Fat-Free Econ 4: Unemployment, Good and Bad News

(This is my article yesterday in TV5's news portal,  http://www.interaksyon.com/article/27514/fat-free-economics-unemployment-good-and-bad-news)

A high unemployment rate means there is a huge waste of a country’s manpower, and the people’s productivity and economic potential are not maximized. High unemployment also indicates high poverty incidence.

The National Statistics Office (NSO) released the January 2012 Labor Force Survey late last week. There are two pieces of good news here.

One, the labor force participation rate (LFPR) has increased from 63.7 percent in 2011 to 64.3 percent this year. This means more people are entering the labor force, and there are fewer people bumming around or pursuing further studies, thinking, "I cannot find a job anyway, why go out and bother.”

A high LFPR means people are more hopeful and more adventurous, saying, "I will go out and find a job, I might be rejected but I might find one."

The second piece of good news is that both unemployment and underemployment rates have declined this year. The underemployed are those who have work already – whether full time or part time – but are still looking for additional work, mainly to augment existing income.

Now this seldom happens. Usually, unemployment and/or underemployment rate declines because LFPR has declined too. So when the labor force surveyors come to randomly ask people if they have work or no work, some respondents would say “No, I have no work and I am not looking for one.”

The combined unemployment and underemployment rates last year was 26.8 percent and only 26.0 percent this year. Still a high figure but nonetheless a year-on-year decline.

So with two counts of good news on the most recent labor force data, do we say hooray for the current administration?

Not too fast guys. There are two pieces of bad news that can douse cold water on any exaggerated claim on the performance of the Philippines economy.

One is that we are now experiencing a decline in the number of people who are entering the labor force.

Compare the increase in population who are 15 years and over: 1.55 million people between 2009-2010, down to 1.32 million between 2010-2011, and further down to 1.16 million from 2011 to 2012. I am a bit surprised at this data as I assumed the labor force is either flat-lining or increasing, not decreasing.

The second not-so-good-news is that compared to many industrialized and industrializing economies in Asia, ours is among the highest unemployment rates in the region.

Our neighboring economies in East Asia have unemployment rates of only 0.4 to 4.6 percent. There are two important challenges for the Philippine government to reduce this rather bad situation.

One is to drastically reduce the red tape and business taxes and fees that adversely affect entrepreneurship. Putting up a bakeshop or food shop, a parlor or barbershop, an internet or photocopying shop, is not a criminal act and hence, should not be subjected to red tape and taxes.

Second point is that the playing field should be as fair and level as possible, and not changeable midstream.

While employment and job creation is mainly a function of how dynamic and innovative the private enterprises and the entrepreneurs are, government policies and regulations play a big role.

In short, a fat-free economic policy to address this problem is to drastically reduce red tape and business taxes, not increase them.
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Here are two tables that were not included in the original article due to space limitations:

Table 1, Philippine Labor Force Data.

Philippines	Jan. 2012 1/	Jan. 2011	Jan. 2010	Jan. 2009
Population 15 years and over (million)	62.689	61.531	60.207	58.657
Labor Force Participation Rate (%)	64.3	63.7	64.5	63.3
Employment Rate (%)	92.8	92.6	92.7	92.3
Unemployment Rate (%)	7.2	7.4	7.3	7.7
Underemployment Rate (%)	18.8	19.4	19.7	18.2

Table 2, Unemployment Rates in Asia

Dec. 2010, unless specified: India 10.8, China 9.6 (2009) Philippines 7.1 (Q3), Indonesia 7.1 (Aug.), Pakistan 5.5 (July), Japan 4.9, Taiwan 4.7, HK 4.0 S. Korea 3.6, Malaysia 3.1 (Nov.) Singapore, 2.2 (Q4), Thailand 0.9 (Sept.) Vietnam 4.6 (2009)

