Philippine Statistics Authority 1 Understanding the TRENDS & Patterns In the Philippine Labor Market 24 May 2014

PhilippineStatisticsAuthority

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Understanding the TRENDS & PatternsIn the Philippine Labor Market

24 May 2014


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(1) Serious disconnect between the structures of GDP and Employment

Often results in jobless growth

Underscores the structural nature of the unemployment problem


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GDP and Employment Shares by Sector: 2013Sector GDP share (%) Employment share (%)

Agriculture 10.4 31.0

Industry 32.7 15.6

Services 56.8 53.4


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GDP AND EMPLOYMENT : Divergence in growth patterns

Jobless growth: High GDP growth rate but low employment creation (i.e., 2008, 2012, 2013)

Or the reverse: Low GDP growth rate but high employment creation (i.e., 2009 - part-time employment in services sector)


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Sector GDP Growth Rate (%) Employment Growth Rate (%)

Agriculture 1.1 -2.1Industry 9.5 3.4Services 7.1 2.9All Sectors 7.2 1.4

GDP AND EMPLOYMENT, 2013GROWTH RATE (%)

High GDP growth rate with low employment creation (jobless growth)

Structural nature of employment problem


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Country Agriculture Industry ServicesIndonesia 39.7 18.8 41.5Malaysia 13.5 27.0 59.5Thailand 41.5 19.6 38.9Philippines 35.2 14.5 50.3

EMPLOYMENT STRUCTURE SECTORAL EMPLOYMENT SHARE (% to total employment) Selected ASEAN Countries, 2009

Source: Norio Usui, Taking the right road to inclusive growth, Asian Development Bank (2012).

Share of employment in industry lowest in the Philippines Robust growth in industry output will not translate to more jobs and lower unemployment – because of low employment base in industry For growth to make a dent on unemployment rate – growth should occur in agriculture with large employment base. But in the long-run the shift in labor resources should occur from agriculture to industry. This is where right policies and programs can make a difference as shown by the experiences of neighboring ASEAN countries.


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Country Agriculture Industry ServicesIndonesia 15.9 49.6 34.5Malaysia 9.5 44.3 46.2Thailand 11.5 43.3 45.2Philippines 12.5 31.5 56.0

OUTPUT STRUCTURE SECTORAL SHARE (% to GDP) Selected ASEAN Countries, 2009

Source: Norio Usui, Taking the right road to inclusive growth, Asian Development Bank (2012).

Share of industry output lowest in the Philippines


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Country 2000 2005 2012Indonesia 5,554 6,513 8,856Malaysia 15,688 17,921 21,897Thailand 8,939 10,901 13,586Philippines 4,243 4,804 6,005Vietnam 2,650 3,485 4,912Cambodia 1,368 1,957 2,789Lao,PDR 2,327 2,930 4,388

GDP PER CAPITAPPP (at constant 2011 international $)Selected ASEAN Countries

Source: World Bank, World Development Indicators.


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According to NEDA, it is not unusual for high unemployment even with economic growth. It is normal, as shown by experiences of other emerging economies.

As the economy grows and its structure transforms, employment exhibits volatility as the labor market adjusts---optimism increases among the working age population resulting to more people looking for work.

Further, in the course of structural change, jobs are destroyed and new ones are created.

But the current skills of the labor force may not be able to match the growing and shifting demand for labor.

This may result to increase in unemployment rates at certain points during the transformation process.


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(2) Economic growth consumption led - fuelled by remittances

Share of capital formation stagnant Share of trade (X-M) negligible


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Gross National Income and Gross Domestic Product by Expenditure Share: 2000, 2005 and 2010 - 2013 (at constant 2000 prices)Percent distribution

Type of Expenditure 2000 2005 2010 2011 2012 2013

1. Household Final Consumption Expenditure 61.6 58.6 57.6 59.2 59.3 58.2

2. Government consumption 9.7 7.4 8.3 8.3 8.7 8.8

3. Capital Formation 15.7 16.8 17.3 17.1 15.6 17.1

4. Export-Import (X-M) -1.7 -3.2 0.0 -0.7 0.6 -0.7

Gross Domestic Product 85.3 79.6 83.2 83.9 84.2 83.9

- Net Primary Income from Rest of the World (ROW) 14.7 20.4 16.8 16.1 15.8 16.1

Gross National Income 100.0 100.0 100.0 100.0 100.0 100.0Source: Philippine Statistics Authority, National Accounts of the Philippines.

Consumption - a main growth driver Gov’t expenditure on the uptrend Capital formation (Investment) the engine growth contributed less than one-fifth to GNI - its share to GNI erratic Export-Import share low or negative – bad for employment Share of remittances (net primary income from ROW) erratic– boosting consumption Danger of too much dependence on remittances


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Annual Growth Rate in Capital Formation, Philippines: 2002 - 2013(at constant 2000 prices)

Trend in capital formation highly erratic Declines occurred in 2003, 2004, 2006, 2009, 2011 and 2012 – this means lack or absence of investment, but significant upswing in 2013 No investment >>> lower outputs and fewer jobs Foreign direct investment lowest among original ASEAN

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

15.7 -0.4 -2.2 3.0 -15.1 -0.5 23.4 -8.7 31.6 2.0 -3.2 18.2

Source: Philippine Statistics Authority, National Accounts of the Philippines.

