* This is my article today in TV5's news portal.
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One
of the never-ending criticisms of the country's recent economic performance is
that it was a “jobless growth” or “elitist growth." The people who say
this refer to the lack of sufficient jobs created in the economy and hence
point to further social inequality.
Last week's
column has attracted
similar skeptical comments in social network sites, such as “growth for the
rich”, “what growth, growth of the urban slums,” “gobbledygook growth,” and so
on. Perhaps it is a case of people being too mired with slow growth in the
past, that faster-than-expected economic expansion has become unfamiliar and
even uncomfortable for them.
There
are valid and invalid reasons and premises for such statements. But before we
enumerate these premises, let us review some of the latest GDP growth figures for
key economies. This is from The Economist magazine, which conducts a quarterly
pool of some of the world’s biggest investment banks and rating companies about
their GDP and other macroeconomic forecasts, tabulate those forecasts and get
the average.
Source: The Economist, February 2, 2013
The
Philippines’ full year 2012 growth of 6.6 percent is nearly a percentage point
higher than the 5.9 percent projection. A week before that and prior to the
announcement of the fourth-quarter 2012 GDP growth, the average forecast for
full-year 2012 by The Economist was only 5.5 percent. This is a bit unusual
because in most cases and in many countries, actual numbers are about +/- 0.5
percent maximum divergence from projections, the Philippines’ is 0.7-1.1
percent higher than the average forecast.
If
the Philippine economy grew slow, like Hong Kong and Singapore’s 1-1.3 percent
third-quarter growth, or even contracted to -1.5 to -6.9 percent like what
happened to the Netherlands, Italy, Greece and Spain, the complaints of
“jobless growth” may have turned into a remark like “jobless non-growth” -- a
not-so gratifying situation. See this graph for instance, showing the big
disconnect between expectations of stock market growth and GDP growth this
year.
The
European Central Bank simply threw money at almost everything while the
fundamentals remained gloomy. Expectations like these in such a big continent
like Europe can drive some if not many businesses there to head out for other
more promising economies. The Philippines should be one of those emerging
markets where their financial radars are currently directed.
So,
can “jobless growth” really happen and is it theoretically possible?
Yes,
it is a theoretical possibility and can happen if the number of the employed
people has remained the same while the output of enterprises has increased due
to higher productivity (more automation, improvement in production processes,
more personal motivation) and the number of people in the active labor force
has increased. There were no net job losses that occurred, it is just that the
new entrants to the labor force were not absorbed and hired mainly by the formal
sector.
The
next question will be thus: Is this happening in the Philippines now?
There
are mixed signals based on the latest labor force survey (LFS) data as of
October 2012. Compared to October 2011, the unemployment rate was higher at 6.8
percent last year compared with 6.4 percent in 2011, and the number of
unemployed people was 2.76 million in 2012 compared with 2.64 million the
previous year.
If
compared two years ago in October 2010, unemployment in 2012 was tame and
lower: 6.8 percent unemployment rate compared with 7.1 percent in 2010, and
2.76 million unemployed compared with 2.80 million in 2010. A rise in
unemployment also does not always mean that many job applicants are rejected.
An
improving overall economic condition also produces job seekers with rising
“reservation wage” For instance, they are offered a monthly pay of P20,000 but
they did not grab it because they are waiting for a possible job call that will
give them a P25,000 monthly pay. So when the LFS was conducted during that period,
they were still unemployed, as argued in an earlier column.
There
are valid and invalid criticisms of a “jobless growth” phenomenon, actual or
imaginary. Perhaps the quickest way to dispel this is for the government to
encourage more self-employment or entrepreneurship among the people. If some
people harbor a high reservation wage for long, the rational thing to do is for
them to employ themselves.
This
will require that government must reduce certain procedures, permits, taxes and
fees for people to start and maintain a business. Credit is relatively easy
these days with interest rates at very low levels. The 91-day Treasury bill
rate -- the benchmark for loans -- is down from about 4 percent just three
years ago to the current 0.05 percent.
There
is a need to sustain the overall economic optimism in the country. People
abroad are beginning to see it, but Filipinos have yet to feel it.
See also:
Fat-Free Econ 34: Rise in Unemployment Rate Not Exactly Bad, December 20, 2012
Fat-Free Econ 35: World's 25 Largest Economies in 2012, January 02, 2013
Fat-Free Econ 36: Peso Appreciation, Growth and Less Government, January 06, 2013
Fat-Free Econ 37: PH GDP Growth 2012, February 02, 2013
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