The problem is joblessness, NOT temporary jobs

By Ernie Cecilia | May 6, 2018

Due to incessant grievances, rallies and demonstrations by labor groups, it seems that Filipinos are now aware that many jobs in the country are temporary or “contractual.” This is the reality all over the world. In other countries, more temporary jobs abound, and job contracting is more prevalent than in the Philippines. Unbeknownst to many, lack of jobs is a more serious problem.

The Social Weather Station (SWS) says that 10.9 million Filipinos aged 18 and up are jobless in the first quarter of 2018. This means that more than one of ten Filipinos are jobless, and another one of ten is working as a contractual employee abroad. This places the unofficial national unemployment rate at 23.9 percent.

According to the SWS poll, 12.6 percent or 5.8 million individuals left their old jobs, 7.7 percent or 3.5 million Filipinos lost their jobs involuntarily, while 3.5 percent or 1.6 million are looking for their first jobs but can’t find one.

Joblessness grew during the quarter in most parts of the country, except in Metro Manila where the unemployment rate dropped from 24.9 percent in March 2017 to a record low of 19 percent. Adult joblessness in Luzon grew by 12.1 percentage points to 28.1 percent. In the Visayas, unemployment rose by 6.3 points to 21.6 percent; in Mindanao, the unemployment rate increased by 7.6 points to 20.8 percent. Generally, unemployment rose by 5.6 percent in urban areas and by 10.2 percent in rural areas.

Anatomy of unemployment

A study made by Tejvan Pettinger, Oxford, UK in September 2017 revealed a number of causes of unemployment, among them as follows:

• Occupational immobilities” refer to the inability of jobseekers to learn new skills required by industry and qualify for jobs
• Technological change” refers to development of labor saving technologies that lead to a reduction in demand for manual labor
• Geographical immobilities” refer to the difficulty in moving to regions where jobs are abundant
• Structural change in the economy” refers to decline in certain industries due to lack of competitiveness, resulting in massive reduction of the demand for workers who find that they could not qualify in other new industries
• Frictional unemployment” refers to a situation where people take much time to move between jobs due to lack of information; this also happens when new entrants to the workplace cannot find entry-level jobs because older employees take too much time to move up their career ladder
• Real wage unemployment” occurs when wages in a competitive labor market are pushed above the equilibrium, and the wages have increased higher than the demand for labor; this is also known as “disequilibrium unemployment”
• Voluntary unemployment” happens when people choose to remain unemployed instead of taking jobs, particularly when unemployment benefits are generous
• Demand deficient unemployment” occurs when the economy is below full capacity or when demand for goods and services decline and result in negative economic output; firms will naturally employ fewer workers

Demand and supply equation

The employment equation has remained the same for some time now – Investment equals Employment. While there are two sides to the employment equation, economists continue to debate on which side bears more on unemployment. Many believe that the supply side causes are more prevalent in a typical location – frictional, job-skills mismatch, geographical immobility and real wage unemployment. The other causes attributed to the demand side are high interest rates, global recession, financial crisis, lack of investors, etc.

According to classical economists, the supply side factors are the main causes of unemployment, while demand deficient unemployment tends to be short term in nature.

Keynesian economists argue on the importance of aggregate demand as affecting unemployment. If wages are cut, workers will not be willing to work and unemployment goes up. Then there is reduced consumer spending that causes a fall in aggregate demand, and unemployment becomes worse. If wages are low, workers become demotivated and work less, leading to lower output, and recession could ensue. When recession sets in, firms are reluctant to employ more workers, even at a lower wage. It’s as if Keynes is saying, “In the long run wages may adjust, but in the long run we are all dead!”

Better paying jobs

Labor groups argue that many jobs in the country are “contractual” if not temporary. They want jobs that are regular with the principals, not the job contractors. Jobs in multinationals require higher levels of qualifications – education, training, both hard and soft skills. However, under the legitimate job contracting arrangement today, there are thousands of individuals who have not even completed elementary or high school education but have gained access to decent jobs in multinational companies through the service cooperatives. These workers would otherwise not qualify if they applied directly with the multinationals.

Is it enough to have a job, or should Filipinos aspire for better paying jobs? How can we develop an economy that produces higher quality jobs? Shall we continue to send domestic helpers to such places as Kuwait and the Middle East?

To me, one of the most important elements to move the Philippine economy and the Filipinos’ human development forward is education. I don’t have immediately available Philippine data, so I’ll use USA data (Brookings Papers by Greenstone and Looney) for the purpose of illustrating the impact of education on jobs.

According to a USA study, “those with only a high school diploma accounted for 39 percent of those making $20k-$30k annually, but just 8 percent of those earning $100k or more. College graduates accounted for 18 percent of those earning $20k-$30k and 75 percent of those earning more than $100k.”

What’s the lesson here? Better education is the key to better, higher paying jobs. Among those surveyed by Greenstone and Looney: •

A high school diploma holder is twice likely to make under $40k annually than someone with a college degree •

A college graduate is 9 times more likely to earn $100k than someone with only a high school diploma and 13 times more likely to make more than $200k per year.

But then again, it’s not just about getting higher education. It must be relevant enough to address the needs of industry, or to prepare young Filipinos to become entrepreneurs and help create more decent, better-quality, and higher-paying jobs.

I remember what Abraham Lincoln said. He struggled throughout his personal, professional and political life, but he kept himself prepared and ready to take on any job, including the US Presidency. He said, “I will study and prepare myself, and someday chance will come.” (Email: [email protected])

Better paying jobs Labor groups argue that many jobs in the country are “contractual” if not temporary. They want jobs that are regular with the principals, not the job contractors.

Source: https://www.pressreader.com/philippines/philippine-daily-inquirer/20180506/281986083184018