How and why the labor force framework had to be redefined

(Excerpted from the milestone paper by the Chief Labor and Employment Officer of the Bureau of Labor and Employment Statistics (BLES), Department of Labor and Employment(DOLE), Manila, Philippines “Redefining the Labor Force Framework: Some Inputs from the Philippine Experience.” The paper was prepared for the seminar on “Employment and unemployment: Revisiting the relevance and conceptual basis of the statistics” conducted by the International Labour Office on December 4 to 5, 2008 in Geneva, Switzerland.)

The Philippine Labor Force Survey (LFS) has been collected by the National Statistics Office (NSO) since May 1956, undergoing changes through the years from population coverage, reference period and concepts. Currently, it is conducted during the first month of every quarter with a past week reference period and covers about 51,400 households nationwide.

The LFS concepts and measurements fundamentally follow the international standards as contained in the resolution concerning statistics of the economically active population, employment, unemployment and underemployment, adopted by the 13th International Conference of Labour Statisticians (ICLS) in October 1982.

As a major user of the labor force statistics, the Department of Labor and Employment (DOLE), through its statistical arm, the Bureau of Labor and Employment (BLES), closely coordinates with and provides feedback to the NSO regarding the LFS results. As a major statistical agency in the Philippine Statistical System (PSS), the BLES can influence the kind of labor statistics that data producing agencies generate. Thus, this paper is prepared from the user’s point of view as regards the limitations of the labor force concepts and definitions with the aim of providing inputs for the review of the labor force framework under Resolution No. 1 adopted by the 13th ICLS.

The issues discussed herein have posed conceptual difficulties in the course of analyzing the labor force statistics for planning, and policy and program development in the DOLE.

New unemployment definition

A milestone in recent years of the Philippine labor force statistics was the change in the definition of unemployment through Board Resolution No. 15 passed in 2004 by the National Statistical Coordination Board (NSCB), the national policy making body on statistical matters. The decision to revise the unemployment definition was prompted by the fact that unemployment rate has been frequently used as one of the benchmarks for comparing the economic performance and growth potentials of economies around the globe. In 2004, only ten (10) out of 88 countries conducting the labor force surveys were not using the “availability to work” criterion. And the Philippines was one of these countries. So starting with the April 2005 round of the LFS, those counted as unemployed should satisfy simultaneously the three criteria: (1) without work, i.e., were not in paid employment or self-employment; (2) seeking work, i.e., had taken specific steps in the past reference week to seek paid employment or self-employment; and (3) currently available for work, i.e., were available for paid employment or self-employment in the past week or within two weeks. (Ms. Rivera has a flowchart for identifying the unemployed which we are unfortunately not reproducing here.)

It however retained the relaxation of the seeking work criteria by accepting five (5) reasons as valid for not actively seeking work.

The change was met with so much resistance (even up to this time) especially from economists and analysts as the adoption of the new definition has led to a drop in the country’s unemployment rate by almost two (2) percentage points, and correspondingly, the labor force participation rate by almost three percentage points. Because of this, there was public perception that the change was intended to “mislead data users.”

Nevertheless, the adoption of the new unemployment definition has provided the major statistical agencies the opportunity to educate users and analysts of labor statistics as the NSCB Resolution mandated them to conduct advocacy campaigns in major regional centers of the country.

What emerged in these fora was that the most common misconception and conceptual difficulties identified were on the one-hour criterion in the definition of work, unemployment especially the relaxation of the seeking work criterion, underemployment, multiple jobs, and job-vs-employment creation measurement.

Inactive unemployed

A critical concern is the large proportion of the inactive unemployed in the Philippines. These are persons with no job or business who were not seeking work but were available and willing to take up work.

Prior to April 2005, they constituted about seventy percent of the total unemployed. In April 2005 and thereafter, their share went down to a little above fifty percent. (There is an Annex Table 1 that we are unfortunately unable to reproduce.)

These inactive jobseekers were mostly non-heads of households (82.9 percent), very young (46.9 percent) and with secondary education ((46.3 percent) and college educated (33.4percent).

These demographic characteristics indicate that this group can afford not to work, and hence does not exert much pressure on the labor market. Whether this is a universal phenomenon or something unique to the Philippine labor market needs to be validated by statistics from similarly situated countries as the Philippines. Statistics available in websites from these countries do not allow us to compare as there are few notes provided.

Female LFPR

Whether the concepts and definition is “culture sensitive” can not be said at this point. In the Autonomous Region of Muslim Mindanao where per capita regional domestic product has been consistently the lowest and where it is predominantly Muslim, the region has consistently obtained one of the lowest unemployment rates over the years. In one of the consultative meetings with the regional staff of the NSO, we probed on the reasons for this low unemployment rate. The reason forwarded by our informant was that respondents of the LFS were usually male members of the household and they would not admit that their women members are working when it is obvious that Muslim women are engaged in trading or are seen minding stores in the area. Thus, statistics also indicate the low labor participation rate of women in the region.

Seeking work for overseas jobs

The phenomenon of overseas employment impacts positively on the Philippine labor market as it has created an avenue for more employment opportunities for Filipino workers abroad. It has also changed the perspective of new entrants to the labor force as it broadens their choices of labor market. Further, it has influenced their career decisions by enrolling in college courses that will give better chances of working abroad. In the present LFS, the intended labor market is not asked of jobseekers, whether their job search is confined to local market or for overseas. This development must be considered in redefining the labor force framework.

Underemployment

In the Philippines, underemployment is a more serious problem than unemployment. Statistics in Annex Table 2 indicate that regions with low per capita GDP have higher underemployment rates. (We are not here reproducing this annex.)

According to the Philippine NSO, underemployed persons are those employed persons who express the desire to have additional hours of work in their present job or in an additional job, or to have a new job with longer working hours (NSO, 2005). Operationally, it is measured by asking respondents whether s/he wants more hours of work or s/he look foradditional hours of work during the past week. The underemployment rate is estimated by getting the proportion, expressed in percent, of the underemployed to total employed persons. On the other hand, the time-related underemployment or visible underemployment is the underemployed working less than 40 hours during the reference week. This is considered the working hours threshold except for agriculture and fishery which could be lower than forty hours. As defined therefore, underemployment is not a useful analytical concept because it is subjective, that is, it only captures the respondents’ expression of desire to have additional hours of work or to have another job with longer working hours, without probing further whether there have been concrete steps taken to seek to work additional hours and/or whether they were available within specified subsequent period to work additional hours. It is indeed unfortunate that the Philippines, despite the potential usefulness of these data in view of the kind of labor market that exists, has not been able to adopt the recommended measurement embodied in the resolution adopted by the 16th ICLS in 1998. –Editha Rivera, Manila Times

(Continued on Monday)