Macro
CHAPTER 1
INTRODUCTION
Losing one’s job is the most upsetting thing that an individual can go through short of the loss of a loved one. Economists therefore consider the unemployment rate to be one of the most important indicators both of the economy and of well-being in general. When people who want and need to work cannot find suitable employment, they lose not only income but self-esteem (Robert Guell, 2003). According to Merriam-Webster Dictionary, labor is a human activity that provides the goods or services in an economy. It is the services performed by workers for wages as distinguished from those rendered by entrepreneurs for profits. On the other hand, employment is an activity in which one engages or is employed. It also refers to a contract between two parties, one being the employer and the other being the employee. In a commercial setting, the employer conceives of a productive activity, generally with the intention of creating profits, and the employee contributes labour to the enterprise, usually in return for payment of wages and to the extent that employment or the economic equivalent is not universal, unemployment exists. However, according to Business Dictionary, labor is the aggregate of all human physical and mental effort used in creation of goods and services. It is a primary factor of production. The size of nation’s labor force is determined by the size of its adult population, and the extent to which the adults are either working or are prepared to offer their labor for wages. Labor and employment plays a major role in the economy. There some labor and employment factors that people cannot notice that can affect the economic stability of a country. In some point, there are always people lose their jobs and makes up the unemployment line. There is considerable debate amongst economists as to what the main causes of unemployment are. Keynesian economics emphasizes unemployment resulting from insufficient effective demand for goods and service in the economy. Others point to structural problems inherent in labor markets. Classical or neoclassical economics tends to reject these explanations, and focuses more on rigidities imposed on the labour market from the outside, such as minimum wage laws, taxes, and other regulations that may discourage the hiring of workers.
Background of the Study A country with a population of 92 million people, the Philippine economy expanded at a modest growth rate of 4.7% per annum over the ten-year period 2001-2010. Measured in terms of Gross Domestic Product (GDP), the economy grew almost uninterrupted from 2001 (1.8%) to 2004 (6.4%). The pace of growth slowed down in 2005 (5.0%) and 2006 (5.3%) but was up again in 2007 (as in the global economy) recording the second highest growth (7.1%) during the decade. With the onset of the global financial crisis, the growth figure declined sharply in 2008 (3.7%) and bottomed to 1.1% in 2009. With the global economic recovery in 2010, the domestic economy again posted a rebound, growing by 7.3%, on the back of firm recovery in manufacturing, merchandise exports and service based industries (trade and private services), bolstered by strong consumption and sustained inflow of remittances (DOLE, 2011).
Statement of the Problem Economic growth in the past decade (2001-2010) has not explained to corresponding development in employment levels. Employment growth (2.9%) tended to be slower than economic growth (4.7%). Likewise, unemployment rates showed little improvement despite periods of economic growth. Low economic growth is attributed to low investments and slow technology progress. The country is also prone to economic shocks, natural disasters and extreme weather disorder that affect agriculture, which is a labor-intensive sector. The insufficiency of employment opportunities in the country is causing the out-migration of professionals and skilled workers and is discouraging their return. Skilled migration is not inherently detrimental, as long as its optimal economic gains are ensured and social costs, including brain drain especially of so-called mission critical skills, are minimized. The challenge is how to translate the gains of skilled migration into productive investments in the country by transforming migrant workers and professionals into entrepreneurs and investors and by harnessing their capital, skills and knowledge to spur productive activities. A climate that promotes investments, both foreign and domestic, as well as savings, is inadequate. For instance, investment performance in 2010 (15.6% as a share of GDP) was lower compared to the 2004 level (16.7% as a share of GDP). Inadequate infrastructure and a resulting poor logistics have been identified as a cause of poor investments record. Weak investment in power generation and transmission is also a problem, resulting in short supply of energy and causing disruptions in production and other economic activities. Labor productivity is low, primarily because of lack of investments, economic disruptions, calamities, low technology and lack of skills and training. The state of the environment is deteriorating. Urban centers are polluted and wastes are improperly managed. Continued deforestation is exacerbating loss of watersheds, which affects water supply. Land and water resources are fast depleting. Consequently, industries, which inevitably rely on natural resources for inputs, are threatened. Vulnerable workers are also at risk because they mostly depend on natural resources for their livelihood. This paper aims to determine the importance and role of labor and employment in stabilizing the economy. With regards to this matter, the following research questions are expected to be answered: 1) How the labor and employment affects the economy? 2) What are the factors we can consider why labor and employment plays a very important role in economy? 3) How unemployment occur? 4) What are the consequences of having a high unemployment? 5) How to stabilize the economy, in terms of labor and employment, despite of unemployment?
Objectives of the Study This paper, in general, intends to determine the role of labor and employment in stabilizing the economy. Aside from this, the following specific objectives are also presented: 1) To determine how the labor and employment affects the economy 2) To identify those factors affecting economy due to labor and employment 3) To determine how unemployment occurs that affects the labor market and labor supply 4) To state the consequences of having a high unemployment 5) To determine the ways to stabilize the economy in terms of labor and employment.
Significance of the Study It is very important to the people, especially for those who are working and not working to know how the employment will affect the economy of the whole country. Through this, they can appreciate the benefit of having a high employment rate to them and, generally, to our nation. With this information, the labor force can know how they can contribute in stabilizing the economy. The factors affecting the labor and employment should remind the people that having a good employment rate will lead to steady labor market. The study will also be beneficial to the government. This will make the government aware to the real condition of our labor market. Also, through this, they can formulate some ways or methods to lessen the unemployment rate in the Philippines. And also, the students can learn more about the employment situation in the Philippines. It can serve as challenge for them to do their best in school to be able to land in a stable job. With this, it can help as foundation in having a good mindset before they enter in the workforce.
Scope and Limitations of the Study This paper includes the analysis of the labor and employment status in the Philippine economy from 2001 to 2010, as well as the economic growth on the same period. In order to analyze the data carefully, the researchers used different labor and employment indicators as well as economic indicators. This also includes the discussion about the role of labor and employment in stabilizing the economy.
Definition of Terms
Boom and Bust Pattern refers to a period during which a country 's economy moves from strength to weakness and back to strength.
Constraints refer to the threat or use of force to prevent, restrict, or dictate the action or thought of others.
Deflation refers to a decrease in the general price level of goods and services.
Deployment refers to methodical procedure of introducing an activity, process, program or system to all applicable areas of an organization.
Economic Downturn refers to the economy that is entering into recession.
Economic Growth refers to the increase in the amount of the goods and services produced by an economy over time.
Elasticity refers to the degree to which individuals (consumers/producers) change their demand/amount supplied in response to price or income changes.
Exports refer to a function of international trade whereby goods produced in one country are shipped to another country for future sale or trade. The sale of such goods adds to the producing nation 's gross output. If used for trade, exports are exchanged for other products or services.
Full-time employment is employment in which a person works a minimum number of hours defined as such by his/her employer. GDP or Gross Domestic Product refers to the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
Growth Elasticity of Poverty (GEP) is the percentage reduction in poverty rates associated with a percentage change in mean (per capita) income.
Human resources refers to the set of individuals who make up the workforce of an organization, business sector or an economy.
Labor refers to the aggregate of all human physical and mental effort used in creation of goods and services.
Labor Force, (Persons in the) - the population 15 years old and over who contribute to the production of goods and services in the country. It includes those who are either employed or unemployed. Those who are neither employed nor unemployed are considered not in the labor force, e.g. persons who are not working and are not available for work during the reference week and persons who are not available and are not looking for work because of reasons other than those previously mentioned. Examples are housewives, students, disabled or retired persons and seasonal workers.
Labor Force Participation Rate - proportion of the total number of persons in the labor force to the total population 15 years old and over.
Labor Force Survey provides estimates of employment and unemployment which are among the most timely and important measures of performance of the economy.
Labor Market refers to the nominal market in which workers finding work, employers find willing workers, and wage rates are determined.
Labor Productivity refers to the output per employed person
OFW or Overseas Filipino Worker refers to Filipinos working abroad.
Part-time employment refers to an employment position or job posting wherein fewer hours are put in per week by an individual than a full-time job.
Production refers to the processes and methods employed to transform tangible inputs (raw materials, semi-finished goods, or subassemblies) and intangible inputs (ideas, information, knowledge) into goods or services.
Recession is a period of negative economic growth with falling output and rising unemployment.
Underemployment refers to a situation in which a worker is employed, but not in the desired capacity, whether in terms of compensation, hours, or level of skill and experience.
