Arroyo’s promised job creation
a ‘dismal failure’

DID the government achieve its job creation targets last year?

Unfortunately, Gloria Macapagal-Arroyo’s much-applauded State of the Nation Address (SONA) today was silent on this matter. But in anticipation of the speech before Congress, the government had earlier announced that it was able to surpass its 2005 target of 2.26 million jobs by generating 2.38 million jobs. Four sectors — housing, small- and medium-scale enterprise lending, microfinance, and information and communication technology — led the way, even exceeding their full-year targets, along with the country’s economic zones.

An ad even appeared in today’s issue of the Philippine Star to quantify the gains in employment. Jobs generated by the sectors were as follows: 739,855 in housing; 506,838 in tourism; 211,196 in infrastructure projects; 327,942 in ecozones; and 62,750 in ICT, among others.

Two years after Arroyo declared in her inaugural speech to put job creation as the top priority of her administration’s ten-point agenda to address poverty, a theme she again revisited in her SONA last year, labor groups are however saying that the jobs crisis has taken a turn for the worse.

The Alliance of Progressive Labor (APL) and Labor Education and Research Network (LEARN) say that job creation has been weak on account of lackluster economic growth, with unemployment remaining at near record levels.

By sheer magnitude, the labor groups claim that the jobs crisis is the most important problem facing the nation today, with 12 million unemployed and underemployed Filipinos, an increase of two million in two years. On top of this, the working-age population is growing by around 1.3 million every year.

Below target

Reviewing the statistics, Clarence Pascual, APL economist, claims that Arroyo’s performance so far has been a dismal failure. Contrary to government’s pronouncements, he says the economy only generated 700,000 jobs in 2005 and 780,000 jobs in the first two quarters of 2006.

“Actual employment generation was halfway the government target of 1.5 million new jobs every year. It was considerably below the 1.3-million annual increase in the working-age population,” Pascual explains.

(See more tables on the job-creation performance of the Arroyo government here.)

Pascual traces the weak job creation to slow and low-quality economic growth with GDP growth only averaging 5.5 percent over the last four quarters. “(This is) below the 7-8 percent growth target required to generate enough jobs to bring down unemployment.”

At the same time, the bulk of the growth came from low-productivity sectors — agriculture and the informal services — which also reflected the pattern in employment creation as two-thirds of jobs generated during this period were in agriculture and retail trade.

Employment also declined in the industrial sector, including in manufacturing, which posted job losses as output growth stagnated due to low global and local consumer demand.

“Unabated increases in oil prices and rising global interest rates have dampened consumer demand. The poor external environment is compounded by higher local tax rates, deep cuts in public spending, and unresolved political problems,” says Pascual.

Weak employment creation has also meant fewer job opportunities for a rapidly growing working-age population. Pascual says the decline of the employed-to-population ratio from 596 (per 1,000 population) in 2004 to 591 in the first half of 2006 translates to some 1.2 million people added to the non-economically active population — a ratio which he sees as having no significant improvement over the long-term.

Mostly short-term employment

Even the House oversight committee chaired by Rep. Danilo Suarez, though acknowledging government’s achievement in its assessment of the Arroyo government’s performance last year, also observed that slightly more than half of the jobs created in 2005 (including more than 70 percent so far generated in 2006) have been short-term and contractual or seasonal in nature. Most of these jobs were in the tourism, housing and infrastructure sectors.

Economist Maitet Diokno-Pascual already noted this situation in her critique of Arroyo’s economic policies early this year. She said that 59 percent of working-age population are employed in jobs that are less permanent, seasonal/part-time, low waged or unpaid, or low-skilled.

The right question to ask, says Wilson Fortaleza, president of the Sanlakas partylist group, is “Do these jobs still exist?”

Fortaleza says the true picture is revealed by examining the kinds of jobs generated behind government’s employment statistics. These were among his findings:

• Only a total of 2.939 million jobs were generated from April 2001 to April 2006 or an average of 587,800 a year.

• Even the agricultural sector, which was identified as one that would generate more jobs, was only able to create an additional 167,000 new jobs from 11.253 million in 2001 to 11.420 million in April 2006.

• The number of unemployed persons fell from 4.461 million in April 2001 to 2.930 million in April 2006. But this was mainly because of the introduction of the new definition where more than a million (1.503 million) unemployed persons were removed from the list beginning April 2005. Using the old definition, the unemployment rate today is at 11.8 percent rather than 8.2 percent.

• Underemployment rate rose dramatically from 17.5 percent in 2001 to 25.4 in 2006 which is reflective of the kind of jobs that were generated over the period of time.

Under the new definition, the unemployed are those without jobs but have lost interest in looking for employment for at least six months — which Pascual similarly acknowledges as having allowed the government to realize a much lower unemployment rate. This, he says, explains why open unemployment eased to 11.3 percent in the first two quarters of 2006 from a high of 11.8 percent in 2004.

The sharp rise in underemployment since April 2005 has also erased the gains made since 2001. Total underemployment has gone up from 9 percent in 2004 to 12 percent in 2005 and 14 percent in the first half of 2006. The agricultural and service sectors, like in the areas of trade and transport where jobs are less permanent, have exhibited high underemployment rates.

Now at an 18-year high, this surging underemployment, explains Pascual, is important because it may indicate rising poverty incidence that is not yet reflected in currently available income statistics. “Underemployed workers carry a high risk of becoming working poor with incomes insufficient to carry themselves and their families above the poverty threshold,” he says, pointing to previous studies on poverty strongly relating underemployment with poverty incidence.

No better than Ramos and Estrada

Comparing Arroyo’s achievement in terms of creating new and permanent jobs to that of her predecessors — the Ramos and Estrada administrations, Fortaleza says she is “no better and is in fact far slower.”

“Between 1995 and 1998, Ramos was able to create 2.1 million jobs or a yearly average of 700,000, while the short stint of Erap has averaged 530,000,” he says.

Arroyo’s only saving grace in job generation has been the heavy outflow of overseas Filipino workers (OFWs) to almost all destinations abroad. In 2005, deployment almost reached the one-million mark at 981,677 OFWs.

“Without this, Arroyo would have faced a very serious unemployment problem and a dearth in dollar reserves,” says Fortaleza.

Download Fortaleza’s assessment here.