thesis on unemployment in the philippines

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A Jobless Growth: Why is Unemployment Still High in the Philippines?

This paper investigates the effects of education, inflation, consumption, and GDP growth on unemployment in the Philippines. Using Ordinary Least Squares, the impact of each factors affecting unemployment is determined. To yield robust estimates, possible violations of the assumptions of the classical linear regression model (CLRM) are accounted for. Several theories indicate that an increase in education and consumption is associated with a decrease in unemployment. However, results of this study show otherwise. The findings suggest that the country’s labor force grows faster than its GDP. Furthermore, the government highly invests in education, but focuses less on the availability of jobs for future labor force participants. Because of this, there is an oversupply of potential workers that would not only lead to more unemployment but underemployment as well.

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This study investigates the determinants of unemployment in selected ASEAN states: Indonesia, Malaysia, Philippines, Singapore, and Thailand; employing the methods of panel data analysis. Specifically, this study aimed to address the following: (1) identify and compare the determinants of unemployment rate; (2) investigate if there is evidence of a short run tradeoff between inflation and unemployment commonly known as the Phillips Curve; (3) provide analysis on the determinants of unemployment rate in each country; (4) present trends of relevant macroeconomic indicators; and (5) provide policy recommendations that will address the unemployment problems in the 5 ASEAN states. This study made use of secondary time series data of the 9 macroeconomic variables of the 5 ASEAN states from 1980-2011. In this study, the economic model employed is that unemployment rate is a function of real GDP, inflation rate, population, real interest rate, foreign direct investment, real wage, and literacy rate. Results of the least squares dummy variable (LSDV) regression shows that real GDP, inflation rate, real interest rate, and real wage are negatively associated with the unemployment rate. Population shows a positive relationship to unemployment. Furthermore, results suggest that Phillips Curve is relevant in the 5 ASEAN states indicating that the higher the inflation rates, the lower the unemployment in the short-run. Trends of the macroeconomic indicators used in the study is presented giving emphasis on the real GDP and unemployment rate to see the disparities between each ASEAN member state and see the changes of the variables over time. This study also found the determinants of unemployment rate in each of the selected ASEAN member states through employing the ordinary least squares (OLS) regression. More importantly, this study aims to provide possible policy recommendations that will help in minimizing unemployment incidence in the selected ASEAN states in preparation for the forthcoming changes to be brought about by the ASEAN Economic Community in 2015.

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Imperfections such as unemployment and inequality are much discussed drawbacks that exist in any free market society. Those who become unemployed often experience sharp decreases in income and doubt about how long the spells will last. Recent decades have tolerated increases in the unemployment duration and income inequality that lead to unfavorable changes in consumption spending. This paper combines economic, social, and political factors to further explain consumer behavior. Consumption is hypothesized to be a function of the unemployment rate and duration, the interest rate, income inequality, and the election cycle. Data from the U.S. Bureau of Economic Analysis, Bureau of Labor Statistics, the Federal Reserve Bank of St. Louis, and World Bank is used in this time series analysis to test the model in the United States from 1967 to 2015. The results reveal that the unemployment rate, the interest rate, and income inequality have a statistically significant negative relationship with real personal consumption expenditures.

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Unemployment, Labor Laws, and Economic Policies in the Philippines

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• Jesus Felipe 2 &
• Leonardo Lanzona Jr. 3  

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Unemployment and underemployment are the Philippines’ most important problems and the key indicators of the weaknesses of the economy. Today, around 4 million workers (about 12% of the labor force) are unemployed and another 5 million (around 17% of those employed) are underemployed. This Reserve Army of workers is a reflection of what happens in the economy, particularly because of its incapacity to provide jobs (especially in the formal sector) to its growing labor force. The social costs of this mass unemployment range from income losses to severe social and psychological problems resulting from not having a job and feeling insecure about the future. Overall, it causes a massive social inefficiency.

The authors thank participants at the workshop, Employment Creation, Labor Markets, and Growth in the Philippines (19 May 2005, Manila) for their comments and suggestions on an earlier draft of the chapter. They also thank Rana Hasan for useful discussions on labor market issues.

