growth is essential for generating employment, as demonstrated by the experiences of countries in which unemployment is low. 9ow such employment7generating growth could be achieved is still being debated, although there is general agreement that macroeconomic stability is a necessary, albeit not a sufficient, condition for growth. The role of the government as a source of growth has been greatly diminished in recent years and may diminish even further. The view that expansion of productive employment will be achieved primary through stimulation of the private sector, including self7employment, is gaining wider acceptance. <s a result, the stimulus for growth will have to come from the people and the domestic private sector and from abroad. <ccordingly, virtually all the developing

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countries and territories in the <sian and Pacific region have embar ed on policies aimed at liberaliAing their economies in order to increase their competitiveness in international mar ets and attract foreign investment to finance growth. ;hile the positive long7term effects of reforms are already evident in a few countries which implemented reforms earlier, the short7term adverse effeccts on employment have been observed in a number of countries. Thus, the right mix of stabiliAation policies and more 8udicious management of fiscal balances and public investment to promote the continuation of economic growth are necessary. The <genda for <ction suggests that countries should pursue, in the pattern of growth and investment, plans that are effectively employment7intensive and directed at those sectors with the greatest scope for absorbing labour. 4or labour7abundant countries, the strategy will li ely be based on the use of uns illed labour in agriculture and manufacturing, as the early experiences of the ?epublic of Eorea and the more recent experiences of 3ndonesia and Thailand demonstrate. 9owever, this strategy may be fruitful in the early stages and for only a limited period. Upgrading of labour s ills and improvement of technologies should be actively promoted during this early period so as to maintain competitiveness and sustain growth. The experiences of the ?epublic of Eorea and .ingapore, which successfully shifted from low7s ill labour7intensive activities to s ill7intensive activities, are noteworthy in this regard. Upgrading s ills may not be enough to address the unemployment problem, as the problem of educated unemployed prevailing in some countries indicates, particularly 3ndia and .ri "an a. The demand for that s illed labour must be generated through an appropriate pace of growth. <lthough globaliAation and integration of the world economy have opened many opportunities for developing countries, they also limit the room for governments to manoeuvre the policy instruments used in the past and penaliAe inappropriate policies and inefficiencies. 3n a number of developing countries with high unemployment andFor underemployment, the agricultural sector and the informal sector continue to be important sources of employment, especially for the poor. The <genda for <ction calls

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on governments to determine the feasibility, scope and appropriate modes of land reform in both rural and urban areas by #$$$ in order to enhance income7earning opportunities for the poor. 3n the medium7term, promoting the informal sector may be an important means of creating and expanding employment for the poor in these countries, albeit at subsistence wages. 3n this regard, the focus should be on removing unnecessary regulatory obstacles to enterprise formation and growth ,including micro7enterprises and small7scale businesses2, and measures to improve access to credit and improved technologies. The aim should be not only to create 8obs but also to foster lin ages between the informal and formal sectors and to help moderniAe the technologies in the informal sector. 3mproving the functioning of the capital mar et may be an important ingredient in establishing the lin ages and in promoting the moderniAation and growth of the informal sector. /onsidering that a large proportion of the poor in many countries in the region are in rural areas, priority should be given to expanding rural employment. The opening up of global mar ets for agricultural exports, for example, through the implementation of the Uruguay ?ound, provide new opportunities for developing countries. ?ecent cutbac s in support for the agricultural sector should be rescinded with a particular focus on support to the small7farm sector to produce and export high7value products. Promotion of rural non7farm activities has proven to be another important way of reducing underemployment, improving s ills and facilitating lin ages with the formal sector ,for example, the ?epublic of Eorea and Thailand2. ?elief programmes for the poor through public employment schemes including food7for7wor programmes should be improved to create tangible infrastructure and facilities that would benefit the communities. Policies for reducing child labour should ta e into account the economic survival imperatives of the families and their dependence on the children@s wor contributions. The provision of appropriate educational services and economic incentives compatible with the needs and demands of poor children and their families is also critical. The latter may include organiAation of classes to fit better with the wor contributions of the children. 3t may also involve the design of curricula and schedules that cater better for the needs of the children and their families.

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!imitations and unanticipated conse"uences 9igh labor supply and the insufficiency of 8obs are the two principal reasons for the poor employment performance of the country. 9ence, if the government wants to address the escalating problem of 8oblessness, it must also attac these two areas. The growth of the labor supply can be tamed by an effective population management strategy and by ensuring that the youth are ept in schools. 9igh and sustainable growth performance and a stable investment environment will encourage 8ob generation. The challenge, however, is not simply generating more 8obs but also securing favorable terms of employment for wor ers. 3nvestments in !uality education and s ills training will ma e individuals more productive and will preclude them from settling for marginal, low7paying 8obs. The economy, on the other hand, should ensure that there are opportunities for the s illed and productive individuals. Direct interventions that will facilitate the exchange of labor mar et information and reduce costs between 8obsee ers and employers, here, and abroad, must be implemented. Effecting a balance in the development levels across all regions of the country must also be pursued. This will help narrow down the disparities not only in employment opportunities butal so in the people@s access to productive resources and social services. 3n addition, it may be worthwhile to loo into the G9uman /apital in the Emerging Economy,H an important document prepared by the /ongressional /ommission on "abor in#$$&. The report exhaustively discussed the challenges faced by the labor sector and one of its ma8or recommendations is the amendment of the "abor /ode to ma e it more attuned to the current trends in the labor mar et. The proposed amendments cover wages, labor disputes, union activities, collective bargaining agreements and 8ob security, particularly the issue of contractualiAation. These proposals have elicited varying reactions from different sectors. Thus, a framewor by which the reforms should be made is a good sub8ect for further study.

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References

/arlin ; and .os ice D ,&==$2, :acroeconomics and The ;age 0argain "ayard ?, -ic ell . and >ac man ? ,&==&2, Unemployment 7 :acroeconomic Performance and the "abour :ar et 6E/D ,&=='2, >obs .tudy 7 Evidence and Explanation I Part 3 J 33 6E/D ,&=='2, Employment 6utloo 6E/D ,&==%2, Employment 6utloo .alop .. ,&=*=2, C< :odel of The -atural ?ate of UnemploymentC, <merican Economic ?eview, )= .hapiro / and .tiglitA > ,&=5'2, CE!uilibrium Unemployment <s < ;or er Discipline DeviceC, <merican Economic ?eview, *' <gcaoili, ". ,#$$=, December &2. 3:4 says ?P ban s remain resilient. ?etrieved 4ebruary ', #$&$, from The Philippine .tar websiteI httpIFFwww.philstar.comF<rticle.aspxKarticle3dL+#5#%%Jpublication.ub/ategory3dL))