01 Putting Filipinos to Work - Dr. Cielito F. Habito

8/14/2019 01 Putting Filipinos to Work - Dr. Cielito F. Habito

1/41

Putting Filipinos to

Work:

Cielito F. HabitoAteneo Center for Economic Research & Development

Ateneo de Manila University

The Continuing Challenge

of Job Creation


2/41

Overview

Introduction:How to create jobs, how to kill them

The economy and jobs situation:

Whats wrong with the picture?Employment diagnostics

Why cant we generate theneeded jobs?

What needs to be done:

In quest of a job-friendly economy


3/41

Carabaos, Not Fertilizers:

A Lopero, Jose Dalman Farmers 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

How to Create or Kill JobsSome True Stories


4/41

Top-Heavy Growth,Bottom-Heavy Needs

Narrow: Growth propelled primarilyby a few leading sectors and

geographic areas Shallow: Weak linkages to rest of

economye.g., low domestic value-

added exports Hollow: Jobless growth; poverty-

increasing growth


5/41

Poverty incidence rose from 30% in 2003 to33% in 2006

Real per capita income fell 10% nationally,and fell in 50 provinces between 2003 and2006 (PHDR 2008/2009)Basic education enrollment rates droppedin 75% of provinces between 2002 & 2004

Wide disparities in life expectancy acrossprovinces: from low of 53.4 (Tawi-tawi) tohigh of 74.6 (La Union)

Top-Heavy Growth,

Bottom-Heavy Needs


6/41

Ateneo Center for Economic Research and Development

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

Philippines: KeyEconomic Trends, 2009


7/41


Agriculture, manufacturing down

Exports continue steep slide

Overall investment dropsForeign investments recover

Government construction

dwindles Government deficit balloons

Philippines: Key EconomicTrends, 2009

P i Ri R d U ti k


8/41

Price Rises on Renewed Uptick

Poor, countryside at a

disadvantageYear Inflation Rate (%)

2006 6.2

2007 2.82008 9.3

Sept 2009 0.7

Dec 2009 4.4

Non-NCR 4.5Food 5.3

Full Year 3.2


9/41


Domestic Production (GDP):Government spends its way out

of recessionGovernment consumption & cons-

truction up 8.5% & 15.7% respectively

Consumption growth moderates asconsumers pull backbut

Total investment spending dropped 10%

even with brisk government constructionExports fell 15%


10/41


Overall Output Growth

RP Narrowly Avoids Recession

Q4 FY Q1 Q2 Q3P Q3 Q4 FY

GNP Growth (%) 6.4 6.1 3.1 3.2 3.5 3.1 2.4 3.0Net 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

2009Indicator

2008


11/41


Agriculture Slides

Overall sector stagnant


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

Sector2008 2009


12/41



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

Sector2008 2009

Overall Industry DeclinesMining upbeat, manufacturing & utilities

recover but construction slides


13/41


Services Sector Keeps PaceReal Estate, Transport Dip; Finance Gains


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 1.8Transport & 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 -10.5Private 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

Sector2008 2009


14/41


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

Indicator2008 2009

Govt Spending Dominates GrowthAmid Capital Attrition


15/41


Foreign Direct Investments

Net Inflows Up, Approvals DownAnnual Growth Rate (%)*

2008 2009*

Net FDI Inflows (BSP) -63.8 17.9Approvals -14.7 -78.7BOI -8.5 -97.0

PEZA -19.5 -51.9

SBMA -58.5 -66.2Clark 532.1 -53.2

*January to October

Indicator


16/41

Latest Prev Year YearPeriod Period Ago AverageUnemployment Rate (%) (Oct '09) (Jul '09) (Oct '08)

New Definition 7.1 7.6 6.8 7.5Jobs Generated ('000) 944 916 861 972

Agriculture -250 -159 160 12Industry 72 137 2 44Services 1123 939 699 916Underemployment Rate (%) 19.4 19.8 17.5 19.1

Employment (NSO-LFS)(Jan-Oct

'09)

Job Growth:

Whats wrong with the picture?

vs. Labor ForceAddition of 1.2M


17/41

Where Are The New JobsComing From?


18/41

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 37Education 87 45 99 66 74

Finance -28 16 10 10 2

Intl Orgs 0 0 0 0 0


19/41

What Kinds of Jobs Are

Coming About?

Worker CategoryJan

2009

Apr

2009

Jul

2009

Oct

2009

Ave

2009%

498 421 1,337 1,093 837 86.3-36 609 -243 -20 78 8.0

103 392 -178 -95 56 5.7

565 1,423 916 979 971 100.0

Wage/Salary WorkersOwn Account

Unpaid Family Labor

Total


20/41

63.8% are male, 36.2% female50% are under 24 years old; 80% are under34 years old

60 percent managed to make it only tohigh school or less12.6% only made it to elementary

grades47.2% went to high school; only 34.7%

finished39.7% made it to college, but only 18%

graduated

Who need the jobs?Profile of the Unemployed


21/41

Why cant we generate the

needed jobs? 2.8 million unemployedMostly male, young and

undereducated 7 million underemployedMostly in agriculture


22/41

Supply Side:Lack of Entrepreneurship

Educational system is oriented to trainFilipinos to find a job and work for others(incl. overseas), rather than to create jobs

Students aspire to earn an income upongraduation, rather than to create wealthTESDA graduates prefer employment tolivelihood (Interview with Iloilo official, 2008)

Workers place greater value on regularityof cash flow over higher but sporadicincome (popularity of pedicabs/tricycles)(Guillen 2007)