2012, unless specified: India 9.8 (2011), Philippines 7.2 (Q1) Indonesia 6.6 (Q3 2011), Pakistan 6.0 (2011), Japan 4.6 (Jan.), S. Korea 4.2 (Feb.), Taiwan 4.2 (Jan.), China 4.1 (Q4 2011), HK 3.2 (Jan.), Malaysia 3.1 (Dec. 2011), Sing. 2.0 (Q4 ‘11), Thailand 0.4 (Dec. ‘11), Vietnam 4.3 (2010)

Source for 2012: The Economist, March 17^th 2012,  http://www.economist.com/node/21550312

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See also:
Rule of Law 1: Entrepreneurship and Government Permits, September 16, 2008
Welfarism 11: Bureaucratizing Entrepreneurs, April 12, 2011
Reducing Business Bureaucracies, January 27, 2012

Fat-Free Econ 1: Macroeconomics for Micro Concerns, March 08, 2012
Fat-Free Econ 3: Mining and Environmentalism, March 15, 2012

Climate Tricks 5: CO2, Clouds and Positive Feedback

One of the key themes of anthropogenic global warming (AGW) or "man-made warming" or later revised to "man-made climate change", is that more human emission of carbon dioxide (CO2) via fossil fuel burning, more coal power plants, etc., results in more warming. suggesting a high climate sensitivity. Such sensitivity is reflected in the cloud formation in the atmosphere, saying that more CO2 results in less clouds and hence, more solar energy penetration on the planet's air, land and sea surfaces.

Dr. Roy Spencer (www.drroyspencer.com) made a good illustration about this in his presentation during the 2nd International Conference on Climate Change (2nd ICCC) in NYC in March 2009 that I was able to attend.  This is how the feedback theory works.

Now, here is the data summarized in a chart/illustration, still part of Dr. Spencer's presentation. Should be mind-boggling for those who believe that only human factors, not natural factors, can influence the planet's climate.

Get that? More low-level clouds, more cooling. Less clouds, more warming. In his concluding slide, Dr. Spencer said,

The Bottom Line...

The IPCC Has IGNORED Natural Variations in Clouds …which has led to…

The ILLUSION of Positive Feedback (aka a “sensitive” climate system)

The CLAIM that only CO2 can Explain Global Warming

The FAITH that Earth’s cloud cover never changes, decade after decade, century after century.

Ouch, that hurts! At least to believers of "only human activities cause global warming".

Now, there is this interesting article about this subject in WUWT:

http://wattsupwiththat.com/2012/02/09/declining-global-average-cloud-height-a-significant-measure-of-negative-feedback-to-global-warming/

Declining global average cloud height: “A significant measure of negative feedback to global warming”

Posted on February 9, 2012 by Anthony Watts

Guest post by Dr. Pat Michaels – reposted (with permission) from World Climate Report

A new paper just published in Geophysical Research Letters by Roger Davies and Mathew Molloy of the University of Auckland finds that over the past decade the global average effective cloud height has declined and that “If sustained, such a decrease would indicate a significant measure of negative cloud feedback to global warming.”

Davies and Molloy are quick to point out that part of the decline from 2000 to 2010 in cloud height is due to the timing and variability of El Niño/La Niña events over the same period, however, there still seems to be evidence that at least part of the decline may remain even when El Niño/La Niña variability is accounted for.

Figure 1 (below) shows the history of the effective cloud height, as determined by Davies and Molloy from satellite observations, from March 2000 through February 2010.

Figure 1. Deseasonalized anomalies of global effective cloud-top height from the 10-year mean. Solid line: 12-month running mean of 10-day anomalies. Dotted line: linear regression. Gray error bars indicate the sampling error (±8 m) in the annual average (source: Davies and Molloy, 2012).