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-10

0

10

20

30

40

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

percent


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(3) Quality Employment - a function of GDP growth


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Both move in almost identical direction - With few exception e.g., 2012

Full-time employment expands in times of economic upturn/recovery and contracts during economic slowdown

Annual Growth Rates in GDP and Full-time Employment


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Moved in opposite direction

Part-time employment expands during economic downturn/slowdown but decline during economic upturn/recovery

With few exception e.g., 2008

Annual Growth Rates in GDP and Part-time Employment


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(4) Employment grew in “Boom and Bust Pattern”

• Monsoon economy - - - - - - - > Climate change

• Economic crisis (Asian economic crisis/1988 and global financial crisis/2008-2009

• Political events


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ANNUAL EMPLOYMENT GROWTH RATE (%) 2007 - 2013

Employment trend characterized by erratic movement or “boom and bust”

May not be observed at all times


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Boom & Bust - More pronounced year-on-year


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(5) DUALISM IN THE LABOR MARKET

Formal sector ---------------- Precarious employment

Informal sector -------------- Vulnerable employment


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FORMAL SECTOR(Wage and salary)

Private establishment17.114 million

Gov’t/GOCC3.037 million

Own family-operated farm or business

0.127 million

Private household 1.969 million

INFORMAL SECTOR

Self-employed10.668 million

Unpaid family workers3.930 million

Vulnerable employment

Precarious employment

Employer 1.272 million

In 2013


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(6) Climate change and employment instability

- agriculture, fishery and forestry sector

employment a big drag in employment growth

El Nino phenomenon (1998, 2000, 2003 & 2005)

Destructive typhoons ( 1998, 2004,2006, 2009, 2012 & 2013)


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Employment instability is often caused by fluctuations in agriculture, fishery and forestry sector due to extreme weather (climate change)

- Industry employment is small sector (15.6% of total employment) to make a dent on employment growth. Moreover, it has remained stagnant across time.

- Service sector employment (53.4%) is generally stable and increasing overtime.

- Agricultural sector employment (31%) subject to weather disturbances: steep/mark decline in recent years (2010, 2012,2013) a throwback of the 1998 and 2000 El Nino years


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ANNUAL EMPLOYMENT INCREMENTS (‘000) BY SECTOR


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ANNUAL EMPLOYMENT GENERATION: 2007 – 2013(‘000)

Annual employment generation below 1 million - except in 2011 (largely part-time)


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(7) Underemployment - more serious than unemployment problem (1 out of 5 employed is underemployed; its magnitude is 2x the unemployed)

Highly correlated with poverty

Variation most pronounced across regions (spatial)


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• Declining gradually from 2006 to 2010• Relatively unchanged in the past three years

UNDEREMPLOYMENT RATE : 2006 - 2013(‘000)


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TOP 5 REGIONS

1. Bicol Region 37.3

2. Caraga 27.1

3. Northern Mindanao 25.7

4. Eastern Visayas 25.1

5. MIMAROPA 23.4

BOTTOM 5 REGIONS

1. NCR 12.1

2. ARMM 12.4

3. Cagayan Valley 12.9

4. Ilocos Region 20.0

5. Central Luzon 14.5

REGIONAL STATISTICS ON UNDEREMPLOYMENT: 2013


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(8) Unemployment - structural – little change since 2006

(employment and labor force growing at the same pace, translates to unemployment rate unchanged)

- largely a problem of the youth (48.5% of unemployed in 2013)

Rate more than twice the national rate

- Educated workforce – college graduates at around one-fifth of the unemployed


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TOTAL UNEMPLOYED PERSON: 2006-2013 (‘000)

Total unemployed persons stagnant at less than three million since 2006

UNEMPLOYMENT RATE: 2006-2013 (%)

Unemployment rate moving within a very narrow band: 7-7.5% in 2007-2013


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Employment is barely catching up with the growth in labor force

Annual growth rate (%)

Unemployment rate (%)

Unemployment rate stays virtually stagnant. UR down when E > LF UR up when LF > E


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TOP 5 REGIONS

1. NCR 10.3

2. CALABARZON 9.2

3. Central Luzon 8.7

4. Davao Region 6.9

5. Western Visayas 6.9

BOTTOM 5 REGIONS

1. Cagayan Valley 3.2

2. Zamboanga Peninsula 3.5

3. MIMAROPA 4.1

4. SOCCSKSARGEN 4.4

5. CAR 4.5

REGIONAL STATISTICS ON UNEMPLOYMENT: 2013(in percent)


