By Cai U. Ordinario, Catherine N. Pillas, Lorenz S. Marasigan & Bianca Cuaresma
WITH a median age of 23 years, Filipinos are considered among the youngest in the world. A median age of 23 years means that half of the population is aged below 23, while the other half is above 23.
Since many Filipinos are relatively young and belong to the so-called Millennial generation, the country is in the best position to reap the demographic dividend.
The demographic dividend, according to the United Nations Population Fund (UNFPA), is “a boost in economic productivity that occurs when there are growing numbers of people in the work force relative to the number of dependents.”
“The best-selling point of the Philippines right now is its young work force,” Trade Undersecretary Adrian S. Cristobal Jr. said in a news briefing on Wednesday.
Apart from being young, Filipinos are also among the world’s most-educated work force. A major advantage is their English proficiency, a skill that is required by the numerous call centers and outsourcing companies that have sprouted in the Philippines.
Based on the 2010 Census of Population and Household, around 81.87 million Filipinos were aged 5 and above. Only 3.31 million did not complete any grade in elementary or year in high school and college.
Around 22.51 million, or 27.5 percent, were elementary undergraduates and below; and 9.54 million, or 11.7 percent, were elementary graduates.
The Philippine Statistics Authority (PSA) reported that some 11.77 million, or 14.4 percent, were high-school undergraduates; and 15.68 million, or 19.1 percent, were high-school graduates.
There were around 7.71 million, or 9.4 percent, college undergraduates; and 8.29 million, or 10.1 percent, graduated from college.
Cristobal said a relatively young work force will also help the Philippines attract more investments in the labor-intensive manufacturing sector.
“Our demographics now is our strongest feature in marketing and promoting the Philippines as an investment destination. This young, literate and highly skilled population is a big driver of manufacturing,” he said.
Constraints
However, Economic Planning Secretary Arsenio M. Balisacan said the country may not be able to realize fully its demographic dividend relative to its neighbors.
“The country faces a demographic window of opportunity where demographic dividends can be reaped. Studies estimate that demographic transition was responsible for about one-third of the economic growth experienced by East Asia’s ‘economic’ tigers during the period 1965 to 1995,” Balisacan said in a presentation at the Philippine Economic Briefing on Wednesday.
“Our own studies, however, show that we may not be able to realize as much demographic dividend as our neighbors did,” he added.
For one, the Department of Trade and Industry (DTI) said many manufacturers consistently highlight the lack of human capital as a constraint in the Industry Development Program/Roadmapping Initiative of the agency.
“There are always these horizontal-policy constraints in these 35 road maps we have so far, and human-resource development is always an issue,” Cristobal said.
Launched in 2011, the roadmapping initiative is the main program of the DTI to spur the growth of the manufacturing sector and expand its contribution to national output. Its goal is to make the country’s manufacturing sector on a par with neighboring Southeast Asian countries.
Manufacturing accounts for 23 percent of Philippine gross domestic product (GDP) and only 10 percent of employment. Government data showed that 3.2 million Filipinos are employed in manufacturing as of July 2015.
Cristobal said the DTI has linked with the Technical Education and Skills Development Authority (Tesda) to work on a common problem aired by industries: skills deficiency.
Tesda develops standards and programs to match the skills needed by particular industries with the training received by workers.
Investment priorities
To harness the potential of a young work force and to boost the country’s economic growth, Balisacan said the government must continue to invest in both human capital and infrastructure.
“We must continue investing in socioeconomic resiliency while, at the same time, promoting more sustainable production and consumption patterns. These include disaster preparedness, income diversification, social protection and insurance,” he said.
Balisacan said it is also important to strengthen and improve the country’s institutions, including political ones, as these play a “critical” role in development.
“A peaceful and credible transfer of power in 2016 to a new administration and lasting peace in Mindanao will, likewise, be critical in reaping the growth potential of that region and lifting millions of our countrymen out of poverty,” he said.
The Japan International Cooperation Agency (Jica) said the government must ensure the availability of facilities in other cities and provinces to create jobs for young people in rural areas. Demographics in the Philippines, according to Jica Chief Representative to the Philippines Noriaki Niwa, is monocentric. This means that most of the population flock to one city instead of being distributed to other locations.
Spatial structure in the greater capital region is highly concentrated in Metro Manila, and although developments are taking place in Clark, Subic, Tarlac, Batangas, Cavite and Laguna, they are considered to be at their early stages and are implemented under a rather uncoordinated manner.
“Today everything is concentrated in Metro Manila. [Economic activities exhibit] a monocentric pattern, but we expect this to shift to a polycentric pattern,” Niwa said on Wednesday.