Underemployment rate refers to the percentage of people who aren 't working or looking for work, but want a job, and those who are working part-time because they can 't find a full-time position.
Unemployment refers to an economic condition marked by the fact that individuals actively seeking jobs remain unhired.
Unemployment Rate refers to the percentage of the total labor force that is unemployed but actively seeking employment and willing to work.
Wage refers to the portion of the national product that represents the aggregate paid for all contributing labor and services as distinguished from the portion retained by management or reinvested in capital goods.
CHAPTER 2
METHODOLOGY
The research design of the study was descriptive and casual/explanatory. This paper requires gathering relevant data and information. Access to the internet was also done for an easy collection of data. The researchers made an assurance that the information gathered was retrieved from different liable sources such as books written by different economists and some website. For instance, the website of the Department of Labor and Employment here in the Philippines. The researchers used the IMRD (Introduction, Methodology, Results, and Discussion) format in order to endow with a reader-friendly research paper. And they added the conclusion and recommendation in the last part of the paper. Graphs and tables contribute a great help when it comes to comparison between two things. So, the researchers decided to use graphs and table for a better presentation of statistical data and for easier analysis of information.
CHAPTER 3
RESULTS
Figure 1
Source: National Statistics Office, Labor Force Survey
Figure 1 shows that over the same period, employment grew but at a slower average rate, about 2.9% annually. This trend follows the global trend of employment lagging behind economic growth hand production. Furthermore, the growth of employment overtime was not the same with the stable growth in GDP but followed a “boom and bust pattern”. Instability in employment can be traced in large part to the effect of extreme weather disturbances (dry spells and destructive typhoons), which had a negative impact on agricultural employment (2000, 2003, 2005, 2009 and 2010). This took place because the agricultural sector still accounts for a reasonably large share (33% to 37%) of the country’s employment in the past decade.
Figure 2
Source: National Statistics Office, Labor Force Survey
Every year, the government sets a variety of targets and the number of jobs generated is part of the quantity of job. However, it is not only the number of jobs that must be aimed for but also their quality. Typically, we define a job to include not only work that is full time but also those that are part time. The relationship and behavior of aggregate output and employment over time can be better observed when employment is distinguished between full-time and part-time workers. A closer look at the data series revealed in figure 2 that full-time employment with few exceptions tended to rise and fall with the growth and decline in domestic output. In contrast, part-time employment generally increases in times of economic slowdown and contracts in times of economic recovery. In 2009 for instance, employment grew by 2.9% despite the slowdown in GDP to 1.1%. But the growth in employment occurred almost entirely among part-time workers (8.4%) while full-time employment actually fell (-0.5%). Another case in point is when the economy rebounded to a 7.3% growth in 2010. Full-time employment growth markedly improved to 6.3% compared with the 2.3% decline in part-time employment. This suggests that while the quantity of employment may expand in times of economic downturn, the quality of employment actually suffers because people will continue to work and accept part-time jobs most likely with lower pay to cope with the difficult situation.
Figure 3 Employment Shares by Major Industry Group (in 000 except %)
Employment stretched out by around 6.879 million or a yearly average of 760,000 from 2001 to 2010. From 29.156 million to 36.035 million, it moved towards the services sector (74.0% of total employment generated) and away from the industry sector (10.0%) and agriculture, forestry and fishing (16.1%). By 2010, more than half (51.8%) of the employed during the year were in the services sector. On the other hand, the share of agriculture, forestry and fishing sector stood at 33.2% while that of industry was 15.0%. In the same year, the largest employment contribution came from agriculture, hunting and forestry (29.1%); wholesale and retail trade (19.5%); manufacturing (8.4%); and transport, storage and communication (7.6%). The smallest shares were attributed to mining and quarrying (0.6%); electricity, gas and water (0.4%); financial intermediation (1.1%); and health and social work (1.2%). Significant employment gains occurred in industries with small employment: real estate, renting and business activities (expanded the fastest at 9.3% annual average) followed by mining and excavation (7.8%) and hotels and restaurants (5.3%). Lower annual growth rates were noted in two industries with bigger employment: agriculture, hunting and forestry, 0.9% and manufacturing, lesser at 0.5%
Figure 4 Employment Shares by Major Occupation Group (in 000 except %)
Laborers and unskilled workers continued to be the largest occupational group during the past decade, recorded at more than one-fourth of total in 2001 to around one-third in 2010. Farmers, forestry workers and fishermen, still were the second largest group although its share has fallen down to less than 20% because of employment shedding in the agricultural sector. Workers in trades occupations; plant and machine operators and assemblers also were observed with lesser employment shares in 2010 compared to their 2001 proportions. The highest average annual employment growth during the period was observed among managerial workers at 6.2%. Clerks and service workers also posted reasonably high growths at close to 5%.
Figure 5
Source: National Statistics Office, Labor Force Survey
Unemployment rates had little changes from 2005-2010. Following a small decline between 2006 and 2007 (-0.7 percentage point), unemployment rates in 2008 (7.4%) and 2009 (7.5%) rose marginally (7.4% in 2010). It can be observed that previous to 2005 the rates of unemployment were a little over 11%. The absence of a visible movement in unemployment rates in comparison with the observed trend in GDP and employment suggests that unemployment as an indicator is less sensitive to the developments in the economy and labor market. This validates the observation that while unemployment is a vital social concern, its measurement is less relevant to a developing country like the Philippines where the self-employed and unpaid family workers (vulnerable employed) account for a considerable proportion of the employed. In 2010, these workers comprised more than two-fifths (41.7%) of total employed.
Figure 6
Source: National Statistics Office, Labor Force Survey
Underemployment is common in many regions of the country particularly in areas where the agricultural sector continues to play a dominant role. With limited wage employment opportunities, the volume of the working population engages in some forms of economic activities no matter how little or inadequate because unemployment is not an option for them. Under this condition, people often search for additional work or sources of income. Hence, they are not counted as unemployed but underemployed persons in the measurement of the local workforce. In the Labor Force Survey (LFS), the underemployed are those employed persons who expressed the desire to have additional hours of work in their present job, or to have additional job, or a new job with longer working hours. Between 2001 and 2004, underemployment rate remained unchanged at around 17%. It grew sharply to 21.0% in 2005 and peaked at 22.6% in 2006 along with the slowdown in GDP growth rates. In the past four years, however, the rate has been on a downtrend despite the slow-moving economy, declining regularly from 20.1% in 2007 to 18.8% in 2010.
Figure 7 Millennium Development Goals Indicators on Employment (%)
Labor productivity reflects increase in output and productive employment, improvements in investments, technological progress and innovation. Increases in productivity positively control the economic and social environments which in the long run lead to poverty reduction and prolonged social protection. Over the period 2001 to 2010, the growth fashion in labor productivity has been generally increasing except during the 2008-2009 crisis years. Nonetheless, labor productivity, on average, grew annually by only 1.6% with the highest growths posted in 2007 (4.1%) and 2010 (4.4%). Note that it was during these years when the economy recorded the highest growth rates during the decade, 7.1% and 7.3%, correspondingly. Further, it was also during these years when full-time employment peaked at 4.7% (2007) and 6.3% (2010). Employment growth during the decade averaged higher at 2.9%. However, a large proportion of the employed is made up of the self-employed and unpaid family workers which by the very nature of their work in agriculture, retail trade and transport contribute relatively less to total output. Employment-to-population ratio indicates the ability of the economy to provide employment to its working population or to provide jobs for those who want to work. Throughout the last decade and the decade earlier, the trend in employment-to-population ratio, at about 59%, has remained virtually stagnant which suggests that employment is just growing at the same pace as working age population. It should be noted that in the span of the 2011-2016 development plan period, the working age population (15 years old and over) has already been born. A pressing concern then is to harness the productive potential of this segment of the population so that they can contribute to economic growth but within the bounds of decent work. Statistics on working poverty give indication of the lack of decent work. If the work of individuals does not even provide incomes high enough to lift them and their families out of extreme poverty, then these jobs, at the very least, do not fulfill the income component of decent work. Available statistics on working poverty rate showed an erratic but slightly increasing trend. On average, based on the 2003 and 2006 data, around one out of every four (4) employed individual comes from a poor household. Measured as the sum of the self-employed (without any paid employee) and unpaid family workers (in own family-operated farm or business), vulnerable employment is more than five-folds of unemployment. Individuals in this group work under relatively precarious circumstances, i.e., less likely to have formal work arrangements, access to benefits or social protection and are more at risk to economic cycles. In 2010, their share to total employment remained high at 41.7% in 2010 (although this share has fallen from 45.2% in 2001). Further, close to one half of the underemployed are in vulnerable employment. The last out of the five (5) employment indicators in the MDG, this indicator measures the degree to which women have equal access as men to paid employment. Integration into the monetary economy particularly in the industry and services sectors presumably leads to productive and remunerative work. The share of women in wage employment in 2009 was placed at 41.9% which is of little change from the rate in 2001 at 41.2%.
