1. & Patterns In the Philippine Labor Market Understanding the TRENDS
24 May 2014

2. between the structures of GDP and Employment
(1) Serious disconnect
between the structures
of GDP and Employment
Often results in jobless growth
Underscores the structural nature of the unemployment problem
Highlights of labor market performance in 2013.
The year 2013 has been a good year for the economy which registered an average annual growth rate of of 7.2% - one of best performers in Asia and strongest performance in recent years . This was on the back of the robust expansion in the services and industry sectors that more than made up for the slowdown in the agriculture sector .
But the same good news can not be said for the performance of labor market which registered a small or marginal increase in employment due largely to the uneven or mixed outcomes across the three broad sectors of the labor market.
Gains made in services and industry sector were almost offset by the big decline in agriculture sector.
The decline was due largely to extreme weather that prevailed throughout the year – starting with strong typhoons as early as the first quarter hot and dry weather in the second quarter, another typhoon in the third quarter and the most destructive typhoon in the forth quarter.

3. GDP and Employment Shares by Sector: 2013
GDP share (%)
Employment share (%)
Agriculture
10.4
31.0
Industry
32.7
15.6
Services
56.8
53.4
Another reason for the repeated occurrence of jobless growth is the serious disconnect between the structure of production and employment
The agricultural sector which accounted for nearly one-third (31.0%) to total employment contributed only 10.4 % to total GDP .
While industry sector which comprised less than one-sixth (15.6%) of total employment contributed nearly one-third of GDP.
Adjustment will have to be made to increase the employment components of industry sector and reduce the share in agriculture.
There must be a shift or reallocation in labor resources from low productive agriculture sector to high value added industry sector and this is possible only through the expansion of the manufacturing sector that is capable in absorbing low skilled labor.
The shift from agriculture to services often results to low skilled agricultural labor ending up in the informal retail trade and transport sector where employment opportunities are generally low productive and low paid.

4. GDP AND EMPLOYMENT : Divergence in growth patterns
Jobless growth: High GDP growth rate but low employment creation (i.e., 2008, 2012, 2013)
Or the reverse: Low GDP growth rate but high employment creation (i.e., part-time employment in services sector)

5. Employment Growth Rate (%)
GDP AND EMPLOYMENT, 2013
GROWTH RATE (%)
Sector
GDP Growth Rate (%)
Employment Growth Rate (%)
Agriculture
1.1
-2.1
Industry
9.5
3.4
Services
7.1
2.9
All Sectors
7.2
1.4
This slide shows the growth rate of GDP and employment side by side that give us a better story of what happen to labor market last year.
Industry was the growth driver with 9.5% growth rate and this corresponds to 3.05 employment growth.
Services sector also expanded at respectable rate of 7.1% and generated and a 2.4% employment growth.
But these gains were negated by the slowdown in agriculture output to 1.1% growth with corresponding steep decline in employment level - dragging down overall employment to less than one percent.
This contradiction between high GDP growth alongside low employment creation underscore the structural nature of employment problems in the Philippines that will take long years of reforms and adjustments to be in sync with the structure of the economy.
High GDP growth rate with low employment creation (jobless growth)
Structural nature of employment problem

6. Country Agriculture Industry Services
EMPLOYMENT STRUCTURE
SECTORAL EMPLOYMENT SHARE
(% to total employment)
Selected ASEAN Countries, 2009
Country
Agriculture
Industry
Services
Indonesia
39.7
18.8
41.5
Malaysia
13.5
27.0
59.5
Thailand
19.6
38.9
Philippines
35.2
14.5
50.3
Source: Norio Usui, Taking the right road to inclusive growth, Asian Development Bank (2012).
Share of employment in industry lowest in the Philippines
Robust growth in industry output will not translate to more jobs and lower unemployment –
because of low employment base in industry
For growth to make a dent on unemployment rate – growth should occur in agriculture with
large employment base. But in the long-run the shift in labor resources should occur from
agriculture to industry. This is where right policies and programs can make a difference as
shown by the experiences of neighboring ASEAN countries.

