POST PRANDIUM: Why is total employment declining or not growing as fast as before?

FERNANDO FAJARDO

Again, if there is anything that most poor people must have in order to prosper in life, it is a good paying and secure job. Very few of them are prepared to go into business for lack of training, capital, market knowledge, and other limitations.

One indication of the growing prosperity of the nation is the elimination of poverty. This happens when economic growth is inclusive that allows the poor people or low-income groups to be employed in larger proportion and remunerated at higher rates (in real terms or net of inflation) than before. If not, then the workers are in for the worst situation.

Data from Philippine Statistics Authority shows that total employment reached 27.775 million by the time we entered the new millennium. Ten years after in 2010, this increased to 36.035 million. This corresponds to 826 thousand annual increase in employment during the time of Arroyo.

In 2016, total employment went up again to 40.998 million. This again corresponds to 827 thousand annual increase in employment during the time of Aquino.

In 2017, however, total employment only reached 40.334 million, down by 664 thousand from the previous year. Last year, total employment again increased to 41,160, up by 826 thousand from the 2017 level but higher only by 162 thousand from 2016.

Overall, the present administration created only an additional 81 thousand new jobs annually in the last two years.

What is going to happen this year?

If the January labor force survey were any indication, the year may not be favorable again to workers. The result of the January survey shows that total employment only reached 41.368 million, down by 387 thousand workers from 41.755 million total employed workers in the same month last year.

What explains the decline in job creation under the present administration despite the fact that economic growth continued to be as fast as or even faster than before when seen in the 6.4 percent average annual GDP growth rate in the last two years compared to 6.2 percent average annual growth rate in the six years of the previous administration?

The reason is seen in the declining labor force participation rate or LFPR. The LFPR is the ratio of the total labor force to the total working age group. The country’s working age group is presently set at 15 years old and above.

The LFPR was high at 64.3 percent and 64.1 percent in 2000 and 2010, respectively. This went down to 63.7 percent and 63.5 percent in 2015 and 2016, respectively, and to 61.2 percent 2017 and 60.9 percent in 2018. In January this year, this went down again to 60.2 percent.

The lower LFPR means that many people of working age do not join the labor anymore. Instead, they may opt to continue their schooling, become sick or disabled for some time, or live in such institutions as the church, or join the missions. Some may decide to join the men in uniform, which are considered not part of the labor force.

One thing posited in economics, however, is that the increase or decrease in the LFPR may be also caused by the condition in the labor market. If workers find it hard or longer to land a job, they may stop look for jobs anymore and may decide instead to continue their schooling after high school or even after college, join the men in uniform with more risk to their lives, or do nothing as “estambays.” When survey comes, they are not listed as part of the labor force.

In addition, jobs can be scarce even if the economy is growing fast when growth is propelled more by intensive investment (capital deepening) rather than by hiring more workers. This situation is observed in many countries with advance technology or in emerging countries like the Philippines, that now adapt new but labor saving technology.

Consequently, lower LFPR may also mean higher employment as less are now looking for jobs than before. That also explains the rapid decline in the unemployment rate from 7.4 percent in 2010 to 5.4 percent in 2016, and to 5.3 percent in 2018.

There you are.