THE Philippines seems to be stuck on a treadmill—moving a lot but going no place fast—on the issue of our unemployment problem. While the government keeps pushing the fact that the country has one of the highest economic-growth rates in the world, we all know that there is a problem of this growth being inclusive to all parts of our society.
Unemployment in the Philippines is one of the worst in Southeast Asia and, combined with underemployment, the situation is absolutely dismal.
We have been hearing the same arguments as to why we have not been able to make a significant and sustainable move toward greater and higher quality employment for years if not decades. “Our education system is deficient.” “There are not enough high paying manufacturing jobs.” “There are jobs available, but there is a mismatch between employee’s skills and the job requirements.” “There is not enough foreign investment to create more jobs.” “There is a misallocation of domestic capital for job creation.” “The government has continuously failed in its job creation polices.”
All of the above arguments may be true to a certain extent, but none can adequately explain why the Philippines is so far beyond similar nations in job creation. Perhaps, the answer lies someplace else and is more systemic and complex.
We have heard so many times how the Philippines is moving up the rankings of global comparisons in innovation, governance and competitiveness. There is no question that in many areas the Philippines—its government, its businesses and its people—are doing a better job.
But even after years of better government financials and better corporate performance, job creation is not progressing at the same speed.
The latest Global Competitive Index (GCI) does offer some important insights. In the category of “Labor Market Efficiency,” the Philippines ranks 91st which is way below our overall rank at 52. We scored high on “Cooperation in labor-employer relations” (29th); “Pay and productivity” (27th); and “Reliance on professional management” (29th): We score very poorly on “Hiring and firing practices” at 104th and even worse on “Redundancy costs” at 124th.
The GCI says that, “The efficiency and flexibility of the labor market are critical for ensuring that workers are allocated to their most effective use in the economy and provided with incentives to give their best effort in their jobs. Labor markets must, therefore, have the flexibility to shift workers from one economic activity to another rapidly and at low cost.”
If it is cheaper for a business to keep a low-cost motorcycle messenger than to up-train them for a higher skilled job, the labor market does not become more efficient. If it is more cost effective to hire contractual workers because of inflexible labor laws, careers are not created.
It is time the legislature looked to bringing Philippine labor laws up to 21st century standards in order to make our labor market more flexible and efficient.
Image credits: Jimbo Albano