Philippine unemployment rising undermines Aquino’s growth

Jeany Rose Callora left her home on the Philippine island of Negros last year to work at a soft- drinks factory in Manila, hoping to earn money for college. When her contract ended six months later, she said she couldn’t get another job in Southeast Asia’s fastest growing economy.

“I’ll do anything: saleslady, factory worker, waitress,” the 20-year-old high-school graduate said as she waited 11 hours for an interview in an employment agency in Manila, surrounded by dozens of other applicants.

With one of the youngest populations in the world, President Benigno Aquino needs to find jobs not just for the current unemployed, but also for the growing ranks of teenagers entering the workforce in the Philippines.

With one of the youngest populations in the world, President Benigno Aquino needs to find jobs not just for the current unemployed, but also for the growing ranks of teenagers entering the workforce in the Philippines.

Employees take phone calls as they work in an SPi Global call center in Manila. Call center agents are the most in demand, followed by salesmen and service crew, according to Phil-JobNet, the official job portal of the government.

Callora is one of 2.89 million unemployed Filipinos, swelling a jobless rate that climbed to 7.1 percent in January from 6.8 percent the previous month. About 660,000 positions have been lost since October 2011, even as the economy expanded 6.6 percent last year.

The nation is struggling to reconcile a lack of jobs for people like Callora, who have little training, with a shortage of skilled workers in industries such as information technology and shipbuilding. While the economy is being boosted by call centers and remittances from workers who moved abroad, the country’s poverty level hasn’t decreased since 2006.

“What we’re seeing is a two-tier economy with booming sectors favoring skilled workers,” said Frederic Neumann, co- head of Asian economics research at HSBC Holdings Plc in Hong Kong. “The government must boost labor-intensive sectors such as manufacturing, agriculture, or else rising inequality will create pressure for increased social spending.”

Aquino’s Plan

President Benigno Aquino has promised to create millions of jobs to cut unemployment to 6 percent at most by the end of his term in 2016. Proposals include easing curbs on foreign investment, boosting tourism and infrastructure to provide more work outside the capital, and expanding farming and fishing, said Economic Planning Secretary Arsenio Balisacan, who’s in charge of the plan.

“Jobs are now the biggest priority of the government,” Balisacan said in an April 29 interview. “We are using all resources to create jobs as fast as we can.”

The Philippines attracts the least foreign direct investment in Southeast Asia, according to the World Bank. That’s in part because contract disputes and regulatory reversals in the past led companies, including Frankfurt, Germany-based Fraport AG, to leave the country. Fraport stopped work on an almost-completed airport terminal building in 2002 and later sought compensation after having its contract nullified by the Supreme Court.

“The low investment share is because past economic growth has depended more on services that are less capital intensive than industry,” said Norio Usui, senior country economist for the Philippines at the Asian Development Bank in Manila. “The Philippines’ biggest need is to generate productive job opportunities for the growing working-age population.”

Teenage Ranks

Presiding over a country with one of the youngest populations in the world, Aquino needs to finds jobs not just for the current unemployed, but also for the growing ranks of teenagers entering the workforce. The Philippine labor pool will expand by almost 18 million, or 31 percent, to 75 million by 2020 compared with 2010, Bank of America Corp. projected in April last year.

Almost half of all jobless Filipinos are between the ages of 15 and 24, according to the government statistics office. The biggest area of employment remains agriculture and fishing, which provides work for 30.4 million people, or almost a third of the population. About 8 percent work in manufacturing.

Call center agents are the most in demand, followed by salespeople and service crew, according to Phil-JobNet, the government’s official job portal. The site has 14,165 vacancies in so-called business process outsourcing, which includes call centers, from companies such as Dublin-based Accenture Plc (ACN) and Sitel LLC, headquartered in Nashville, Tennessee.

Night Work

Leny Aceveda Roxas, who in March lost her job providing after-sales support for an outsourcing company, said she’s trying to avoid BPO jobs, which typically involve working at night. “But with tough times and the lack of opportunities elsewhere, I’ll have to consider it.”

The Business Processing Association of the Philippines forecast the industry will employ 1.3 million people by 2016, from 638,000 in 2011. Most of the jobs require fluent English speakers.

Banking, services, construction and administration are among other industries struggling to find competent staff.

“The demand for workers is there but the pool of qualified applicants is shallow,” said Joann Hizon, vice president of human resources at SM Investments Corp. (SM), the holding company of Philippine billionaire Henry Sy. SM plans to hire 8,800 workers this year to boost its payroll from 71,500 as it expands its property, shopping mall, and banking businesses, Hizon said in an interview.

Missing School

The Philippines spent the least on public education in 2009 in proportion to its economy among major Southeast Asian nations including Thailand, Indonesia and Malaysia, according to the latest comparable figures available from the World Bank. The budget was 2.7 percent of gross domestic product, compared with 6 percent for Malaysia and 3.5 percent for Indonesia.

Aquino promised to boost spending more than 20 percent this year to address a shortage of teachers, textbooks and classrooms. The government also aims to fund more scholarships for vocational courses like bartending, welding and health care.

For the few who can afford to go to an elite college, the situation is very different. Joy Billones, a legal management graduate from Ateneo de Manila University, said responses to her job applications have been good.

“We’re just working on the salary range,” said Billones, who has offers from five companies, including Security Bank Corp. and SM Supermalls, part of SM Investments. “I’m lucky because companies prioritize applicants from top schools.”

Take Years

Still, investment in schools and colleges will take years to improve skill levels and the government in the meantime needs to attract investment in factories, farms and mines to reverse the unemployment trend.

“The government is investing in education so that, over the long term, workers have higher skills,” said Prakriti Sofat, a Singapore-based regional economist for Barclays Plc. “At the same time, we need opportunities for the currently unemployed.” The nation has the second-highest jobless level in Asia-Pacific.

With limited opportunities at home, many jobseekers go abroad to find work. The number of overseas Filipino workers climbed 15 percent in 2011 to almost 1.7 million, the Philippine Overseas Employment Administration said. The funds they sent home totaled $21.4 billion last year, about 10 percent of gross domestic product.

Rating Upgrade

The remitted funds have helped fuel economic growth that the World Bank estimates will stay above 6 percent through 2014. Standard & Poor’s upgraded the Philippines to investment grade for the first time last week, as Aquino battles corruption and increases spending on roads and schools.

Still, the proportion of families living below the poverty line in the first half of 2012 was 22.3 percent, almost the same as the 23.4 percent in 2006, the government statistics agency said in an April 23 report.

That’s putting pressure on Aquino to divert funds to social services, with the government increasing its conditional cash transfer program to 44.26 billion pesos this year to benefit a record 3.8 million families. The program funds poor households to keep their children in school and get regular health checks.

Callora, the youngest of seven siblings and daughter of a farmer, is not giving up hope and refuses to go back home to Negros, the country’s largest producer of sugar cane.

“I’m going to try my hardest to find work and to study again,” she said. “I’m still young.” Then she added shyly: “I really want to be a stewardess.”

To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net