Caution urged on jobs plan

SIMPLY creating jobs will not be enough to usher in inclusive growth and decrease inequality, according to a study released by the Asian Development Bank (ADB), a finding that is seen to impact efforts of the Aquino administration to craft a strong employment-generation program in order to stimulate the economy and boost household incomes.

The ADB study, titled “Growth, Inequality, and the Labor Market: The Philippines,” authored by ADB economist Hyun H. Son, tried to explain the reason for the jobless growth in the country and gave recommendations on moving forward.

The study said creating jobs without ensuring that labor supply and skills match the demand of industries will not be able to provide adequate jobs for Filipinos. There is a need, therefore, to study the education system and determine the needs and demands of real industries.

“To accelerate and sustain economic growth, therefore, the government not only needs to support the creation of more productive job opportunities, but also to reckon with the labor mismatch. Expanding the aggregate supply of skills may not be sufficient to address the decline in labor productivity, which, in turn, has slowed the pace of economic growth,” the study stated.

“From a policy perspective, going beyond universal coverage in education is imperative, because the supply of the right kinds of skills needs to be expanded,” it added.

Because of this, the study said, the government, employers and individuals must obtain the right information on real labor market values of different qualifications. This will, in turn, lead to a better understanding of the education system and how to improve or invest in it.

Identifying the problems of the system would lead to better labor productivity, said the study, as it noted that labor productivity in the Philippines only rose by less than 7 percent in 1988 to 2000.

This was a striking contrast to the 30 percent to 50 percent increase observed in other Asian countries like Indonesia, Republic of Korea, Malaysia and Thailand.

The study reported a decline in annual per-capita real-labor income of 2.73 percent from 1997 to 2000 due to the Asian crisis. The drop in earnings was also mirrored by the 4.76-percentage-point contraction in the contribution of real productivity to growth.

While per-capita real-labor income improved and did not post sharp declines after the crisis, the increase was still at a slower pace compared with the precrisis period. The fact that there were more job entrants to the labor force only made it difficult to increase productivity, according to the study.

“Despite the increase in the LFP [labor-force participation] rate among the poor, they were not able to find sufficient employment—as indicated by the negative contribution of the employment rate to the decline in real-labor income. They also worked fewer hours, indicating the appalling lack of job opportunities for the poor,” it added.

The lack of quality jobs, meanwhile, only increased inequality in the labor market. Usually, the study said, inequality in per- capita labor income can be reduced by increasing the LFP rate among the poor, but this was not enough.

The ADB paper said the contribution of the employment rate was only 1.5 percent. This suggested that the disparity in the employment rate between the poor and nonpoor is very small, and does not significantly impact on inequality.

“What matters is the quality of jobs. The factor that contributes most to inequality is labor productivity, at 33.4 percent,” the study said. “Human capital may be an important factor in causing the productivity difference between the poor and the nonpoor.”

This becomes a matter of employability, the probability of being employed with a given level of education. In 1997 employability of people with primary education was 47.8 percent; secondary, 48.9 percent; and tertiary, 56.6 percent. 

However, in poor households, the pattern was reversed. The employability of those who had primary education in 1997 was at 50.2 percent; secondary, 47.6 percent; and tertiary, 43.3 percent.

Poor households only matched the pattern in 2003 when the employability of those with primary education was at 36 percent; secondary, 48.1 percent; and tertiary, 52.1 percent.

“Employability declined sharply during 1997-2003, for the labor force with only primary education, but increased for those with secondary or tertiary education. This could indicate that more-educated workers were taking low-productivity jobs from less-educated workers and, consequently, wages and labor productivity were falling for the educated and skilled workers. This suggests a mismatch between labor demand and supply in the skill mix,” concluded the study. –Cai U. Ordinario / Reporter, Businessmirror