Putting Filipinos to

Work:
The Continuing Challenge
of Job Creation

Cielito F. Habito
Ateneo Center for Economic Research & Development
Ateneo de Manila University
 Overview
Introduction:
How to create jobs, how to kill them
The economy and jobs situation:
What’s wrong with the picture?
Employment diagnostics
Why can’t we generate the
needed jobs?
What needs to be done:
In quest of a job-friendly economy
How to Create or Kill Jobs
Some True Stories
 Carabaos, Not Fertilizers:
A Lopero, Jose Dalman Farmer’s Plea
 Killing the Goose:
The Story of E.O. 500 and 500-A
 Beating Benguet from Afar:
Mindanao farmers show the way
 Harvard Medical School Leaves Town
How not to promote medical tourism
Top-Heavy Growth,
Bottom-Heavy Needs
 Narrow: Growth propelled primarily
by a few leading sectors and
geographic areas
 Shallow: Weak linkages to rest of
economy – e.g., low domestic value-
added exports
 Hollow: Jobless growth; poverty-
increasing growth
Top-Heavy Growth,
Bottom-Heavy Needs
Poverty incidence rose from 30% in 2003 to
33% in 2006
Real per capita income fell 10% nationally,
and fell in 50 provinces between 2003 and
2006 (PHDR 2008/2009)
Basic education enrollment rates dropped
in 75% of provinces between 2002 & 2004
Wide disparities in life expectancy across
provinces: from low of 53.4 (Tawi-tawi) to
high of 74.6 (La Union)
Philippines: Key
Economic Trends, 2009
 Prices: Inflation had eased consider-
ably since 2008, but rising anew
 Jobs: Labor force growth outstrips job
generation; unemployment rate up
 Incomes: Largely stagnant
 FDI flows appear to be recovering.
 Balance of payments favorable
 Net income inflows have “defied
gravity”
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Philippines: Key Economic
Trends, 2009
 Agriculture, manufacturing down
 Exports continue steep slide
 Overall investment drops
 Foreign investments recover
 Government construction
dwindles
 Government deficit balloons
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Price Rises on Renewed Uptick
Poor, countryside at a
disadvantage
Year Inflation Rate (%)

2006 6.2
2007 2.8
2008 9.3
Sept 2009 0.7
Dec 2009 4.4
Non-NCR 4.5
Food 5.3
Full Year 3.2
 Domestic Production (GDP):
Government spends its way out
of recession
•Government consumption & cons-
truction up 8.5% & 15.7% respectively
•Consumption growth moderates as
consumers pull back
but…
•Total investment spending dropped 10%
even with brisk government construction
•Exports fell 15%

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 Overall Output Growth
RP Narrowly Avoids Recession
2008 2009
Indicator
Q4 FY Q1 Q2 Q3P Q3 Q4 FY

GNP Growth (%) 6.4 6.1 3.1 3.2 3.5 3.1 2.4 3.0
Net Factor Inc fr Abr 27.9 20.9 25.8 23.9 26.0 26.1 7.5 20.1
GDP Growth (%) 4.5 4.6 0.6 0.8 0.8 0.4 1.8 0.9
Agri, Fish & Forestry 2.9 3.2 2.1 0.2 1.6 1.5 -2.8 0.1
Industry 5.3 5.0 -2.5 -1.7 -4.4 -5.0 1.1 -2.0
Services 1.3 4.9 2.0 2.7 4.0 3.8 4.2 3.2

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 Agriculture Slides
Overall sector stagnant

Sector 2008 2009

Q4 FY Q1 Q2 Q3P Q3 Q4 FY

AGRI, FISH & FOR 2.9 3.2 2.1 0.2 1.6 1.5 -2.8 0.1
Agriculture 0.7 2.5 1.6 -1.7 2.0 2.1 -3.8 -0.7
Fishery 11.2 5.5 3.8 5.5 -0.5 -0.6 0.7 2.4
Forestry 7.4 1.7 -11.8 -6.1 17.4 10.3 0.7 -1.1

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 Overall Industry Declines
Mining upbeat, manufacturing & utilities
recover but construction slides
2008 2009
Sector
Q4 FY Q1 Q2 Q3P Q3 Q4 FY

