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Putting Filipinos to
Work:
Cielito F. HabitoAteneo Center for Economic Research & Development
Ateneo de Manila University
The Continuing Challenge
of Job Creation
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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
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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
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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
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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
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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
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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
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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
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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%
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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
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Agriculture Slides
Overall sector stagnant
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
Sector2008 2009
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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
Sector2008 2009
Overall Industry DeclinesMining upbeat, manufacturing & utilities
recover but construction slides
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Services Sector Keeps PaceReal Estate, Transport Dip; Finance Gains
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 1.8Transport & 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
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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
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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
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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
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Where Are The New JobsComing From?
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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
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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
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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
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Why cant we generate the
needed jobs? 2.8 million unemployedMostly male, young and
undereducated 7 million underemployedMostly in agriculture
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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)
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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
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I t t G th ASEAN
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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:
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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:
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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:
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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
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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
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The Multiplier Effect is strongerwhen:
Saving rate is lower
Import content of thestimulated economic activitiesis lower (= domestic content
higher)
Housing: The Best Stimulus
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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
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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
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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
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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?
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What Needs To Be Done?
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
What Needs To Be Done?
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What Needs To Be Done?
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)
What Needs To Be Done?
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What Needs To Be Done?
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
What Needs To Be Done?
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What Needs To Be Done?
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
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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
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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.
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