Figure 8 Labor Force Participation Rate and Employment Share by Sex (%)
Figure 9 Labor Force Participation Rates (LFPR), Philippines: 2003-2010
Source:http://pcw.gov.ph/statistics/201210/statistics-filipino-women-and-mens-labor-and-employment
The men continued to dominate the workforce as they accounted for more than 60% of total employed over the past ten years. Relative to the labor force, their participation rate, at an annual average of 80.4%, exceeded that of women by 30.1 percentage points. Nevertheless, through the years, the gender gap has slightly narrowed down to 28.8 percentage points in 2010 from 30.6 percentage points in 2001.
Figure 10 OFW Deployment: 2001 to 2010 (in 000) Year | Land | Sea | TOTAL | 2001 | 662 | 205 | 867 | 2002 | 682 | 210 | 892 | 2003 | 652 | 216 | 868 | 2004 | 705 | 229 | 934 | 2005 | 741 | 248 | 989 | 2006 | 788 | 275 | 1063 | 2007 | 974 | 262 | 1236 | 2008 | 974 | 262 | 1236 | 2009 | 1092 | 330 | 1422 | 2010a | 840 | 239 | 1079 | a- January to September data only
Source: Philippines Overseas Employment Administration
Figure 11
Source: Philippines Overseas Employment Administration A key feature of the Philippine labor market is the presence of a large number of Overseas Filipino Workers or OFWs. The annual outflow of OFWs begun in the 1970’s with the modest deployment of 14,366 in 1972. Since then annual deployment figures have grown by leaps and bounds breaching the one million mark in 2006 (1.063 million) which was followed by robust growth rates in 2008 (14.7%) and 2009 (15.1%). About three-fourths of them were land-based workers.
Figure 12 Overseas Employment (New Hires) by Major Occupation Group: 2001-2009 (in 000 except %)
It is obvious that majority of OFWs were women workers. Statistics revealed that three-fifths (61.6%) of annual deployment of new hires over the past nine(9) years were women who had to leave their homes and undergo years of separation from their families. Nevertheless, their employment share to total new hires has slipped from 68.9% in 2001 to 52.7% in 2009. Over the 9-year period women were dominant in three (3) major occupation groups: services (55.7%) e.g., domestic workers or caregivers; professionals and technical workers (27.7%) e.g. nurses and teachers; and production and related workers (11.2%) e.g. factory workers.
CHAPTER 4
DISCUSSION
As seen in the results, labor and employment plays a vital role in economy. It can turn the economy up or even down with its impact in different economic markets. Also, some factors are also presented in those results that determine the effect in macro economy of the Philippines. For the current labor and employment situation in the Philippines, employment growth remained positive in July 2012 despite strong typhoons and flooding that brought down employment level in the agriculture sector. Overall, employment has increased though moderately (1.3%) - as losses in agriculture (-4.1%) was more than compensated by the robust growth in industry sector (+5.4%) and continued expansion in services sector (+3.5%).
The quality of employment was mixed as indicated by the growth in full-time employment (2.3%), wage and salary employment (6.3%) and increase in mean hours of work a week (42.2 from 41.8). This was accompanied by the decline in part-time employment (-0.1%) and reduction in vulnerable employment rate (-3.2 percentage points). These improvements, however, was dampened by a sharp rise in underemployment rate (22.7%). Unemployment rate eased marginally to 7.0% from 7.1% a year ago. Meanwhile, the growth in the country’s labor force slowed down to 1.2% compared with 2.5% a year ago. This was reflected by the decline in labor force participation rate to 64.0% from 64.3%. (DOLE, 2012) Moreover, the Philippine economy is regarded as being one of fastest economically developing countries in South East Asian region. In financial year 2007, its gross domestic product grew at a rate of 7.3 percent. This was quickest for the Philippines economy in last thirty years. Economic growth Philippines can stand toe to toe with some other rapidly developing South East Asian economies like India for example. (Economy Watch, 2010) According to the latest publication of Business Inquirer, Philippines has the highest unemployment rate in ASEAN (Association of South East Asian Nation) despite of the high economic growth. Despite the respectably high economic growth rate that the country registered in the second quarter, the Philippines has the worst unemployment rate in Southeast Asia, independent think tank Ibon Foundation has pointed out. “The Philippines’ average economic growth is reportedly higher than some Southeast Asian countries but at the same time, it also has the worst unemployment rates in the region,” Ibon Foundation Executive Director Sonny Africa said in a statement. The government had reported that the country’s second-quarter Gross Domestic Product (GDP) grew by 5.9 percent year on year. Unemployment rate is the litmus paper of a country’s economy, security and its overall production force. The more unemployment rate increases the more consumption rate decreases. Since many people are unemployed, their spending power struggles causing the economic wheel to stop rotating. High Unemployment rates indirectly induce a widespread of insecurity within the general population. (Suleyman, 2011) Unemployment affects the economy in ways that many people do not see. If many people are unemployed, less people have money for spending or pay taxes. Spending money boosts the economy through taxes which is why everything is taxed. The taxed money adds up when everyone shops. If one is unemployed, they live on what is saved or what unemployment departments give them. Therefore, they do not have money to be cheerful, they only buy necessities. Also by not having the money to buy wants, not only needs, it means some business will have to cut prices in order to try to sell. By cutting prices this leads to less, no, or sometimes negative profits. Enough of this happens and that business might go out of business which leads to more unemployment. All of this leads to deflation which could lead to a depression (like it did in the Great Depression). Deflation does not encourage spending, in fact it does the opposite. Also your debts numerically stay the same but now you earn less so it will be even harder to pay them off. If people are unemployed they don 't make money. If people don 't make money they don 't buy things. If people don 't buy things there is less demand. If there is less demand then companies don 't produce goods. If companies don 't produce goods they don 't need employees. If people are unemployed they don 't make money. If people don 't make money they don 't buy things. If people don 't buy things there is less demand. If there is less demand then companies don 't produce goods. If companies do not produce goods they don 't need employees. If people are unemployed they don 't make money. It is a vicious cycle! No employment means people have less income which means they will spend less. And remember that spending less does not benefit economic growth. Employment, and the quality of employment, decent work, is crucial for poverty reduction and in achieving growth with equity and pro-poor growth. The link between economic growth, employment and poverty reduction is thus a process in which output growth induces an increase in productive and remunerative employment, which, in turn, leads to an increase in the incomes of the poor and a reduction in poverty. Ensuring that growth is pro-poor requires high employment-intensity of growth and a rise in productivity which also depend on institutions, policies, laws and practices that positively affect the functioning of labor markets. A well-functioning institutional environment can support the virtuous circle and, in the process, facilitate pro-poor growth. Informal employment remains important, persistent and is often even rising. Thus, the quality of work of poor people holding an informal job has to be improved through the rise of productivity through vocational training and education, micro and small enterprise development and access to credit. Moreover, new strategies are needed to extend social security to informal workers, and to improve their working conditions. Formal job creation has to be accelerated, exceeding labor force growth. And the transfer from informal to formal employment should be facilitated through changes in regulations and tax or incentive systems, as well as rising productivity of informal activities. (Ernst & Berg, 2009) I. Employment Creation: Key Factor for Poverty Alleviation and Political Stability Policy makers and leaders from the various sectors of society probably consider unemployment and underemployment as simply part of a laundry list of problems that each government needs to solve. However, it must be highlighted that tackling this urgent concern may actually spur and sustain economic growth and development. The reason is that unemployment and underemployment have negative spillover effects not only on individuals but for society at large. For Filipinos, jobs are considered hanap buhay or ‘source of life’. According to Nobel laureate Amartya Sen, aside from the mere loss of income associated with unemployment and underemployment, there are other effects not entirely economic that include: * skill loss and long-run damages to human resources: people “unlearn by not doing”; unemployment or underemployment may result into skills depreciation, loss of cognitive abilities, loss of confidence and sense of control * loss of freedom: unemployment and underemployment constrains the choices of people with regard to various decisions affecting everyday life * psychological harm and misery: intense suffering and mental agony sometimes resulting into loss of self-esteem and even to suicides * ill health and mortality: unemployment and underemployment can also lead to clinically identifiable illnesses and to higher rates of mortality * loss of human relations: disruptive of social relations and family life * motivational loss and future work: social-psychological effects of unemployment include breeding of further unemployment in the future; transformation from being “in the labor force but unemployed” to being “out of the labor force” * gender and racial inequality: unemployment and underemployment feeds the politics of intolerance and racism and heightens gender and age discrimination * weakening of social values: continued unemployment and underemployment breeds cynicism about fairness of social arrangements and a perception of dependence on others; they may also increase alcohol and drug use and increased crime rates Given such hidden costs and losses from unemployment and underemployment, government bureaucrats and policy makers need to give sufficient attention to these double labor market headaches. One realizes that increased employment, better incomes and more quality jobs accessible to the citizenry will in turn translate to greater domestic demand and further growth plus the bonus of better social cohesion and peace and order. In the lingo of the current response to the crisis, increased domestic economic activity is critical for growth rebalancing. In addition, sustained job creation lifts the country out of the poverty trap with improved growth elasticity of poverty reduction resulting from more and better quality jobs. (Aldaba & Hermoso, 2009)