INDUSTRY SECTOR 5.3 5.0 -2.5 -1.7 -4.4 -5.0 1.1 -2.0
Mining/Quarrying 18.2 0.6 19.5 22.1 26.9 26.9 17.0 21.1
Manufacturing 3.4 4.3 -7.6 -7.4 -7.6 -7.8 1.3 -5.1
Construction 14.5 8.2 14.0 14.0 1.3 0.9 -5.8 5.8
Utilities 3.8 7.7 0.6 -4.9 -2.2 -6.3 0.5 -2.8

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 Services Sector Keeps Pace
Real Estate, Transport Dip; Finance Gains
2008 2009
Sector
Q4 FY Q1 Q2 Q3P Q3 Q4 FY

SERVICE SECTOR 1.3 4.9 2.0 2.7 4.0 3.8 4.2 3.2
Trans, Comm & Stor 4.5 3.7 5.6 1.0 -0.8 -1.5 1.9 1.8
Transport & Storage -1.1 2.6 0.8 -2.1 -3.3 -3.7 -0.9 -1.4
Communication 7.8 4.5 9.2 3.5 1.3 0.3 3.7 4.3
Trade 0.0 4.7 0.4 2.7 4.5 4.4 3.5 2.9
Finance -4.6 4.9 1.2 5.8 11.7 11.5 11.0 7.1
Own Dwell & Real Est 1.7 7.0 0.7 -2.5 -0.4 -2.3 0.3 -1.0
Real Estate -0.4 19.4 -4.6 -15.8 -7.8 -13.8 -6.6 -10.5
Private Services 2.4 5.7 2.5 2.1 4.0 4.4 6.1 3.8
Government Servcs 6.2 4.7 1.1 8.7 6.3 6.6 3.4 5.0

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 Govt Spending Dominates Growth
Amid Capital Attrition
2008 2009
Indicator
Q4 FY Q1 Q2 Q3 Q3 Q4 FY

Personal Consn Exp 5.0 4.5 1.3 5.4 4.0 3.2 5.1 3.8

Govt Consumption 2.6 4.3 4.5 9.7 7.9 8.1 12.1 8.5

Capital Formation -13.1 4.2 -15.1 -10.3 -11.3 -12.1 -0.8 -9.9
Of which:
Construction 8.2 6.3 6.7 8.9 1.7 1.7 -2.9 5.8
Public 3.2 -0.7 11.5 27.7 22.2 21.8 -7.2 15.7
Private 17.8 11.4 4.3 -10.1 -9.7 -9.4 -0.1 -4.2
Durable Eqpt -7.9 1.7 -18.5 -19.7 -5.7 -4.2 -0.1 -11.4
Br Stck & Orch Dev 1.2 -1.6 1.0 -5.6 1.4 1.5 -2.0 -1.4

Exports -11.5 0.0 -14.7 -18.1 -13.6 -13.0 -10.0 -14.2

Imports 5.0 -1.1 -20.6 -2.2 0.2 0.1 -2.5 -5.8

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 Foreign Direct Investments
Net Inflows Up, Approvals Down
Annual Growth Rate (%)*
Indicator
2008 2009*
Net FDI Inflows (BSP) -63.8 17.9
Approvals -14.7 -78.7
BOI -8.5 -97.0
PEZA -19.5 -51.9
SBMA -58.5 -66.2
Clark 532.1 -53.2
*January to October

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 Job Growth:
What’s wrong with the picture?
Latest Prev Year Year
Employment (NSO-LFS)
Period Period Ago Average
(Jan-Oct
Unemployment Rate (%) (Oct '09) (Jul '09) (Oct '08) '09)