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3.2% 3.5%4.1% 4.4% 4.5% 4.6%

5.3%5.7% 6.0% 6.3% 6.5%

6.9% 6.9% 7.1%

8.3%8.7%

9.2%

10.3%

R2 R9 R4-B R12 CAR ARMM R8 R10 Caraga R7 R5 R11 R6 PHIL R1 R3 R4-A NCR

UNEMPLOYMENT RATE (%)2013

As a general rule, high unemployment is associated with low underemployment and vice versa

37.3%

27.1%25.7% 25.1%

23.4% 22.7% 22.7% 21.8%20.0% 19.3%

17.9% 17.2%15.1% 14.5% 14.1%

12.9% 12.4% 12.1%

R5 Caraga R10 R8 R4-B R12 R6 R9 R1 PHIL R4-A R11 R7 R3 CAR R2 ARMM NCR

UNDEREMPLOYMENT RATE (%)2013


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(9) Flukes in the labor market


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Flukes (blips) in the labor market

- Underemployment rate surged to 22.8% (+1.470 million) in July 2012

∞ - Part-time employment shot up by 18.4% (+2.514

million) in April 2012 and dipped by 18.9% (-3.064 million ) in April 2013

This phenomenon could be a “fluke” or temporary in nature that needs further validation in the next survey round - hence any attempt on conclusion could be premature (not conclusive).


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(9) Bright spots in the labor market- Sustained rise in private establishment employment

Vulnerable employment on the decline

- Strong growth in industry employment


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Employment share of wage workers in private establishments rose steadily from 38.1% in 2006 to 44.9% in 2013

This suggests that more jobs are now being created in the economy by the private sector in recent years

12,423 12,950.00 13,283.00 13,824.00 14,565.00 15,431.00 16,377.00 17,114.00

0

5,000

10,000

15,000

20,000

2006 2007 2008 2009 2010 2011 2012 2013

(1) Employment in Private Establishments on the Steady Rise

(in ‘000)

(in percent)


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-3-2-101234567

2007 2008 2009 2010 2011 2012 2013

Agriculture Industry Services

………….on the back of strong growth in industry employment in recent years

Sector 2007 2008 2009 2010 2011 2012 2013

Agriculture 0.9 2.1 0.1 -0.7 2.6 -1.4 -2.1

Industry 2.5 -1.4 0.9 6.0 2.4 3.9 3.4

Services 4.4 2.1 5.4 4.2 3.8 1.9 2.9


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• Declining trend in the proportion of self-employed and unpaid family workers from 44.5% in 2006 to 38.3% in 2013

• A measure of vulnerable employment – one of the employment indicators in the Millennium Development Goals (MDGs)

(2) Proportion of Vulnerable Employment on the Downtrend


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(3) Employment creation in BPO remained robust

Annual Employment Growth rate (%): 2007-2013

Note the change in in in industry classification of BPO 2007-2011 – Real estate, renting and business activities 2012 – Break in data series 2013 – Administrative and support service activities

8.4


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DATA LIMITATIONS

Short reference period (snapshot or stock of economically active persons)

Absence of provincial data

Data reliability subject to proxy respondents

Break in the data series due to changes in reference period, coverage and population projection benchmark

Change in definition in April 2005 on unemployment


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SOME GUIDELINES IN USING LFS DATA

1. Never use the term ”Job” as synonymous to EMPLOYMENT. The LFS is counting people at work and not number of “jobs”.

3. Never use the term ”Quarter”. The LFS is based on a “past week” reference period not “QUARTER”.

4. Always bear in mind the “break” in the LFS data series,

the existing data series covers the period 2006 to present.

5. Be cautious in comparing LFS with other sources of data.

2. Comparison of data should be made on a “year-on-year” basis

not on monthly/“survey round” basis – note: LFS data series

is subject to seasonality.


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Job: an activity that a person does for a living

- a set of tasks and duties which are carried out by, or can be assigned to, one or more person (ILO definition)

- in establishments (payroll –statistics), a person can be counted several times depending on the number of jobs held

Employment:

Persons or individuals at work

- the LFS counts person at work not jobs- in the LFS, a person can be counted only once regardless of the

number of jobs he/she held


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The term job is really a misnomer. - in practice, the generation of job statistics does not exactly involve the counting of activities or tasks or duties - counting is tedious and cumbersome - it does not make sense to do this counting

The object of measurement in job statistics is the same with LFS i.e., “person at work” or “employed person”. But the difference lies on the statistical measurement or manner of counting.

In the LFS, a worker is counted only once during the reference week regardless of the jobs held –in accordance with mutually exclusive principle in the LFS.

In the job statistics, a worker is counted every time his/her name appears in one payroll because he/she holds more than one job or changes jobs during the reference period.


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THANK YOU!URL: http://www.psa.gov.ph

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Philippine Statistics Authority 1 Understanding the TRENDS & Patterns In the Philippine Labor Market 24 May 2014