Underemployment high despite strong economic performance of Philippines

Author: PM editorial | Date: 22 June 2016

Wages are out of kilter with the country’s labour market performance, says new World Bank report

Real wages are yet to catch up with rising productivity in the Philippines, according to a new report from the World Bank.
 
Speaking at the launch of Labor Market Review: Employment and Poverty in the Philippines, on Friday (17 June), Mara Warwick, country director, World Bank Philippines, said that despite the country’s economy growing at around five to six per cent, “the working population and jobs have been growing at an average of 1.8 per cent and 2.9 per cent, respectively”. Many of the newly created jobs are “precarious and low-paying”, she added.
 
The review sets out labour market performance in the country – which has seen productivity increase 3.4 per cent year-on-year – from the perspective of the worker’s welfare, with the aim of identifying market constraints that are preventing the reduction of poverty.
 
“The report shows that, contrary to some perceptions, economic growth in the last 10 years has created enough jobs to absorb the growing labour force. Still many workers remain underemployed,” said Warwick.
 
However, she believes that with sound macro-economic fundamentals – such as GDP growth, unemployment rates and inflation levels – the Philippines is well positioned to address this challenge.
 
The study suggests that greater investment in workers’ skills and education, coupled with flexible labour regulations, are needed to encourage firms to generate more jobs and offer better pay and social protection.
 
Around three-quarters of all jobs, and two-thirds of urban jobs, are informal, with workers therefore lacking employment contracts and social insurance, and are not protected against unfair dismissal.
 
Jan Rutkowski, lead economist at the World Bank’s social protection and labour global practice, said: “The scarcity of ‘good jobs’ reflects the structure of the Philippine economy where low-value-added activities predominate. This is partly due to constraints in the investment climate and the high cost of doing business in the formal sector.”
 
At the end of last year, HSBC said the Philippines was poised to benefit from an unprecedented push towards free trade in Asia, with the creation of the ASEAN economic community that promised to boost economic growth. As the country reported its 65th quarter of consecutive growth, HSBC Global Research forecast the Philippines would become the world’s 16th largest economy by 2050.
 
Wick Veloso, president and CEO of HSBC in the Philippines, added: "The Philippines has been on a growth trajectory, seeing positive growth since the first quarter of 1999. Despite a challenging global and macro-economic backdrop in 2016, the Philippines remains one of the fastest growing economies in Asia.”
 
Low pay is by no means only a problem in the Philippines. According to a recent article published by Thomson Reuters Foundation, Indonesian women are defying a government ban which stops them travelling to the Middle East to find employment as domestic workers.
 
The ban, announced in May last year, followed reports of widespread abuse of domestic workers, however the pull of higher wages is resulting in many risking the consequences.