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Felipe, J., Lanzona, L. (2006). Unemployment, Labor Laws, and Economic Policies in the Philippines. In: Felipe, J., Hasan, R. (eds) Labor Markets in Asia. Palgrave Macmillan, London. https://doi.org/10.1057/9780230627383_7

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ADDRESSING YOUTH UNEMPLOYMENT IN THE PHILIPPINES: A policy analysis of JobStart and Enterprise-led Learning Networks (ELLN)

Intended to be an evidence-based policy support for Bureau of Local Employment (BLE) in its continued quest to lower youth unemployment in the Philippines, this issue paper embodies a “choice-problem” type of policy analysis which puts utmost emphasis on both problem analysis and solution analysis.

IOn the one side, the problem analysis reveals various causes and effects of high youth unemployment in the country. Per the problem structuring, there are at least 14 possible causes identified, of which 8 are deemed plausible causes based from review of relevant literature and author’s own previous studies. From the vantage point of BLE, six (6) out of the 8 plausible causes are considered actionable causes. Among the six (6) actionable causes, the policy analysis focuses on SWT and job-skills mismatch. Meanwhile, effects of high youth unemployment EXECUTIVE SUMMARY in the Philippines include, but not limited to the following: hampered economic growth; persistence of poverty and inequality; persistence of unemployment; low returns to human capital investment; social exclusion; and mental health scarring.

IOn the other side, solution analysis revolves around the evaluation of the identified/formulated policy alternatives being proposed for BLE’s consideration: (1) continue JobStart implementation (status quo or no action alternative); (2) terminate implementation of JobStart Program and replace it with Enterprise-led Learning Networks (ELLN); and (3) continue implementing JobStart and then introduce ELLN as a complementary program..

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Title:  ADDRESSING YOUTH UNEMPLOYMENT IN THE PHILIPPINES: A policy analysis of JobStart and Enterprise-led Learning Networks (ELLN)

Researcher: John Emmanuel B. Villanueva 

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Introduction

Historical economic context, unemployment, addressing unemployment, poverty, and inequality.

The Philippines has vast opportunities for growth and development as the country has shown a significant improvement in the overall political, social, and economic processes. Compared to the previous decades, the rates of unemployment have decreased along with poverty statistics, showing an overall prospective image of the country’s future. However, despite the strong emphasis of the government on income equality and poverty reduction along with the growth of GDP, both poverty and economic and social inequality remain persistent in the Philippines. This paper will explore the economic background of the country with a specific focus on unemployment, poverty, and inequality. Recommendations for eliminating these issues will be made to suggest how the Philippines can decrease the impact of the negative conditions on the population.

It is essential to offer a context for understanding poverty and unemployment in the Philippines. Immediately after 1945, a brief economic increase could not be sustained for a long time, with food deficits becoming a significant problem. During that time, the country’s Gross Domestic Product (GDP) depended on the export of timber, fibers, sugar, and coconuts to sustain the import of food. Manufacturing was inward-looking at that time, focusing predominantly on import-substituting, with the country’s products intended predominantly for being consumed domestically instead of being imported overseas (Leonor, 2018). High tariff limits negatively influenced inefficient industries while the Philippines’s over-valued currency and artificially low capital interest rates made those industries capital-intensive. These conditions reduced the ability of the country to absorb labor in gainful employment.

Farming communities that developed after the end of WWII were economically inefficient areas. The expenditures of the government were focused on big towns and cities while the surplus produced by farmers was taken over by landowners and intermediaries. Therefore, the natural response to the mistreatment of farms was for peasants to move to larger cities, especially Manila, in pursuit of work (Leonor, 2018). With the increase of education migration, the depletion of rural areas and educated specialists caused congestion in cities, thus contributing to open unemployment and other related social problems in cities.

In 1961, the aggregate rate of unemployment in the Philippines was 8.5%, 6.1% in 1965, and 7.8% in 1968 (Leonor, 2018). The figures indicate a relatively narrow variation band despite the timing of data collection. However, between 1974 and 1978, the unemployment rates ranged between 3.9% and 5.2%, suggesting that employment increased to levels at which the economy could be considered to be “running at full employment” (Leonor, 2018, p. 145). Nevertheless, it is essential to mention that the figures are no more than estimations that did not account for the time people spent at work as well as how much they earned. Hence, the estimations did not consider underemployment and the unemployment’s full arithmetic equivalent. According to Leonor (2018), that the direct estimates by the ILO Mission “showed that far from the 4%-8% range, unemployment in the Philippines could be placed at between 25%-34% of the labor force in 1971” (p. 146).