II. Understanding the Critical Constraints to Sustained Economic Growth The demand for labor is a derived demand i.e. it follows from increased demand for goods and services. Thus, any type of constraint that decreases the growth potential of the country is also a hurdle for job creation. Most of the reasons outlined below are related to critical constraints to growth of the Philippine economy. The ADB (2007) study on Philippine Critical Development Constraints uses a variety of evidence to determine the critical constraints to growth in the Philippines, among which are: a tight fiscal situation, inadequate infrastructure, weak investor confidence, and an inefficient labor market. Many of these critical constraints are interlinked. Only when the fiscal situation sufficiently improves will the Government be in a position to allocate more resources to infrastructure investment. However, improved infrastructure alone is not enough to lower the cost of doing business and to stimulate private investment. Better infrastructure has to be accompanied by significant improvements in investor confidence, which can be done through the Government adequately addressing governance concerns by implementing initiatives aimed at reducing corruption and improving political stability. Removing these three constraints (e.g., tight fiscal space, inadequate infrastructure, and weak investor confidence) will result in increased private investments from domestic and foreign sources. But, to ensure that growth can be sustained at a high level similar to that achieved by many Southeast and East Asian economies in recent decades, the Government will also need to address the market failures (such as information and coordination externalities) in order to encourage investments for diversifying and expanding the manufacturing sector/exports, and in upgrading the level of technology. Sustained high growth, resulting from removing the critical constraints, will create more productive employment opportunities. This is essential because insufficient and low quality employment is the most critical constraint to poverty reduction in the Philippines. (Aldaba & Hermoso, 2009)
CHAPTER 5
CONCLUSION
Therefore, labor and employment plays a vital role in economy. It affects our economy in different ways. As the researchers observed, there is growing evidence of a negative feedback loop between the labor market and the macro economy: high unemployment and low wage growth are reducing demand for goods and services, which further damages business confidence and leaves firms hesitant to invest and hire. Breaking this negative loop will be essential if a sustainable recovery is to take root. There are such sustainable increases in productivity and it will require accelerated structural transformation – shifting to higher value added activities while moving away from subsistence agriculture as a main source of employment and reducing reliance on volatile commodity markets for export earnings. Further gains in education and skills development, adequate social protection schemes that ensure a basic standard of living for the most vulnerable, and strengthened dialogue between workers, employers and governments are needed to ensure broad-based development built on a fair and just distribution of economic gains. The effect of having a high unemployment rate can turn to a domino effect in stability of a country so it is important to how it can be minimize. The government is trying some methods to be able to minimize the unemployment rate. They are generating plans in order to be productive so that there will be an economic growth.
CHAPTER 6
RECOMMENDATION
The researchers recommend several policy changes to address the unstabilized labor market and put the economy on a more sustainable path. First, economic policies need to be implemented more firmly. As the researchers observed, there is loose implementation of some policies like in fiscal policy that can lead to not being stabilized employment condition. The large increase in public debt and ensuing concerns about the sustainability of public finances have forced some industries to increase their debt risk premiums to implement strict belt-tightening. It is such coordinated public finance measures that are now necessary to support aggregate demand and stimulate job creation going forward.
Second, more substantial repair and regulation of the financial system would restore credibility and confidence of the employees. An encompassing reform of financial markets would substantially help the labor market and could add up to half a percentage point in employment growth.
Third, target the real economy to support job growth. Faltering employment creation and ensuing weak growth in labor incomes have been at the heart of the slowdown in global economic activity and the further worsening of public finances. Clearly, the policy measures have not been well targeted and need reassessment in terms of their effectiveness. Indeed, estimates for advanced economies regarding different labor market instruments show that both active and passive labor market policies have proven very effective in stimulating job creation and supporting incomes. It is evident that across a range of labor market policies – including the extension of unemployment benefits and work sharing programs, the re-evaluation of minimum wages and wage subsidies as well as enhancing public employment services, public works programs and entrepreneurship incentives – show impacts on employment and incomes.
Fourth, additional public support measures alone will not be sufficient to foster a sustainable jobs recovery. The government must act decisively and in a coordinated fashion to reduce the fear and uncertainty that is hindering people to enter the labor force. Incentives to businesses to invest in plant and equipment and to expand their payrolls will be essential to stimulate a strong and sustainable recovery in employment. Fifth, to be effective, adding stimulus packages must be put in concern. People may be encouraged to work especially in the current environment of massively underutilized capacities and high unemployment rates if there are high incentives waiting for them. At the same time, the economy will be right on track if there is a good management for the government in giving these benefits.
References * Issues on Macroeconomics Today, Robert Guell, 2003, Date Retrieved, October 2, 2012 * The Philippine Labor and Employment Plan 2011-2016, October 5, 2012, http://ncmb.ph/Others/dole/dole11.pdf * http://www.studymode.com/essays/Causes-And-Effects-Of-Unemployment-849729.html * http://www.oecd.org/dac/povertyreduction/43280231.pdf * Causes and Effects of Unemployment. StudyMode.com. October 6, 2012, http://www.studymode.com/essays/Causes-And-Effects-Of-Unemployment-849729.html * Sustainable Employment Creation: A Strategic Concern for the Philippine Economy, October 10, 2012, * http://www.competitive.org.ph/files/downloads/Sustainable_Employment_reation_-_A_Strategic_Concern_for_the_Philippine_Economy.pdf * http://pcw.gov.ph/statistics/201210/statistics-filipino-women-and-mens-labor-and-employment * http://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/@publ/documents/publication/wcms_171571.pdf * http://www.investorwords.com/5838.html * www.wikipedia.com * http://www.businessdictionary.com/definition.html * http://www.thefreedictionary.com * http://www23.statcan.gc.ca/imdb-bmdi/pub/3701-eng.htm * http://www.dole.gov.ph/ * http://www.ble.dole.gov.ph/ * http://www.manilavisa.com/services-in-the-philippines/labor-and-employment-in-the-philippines/ * http://www.nscb.gov.ph/ru12/DEFINE/DEF-LABO.HTM * http://www.infoplease.com/ipa/A0854971.html * http://www.bles.dole.gov.ph/PUBLICATIONS/LABSTAT%20UPDATES/vol16_27.pdf * http://www.economywatch.com/economic-growth/philippines.html * http://business.inquirer.net/80138/despite-high-economic-growth-ph-has-highest-unemployment-rate-in-asean * http://www.economicforecasts.org/2008/11/economic-downturn-definition.html * http://www.ehow.com/facts_5048523_definition-parttime-job.html
References: * Issues on Macroeconomics Today, Robert Guell, 2003, Date Retrieved, October 2, 2012 * The Philippine Labor and Employment Plan 2011-2016, October 5, 2012, http://ncmb.ph/Others/dole/dole11.pdf * Causes and Effects of Unemployment. StudyMode.com. October 6, 2012, http://www.studymode.com/essays/Causes-And-Effects-Of-Unemployment-849729.html * Sustainable Employment Creation: A Strategic Concern for the Philippine Economy, October 10, 2012,
INTRODUCTION
Losing one’s job is the most upsetting thing that an individual can go through short of the loss of a loved one. Economists therefore consider the unemployment rate to be one of the most important indicators both of the economy and of well-being in general. When people who want and need to work cannot find suitable employment, they lose not only income but self-esteem (Robert Guell, 2003). According to Merriam-Webster Dictionary, labor is a human activity that provides the goods or services in an economy. It is the services performed by workers for wages as distinguished from those rendered by entrepreneurs for profits. On the other hand, employment is an activity in which one engages or is employed. It also refers to a contract between two parties, one being the employer and the other being the employee. In a commercial setting, the employer conceives of a productive activity, generally with the intention of creating profits, and the employee contributes labour to the enterprise, usually in return for payment of wages and to the extent that employment or the economic equivalent is not universal, unemployment exists. However, according to Business Dictionary, labor is the aggregate of all human physical and mental effort used in creation of goods and services. It is a primary factor of production. The size of nation’s labor force is determined by the size of its adult population, and the extent to which the adults are either working or are prepared to offer their labor for wages. Labor and employment plays a major role in the economy. There some labor and employment factors that people cannot notice that can affect the economic stability of a country. In some point, there are always people lose their jobs and makes up the unemployment line. There is considerable debate amongst economists as to what the main causes of unemployment are. Keynesian economics emphasizes unemployment resulting from insufficient effective demand for goods and service in the economy. Others point to structural problems inherent in labor markets. Classical or neoclassical economics tends to reject these explanations, and focuses more on rigidities imposed on the labour market from the outside, such as minimum wage laws, taxes, and other regulations that may discourage the hiring of workers.