IPR and Medicines 24: Balancing Costly Innovation and Cheaper Drugs

A high government official, now UnderSecretary for Political Affairs at the Office of the President (OP), former Director-General of the Liberal Party, also a friend way back in the 80s at the University of the Philippines, Atty. Chito Gascon,  posted my earlier paper criticizing the compulsory licensing (CL) scheme, in his facebook wall. I thanked him for doing it. Here is his posting and the subsequent comments.
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Chito Gascon

thanks to Bong Montesa, i shared a recent news item about india's compulsory licensing practice - the purpose of which is to make medicines accessible to the poor - the discussion about this matter on that wall post was lively (see below!)... some persons shared the link as i did... and it also prompted minimal government advocate Nonoy Oplas to write a blog about it... here is the link to that piece:http://funwithgovernment.blogspot.com/2012/03/ipr-and-medicines-22-cl-on-anti-cancer.html ... as a social liberal (left liberal?), living in a developing country, i'm all for access & equal opportunity for all - particularly the poor as i also appreciate bong & peter's proposition for striking a balance to encourage innovation! share your own views about this important matter...

Government and Taxes: IPR and Medicines 22: CL on Anti-Cancer Drug Nexavar

funwithgovernment.blogspot.com

 ·  · Share · Sunday at 4:26pm near Makati · 

• You, Peter Casimiro, July Teehankee and 18 others like this.
• 1 share
• • 
    

    Nonoy Oplas Thanks Chito. I argued from a (right) liberal, strict private property rights perspective. Private property is private property, it is not and should never be, government or collective property, whether physical or intellectual property.
    

    Sunday at 4:48pm · 
  • Ipat  Nonoy, there are private but collective property rights also. Don't confuse individual property as if it is the same as private. There are collective private property rights of many types.
    

    Sunday at 5:42pm ·  ·  1
  • Ben  Just compare prices of drugs between the Philippines and India made by let's say Pfizer and see the big difference. Even drug price between Australia and Philippines you would see PH price is much higher. Now tell me should the government interfere when we are talking about life saving drugs. At one time the drug company Roche was price fixing vitamins:http://en.wikipedia.org/wiki/Hoffmann-La_Roche
    

    Expand Preview

    
    

    Sunday at 6:56pm ·  ·  1
  • 
    

    Nonoy Oplas H Ipat,I hope you read my article as posted by Chito. I was referring to drug molecules that did not come out of thin air but were scientificallly invented. Oxygen or hydrogen molecules art part of nature, they are collective property. Sorafenib molecule, the one that composes the anti-cancer drug Nexavar,was invented. Not by any mediocre minds who can also say *I invented a new drug against breast cancer, it\s made out of mango extracts + salt + chicken intestines + avocado+ ... I sell it very cheaply, no patent and its very effective." That's why I said that not all ideas are the same, majority of the ideas around the planet are mediocre if not idiotic, they are not scarce, they are everywhere, they do not need protection. The bright ideas are scarce,they need protection. And CL is a violation of such private property rights.
    

    Yesterday at 9:20am · 
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    Nonoy Oplas Bern, I keep hearing and reading that "drug prices inIndia and Pakistan are much much lower than in the Philippies." Can you provide the most updated studies, say Amlodipin molecule. Pfizer brand' Norvasc 5mg and 10 mg. The 10 mg here is about P22 per tablet,How much is it in India and Pakistan now? Provide actual numbers and prices,not guesses and assumptions, thanks.
    

    Yesterday at 9:23am · 
  • 
    

    Nonoy Oplas In comparing prices of the same or homogeneous product, say diesel, amlodipine, etc., one must show transparently the assumptions and factors used in converting one currency to the other. Like the prevailing exchange rate at the time of conversion price comparison,the taxesapplied. Here, drugs are taxed several times. import tax 3-5percent, VAT12 percent, local govt taxes,doc stamp tax I think, so that government taxes account for 16-20percent of the retail price of drugs. Or govt is responsible for expensive medicines by 16-20 percent,and people turn a blind eye on that. So how much taxes are applied in India, Pakistan, Australia?
    

    Yesterday at 9:31am · 
  • 
    

    Nonoy Oplas In the absence of reply yet from Ipat and Ben, I want to share a comment in our health yahoogroups, from James Auste of the Cancer Warriors Foundation (CWF). James wrote (he cc'd many other people aside from the ygroups members), "MDRP-- Mataas(M) ang Drug(D) Retai(R)l Price(P) ng gamot sa Pilipinas! number 1 in Asia na hindi maabot ng ating mga kaabayan." This is similar to Ben's concern above.
    