According to the latest Trading Economics (2019) data, in the June quarter, the unemployment rate in the Philippines dropped to 5.1% compared to 5.5% in the same quarter the previous year. The all-time highest rate of unemployment in the country was 13.9% in the first quarter of 2000, while the lowest was 4.7% in the fourth quarter of 2016 (Trading Economics, 2019). While the rates of unemployment may seem low, it is imperative to mention that the labor market of the country suffers significantly from the outflow of talent. As mentioned by Urrutia, Tampis, and Atienza (2017), around 2,500 Filipinos flee the country every day in pursuit of better work opportunities as well as to provide for their families. This trend is also associated with the increase of the population in the country, which does not allow for the positive development of employment. The researchers that aimed to forecast the unemployment rate in the Philippines found that estimated values would range in the 6% to 8% range, which are the figures found to be 72% closely relative to actual values (Urrutia et al., 2017). Such variables as labor force rate and population were identified as significant factors contributing to the unemployment rate in the country.

The lack of work for the population leads to a decrease in their income and the subsequent quality of life, thus contributing to rising poverty in the country. Poverty is defined as a “deprivation of essential assets and opportunities to which every human is entitled. Everyone should have access to basic education and primary health services” (Schelzig, 2005, p. 10). It is worth mentioning that between 1985 and 2000, the number of Filipinos living below the poverty line decreased by 10.5% (Schelzig, 2005). If to look at this figure in isolation, the reduction can be considered as a progress in terms of poverty rate; however, the magnitude of poverty increased by more than 4 million (Schelzig, 2005). This is linked to the boost in population’s growth over time. The population growth rate each year can be estimated to be around 2.3%, with the expectations to reach 105 million by 2020 (Schelzig, 2005). As a result of the rapid growth of the population, there are many young people, with the median age being 24.1 years in 2015 (Statista, 2016). As the comprehensive analysis of poverty is associated with a broad and multi-dimensional approach, it is essential to understand that the rate of poverty in the country does not mean that there are many poor people.

In 2015, the overall poverty rate in the Philippines was 21.6%, which means that every fifth citizen lives beyond the poverty line. The median spending capacity for these individuals is less than $2 per day, which many people, including children and youth are forced to work as street laborers or vendors to have enough money to feed themselves. The highest rates of hunger occur in the fishing and agriculture sectors where the majority of workers are poor (International Monetary Fund, 2015). Therefore, poverty represents a multi-dimensional phenomenon, which means that addressing the problem requires a broader focus. For instance, it is essential to consider human capital, which includes population’s education, skills, health, natural capital such as land, clear air, and forested areas, as well as physical, financial, and social capital. Additionally, communicating the connection between poverty and inequality is imperative for the understanding of the real impact of low income on the population.

A way of understanding inequality is calculating the contributions of various socioeconomic groups to aggregate inequality. In most regions, inequality has risen over time due to the increase in the population number and the decrease in the median age (Canlas, Khan, & Zhuang, 2011). As more people moved to large cities, abandoning the economy of small towns that require support, the distribution of income and life quality was becoming unfair. This means that both social and economic inequality represents major issues in the Philippines, where the gap is expected to increase with time. The degree of inequality has become so high that the Philippines became the state with the highest rate of social and social gaps in Southeast Asia. Importantly, the issue is not limited to personal wealth only.

Such aspects as educational opportunities, the unequal distribution of land, vocational capabilities, as well as general welfare programs, are also influenced by the widening disparity between the poorest and the richest members of society. With the pronounced economic inequality that became persistent in the past ten years, there has been an increase in the geographical disparity. For instance, in Mindanao, the second largest island in the Philippines, between 20% and 40% of families live below the poverty rate. However, nationwide, thirty most neglected and deprived provinces are home to one-third of the poorest families, resulting in generational poverty. It is also important to mention that, similar to the global trend of indigenous populations being more vulnerable to unstable economic conditions, in the Philippines, up to two million people belonging to ethnic groups of the nation are the most disadvantaged.

