The Philippine jobs challenge: How to create more, better jobs

MANILA, Philippines – The Philippines faces an enormous jobs challenge. Good jobs — meaning jobs that raise real wages or bring people out of poverty — needed to be provided to 3 million unemployed and 7 million underemployed Filipinos — that is those who do not get enough pay and are looking for more work—as of 2012.

In addition, good jobs need to be provided to around 1.15 million Filipinos who will enter the labor force every year from 2013 to 2016. That is a total of 14.6 million jobs that need to be created through 2016.

Did you know that every year in the last decade, only 1 out of every 4 new jobseeker gets a good job? Of the 500,000 college graduates every year, roughly half or only 240,000 are absorbed in the formal sector such as business process outsourcing (BPO) industry (52,000), manufacturing (20,000), and other industries such as finance and real estate.

Around 200,000 new job seekers find work abroad, and around 60,000 will join the ranks of the unemployed, go back to school, or rely on financial support from family for the time being.

This still leaves 600,000 new jobseekers who have no choice but to work in the low-skill and low-pay informal sector in rural and urban areas.

Higher growth can provide more Filipino workers with good jobs. With sustained GDP growth of 7 percent per year and the removal of constraints in fast growing sectors (e.g., addressing skills shortages so that the BPO industry can accelerate its annual growth from 20 to 30 percent), the formal sector will be able to provide good jobs to around 2 million people in the next 4 years – that is double the current figure.

Even so, the majority of Filipino workers will still be left out. By 2016, around 12.4 million Filipinos would still be unemployed, underemployed, or would have to work or create work for themselves in the low pay informal sector such as selling goods in sari-sari stores (small retail stores) and peddling on the streets, and driving tricycles and pedicabs.

Addressing this jobs challenge requires meeting a dual challenge: expanding formal sector employment even faster, while rapidly raising the incomes of those informally employed.

To create good jobs for the 12.4 million, a comprehensive package of reform is needed to create a business environment that is conducive for the private sector to create jobs and increase human capital. Reforms that will secure property rights, open the economy to more competition, simplify business regulations, and increase investments in health, education, and infrastructure are needed.

But will the private sector have the incentive to invest and create jobs for the 12.4 million Filipinos who are left out of the fast growing formal sector?

What do you think is key to creating more and better jobs in the country? Creating jobs for millions is a daunting task, but perhaps we can agree to start somewhere. –Karl Kendrick Chua