7. Country Agriculture Industry Services
OUTPUT STRUCTURE
SECTORAL SHARE
(% to GDP)
Selected ASEAN Countries, 2009
Country
Agriculture
Industry
Services
Indonesia
15.9
49.6
34.5
Malaysia
9.5
44.3
46.2
Thailand
11.5
43.3
45.2
Philippines
12.5
31.5
56.0
Source: Norio Usui, Taking the right road to inclusive growth, Asian Development Bank (2012).
Share of industry output lowest in the Philippines

8. Country 2000 2005 2012 Indonesia 5,554 6,513 8,856 Malaysia 15,688
GDP PER CAPITA
PPP (at constant 2011 international $)
Selected ASEAN Countries
Country
2000
2005
2012
Indonesia
5,554
6,513
8,856
Malaysia
15,688
17,921
21,897
Thailand
8,939
10,901
13,586
Philippines
4,243
4,804
6,005
Vietnam
2,650
3,485
4,912
Cambodia
1,368
1,957
2,789
Lao,PDR
2,327
2,930
4,388
Source: World Bank, World Development Indicators.

9. According to NEDA, it is not unusual for high unemployment even with economic growth. It is normal, as shown by experiences of other emerging economies.
As the economy grows and its structure transforms, employment exhibits volatility as the labor market adjusts---optimism increases among the working age population resulting to more people looking for work.
Further, in the course of structural change, jobs are destroyed and new ones are created.
But the current skills of the labor force may not be able to match the growing and shifting demand for labor.
This may result to increase in unemployment rates at certain points during the transformation process.

10. (2) Economic growth consumption led - fuelled by remittances
Share of capital formation stagnant
Share of trade (X-M) negligible

11. Gross National Income and Gross Domestic Product by Expenditure Share: 2000, 2005 and (at constant 2000 prices)
Percent distribution
Type of Expenditure
2000
2005
2010
2011
2012
2013
1. Household Final Consumption Expenditure
61.6
58.6
57.6
59.2
59.3
58.2
2. Government consumption
9.7
7.4
8.3
8.7
8.8
3. Capital Formation
15.7
16.8
17.3
17.1
15.6
4. Export-Import (X-M)
-1.7
-3.2
0.0
-0.7
0.6
Gross Domestic Product
85.3
79.6
83.2
83.9
84.2
- Net Primary Income from Rest of the
World (ROW)
14.7
20.4
16.1
15.8
Gross National Income
100.0
Source: Philippine Statistics Authority, National Accounts of the Philippines.
Consumption - a main growth driver
Gov’t expenditure on the uptrend
Capital formation (Investment) the engine growth contributed less than one-fifth
to GNI - its share to GNI erratic
Export-Import share low or negative – bad for employment
Share of remittances (net primary income from ROW) erratic– boosting consumption
Danger of too much dependence on remittances

12. Annual Growth Rate in Capital Formation, Philippines: 2002 - 2013
(at constant 2000 prices)
Source: Philippine Statistics Authority, National Accounts of the Philippines.
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
15.7
-0.4
-2.2
3.0
-15.1
-0.5
23.4
-8.7
31.6
2.0
-3.2
18.2
Trend in capital formation highly erratic
Declines occurred in 2003, 2004, 2006, 2009, 2011 and 2012
– this means lack or absence of investment, but significant
upswing in 2013
No investment >>> lower outputs and fewer jobs
Foreign direct investment lowest among original ASEAN

13. (3) Quality Employment - a function of GDP growth

14. Annual Growth Rates in GDP and Full-time Employment
Both move in almost identical direction - With few exception e.g., 2012
Full-time employment expands in times of economic upturn/recovery and contracts during economic slowdown