23/41

Supply Side:Lack of Qualified Workers

Business process outsourcing growthpotentials are outstripping our ability toprovide qualified personnel

Graying OFW market: rehiresoutstripping new hires, indicatingdwindling qualified recruits

Declining education indicators pose

severe threat to future employability Basic education enrollment rates dropped in

75% of provinces between 2002 & 2004


24/41

I t t G th ASEAN


25/41


Investment Growth. ASEAN(Annual Growth Rates, %)

0.0 0.2

3.14.2 4.7

7.5

11.1

18.119.7

-2.0

0. 0

2. 0

4. 0

6. 0

8. 0

10.0

12.0

14.0

16.0

18.0

20.0

RP LAO SIN MAL INDO THA VIET CAM MYA

Demand Side:


26/41

Demand Side:Lack of Enterprises

Credit inaccessibility underminesentrepreneurship (Madarang & Habito 2008)Only one in 20 enterprises makes use of

bank financing

Only one in 3 enterprises deals withbanks at all

Business-unfriendly environment

Infrastructure inadequacies

High transactions costs in starting abusiness

Unstable peace and order

Demand Side:


27/41

Demand Side:Lack of Enterprises

Weak performance of agricultural sector Ineffective agriculture bureaucracy

Politicized priorities in policy andbudget 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:


28/41

Demand Side:Misplaced Expenditure Priorities

Need expenditures with strongmultiplier effect on domesticeconomy (One Peso of spending

begets several pesos of incomes insubsequent spending rounds)

Infrastructure

Housing


29/41


Round Spending Incomes Savings(20%)1 1,000,000 1,000,000 200,0002 800,000 800,000 160,0003 640,000 640,000 128,000

4 512,000 512,000 102,4005 409,600 409,600 81,9206 327,680 327,680 65,5367 262,144 262,144 52,429

etcTOTAL 5,000,000 5,000,000 1,000,000

Digression: The Multiplier Process

Multiplier =

1/saving rate

= 1/.2 = 5


30/41


The Multiplier Effect is strongerwhen:

Saving rate is lower

Import content of thestimulated economic activitiesis lower (= domestic content

higher)

Housing: The Best Stimulus


31/41


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 peoples lives; raises level ofaspirations of the poor(Meloto)

Begets more consumer expenditures

Housing: The Best Stimulus

RP Fi l Sti l P k


32/41


RP Fiscal Stimulus PackageEconomic Resiliency Plan (P330B)

P160B for hiring more teachers, police-men, soldiers & doctors; repair/ rehabgovt buildings; supplies and equipment

e.g. patrol cars, ambulances; agrisupport

P100B for infra investments by SSS, GSIS

P30B additional SSS, GSIS & PH benefits

P40B in income tax cuts Nothing for housing?

Average Annual Public Expenditures on


33/41


Average Annual Public Expenditures onHousing, Asian Countries,

2000-2007 (% of GDP)

Public Housing Expenditures

(Percent of GDP)

Singapore 2.089Nepal 1.482

Mongolia 1.206Indonesia 1.012

Sri Lanka 0.758Thailand 0.742

Malaysia 0.383

Bangladesh 0.354Philippines 0.089

Source: Asian Development Bank

Country


34/41


Habito 2009 (ADBI Study)*:

For every one percent of GDP spent onhousing, responsiveness of povertyreduction to GDP growth improves by0.473 percent

No wonder the Philippines had perverseexperience ofrising 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 anEnhanced Growth-Poverty Elasticity Analysis, ADBI Working Paper.

What Needs To Be Done?


35/41


Boost multisectoral initiative for massiveeducation reform

Open up Local School Boards

Education for entrepreneurship

Entrepreneurship values from primary schoolEntrepreneurship skills from high school

onward

Strategic education planningAnticipate and respond to emergingrequirements



36/41


Enterprise development as central

concern (centerpiece program) ofgovernmentFoster LE-SME partnership/symbiosis a la

Japan model

Address age-old impediments to SMEfinance, technology support, raw materialand market access

Promote SME agri-processing to expand off-

farm/non-farm employmentFacilitate enterprise/farm clustering to meet

volume demands (a la Normin Veggies)



37/41


Reform agriculture governance

Let LGUs do rowing; confine DA tosteering, 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 tourismEvery foreign investor starts as a tourist

Each tourist creates one Filipino job



38/41


Triple government housing targets;

quadruple budgetary allocation to publichousing (Karaos et al 2009)Strong multiplier effect to create massive jobs

boost

Address governance impediments toinvestment growthCorruption, corruption, corruption

Streamline business registration & start-upBusiness-friendly, not extortionary LGUs

Boost tax compliance & collection efficiency

The war on poverty is all about job creation


39/41

The war on poverty is all about job creation,for which economic growth is essential. Butthe key to creating jobs for Filipinos where

they are needed most

right here at home,and in the Philippine countryside is topursue not just rapid economic growth, butbroad-based economic developmentthat

draws on the active participation of anddirectly benefits all regions, all industries, andall sectors of the Philippine economy andsociety.

Postscript


40/41

p

Poverty Is Not Inevitable

Official statistics tell us that one in every fourFilipino families is poor but this also means 3out of 4 are not

We just need one out of those three non-poor

families to adopt a poor family and help liftthem 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 elses sharing With enough caring & sharingpoverty need

not be inevitable.


41/41

01 Putting Filipinos to Work - Dr. Cielito F. Habito

Documents

Transcript of 01 Putting Filipinos to Work - Dr. Cielito F. Habito