Unemployment woes persist

How healthy is the Philippine job market? Its condition has remained weak, and may have even deteriorated slightly, from where it was a year ago, according to the April 2012 Labor Force Survey (LFS) results. While the unemployment rate eased slightly to 6.9% this April from 7.2% a year ago, the overall quality of jobs has deteriorated.

Sure, some one million new jobs were created. But the labor force grew by slightly less than one million. So was it a wash? Not exactly. The headline unemployment rate hides the reality that the quality of employment has worsened.

A comparison of the April 2012 LFS results with those of April 2011 (definitely a bad quarter) reveals the following:

First, the number of part-timers (those who work for less than 40 hours) has increased by 2.5 million, while the number full-timers has declined by 1.6 million. The number of part-timers rose to 42.8% in April 2012 from 37.1% in the same period last year.

Second, and related to the first, the mean hours worked fell to 39.2 hours from 41.6 hours, or by 2.4 hours daily from a year ago. This fewer hours of work translates into lower take-home pay for many workers.

Third, underemployment has worsened. It increased by 185,000, to 7.312 million in April this year from 7.127 million last year. An underemployed worker is one who express the desire to have additional hours of work in their present job, or to have additional job, or to have a new job.

One in five employed workers in Metropolitan Manila is considered underemployed. But outside the National Capital Region, underemployment is much more serious. It is specially critical in the Bicol region where more than one in three workers are underemployed. In 10 of 17 administrative regions, underemployment is around 20% or higher.

Fourth, youth unemployment remains high and has deteriorated. More than half (51.7%) of the unemployed were in age group 15-24 years. Some 14,000 youths have joined the ranks of the unemployed, to 1.45 million this April from 1.44 million last year.

Fifth, non-farm jobs, that is, total employment less jobs in the agriculture sector, as percent of total employment has remained unchanged. It was 67% this April and 67% in April last year.

Sixth, the percentage of total workers employed less unpaid family workers to total employment has slightly deteriorated, to 88.1% this April, 88.2% last year.

Seventh, the percentage of unemployed plus unpaid family workers to total work force, or a broad measure of the size of unemployment has a slight improvement, to 18.8% this year from 19.0% last year.

Eight, the percentage of unpaid family workers to total employment has deteriorated slightly, to 11.9% this April from 11.8% last year.

It’s not all bad news, however. One million new jobs were created, to 37.8 million this April from 36.8 million a year ago. But of the one million new jobs, almost half consisted of low-paying farm jobs (337,000 workers) and the so-called unpaid family workers (158,000 workers). Yes, that’s how misleading the labor statistics are: a worker maybe considered employed even if has not been paid, and there are some 4.5 million such workers.

Implications for policy of the April 2012 LFS results (breaker)

What are the policy implications of the April 2012 employment numbers? There are at least two, one positive, the other negative.

First the positive implication: it is easy to create jobs. The increased public infrastructure program has contributed to the creation of the some 173,000 new workers in the construction industry. The problem, a minor one, is that it’s unclear how many of these jobs are part-time or full-time. For some, it doesn’t matter. Having a part-time job is better than not having one.

Think of the employment effect of the government infrastructure program. If only the government was twice as fast in implementing projects that have already been authorized by Congress, then jobs could have been generated sooner rather than later. Put differently, had the Executive requested an infrastructure budget twice the size of what it had asked, then more jobs, direct and indirect, could have been created.

Next, the negative implication: the persistently weak jobs market suggests that the 6.4% GDP growth in the first quarter of 2012 is likely to be unsustainable. It’s hard to build a case where the economy grows at rates exceeding its long-term growth, on a sustained basis, under a regime of high unemployment.

Benjamin Diokno is professor of Economics at the School of Economics, University of the Philippines (Diliman). He was formerly secretary of budget and management in the Estrada Cabinet and undersecretary for budget operations in the Aquino 1 administration. –Benjamin E. Diokno, Businessworld