New Definition 7.1 7.6 6.8 7.5

Jobs Generated ('000) 944 916 861 972

Agriculture -250 -159 160 12
Industry 72 137 2 44
Services 1123 939 699 916

Underemployment Rate (%) 19.4 19.8 17.5 19.1

vs. Labor Force

Addition of 1.2M
 Where Are The New Jobs
Coming From?
New Jobs by Sector Jan April July Oct Ave
(Thousands) 2009 2009 2009 2009 2009
Agriculture 61 408 -177 -196 24
Agri, Hunting & For 38 385 -214 -271 -16
Fishery 23 28 38 75 41
Industry -122 86 136 68 42
Manufacturing -122 -16 -28 44 -30
Mining 2 7 39 5 13
Utilities 2 6 4 39 13
Construction -39 80 120 15 44
Services 626 964 921 1,142 913
Total New Jobs 565 1,457 880 1,014 979
 Where Are The Services Sector
Jobs Coming From?
Services Sector Jobs 626 964 921 1,142 913
W&R Trade 312 346 104 356 279
Priv HH Emp 29 139 263 189 155
Real Est&Bus Act 118 76 132 98 106
Public Admin 27 108 46 82 66
Hotels & Rest 16 41 97 96 63
Other Services 14 71 57 57 50
Transp-Stor-Comm 10 42 173 142 92
Health & SW 41 51 46 11 37
Education 87 45 99 66 74
Finance -28 16 10 10 2
Intl Orgs 0 0 0 0 0
 What Kinds of Jobs Are
Coming About?
Jan Apr Jul Oct Ave
Worker Category %
2009 2009 2009 2009 2009
Wage/Salary Workers 498 421 1,337 1,093 837 86.3
Own Account -36 609 -243 -20 78 8.0
Unpaid Family Labor 103 392 -178 -95 56 5.7
Total 565 1,423 916 979 971 100.0
Who need the jobs?
Profile of the Unemployed
63.8% are male, 36.2% female
50% are under 24 years old; 80% are under
34 years old
60 percent managed to make it only to
high school or less
―12.6% only made it to elementary
grades
―47.2% went to high school; only 34.7%
finished
―39.7% made it to college, but only 18%
graduated
Why can’t we generate the
needed jobs?
 2.8 million unemployed
 Mostly male, young and
undereducated
 7 million underemployed
 Mostly in agriculture
Supply Side:
Lack of Entrepreneurship
Educational system is oriented to train
Filipinos to find a job and work for others
(incl. overseas), rather than to create jobs
Students aspire to earn an income upon
graduation, rather than to create wealth
TESDA graduates prefer employment to
livelihood (Interview with Iloilo official, 2008)
Workers place greater value on regularity
of cash flow over higher but sporadic
income (popularity of pedicabs/tricycles)
(Guillen 2007)
Supply Side:
Lack of Qualified Workers
Business process outsourcing growth
potentials are outstripping our ability to
provide qualified personnel
“Graying OFW market”: rehires
outstripping new hires, indicating
dwindling qualified recruits
Declining education indicators pose
severe threat to future employability
― Basic education enrollment rates dropped in
75% of provinces between 2002 & 2004
Demand Side:
Lack of Enterprises
Low levels of investment; stagnant in
recent years
Country 2002 2003 2004 2005 2006 Average
Philippines -4.3 3.0 7.2 -8.8 2.7 0.0
Lao PDR -5.3 18.2 -14.7 3.0 0.2
Singapore -4.9 -32.4 34.9 4.6 13.1 3.1
Malaysia 7.9 -1.5 6.9 -1.0 8.6 4.2
Indonesia -4.5 -4.6 23.5 4.2 4.7
Thailand 6.0 13.5 12.9 12.2 -7.1 7.5
Viet Nam 12.7 11.9 10.5 11.2 9.3 11.1
Cambodia 14.9 22.3 -6.8 36.2 24.1 18.1
Myanmar 10.1 24.8 24.3 19.7
 Investment Growth. ASEAN
(Annual Growth Rates, %)
19.7
20.0
18.1

18.0

16.0

14.0

12.0
11.1

10.0

7.5
8.0

6.0 4.7
4.2
3.1
4.0

2.0
0.0 0.2

0.0

-2.0
RP LAO SIN MAL INDO THA VIET CAM MYA

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Demand Side:
Lack of Enterprises
Credit inaccessibility undermines
entrepreneurship (Madarang & Habito 2008)
― Only one in 20 enterprises makes use of
bank financing
― Only one in 3 enterprises deals with
banks at all
• Business-unfriendly environment
― Infrastructure inadequacies

― High transactions costs in starting a

business
― Unstable peace and order
Demand Side:
Lack of Enterprises
• Weak performance of agricultural sector
― Ineffective agriculture bureaucracy

― Politicized priorities in policy and

budget allocation
― Overcentralized decision-making

• Policy constraints to tourism growth

― Closed skies policy; narrow view of
reciprocity (E.O. 500)
― Unnecessarily restrictive visa policies

― Inadequate facilities (chicken & egg?)

