MORE employment and labor productivity

The Philippine Statistics Authority (PSA) released the Labor Force Survey (LFS) April 2019 last week and the result was generally good compared to April 2018: both unemployment and underemployment rates in 2019 have significantly declined, and labor force participation rate (LFPR) has increased. Thus, the labor force Q1 data seem to contradict the GDP Q1 data where growth has decelerated further.

Are things in the labor force really improving? To answer this question, I backtracked and got data for the past five years, not just the last year. The numbers are interesting (see table 1).

One, the LFPR is declining. Meaning more people are postponing joining the labor force, choosing instead to pursue more studies or internships, or bum around. The K+12 must have contributed to this trend too. When LFPR is declining, both unemployment and underemployment rates tend to decline because those who join the LF are more equipped and more confident that they will be hired as full-time or part-time workers or entrepreneurs.

Two, both rates of unemployment and underemployment (people who work below 40 hours a week, or those already working above 40 hours but want additional work) are indeed declining and hence, the employment rate is increasing.

Three, compare election years 2016 (Aquino) and 2019 (Duterte) — higher LFPR in the former. In terms of absolute numbers in LF, 43.3 million vs. 44.5 million, or an increase of only 1.2 million in LF over three years, an average of 0.4 million per year was added to the LF under the Duterte administration. This is not good.

Therefore, labor force Q1 2019 data is actually not as rosy as it initially looks, and the numbers support — not contradict — the macro GDP growth deceleration: 6.9% in 2016, 6.7% in 2017, 6.2% in 2018, 5.6% in 2019 Q1.

Among the employed people, how is the labor productivity of the Philippines compared with its neighbors in East Asia?

I checked the International Labor Organization (ILO) Organization Database (ILOSTAT) for Key Indicators of the Labour Market (KILM). Numbers show that ours is lower than Indonesia, Thailand, Malaysia, but higher than average for world lower middle income (see table 2).

I also checked the same database from ILOSTAT-KILM for the unemployment rate covering many countries. There seems to be wrong data for the Philippines 2017: an unemployment rate of 2.6%, and a combined rate of unemployment and potential labor force (LU3) of 5.9%. What??

The market-oriented reforms for efficiency (MORE) for the Philippines in the labor sector — more competition and deregulation, more investments and entrepreneurship, investors hiring more workers or people hiring themselves as entrepreneurs — mean faster growth.

The main hindrances to this — more/higher taxes and fees, more bureaucracies and business permits that take a long time to be secured, government-created monopolies and oligopolies via congressional franchising, agency and local government franchising, and low respect for rule of law.

We need fewer hindrances, we need more growth, more employment, more labor productivity and, hence, higher income for workers and entrepreneurs.

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.

minimalgovernment@gmail.com