Background of the Study A country with a population of 92 million people, the Philippine economy expanded at a modest growth rate of 4.7% per annum over the ten-year period 2001-2010. Measured in terms of Gross Domestic Product (GDP), the economy grew almost uninterrupted from 2001 (1.8%) to 2004 (6.4%). The pace of growth slowed down in 2005 (5.0%) and 2006 (5.3%) but was up again in 2007 (as in the global economy) recording the second highest growth (7.1%) during the decade. With the onset of the global financial crisis, the growth figure declined sharply in 2008 (3.7%) and bottomed to 1.1% in 2009. With the global economic recovery in 2010, the domestic economy again posted a rebound, growing by 7.3%, on the back of firm recovery in manufacturing, merchandise exports and service based industries (trade and private services), bolstered by strong consumption and sustained inflow of remittances (DOLE, 2011).
Statement of the Problem Economic growth in the past decade (2001-2010) has not explained to corresponding development in employment levels. Employment growth (2.9%) tended to be slower than economic growth (4.7%). Likewise, unemployment rates showed little improvement despite periods of economic growth. Low economic growth is attributed to low investments and slow technology progress. The country is also prone to economic shocks, natural disasters and extreme weather disorder that affect agriculture, which is a labor-intensive sector. The insufficiency of employment opportunities in the country is causing the out-migration of professionals and skilled workers and is discouraging their return. Skilled migration is not inherently detrimental, as long as its optimal economic gains are ensured and social costs, including brain drain especially of so-called mission critical skills, are minimized. The challenge is how to translate the gains of skilled migration into productive investments in the country by transforming migrant workers and professionals into entrepreneurs and investors and by harnessing their capital, skills and knowledge to spur productive activities. A climate that promotes investments, both foreign and domestic, as well as savings, is inadequate. For instance, investment performance in 2010 (15.6% as a share of GDP) was lower compared to the 2004 level (16.7% as a share of GDP). Inadequate infrastructure and a resulting poor logistics have been identified as a cause of poor investments record. Weak investment in power generation and transmission is also a problem, resulting in short supply of energy and causing disruptions in production and other economic activities. Labor productivity is low, primarily because of lack of investments, economic disruptions, calamities, low technology and lack of skills and training. The state of the environment is deteriorating. Urban centers are polluted and wastes are improperly managed. Continued deforestation is exacerbating loss of watersheds, which affects water supply. Land and water resources are fast depleting. Consequently, industries, which inevitably rely on natural resources for inputs, are threatened. Vulnerable workers are also at risk because they mostly depend on natural resources for their livelihood. This paper aims to determine the importance and role of labor and employment in stabilizing the economy. With regards to this matter, the following research questions are expected to be answered: 1) How the labor and employment affects the economy? 2) What are the factors we can consider why labor and employment plays a very important role in economy? 3) How unemployment occur? 4) What are the consequences of having a high unemployment? 5) How to stabilize the economy, in terms of labor and employment, despite of unemployment?
Objectives of the Study This paper, in general, intends to determine the role of labor and employment in stabilizing the economy. Aside from this, the following specific objectives are also presented: 1) To determine how the labor and employment affects the economy 2) To identify those factors affecting economy due to labor and employment 3) To determine how unemployment occurs that affects the labor market and labor supply 4) To state the consequences of having a high unemployment 5) To determine the ways to stabilize the economy in terms of labor and employment.
Significance of the Study It is very important to the people, especially for those who are working and not working to know how the employment will affect the economy of the whole country. Through this, they can appreciate the benefit of having a high employment rate to them and, generally, to our nation. With this information, the labor force can know how they can contribute in stabilizing the economy. The factors affecting the labor and employment should remind the people that having a good employment rate will lead to steady labor market. The study will also be beneficial to the government. This will make the government aware to the real condition of our labor market. Also, through this, they can formulate some ways or methods to lessen the unemployment rate in the Philippines. And also, the students can learn more about the employment situation in the Philippines. It can serve as challenge for them to do their best in school to be able to land in a stable job. With this, it can help as foundation in having a good mindset before they enter in the workforce.
Scope and Limitations of the Study This paper includes the analysis of the labor and employment status in the Philippine economy from 2001 to 2010, as well as the economic growth on the same period. In order to analyze the data carefully, the researchers used different labor and employment indicators as well as economic indicators. This also includes the discussion about the role of labor and employment in stabilizing the economy.
Definition of Terms
Boom and Bust Pattern refers to a period during which a country 's economy moves from strength to weakness and back to strength.
Constraints refer to the threat or use of force to prevent, restrict, or dictate the action or thought of others.
Deflation refers to a decrease in the general price level of goods and services.
Deployment refers to methodical procedure of introducing an activity, process, program or system to all applicable areas of an organization.
Economic Downturn refers to the economy that is entering into recession.
Economic Growth refers to the increase in the amount of the goods and services produced by an economy over time.
Elasticity refers to the degree to which individuals (consumers/producers) change their demand/amount supplied in response to price or income changes.
Exports refer to a function of international trade whereby goods produced in one country are shipped to another country for future sale or trade. The sale of such goods adds to the producing nation 's gross output. If used for trade, exports are exchanged for other products or services.
Full-time employment is employment in which a person works a minimum number of hours defined as such by his/her employer. GDP or Gross Domestic Product refers to the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
Growth Elasticity of Poverty (GEP) is the percentage reduction in poverty rates associated with a percentage change in mean (per capita) income.
Human resources refers to the set of individuals who make up the workforce of an organization, business sector or an economy.
Labor refers to the aggregate of all human physical and mental effort used in creation of goods and services.
Labor Force, (Persons in the) - the population 15 years old and over who contribute to the production of goods and services in the country. It includes those who are either employed or unemployed. Those who are neither employed nor unemployed are considered not in the labor force, e.g. persons who are not working and are not available for work during the reference week and persons who are not available and are not looking for work because of reasons other than those previously mentioned. Examples are housewives, students, disabled or retired persons and seasonal workers.
Labor Force Participation Rate - proportion of the total number of persons in the labor force to the total population 15 years old and over.
Labor Force Survey provides estimates of employment and unemployment which are among the most timely and important measures of performance of the economy.
Labor Market refers to the nominal market in which workers finding work, employers find willing workers, and wage rates are determined.
Labor Productivity refers to the output per employed person
OFW or Overseas Filipino Worker refers to Filipinos working abroad.
Part-time employment refers to an employment position or job posting wherein fewer hours are put in per week by an individual than a full-time job.
Production refers to the processes and methods employed to transform tangible inputs (raw materials, semi-finished goods, or subassemblies) and intangible inputs (ideas, information, knowledge) into goods or services.
Recession is a period of negative economic growth with falling output and rising unemployment.
Underemployment refers to a situation in which a worker is employed, but not in the desired capacity, whether in terms of compensation, hours, or level of skill and experience.