15. Annual Growth Rates in GDP and Part-time Employment
Moved in opposite direction
Part-time employment expands during economic downturn/slowdown
but decline during economic upturn/recovery
With few exception e.g., 2008

16. “Boom and Bust Pattern”
(4) Employment grew in
“Boom and Bust Pattern”
Monsoon economy > Climate change
Economic crisis (Asian economic crisis/1988 and global financial crisis/
Political events

17. ANNUAL EMPLOYMENT GROWTH RATE (%)
Employment trend characterized by erratic movement or “boom and bust”
May not be observed at all times

18. Boom & Bust - More pronounced year-on-year

19. (5) DUALISM IN THE LABOR MARKET
Formal sector  Precarious employment
Informal sector  Vulnerable employment

20. Own family-operated farm or business
FORMAL SECTOR
(Wage and salary)
Precarious employment
Private establishment
million
Private household million
Own family-operated farm or business
0.127 million
Gov’t/GOCC
3.037 million
Employer
1.272 million
INFORMAL SECTOR
Vulnerable employment
Self-employed
million
Unpaid family workers
3.930 million

21. - agriculture, fishery and forestry sector
(6) Climate change and employment instability
- agriculture, fishery and forestry sector
employment a big drag in employment
growth
El Nino phenomenon (1998, 2000, 2003 & 2005)
Destructive typhoons ( 1998, 2004,2006, 2009, 2012 & 2013)

22. Employment instability is often caused by fluctuations in agriculture, fishery and forestry sector due to extreme weather (climate change)
- Industry employment is small sector (15.6% of total employment) to make a dent on employment growth. Moreover, it has remained stagnant across time.
Service sector employment (53.4%) is generally stable and increasing overtime.
Agricultural sector employment (31%) subject to weather disturbances: steep/mark decline in recent years (2010, 2012,2013) a throwback of the 1998 and 2000 El Nino years

23. ANNUAL EMPLOYMENT INCREMENTS (‘000) BY SECTOR

24. ANNUAL EMPLOYMENT GENERATION: 2007 – 2013
(‘000)
Annual employment generation below 1 million - except in 2011 (largely part-time)

25. - more serious than unemployment problem
(7) Underemployment
- more serious than unemployment problem
(1 out of 5 employed is underemployed;
its magnitude is 2x the unemployed)
Highly correlated with poverty
Variation most pronounced across regions (spatial)

26. UNDEREMPLOYMENT RATE : 2006 - 2013
(‘000)
Declining gradually from 2006 to 2010
Relatively unchanged in the past three years

27. REGIONAL STATISTICS ON UNDEREMPLOYMENT: 2013
TOP 5 REGIONS
1. Bicol Region
37.3
Caraga
27.1
3. Northern Mindanao
25.7
4. Eastern Visayas
25.1
5. MIMAROPA
23.4
BOTTOM 5 REGIONS
NCR
12.1
ARMM
12.4
3. Cagayan Valley
12.9
4. Ilocos Region
20.0
5. Central Luzon
14.5

28. (8) Unemployment
- structural – little change since 2006 (employment and labor force growing at the same pace, translates to unemployment rate unchanged)
- largely a problem of the youth (48.5% of unemployed in 2013)
Rate more than twice the national rate
- Educated workforce – college graduates at around one-fifth of the unemployed

29. UNEMPLOYMENT RATE: 2006-2013 (%)
Unemployment rate moving within a very narrow band: 7-7.5% in
TOTAL UNEMPLOYED PERSON: (‘000)
Total unemployed persons stagnant at less than three million since 2006

30. Annual growth rate (%) Unemployment rate (%)
Employment is barely catching up with the growth in labor force
Unemployment rate (%)
Unemployment rate stays virtually stagnant.
UR down when E > LF
UR up when LF > E

