It’s unemployment, stupid!

We can keep telling each other until we are blue in the face that the world financial crisis won’t affect us that badly or worse, still to land on our shores. But the facts of the matter are: the economy has already retreated sharply, exports have declined, there are more factory closures and job layoffs and because foreign direct investments have declined, prospects for new jobs have dimmed.

For the NEDA Chief to say our economy is tough and resilient is probably true on the macro level but in the end, meaningless where it counts. It says nothing about more Filipinos going hungry and more suffering all around on the personal level. As UP economics professor Ben Diokno puts it in his presentation before the foreign correspondents association last Monday, “it is not true that the economic storm is coming. It has arrived.”

For Filipino government leaders, Diokno thinks the real cause for concern in the light of today’s rotten economic environment has to do with unemployment. Joblessness will worsen, the professor warned, both here and abroad. “Because of high population growth rate, the Philippine economy should create between one to 1.5 million new jobs every year. The important implication is that we cannot afford to have any job loss. Every single job lost is one too many.”

Actually, this jobs problem predated the financial crisis but the crisis could make the problem unbearable. Where will this year’s new graduates go for jobs? In January 2008, only 150,000 jobs were created. And even this aggregate number is misleading, Diokno pointed out, because 488,000 new wage-and-salary jobs disappeared. The job loss was offset by the creation of relatively less desirable own-account jobs (397,000) or people who ended up working for themselves and unpaid family workers.

Between April 2007 and April 2008, 168,000 jobs were lost, Diokno cited statistics. The number of unemployed rose by 222,000 – from 2,692,000 (in April 2007) to 2,914,000 (April 2008). The number of underemployed increased by 248,000 – from 6,376,000 (in April 2007) to 6,626,000 (April 2008). And the definition of “employed” is very liberal — if you work at least one hour a week, you are employed as far as government statistics are concerned.

“Good’ jobs are down, ‘bad’ are jobs up.” Diokno rued. About 27 percent or 351,000 were unpaid family workers, and, surprisingly, there are 197,000 new public administration jobs, mostly street sweepers. In July 2008, 1.2 million new jobs were created. But half or 614,000 of the jobs created were in the agricultural sector.  Diokno wondered if the Philippine economy is moving forward or sliding back into a backward, agrarian economy.

By contrast, manufacturing jobs continue to disappear (about 125,000). And for the first time, the transportation, storage and communications sector has started to layoff workers – some 107,000 jobs were lost.

A growing number of overseas Filipino workers are also losing their jobs, threatening our remittances cushion. Slower growth in overseas remittances will result in additional pressure on the domestic labor market as more of the overseas workers are compelled to return home. Dubai, for instance, is now in a bad way with its economy and has started to send expatriate workers home.

What to do? Prof. Diokno underscores the vital role of government in this crisis situation because consumer spending has slowed and investors are hesitant to invest. Creating new jobs has become a new responsibility for government through effective economic stimulus. Diokno wants government to turn this problem into an opportunity to fix infrastructure through fiscal expansion.

On top of Diokno’s list is investing in rural infrastructure. The focus should be on labor-intensive projects that may enhance agricultural productivity – for example, small irrigation facilities and farm-to-market roads.

Diokno wants government to focus spending on maintenance of existing public infrastructure and away from big projects because this is more labor intensive than new construction and more quickly doable. Diokno, a closet optimist, thinks there is also less opportunity for rent-seeking or corruption in maintenance work than in new construction; no right-of-way costs to delay take off of projects and to cheat government coffers with overvalued claims.

He is also calling for investment in reforestation. It is pro-poor and could create a lot of jobs. “The environment is the base of the survival of the poor.” The harsh reality, Diokno observed, is that the Philippines lost forest cover at the rate of 2.1 percent every year from 2000 to 2005. Our rate of forest denudation is the fastest in Southeast Asia and the seventh in the world, Diokno asserts. Now is the opportunity to address this problem as we deal with the worsening jobs problem arising from the crisis.

As was also suggested by other economists, Diokno thinks government should use this period to identify skills needed by the New Economy and retrain Filipino workers accordingly. The skills development should be done jointly with the private sector. Filipino workers should be given opportunities to acquire the ‘right’ skills through government higher education and training facilities.

Economic recovery will definitely take place, though experts disagree when. It is the responsibility of the government to prepare government workers for the new skills needed by the New Economy when it finally recovers, Diokno asserts. We should be ready to take advantage of opportunities, he pointed out, once the world economy turns around. In other words, government should increase its investment in human capital.

Finally, Diokno insists it is government’s duty to provide safety nets for Filipinos who have been, and will be, hurt by the economic crisis. But such government assistance should no ulterior motive. It should be given to the intended beneficiaries wherever they are, in urban settlements or rural communities, and regardless of their political color. Hopefully, whatever little money we can spare would not wasted to support political ends such as charter change.

In other words, Diokno supports the expansion of the conditional cash transfer program. As a humane society, no Filipino child should suffer in the wake of the crisis. As an initial step, the program providing benefits to family who send their kids to school should be made universal for all public school students from Grades 1 to 4. Government should work harder to educate every Filipino child and to provide him basic health care. In other words, government should increase its investment in human capital.

Government has such a pivotal role in alleviating the negative impact of the global financial crisis on our people. It is hoped that this administration redeems itself and its reputation by performing its role in the highest professional standards and devoid of political motivations. I guess we are all dreaming but given our situation, we shouldn’t be deprived of our right to dream.–Boo Chanco, Philippine Star