Underemployment rate refers to the percentage of people who aren 't working or looking for work, but want a job, and those who are working part-time because they can 't find a full-time position.
Unemployment refers to an economic condition marked by the fact that individuals actively seeking jobs remain unhired.
Unemployment Rate refers to the percentage of the total labor force that is unemployed but actively seeking employment and willing to work.
Wage refers to the portion of the national product that represents the aggregate paid for all contributing labor and services as distinguished from the portion retained by management or reinvested in capital goods.
CHAPTER 2
METHODOLOGY
The research design of the study was descriptive and casual/explanatory. This paper requires gathering relevant data and information. Access to the internet was also done for an easy collection of data. The researchers made an assurance that the information gathered was retrieved from different liable sources such as books written by different economists and some website. For instance, the website of the Department of Labor and Employment here in the Philippines. The researchers used the IMRD (Introduction, Methodology, Results, and Discussion) format in order to endow with a reader-friendly research paper. And they added the conclusion and recommendation in the last part of the paper. Graphs and tables contribute a great help when it comes to comparison between two things. So, the researchers decided to use graphs and table for a better presentation of statistical data and for easier analysis of information.
CHAPTER 3
RESULTS
Figure 1
Source: National Statistics Office, Labor Force Survey
Figure 1 shows that over the same period, employment grew but at a slower average rate, about 2.9% annually. This trend follows the global trend of employment lagging behind economic growth hand production. Furthermore, the growth of employment overtime was not the same with the stable growth in GDP but followed a “boom and bust pattern”. Instability in employment can be traced in large part to the effect of extreme weather disturbances (dry spells and destructive typhoons), which had a negative impact on agricultural employment (2000, 2003, 2005, 2009 and 2010). This took place because the agricultural sector still accounts for a reasonably large share (33% to 37%) of the country’s employment in the past decade.
Figure 2
Source: National Statistics Office, Labor Force Survey
Every year, the government sets a variety of targets and the number of jobs generated is part of the quantity of job. However, it is not only the number of jobs that must be aimed for but also their quality. Typically, we define a job to include not only work that is full time but also those that are part time. The relationship and behavior of aggregate output and employment over time can be better observed when employment is distinguished between full-time and part-time workers. A closer look at the data series revealed in figure 2 that full-time employment with few exceptions tended to rise and fall with the growth and decline in domestic output. In contrast, part-time employment generally increases in times of economic slowdown and contracts in times of economic recovery. In 2009 for instance, employment grew by 2.9% despite the slowdown in GDP to 1.1%. But the growth in employment occurred almost entirely among part-time workers (8.4%) while full-time employment actually fell (-0.5%). Another case in point is when the economy rebounded to a 7.3% growth in 2010. Full-time employment growth markedly improved to 6.3% compared with the 2.3% decline in part-time employment. This suggests that while the quantity of employment may expand in times of economic downturn, the quality of employment actually suffers because people will continue to work and accept part-time jobs most likely with lower pay to cope with the difficult situation.
Figure 3 Employment Shares by Major Industry Group (in 000 except %)
Employment stretched out by around 6.879 million or a yearly average of 760,000 from 2001 to 2010. From 29.156 million to 36.035 million, it moved towards the services sector (74.0% of total employment generated) and away from the industry sector (10.0%) and agriculture, forestry and fishing (16.1%). By 2010, more than half (51.8%) of the employed during the year were in the services sector. On the other hand, the share of agriculture, forestry and fishing sector stood at 33.2% while that of industry was 15.0%. In the same year, the largest employment contribution came from agriculture, hunting and forestry (29.1%); wholesale and retail trade (19.5%); manufacturing (8.4%); and transport, storage and communication (7.6%). The smallest shares were attributed to mining and quarrying (0.6%); electricity, gas and water (0.4%); financial intermediation (1.1%); and health and social work (1.2%). Significant employment gains occurred in industries with small employment: real estate, renting and business activities (expanded the fastest at 9.3% annual average) followed by mining and excavation (7.8%) and hotels and restaurants (5.3%). Lower annual growth rates were noted in two industries with bigger employment: agriculture, hunting and forestry, 0.9% and manufacturing, lesser at 0.5%
Figure 4 Employment Shares by Major Occupation Group (in 000 except %)
Laborers and unskilled workers continued to be the largest occupational group during the past decade, recorded at more than one-fourth of total in 2001 to around one-third in 2010. Farmers, forestry workers and fishermen, still were the second largest group although its share has fallen down to less than 20% because of employment shedding in the agricultural sector. Workers in trades occupations; plant and machine operators and assemblers also were observed with lesser employment shares in 2010 compared to their 2001 proportions. The highest average annual employment growth during the period was observed among managerial workers at 6.2%. Clerks and service workers also posted reasonably high growths at close to 5%.
Figure 5
Source: National Statistics Office, Labor Force Survey
Unemployment rates had little changes from 2005-2010. Following a small decline between 2006 and 2007 (-0.7 percentage point), unemployment rates in 2008 (7.4%) and 2009 (7.5%) rose marginally (7.4% in 2010). It can be observed that previous to 2005 the rates of unemployment were a little over 11%. The absence of a visible movement in unemployment rates in comparison with the observed trend in GDP and employment suggests that unemployment as an indicator is less sensitive to the developments in the economy and labor market. This validates the observation that while unemployment is a vital social concern, its measurement is less relevant to a developing country like the Philippines where the self-employed and unpaid family workers (vulnerable employed) account for a considerable proportion of the employed. In 2010, these workers comprised more than two-fifths (41.7%) of total employed.
Figure 6
Source: National Statistics Office, Labor Force Survey
Underemployment is common in many regions of the country particularly in areas where the agricultural sector continues to play a dominant role. With limited wage employment opportunities, the volume of the working population engages in some forms of economic activities no matter how little or inadequate because unemployment is not an option for them. Under this condition, people often search for additional work or sources of income. Hence, they are not counted as unemployed but underemployed persons in the measurement of the local workforce. In the Labor Force Survey (LFS), the underemployed are those employed persons who expressed the desire to have additional hours of work in their present job, or to have additional job, or a new job with longer working hours. Between 2001 and 2004, underemployment rate remained unchanged at around 17%. It grew sharply to 21.0% in 2005 and peaked at 22.6% in 2006 along with the slowdown in GDP growth rates. In the past four years, however, the rate has been on a downtrend despite the slow-moving economy, declining regularly from 20.1% in 2007 to 18.8% in 2010.
Figure 7 Millennium Development Goals Indicators on Employment (%)
Labor productivity reflects increase in output and productive employment, improvements in investments, technological progress and innovation. Increases in productivity positively control the economic and social environments which in the long run lead to poverty reduction and prolonged social protection. Over the period 2001 to 2010, the growth fashion in labor productivity has been generally increasing except during the 2008-2009 crisis years. Nonetheless, labor productivity, on average, grew annually by only 1.6% with the highest growths posted in 2007 (4.1%) and 2010 (4.4%). Note that it was during these years when the economy recorded the highest growth rates during the decade, 7.1% and 7.3%, correspondingly. Further, it was also during these years when full-time employment peaked at 4.7% (2007) and 6.3% (2010). Employment growth during the decade averaged higher at 2.9%. However, a large proportion of the employed is made up of the self-employed and unpaid family workers which by the very nature of their work in agriculture, retail trade and transport contribute relatively less to total output. Employment-to-population ratio indicates the ability of the economy to provide employment to its working population or to provide jobs for those who want to work. Throughout the last decade and the decade earlier, the trend in employment-to-population ratio, at about 59%, has remained virtually stagnant which suggests that employment is just growing at the same pace as working age population. It should be noted that in the span of the 2011-2016 development plan period, the working age population (15 years old and over) has already been born. A pressing concern then is to harness the productive potential of this segment of the population so that they can contribute to economic growth but within the bounds of decent work. Statistics on working poverty give indication of the lack of decent work. If the work of individuals does not even provide incomes high enough to lift them and their families out of extreme poverty, then these jobs, at the very least, do not fulfill the income component of decent work. Available statistics on working poverty rate showed an erratic but slightly increasing trend. On average, based on the 2003 and 2006 data, around one out of every four (4) employed individual comes from a poor household. Measured as the sum of the self-employed (without any paid employee) and unpaid family workers (in own family-operated farm or business), vulnerable employment is more than five-folds of unemployment. Individuals in this group work under relatively precarious circumstances, i.e., less likely to have formal work arrangements, access to benefits or social protection and are more at risk to economic cycles. In 2010, their share to total employment remained high at 41.7% in 2010 (although this share has fallen from 45.2% in 2001). Further, close to one half of the underemployed are in vulnerable employment. The last out of the five (5) employment indicators in the MDG, this indicator measures the degree to which women have equal access as men to paid employment. Integration into the monetary economy particularly in the industry and services sectors presumably leads to productive and remunerative work. The share of women in wage employment in 2009 was placed at 41.9% which is of little change from the rate in 2001 at 41.2%.