Demand Side:
Misplaced Expenditure Priorities
•Need expenditures with strong
multiplier effect on domestic
economy (One Peso of spending
begets several pesos of incomes in
subsequent spending rounds)

― Infrastructure
― Housing
Digression: The Multiplier Process
Savings
Round Spending Incomes
(20%)
1 1,000,000 1,000,000 200,000
2 800,000 800,000 160,000
3 640,000 Multiplier
640,000 128,000=
4 512,000 512,000 102,400
5 409,600
1/saving
409,600
rate
81,920
6 327,680 327,680= 1/.2 =5
65,536
7 262,144 262,144 52,429
etc
TOTAL 5,000,000 5,000,000 1,000,000
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The Multiplier Effect is stronger
when:
 Saving rate is lower
 Import content of the
stimulated economic activities
is lower (= domestic content
higher)

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Housing: The Best Stimulus
• Labor intensive
 generates more jobs (broader benefits)
 money circulates more among lower-
income, lower-saving individuals
• Lower import content than most other
government projects
 money stays in domestic economy
 generates more tax revenues
• Uplifts people’s lives; raises level of
aspirations of the poor (Meloto)
• Begets more consumer expenditures
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RP Fiscal Stimulus Package
Economic Resiliency Plan (P330B)
• P160B for hiring more teachers, police-
men, soldiers & doctors; repair/ rehab
govt buildings; supplies and equipment
e.g. patrol cars, ambulances; agri
support
• P100B for infra investments by SSS, GSIS
• P30B additional SSS, GSIS & PH benefits
• P40B in income tax cuts
 Nothing for housing?
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Average Annual Public Expenditures on
Housing, Asian Countries,
2000-2007 (% of GDP)
Public Housing Expenditures
Country
(Percent of GDP)
Singapore 2.089
Nepal 1.482
Mongolia 1.206
Indonesia 1.012
Sri Lanka 0.758
Thailand 0.742
Malaysia 0.383
Bangladesh 0.354
Philippines 0.089
Source: Asian Development Bank
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Habito 2009 (ADBI Study)*:
• For every one percent of GDP spent on
housing, responsiveness of poverty
reduction to GDP growth improves by
0.473 percent
• No wonder the Philippines had perverse
experience of rising poverty (30%  33%
from 2003-2006) at a time GDP reportedly
grew the fastest in decades.
“Patterns of Inclusive Growth in Developing Asia: Insights from an
Enhanced Growth-Poverty Elasticity Analysis,” ADBI Working Paper.
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What Needs To Be Done?
 Boost multisectoral initiative for massive
education reform
― Open up Local School Boards
 Education for entrepreneurship
― Entrepreneurship values from primary school
― Entrepreneurship skills from high school
onward
 Strategic education planning
― Anticipate and respond to emerging
requirements
What Needs To Be Done?
 Enterprise development as central
concern (centerpiece program) of
government
― Foster LE-SME partnership/symbiosis a la
Japan model
― Address age-old impediments to SME
finance, technology support, raw material
and market access
― Promote SME agri-processing to expand off-
farm/non-farm employment
― Facilitate enterprise/farm clustering to meet
volume demands (a la Normin Veggies)
What Needs To Be Done?
 Reform agriculture governance
― Let LGUs do “rowing”; confine DA to
“steering”, i.e.:
• standards setting & regulation

• technical support and capability building

for LGUs
• trans-provincial initiatives

 Adopt open skies for secondary airports

― Unleash potentials for regional tourism
― Every foreign investor starts as a tourist
― Each tourist creates one Filipino job
What Needs To Be Done?
 Triple government housing targets;
quadruple budgetary allocation to public
housing (Karaos et al 2009)
― Strong multiplier effect to create massive jobs
boost
 Address governance impediments to
investment growth
― Corruption, corruption, corruption
― Streamline business registration & start-up
― Business-friendly, not extortionary LGUs
― Boost tax compliance & collection efficiency
The war on poverty is all about job creation,
for which economic growth is essential. But
the key to creating jobs for Filipinos where
they are needed most – right here at home,
and in the Philippine countryside – is to
pursue not just rapid economic growth, but
broad-based economic development that
draws on the active participation of and
directly benefits all regions, all industries, and
all sectors of the Philippine economy and
society.
Postscript
Poverty Is Not Inevitable
 Official statistics tell us that one in every four
Filipino families is poor… but this also means 3
out of 4 are not
 We just need one out of those three non-poor
families to “adopt” a poor family and help lift
them sustainably out of poverty (“teach them
how to fish” – equip them with or for a job!)
 No one is so poor as to be unable to share; no
one is so rich as to need no one else’s sharing
 With enough caring & sharing – poverty need
not be inevitable.
Mabuhay!