    I pressed to see the data -- a chart, a graph, a table -- showing that Philippine drug prices (say amlodipine or ibuprofen or carbocistein) by the same manufacturer (innovator or generics). Are people comparing the cheapest amlodipine in India, Pakistan, Bangladesh, Vietnam, Indonesia, etc. vs. the highest-priced amlodipine (P22 for 10 mg Norvasc) in the Philippines? If so that is a wrong approach in price comparison. Because there are also amlodipine 10 mg here that are sold at only P5 or less.
    
    If people should make statements like "the most expensive _______ price in the whole of Asia (or the world)" or similar claims, it is important that there should be hard data to show that are verifiable. Otherwise those are just allegations with zero proof.
    

    17 hours ago · 
  • 
    

    Nonoy Oplas The main reason why I pressed to see any data is because I also wrote once that the Philippines has "the most expensive power rate in Asia, at least for industrial users" as of 2011, and I showed a chart, which I got from a presentation by Dr. Jop Yap, the head of PIDS, a government think tank. See that chart and related data here, http://funwithgovernment.blogspot.com/2011/11/welfare-economics-philippine.html.
    

    
    

    Government and Taxes: Welfare Economics: Philippine Institutional Issues

    funwithgovernment.blogspot.com
    

    
    

    16 hours ago ·  · 

There were other comments from Peter Casimiro but these were not related to the original thread, which is about IPR, private property rights, patent and medicine innovation. Peter's posting is about advocacy for a government monopolization or single payor, of the healthcare system. I said that I want to challenge that philosophy too, but in another thread, not here.

I did not get a reply from James Auste in our CHAT yahoogroups about my query -- where is that data, a chart, a table, or a graph, showing that Philippine prices of medicines for the same generic molecule, same brand, from the same manufacturer, are the highest in Asia. I doubt that Ben or other readers of this blog and researchers who claim the same, can produce that data. So since that data is non-existent, that claim is therefore not correct. The truth is that the prices of the cheapest generic drugs in India, Pakistan, China, etc. for the same  molecule, are not that far from the cheapest generic drugs in the Philippines. If one will ask the officials and members of the Philippine Chamber of Pharmaceutical Industry (PCPI), the federation of local generic manufacturers and drugstores in the country, PCPI guys will be confident in saying that they are doing their part in producing among the cheapest drugs in Asia now. So where's the issue?

The bigger issue for them, are government taxes of medicines (the active pharmaceutical ingredients, the finished products, the packaging materials, etc.), the existing drug price control policy where many of their niche lower-income markets are being "raided" unintentionally by the branded products of the innovator companies, and the mandatory 20 percent discounts for senior citizens and persons with disabilities (PWDs). These discounts are not tax creditable, the drugstores and drug manufacturers have to absorb such price cuts with no counterpart burden sharing from the government.

On another note, my 78-years old mother in the province, has Alzheimer's disease. This was confirmed by her physicians more than a month ago to my sister who acts as the main caregiver to her and my 84-years old and equally sickly father. We were very sad to hear this. I have read some stories of friends and other people whose parents have this disease, and it indeed is a cruel disease. It slowly kills a patient's brain cells, leading to various phases of forgetfulness, even forgetting his/her children's names and faces, ultimately leading to mental, and physical shutdown. Isn't that a very cruel disease? And yet there are no medicines or vaccines against Alzheimer's yet. I personally wish too, that a "magic medicine" that is affordable will soon be developed against this disease -- for my mother, for other patients who are suffering the same illness. But that is just a dream for now.

I have read of the nearly 100 different medicines against Alzheimer's on various stages of R&D by the innovator and biotech companies in the US. That's the good news. The bad news is that these medicines are not yet mature and proven to be really effective in killing the disease as they are still in various R&D stages. Besides, the prices of those medicines should they come on stream, will be very high. Only the rich patients should be able to afford them but even then, there is no assurance that they will be totally saved by those future medicines. Each disease has its own way of mutation and evolution, the same way that our immune system has its own way of dealing with those evolving diseases too. Medicines and various treatment are external interventions that are meant to augment our immune system to help defeat various diseases.