Figure 8 Labor Force Participation Rate and Employment Share by Sex (%)
Figure 9 Labor Force Participation Rates (LFPR), Philippines: 2003-2010
Source:http://pcw.gov.ph/statistics/201210/statistics-filipino-women-and-mens-labor-and-employment
The men continued to dominate the workforce as they accounted for more than 60% of total employed over the past ten years. Relative to the labor force, their participation rate, at an annual average of 80.4%, exceeded that of women by 30.1 percentage points. Nevertheless, through the years, the gender gap has slightly narrowed down to 28.8 percentage points in 2010 from 30.6 percentage points in 2001.
Figure 10 OFW Deployment: 2001 to 2010 (in 000) Year | Land | Sea | TOTAL | 2001 | 662 | 205 | 867 | 2002 | 682 | 210 | 892 | 2003 | 652 | 216 | 868 | 2004 | 705 | 229 | 934 | 2005 | 741 | 248 | 989 | 2006 | 788 | 275 | 1063 | 2007 | 974 | 262 | 1236 | 2008 | 974 | 262 | 1236 | 2009 | 1092 | 330 | 1422 | 2010a | 840 | 239 | 1079 | a- January to September data only
Source: Philippines Overseas Employment Administration
Figure 11
Source: Philippines Overseas Employment Administration A key feature of the Philippine labor market is the presence of a large number of Overseas Filipino Workers or OFWs. The annual outflow of OFWs begun in the 1970’s with the modest deployment of 14,366 in 1972. Since then annual deployment figures have grown by leaps and bounds breaching the one million mark in 2006 (1.063 million) which was followed by robust growth rates in 2008 (14.7%) and 2009 (15.1%). About three-fourths of them were land-based workers.
Figure 12 Overseas Employment (New Hires) by Major Occupation Group: 2001-2009 (in 000 except %)
It is obvious that majority of OFWs were women workers. Statistics revealed that three-fifths (61.6%) of annual deployment of new hires over the past nine(9) years were women who had to leave their homes and undergo years of separation from their families. Nevertheless, their employment share to total new hires has slipped from 68.9% in 2001 to 52.7% in 2009. Over the 9-year period women were dominant in three (3) major occupation groups: services (55.7%) e.g., domestic workers or caregivers; professionals and technical workers (27.7%) e.g. nurses and teachers; and production and related workers (11.2%) e.g. factory workers.
CHAPTER 4
DISCUSSION
As seen in the results, labor and employment plays a vital role in economy. It can turn the economy up or even down with its impact in different economic markets. Also, some factors are also presented in those results that determine the effect in macro economy of the Philippines. For the current labor and employment situation in the Philippines, employment growth remained positive in July 2012 despite strong typhoons and flooding that brought down employment level in the agriculture sector. Overall, employment has increased though moderately (1.3%) - as losses in agriculture (-4.1%) was more than compensated by the robust growth in industry sector (+5.4%) and continued expansion in services sector (+3.5%).
The quality of employment was mixed as indicated by the growth in full-time employment (2.3%), wage and salary employment (6.3%) and increase in mean hours of work a week (42.2 from 41.8). This was accompanied by the decline in part-time employment (-0.1%) and reduction in vulnerable employment rate (-3.2 percentage points). These improvements, however, was dampened by a sharp rise in underemployment rate (22.7%). Unemployment rate eased marginally to 7.0% from 7.1% a year ago. Meanwhile, the growth in the country’s labor force slowed down to 1.2% compared with 2.5% a year ago. This was reflected by the decline in labor force participation rate to 64.0% from 64.3%. (DOLE, 2012) Moreover, the Philippine economy is regarded as being one of fastest economically developing countries in South East Asian region. In financial year 2007, its gross domestic product grew at a rate of 7.3 percent. This was quickest for the Philippines economy in last thirty years. Economic growth Philippines can stand toe to toe with some other rapidly developing South East Asian economies like India for example. (Economy Watch, 2010) According to the latest publication of Business Inquirer, Philippines has the highest unemployment rate in ASEAN (Association of South East Asian Nation) despite of the high economic growth. Despite the respectably high economic growth rate that the country registered in the second quarter, the Philippines has the worst unemployment rate in Southeast Asia, independent think tank Ibon Foundation has pointed out. “The Philippines’ average economic growth is reportedly higher than some Southeast Asian countries but at the same time, it also has the worst unemployment rates in the region,” Ibon Foundation Executive Director Sonny Africa said in a statement. The government had reported that the country’s second-quarter Gross Domestic Product (GDP) grew by 5.9 percent year on year. Unemployment rate is the litmus paper of a country’s economy, security and its overall production force. The more unemployment rate increases the more consumption rate decreases. Since many people are unemployed, their spending power struggles causing the economic wheel to stop rotating. High Unemployment rates indirectly induce a widespread of insecurity within the general population. (Suleyman, 2011) Unemployment affects the economy in ways that many people do not see. If many people are unemployed, less people have money for spending or pay taxes. Spending money boosts the economy through taxes which is why everything is taxed. The taxed money adds up when everyone shops. If one is unemployed, they live on what is saved or what unemployment departments give them. Therefore, they do not have money to be cheerful, they only buy necessities. Also by not having the money to buy wants, not only needs, it means some business will have to cut prices in order to try to sell. By cutting prices this leads to less, no, or sometimes negative profits. Enough of this happens and that business might go out of business which leads to more unemployment. All of this leads to deflation which could lead to a depression (like it did in the Great Depression). Deflation does not encourage spending, in fact it does the opposite. Also your debts numerically stay the same but now you earn less so it will be even harder to pay them off. If people are unemployed they don 't make money. If people don 't make money they don 't buy things. If people don 't buy things there is less demand. If there is less demand then companies don 't produce goods. If companies don 't produce goods they don 't need employees. If people are unemployed they don 't make money. If people don 't make money they don 't buy things. If people don 't buy things there is less demand. If there is less demand then companies don 't produce goods. If companies do not produce goods they don 't need employees. If people are unemployed they don 't make money. It is a vicious cycle! No employment means people have less income which means they will spend less. And remember that spending less does not benefit economic growth. Employment, and the quality of employment, decent work, is crucial for poverty reduction and in achieving growth with equity and pro-poor growth. The link between economic growth, employment and poverty reduction is thus a process in which output growth induces an increase in productive and remunerative employment, which, in turn, leads to an increase in the incomes of the poor and a reduction in poverty. Ensuring that growth is pro-poor requires high employment-intensity of growth and a rise in productivity which also depend on institutions, policies, laws and practices that positively affect the functioning of labor markets. A well-functioning institutional environment can support the virtuous circle and, in the process, facilitate pro-poor growth. Informal employment remains important, persistent and is often even rising. Thus, the quality of work of poor people holding an informal job has to be improved through the rise of productivity through vocational training and education, micro and small enterprise development and access to credit. Moreover, new strategies are needed to extend social security to informal workers, and to improve their working conditions. Formal job creation has to be accelerated, exceeding labor force growth. And the transfer from informal to formal employment should be facilitated through changes in regulations and tax or incentive systems, as well as rising productivity of informal activities. (Ernst & Berg, 2009) I. Employment Creation: Key Factor for Poverty Alleviation and Political Stability Policy makers and leaders from the various sectors of society probably consider unemployment and underemployment as simply part of a laundry list of problems that each government needs to solve. However, it must be highlighted that tackling this urgent concern may actually spur and sustain economic growth and development. The reason is that unemployment and underemployment have negative spillover effects not only on individuals but for society at large. For Filipinos, jobs are considered hanap buhay or ‘source of life’. According to Nobel laureate Amartya Sen, aside from the mere loss of income associated with unemployment and underemployment, there are other effects not entirely economic that include: * skill loss and long-run damages to human resources: people “unlearn by not doing”; unemployment or underemployment may result into skills depreciation, loss of cognitive abilities, loss of confidence and sense of control * loss of freedom: unemployment and underemployment constrains the choices of people with regard to various decisions affecting everyday life * psychological harm and misery: intense suffering and mental agony sometimes resulting into loss of self-esteem and even to suicides * ill health and mortality: unemployment and underemployment can also lead to clinically identifiable illnesses and to higher rates of mortality * loss of human relations: disruptive of social relations and family life * motivational loss and future work: social-psychological effects of unemployment include breeding of further unemployment in the future; transformation from being “in the labor force but unemployed” to being “out of the labor force” * gender and racial inequality: unemployment and underemployment feeds the politics of intolerance and racism and heightens gender and age discrimination * weakening of social values: continued unemployment and underemployment breeds cynicism about fairness of social arrangements and a perception of dependence on others; they may also increase alcohol and drug use and increased crime rates Given such hidden costs and losses from unemployment and underemployment, government bureaucrats and policy makers need to give sufficient attention to these double labor market headaches. One realizes that increased employment, better incomes and more quality jobs accessible to the citizenry will in turn translate to greater domestic demand and further growth plus the bonus of better social cohesion and peace and order. In the lingo of the current response to the crisis, increased domestic economic activity is critical for growth rebalancing. In addition, sustained job creation lifts the country out of the poverty trap with improved growth elasticity of poverty reduction resulting from more and better quality jobs. (Aldaba & Hermoso, 2009)
