BY Melissa Luz T. Lopez, Reporter

World Bank report highlights challenges of PHL underemployment

Posted on June 18, 2016

Relaxed labor laws, improved worker skills, and greater ease of doing business would open up high quality and well-paying jobs for Filipinos in order to alleviate poverty, the World Bank said in a new report.

Job applicants swarm a Manila job fair in this BW file photo.
In a report titled “Labor Market Review: Employment and Poverty in the Philippines,” the multilateral lender pointed out the gnawing problem of underemployment in the country, with a big chunk of Filipinos remaining poor despite holding jobs.

“People in the Philippines are working hard but are still poor. Having a job does not lift one out of poverty...It needs to be a good job to lift you out of poverty,” Jan J. Rutkowski, lead economist at the World Bank’s Social Protection and Labor Global Practice, said during the report launch on Friday in Taguig.

“Economic growth has created enough jobs to absorb the growing labor force...There has been no increase in unemployment, but the problem has been that the quality of jobs were not meeting the aspirations of young people entering the labor market. There’s still a lot of informal, low-paying jobs.”

“If you are in the informal sector, you are basically bound to be low paid and bound to be poor.”

The World Bank said worker salaries have trailed the country’s economic growth which posted a 5.3% average in the past decade, even as the number of jobs and the labor force also saw upticks over the period.

“[T]he growth of real wages -- or wages adjusted for changes in prices of goods and services -- has yet to catch up with the rising productivity. As a result, many workers remain poor,” the statement read.

Joblessness rate fell to a 10-year low at 5.8% as of January. Meanwhile, some 26.3% or about one in four Filipinos lived below the poverty line during the first half of 2015, according to the Philippine Statistics Authority.

The World Bank said in its report only 15% of the poorest Filipinos secure formal wage jobs against 33% employed under the informal sector, 35% classified as “self-employed,” and 18% unpaid families.

More than half of workers or 56% from the informal sector get low salaries, while only 7% under formal employment are paid low.  

Despite an increase in available jobs, three-fourths of wage workers are hired under the informal sector, rendering them without proper work contracts and social protection such as benefits and security of tenure, the Washington-based lender said.

To plug the gap, Mr. Rutkowski said improving education and skills development, as well as trimming the high cost of setting up shop in the Philippines, would lend more room for employers to hire workers as formal and permanent employees.

“The answer boils down to two things: the way to reduce poverty is to increase the capacity of the poor by investing in their education and skills, and second, the government needs to enhance productive job opportunities through lowering cost of doing biz and making labor regulations more conducive to economic restructuring,” the economist added.

In particular, Mr. Rutkowski said the K+12 education reform introduced by the Aquino administration would stand to better equip young Filipinos with the skills needed to secure better-paying jobs in the formal sector.

Finishing 12 years of secondary education appears to be a “necessary condition” to clinch a good job, the World Bank economist added.

“If labor regulations are rigid, this gives additional incentive for them (employers) to circumvent it by having workers under irregular contracts or by forcing them into false self-employment,” said Mr. Rutkowski, pointing out that relaxing labor laws would likely prompt companies to offer permanent jobs instead of resorting to contractual agreements.

Minimum wages set by government also need tweaking to level the field to that would entice employers to hire under the formal sector, Mr. Rutkowski said, while acknowledging that there are legitimate sectors that cannot depart from contractual hiring.

Mara K. Warwick, World Bank country director for the Philippines, said the Philippines is “well-positioned” to initiate these changes, backed by sound macro-economic fundamentals and robust growth.

The Philippine economy grew by 6.9% during the first quarter, which falls within the government’s 6.8-7.8% forecast for the year. The World Bank expects full-year growth at 6.4%.