He said decongesting Metro Manila and the emergence of growth centers could be done via the P4.76-trillion Roadmap for Transport Infrastructure Development and its Surrounding Areas. It calls for the establishment of a modern, well-integrated and -coordinated, and affordable transport system for Metro Manila and the adjacent areas of Bulacan, Pampanga, Cavite and Batangas.
The system will consist of expressways, new roads elevated and on ground, railways elevated and on ground, subways, airports and seaports. Near-term components are for completion by 2016, while medium- and longer-term components are for completion by 2020 and 2030, respectively.
Despite its cost and scope, Niwa believes that the Philippine government has the capability to complete the road map.
“The government has enough funds to implement the road map. According to our study, if the Philippine government will only invest 5 percent of its GDP for infrastructure development in the years to come, the Dream Plan can come true. Metro Manila has a historic chance to make the plan a reality,” he said.
Public Works Secretary Rogelio L. Singson said the government is committed to spend 5 percent of the country’s GDP by 2016 for infrastructure alone.
“The transport road map is no longer a dream plan. It has been adopted by the Philippine government,” Singson said.
The Cabinet official said, however, that implementing the project through 2030 will be a “challenge,” especially since there is a constant change in government leadership.
“Continuity will be a challenge, as it will depend on the next administration. But, hopefully, they will adopt it, as it is a good solution. What we are saying is rather than waste three or four years to do a road map, they can opt to adopt the current one,” Singson said.
Data from the Department of Budget and Management showed that government spending in the month of July rose by 92.9 percent to P38.3 billion versus the figure in the same month last year.
This, however, was below the government’s target of spending P45.98 billion for infrastructure in July alone. It was 17 percent lower compared to the government’s self-imposed goal.
Education Secretary Armin A. Luistro, for his part, said the Aquino administration has “actively invested” in the country’s human capital. Luistro noted that the government increased its allocation for education and health care.
He noted that the budget for education rose to P453 billion this year, from P225.1 billion in 2010. Also, the budget for the Conditional Cash-Transfer Program, which encourages school attendance among children from poor households, expanded to P62.3 billion this year, compared to P10.9 billion in 2010.
Demographic window
“If we get it right, sustained GDP growth of about 7 percent yearly could bring us to higher middle-income economy status [per capita of $4,125] by the end of the next administration,” Balisacan said.
He said sustained GDP growth of 7 percent for three more administrations could bring the Philippines at or near high-income economy status (per capita of $12,746) by 2040.
Cristobal said the Philippines could enjoy this demographic advantage for two more decades. But data from the PSA indicated that the Philippines must act with a sense of urgency to be able to take advantage of this demograhic window of opportunity.
PSA data showed that the country’s aging index, or the proportion of persons aged 60 and over per 100 persons under the age of 15, was computed at 20.3 percent in 2010. This means that there is one person aged 60 and over for every five children under 15 years old.
However, data showed that the aging index in 2010 was significantly higher than the 16.1 percent posted in 2000.
Further, the country’s age-dependency ratio—ratio of dependents (people younger than 15 or older than 64) to the working-age population (ages 15 to 64)—is declining.
World Bank data showed that the country’s dependency ratio declined from 61 percent in 2010 to 58 percent in 2014. Between 2005 and 2009, the dependency ratio declined from 68 percent to 62 percent.
Last year University of the Philippines School of Statistics Dean Dennis Mapa said the Philippines needs to address the jobs challenge soon. If the country fails to provide jobs to those entering the demographic transition, Mapa said it will take around 40 to 50 years before the country can start reaping the demographic dividend again.
He explained that when workers enter the labor force at around the age of 20, they have 40 to 50 years to be productive members of the labor force. But if, from the start, they do not have jobs, it will cost the Philippines its demographic dividend.
Luckily, he said the Philippines has not reached the “goldilocks period” when the country’s total fertility rate (TFR) is at around 2.1 percent to 2.4 percent. This means the TFR is “just right,” as it is neither very high nor very low.
The UNFPA data showed that the country’s current TFR is at 3.1 percent. Mapa said his study estimates that the country will reach the goldilocks period by 2020, assuming there are interventions done, or by 2030, under a “business-as-usual” scenario.
“As countries move from large families [high fertility rate] into small families [low fertility rate], they pass through what is called a goldilocks period described as a generation or two in which fertility rate is neither too high nor too low,” Mapa said.
“This fertility rate that is consistent with stable population is about 2.1 [the replacement rate of fertility]. The fall to replacement fertility is a unique and precious opportunity for higher economic growth—demographic gift or dividend,” he added.