II. Understanding the Critical Constraints to Sustained Economic Growth The demand for labor is a derived demand i.e. it follows from increased demand for goods and services. Thus, any type of constraint that decreases the growth potential of the country is also a hurdle for job creation. Most of the reasons outlined below are related to critical constraints to growth of the Philippine economy. The ADB (2007) study on Philippine Critical Development Constraints uses a variety of evidence to determine the critical constraints to growth in the Philippines, among which are: a tight fiscal situation, inadequate infrastructure, weak investor confidence, and an inefficient labor market. Many of these critical constraints are interlinked. Only when the fiscal situation sufficiently improves will the Government be in a position to allocate more resources to infrastructure investment. However, improved infrastructure alone is not enough to lower the cost of doing business and to stimulate private investment. Better infrastructure has to be accompanied by significant improvements in investor confidence, which can be done through the Government adequately addressing governance concerns by implementing initiatives aimed at reducing corruption and improving political stability. Removing these three constraints (e.g., tight fiscal space, inadequate infrastructure, and weak investor confidence) will result in increased private investments from domestic and foreign sources. But, to ensure that growth can be sustained at a high level similar to that achieved by many Southeast and East Asian economies in recent decades, the Government will also need to address the market failures (such as information and coordination externalities) in order to encourage investments for diversifying and expanding the manufacturing sector/exports, and in upgrading the level of technology. Sustained high growth, resulting from removing the critical constraints, will create more productive employment opportunities. This is essential because insufficient and low quality employment is the most critical constraint to poverty reduction in the Philippines. (Aldaba & Hermoso, 2009)
CHAPTER 5
CONCLUSION
Therefore, labor and employment plays a vital role in economy. It affects our economy in different ways. As the researchers observed, there is growing evidence of a negative feedback loop between the labor market and the macro economy: high unemployment and low wage growth are reducing demand for goods and services, which further damages business confidence and leaves firms hesitant to invest and hire. Breaking this negative loop will be essential if a sustainable recovery is to take root. There are such sustainable increases in productivity and it will require accelerated structural transformation – shifting to higher value added activities while moving away from subsistence agriculture as a main source of employment and reducing reliance on volatile commodity markets for export earnings. Further gains in education and skills development, adequate social protection schemes that ensure a basic standard of living for the most vulnerable, and strengthened dialogue between workers, employers and governments are needed to ensure broad-based development built on a fair and just distribution of economic gains. The effect of having a high unemployment rate can turn to a domino effect in stability of a country so it is important to how it can be minimize. The government is trying some methods to be able to minimize the unemployment rate. They are generating plans in order to be productive so that there will be an economic growth.
CHAPTER 6
RECOMMENDATION
The researchers recommend several policy changes to address the unstabilized labor market and put the economy on a more sustainable path. First, economic policies need to be implemented more firmly. As the researchers observed, there is loose implementation of some policies like in fiscal policy that can lead to not being stabilized employment condition. The large increase in public debt and ensuing concerns about the sustainability of public finances have forced some industries to increase their debt risk premiums to implement strict belt-tightening. It is such coordinated public finance measures that are now necessary to support aggregate demand and stimulate job creation going forward.
Second, more substantial repair and regulation of the financial system would restore credibility and confidence of the employees. An encompassing reform of financial markets would substantially help the labor market and could add up to half a percentage point in employment growth.
Third, target the real economy to support job growth. Faltering employment creation and ensuing weak growth in labor incomes have been at the heart of the slowdown in global economic activity and the further worsening of public finances. Clearly, the policy measures have not been well targeted and need reassessment in terms of their effectiveness. Indeed, estimates for advanced economies regarding different labor market instruments show that both active and passive labor market policies have proven very effective in stimulating job creation and supporting incomes. It is evident that across a range of labor market policies – including the extension of unemployment benefits and work sharing programs, the re-evaluation of minimum wages and wage subsidies as well as enhancing public employment services, public works programs and entrepreneurship incentives – show impacts on employment and incomes.
Fourth, additional public support measures alone will not be sufficient to foster a sustainable jobs recovery. The government must act decisively and in a coordinated fashion to reduce the fear and uncertainty that is hindering people to enter the labor force. Incentives to businesses to invest in plant and equipment and to expand their payrolls will be essential to stimulate a strong and sustainable recovery in employment. Fifth, to be effective, adding stimulus packages must be put in concern. People may be encouraged to work especially in the current environment of massively underutilized capacities and high unemployment rates if there are high incentives waiting for them. At the same time, the economy will be right on track if there is a good management for the government in giving these benefits.
References * Issues on Macroeconomics Today, Robert Guell, 2003, Date Retrieved, October 2, 2012 * The Philippine Labor and Employment Plan 2011-2016, October 5, 2012, http://ncmb.ph/Others/dole/dole11.pdf * http://www.studymode.com/essays/Causes-And-Effects-Of-Unemployment-849729.html * http://www.oecd.org/dac/povertyreduction/43280231.pdf * Causes and Effects of Unemployment. StudyMode.com. October 6, 2012, http://www.studymode.com/essays/Causes-And-Effects-Of-Unemployment-849729.html * Sustainable Employment Creation: A Strategic Concern for the Philippine Economy, October 10, 2012, * http://www.competitive.org.ph/files/downloads/Sustainable_Employment_reation_-_A_Strategic_Concern_for_the_Philippine_Economy.pdf * http://pcw.gov.ph/statistics/201210/statistics-filipino-women-and-mens-labor-and-employment * http://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/@publ/documents/publication/wcms_171571.pdf * http://www.investorwords.com/5838.html * www.wikipedia.com * http://www.businessdictionary.com/definition.html * http://www.thefreedictionary.com * http://www23.statcan.gc.ca/imdb-bmdi/pub/3701-eng.htm * http://www.dole.gov.ph/ * http://www.ble.dole.gov.ph/ * http://www.manilavisa.com/services-in-the-philippines/labor-and-employment-in-the-philippines/ * http://www.nscb.gov.ph/ru12/DEFINE/DEF-LABO.HTM * http://www.infoplease.com/ipa/A0854971.html * http://www.bles.dole.gov.ph/PUBLICATIONS/LABSTAT%20UPDATES/vol16_27.pdf * http://www.economywatch.com/economic-growth/philippines.html * http://business.inquirer.net/80138/despite-high-economic-growth-ph-has-highest-unemployment-rate-in-asean * http://www.economicforecasts.org/2008/11/economic-downturn-definition.html * http://www.ehow.com/facts_5048523_definition-parttime-job.html
References: * Issues on Macroeconomics Today, Robert Guell, 2003, Date Retrieved, October 2, 2012 * The Philippine Labor and Employment Plan 2011-2016, October 5, 2012, http://ncmb.ph/Others/dole/dole11.pdf * Causes and Effects of Unemployment. StudyMode.com. October 6, 2012, http://www.studymode.com/essays/Causes-And-Effects-Of-Unemployment-849729.html * Sustainable Employment Creation: A Strategic Concern for the Philippine Economy, October 10, 2012,
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