But then again, human life by default, is meant to end somewhere, sometime. We can only wish to have a life longer by a few years compared to the average lifespan of the rest of humanity.

Here's what I wrote more than two years ago about this disease:

TUESDAY, NOVEMBER 17, 2009

Alzheimer's and medicine innovation

In one of my yahoogroups, I just learned that a number of my friends (age mid-40s to 50s) have parents who suffer from Alzheimer's disease. It's a "cruel, cruel disease" in the words of one friend, as her mother can hardly remember a number of things about her, about their family, and so on. And I didn't know that AZ is a growing disease among Filipinos. I know that cancer is, along with hypertension, dengue, etc.


In that yahoogroups, we were earlier discussing oil price control as a socialist policy adopted by the current government of the Philippines. And speaking of socialist policies driven by envy, the new "cheaper medicines law" is one such scheme.

One policy contained in that law that is currently being implemented by the Philippine government, is medicine price control. Unlike the recent oil price control of freezing oil prices to their Oct. 15, 2009 levels, the drug price control is a mandatory, obligatory, confiscatory, 50 percent price cut by Aug. 15, 2009. And the affected products are the most popular, most saleable products. For instance, there are about 200 medicines in the Phil. market against hypertension, but the target of price control was on the most popular brands, also the more expensive ones, like Norvasc. So it doesn't matter that while there are anti-hypertension drugs selling at P10 or even less -- thus poorer patients have the option to buy these cheaper drugs for the same ailment -- but the policy targeted Norvasc that was selling at P44, a few other popular drugs made by multinationals.

Another confiscatory policy is intellectual property rights (IPR) and patent confiscation via compulsory licensing (CL) of a patented drug or vaccine. This scheme is a technical term for saying, "Your huge cost of medicine R&D is yours and yours alone; your losses for unsuccessful research, losses for less saleable medicines are yours and yours alone. But your successful and saleable medicine invention is also MY invention." And the government made it a policy in the new law.

So now the world is facing various diseases, new and emerging or re-emerging diseases. For instance, before that was only "ordinary flu". Later on we have bird flu, cat flu, cow flu, swine flu, etc. Tomorrow we'll have dog flu, tiger flu, horse flu, etc. And people are becoming more demanding. They want to get cured of their debilitating diseases if possible within 1 week, not 1 month, not 1 year, not 10 years. So people demand more powerful, more disease-killer drugs and vaccines. But the medicine innovators, the only companies who can bring such more revolutionary medicines, are being painted as profit-hungry capitalist multinationals, so that their products should be subjected to confiscatory policies like CL and price control.

In such an environment, we are discouraging the innovators from inventing more powerful drugs. But the richer countries respect IPR and patent, so innvoation should continue somehow, but such innovators will think twice in bringing their more powerful but more expensive, new medicines, to countries like the Philippines with socialist medicine policy. So Filipino patients in need of such medicines will have to buy such drugs in other countries like HK, Singapore, Korea, the US, Europe, etc. Which makes treatment become more expensive, not cheaper, as envisioned by the new law. The generics manufacturers are cute, they give us cheaper generic, off-patent but useful drugs. But they invent no new powerful medicines. They're no innovators.

People's lifestyle evolve, our communities evolve, diseases evolve, so the medicines to kill or neutralize those diseases should also evolve. More strains of AZ, Parkinsons, cancer, swine flu, leptospirosis, etc. should be emerging. Probably more debilitating and more cruel. The need for more new disease-killer medicines and vaccines should continue, endlesslessly. And socialist health and medicine policies are not the way to encourage such innovation.

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* See also:
Alzheimer's, getting old, and new drugs, May 01, 2011
IPR and Medicines 23: Profitability of Innovator Pharma Companies, March 16, 2012