Creating more and better jobs for the population of the Philippines is a challenge for the government. Although, with the sustained growth of the GDP of 7% per year and the elimination of constraints in such fast-growing sectors as Business Process Outsourcing (BPO), it is possible to accelerate the creation of jobs for the population. As the BPO industry is showing annual growth by 20%-30% in the Philippines, it is potentially possible for the formal sector to offer good paying jobs to around two million Filipinos over the next four years (Duke CGGC, 2016). BPO refers to the process of delegating service-type business processes to third-party providers. In the Philippines, BPO is expanding rapidly due to the generally low cost of living as well as the large population of young Filipinos with generally good skills of spoken English. However, the growth of BPO will not resolve the problem of unemployment alone. It is recommended that the government to implement a comprehensive set of reforms to create a business environment that will enable the private sector to create jobs and increase its human capital. Changes are also necessary to secure citizen’s property rights, open the country’s economy to more competition between companies, make business regulations less complex, as well as increase the private and governmental investment in education, health, and infrastructure.

To reduce the adverse impact of poverty on the population, it is first recommended for the government to invest in making birth control accessible to the poor groups. This will enhance family planning opportunities and ensure that families not to raise children in the environment of poverty. Empowering women by giving them more control over their bodies is expected to reduce the population’s growth as well as allow them to pursue career opportunities. It is recommended for the Filipino government also to offer more economic prospects for the population to enable access to employment, as suggested previously.

The key to reducing social and economic inequality in the Philippines is associated with the provision of better education, a higher quality of healthcare, social safety nets, as well as broader growth of the economy, specifically in agriculture. This points to the need for the government to work on the mentioned components of the economic and social well-being of citizens to increase equality. To achieve this, it is possible to collaborate with international organizations that provide resources to the vulnerable population to break the cycle of poverty and enhance the quality of life. Investments into education are essential for increasing the literacy of Filipinos, thus making them more prepared for their future careers. Improving achievement levels within areas such as English, science, and math is essential for creating a strong foundation that will serve as a basis for children’s further education.

To conclude the paper, it is noteworthy to mention that the Republic of the Philippines has vast growth opportunities since the economy is slowly improving, while unemployment rates are decreasing. The contribution from the BPO industry encourages the creation of job opportunities for young and educated Filipinos, thus increasing their contributions to the economy. However, despite the positive prospects, millions of people live beyond the poverty line and do not have the necessary resources to sustain themselves. The challenge is especially relevant when discussing the growing generations of Filipinos who are raised in unacceptable conditions. Although, through collaboration with relevant authorities in the sphere of healthcare, education, and social support, the Filipino government has the opportunity to reduce the burden of unemployment, poverty, and inequality. Future research on this topic can be done in regards to whether the current efforts of the government have been effective.

Canlas, D., Khan, M. E., & Zhuang, J. (2011). Diagnosing the Philippine economy. Toward inclusive growth. London, UK: Anthem Press.

Duke CGGC. (2016). The Philippines in the automotive global value chain . Durham, NC: Duke University.

International Monetary Fund. (2015). Philippines: 2015 article IV consultation-staff report; press release. Washington, DC: International Monetary Fund.

Leonor, M. (2018). Unemployment, schooling, and training in developing countries. Tanzania, Egypt, the Philippines and Indonesia. London, UK. Routledge.

Schelzig, K. (2005). Poverty in the Philippines: Income, assets, and access. Mandaluyong City, Philippines: Asian Development Bank.

Statista. (2016). Median age of the population in the Philippines . Web.

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IvyPanda. (2021, September 11). The Philippines' Unemployment, Inequality, Poverty. https://ivypanda.com/essays/the-philippines-unemployment-inequality-poverty/

"The Philippines' Unemployment, Inequality, Poverty." IvyPanda , 11 Sept. 2021, ivypanda.com/essays/the-philippines-unemployment-inequality-poverty/.

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IvyPanda . "The Philippines' Unemployment, Inequality, Poverty." September 11, 2021. https://ivypanda.com/essays/the-philippines-unemployment-inequality-poverty/.