31. REGIONAL STATISTICS ON UNEMPLOYMENT: 2013
(in percent)
TOP 5 REGIONS
NCR
10.3
CALABARZON
9.2
3. Central Luzon
8.7
4. Davao Region
6.9
5. Western Visayas
BOTTOM 5 REGIONS
Cagayan Valley
3.2
Zamboanga Peninsula
3.5
3. MIMAROPA
4.1
SOCCSKSARGEN
4.4
5. CAR
4.5

32. As a general rule, high unemployment is associated with low underemployment and vice versa

33. (9) Flukes in the labor market

34. Flukes (blips) in the labor market
- Underemployment rate surged to 22.8% ( million) in July 2012
- Part-time employment shot up by 18.4% ( million) in April 2012 and dipped by 18.9%
( million ) in April 2013
This phenomenon could be a “fluke” or temporary in nature that needs further validation in the next survey round - hence any attempt on conclusion could be premature (not conclusive).

35. - Sustained rise in private establishment employment
(9) Bright spots in the labor market
- Sustained rise in private establishment employment
Vulnerable employment on the decline
- Strong growth in industry employment

36. (1) Employment in Private Establishments on the Steady Rise
(in percent)
(in ‘000)
Employment share of wage workers in private establishments rose
steadily from 38.1% in to 44.9% in 2013
This suggests that more jobs are now being created in the
economy by the private sector in recent years

37. ………….on the back of strong growth in industry employment in recent years
Sector
2007
2008
2009
2010
2011
2012
2013
Agriculture
0.9
2.1
0.1
-0.7
2.6
-1.4
-2.1
Industry
2.5
6.0
2.4
3.9
3.4
Services
4.4
5.4
4.2
3.8
1.9
2.9

38. Proportion of Vulnerable Employment on the Downtrend
Declining trend in the proportion of self-employed and unpaid family workers from 44.5% in 2006 to 38.3% in 2013
A measure of vulnerable employment – one of the employment indicators in the Millennium Development Goals (MDGs)

39. Employment creation in BPO remained robust
Annual Employment Growth rate (%):
8.4
Note the change in in in industry classification of BPO
– Real estate, renting and business activities
2012 – Break in data series
2013 – Administrative and support service activities

40. DATA LIMITATIONS
Short reference period (snapshot or stock of economically active persons)
Absence of provincial data
Data reliability subject to proxy respondents
Break in the data series due to changes in reference period, coverage and population projection benchmark
Change in definition in April 2005 on unemployment

41. SOME GUIDELINES IN USING LFS DATA
1. Never use the term ”Job” as synonymous to EMPLOYMENT.
The LFS is counting people at work and not number of “jobs”.
Comparison of data should be made on a “year-on-year” basis
not on monthly/“survey round” basis – note: LFS data series
is subject to seasonality.
3. Never use the term ”Quarter”. The LFS is based
on a “past week” reference period not “QUARTER”.
Always bear in mind the “break” in the LFS data series,
the existing data series covers the period 2006 to present.
5. Be cautious in comparing LFS with other sources of data.

42. Employment: Job: Persons or individuals at work
the LFS counts person at work not jobs
in the LFS, a person can be counted only once regardless of the number of jobs he/she held
Job:
an activity that a person does for a living
a set of tasks and duties which are carried out by, or can be assigned to, one or more person (ILO definition)
in establishments (payroll –statistics), a person can be counted several times depending on the number of jobs held

43. The term job is really a misnomer.
- in practice, the generation of job statistics does not exactly involve the
counting of activities or tasks or duties
- counting is tedious and cumbersome
- it does not make sense to do this counting
The object of measurement in job statistics is the same with
LFS i.e., “person at work” or “employed person”. But the difference lies on
the statistical measurement or manner of counting.
In the LFS, a worker is counted only once during the reference week
regardless of the jobs held –in accordance with mutually exclusive principle
in the LFS.
In the job statistics, a worker is counted every time his/her name
appears in one payroll because he/she holds more than one job or changes
jobs during the reference period.

44. URL: http://www.psa.gov.ph
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