* This is my article yesterday in TV5's news portal,
http://www.interaksyon.com/business/50817/fat-free-economics--why-a-rise-in-unemployment-rate-is-not-exactly-bad-----------
The National Statistics Office (NSO) released the October
2012 quarterly labor force survey (LFS) results, the last for this year.
What was highlighted was the increase in unemployment rate from 6.4 percent in
October 2011 to 6.8 percent this year.
This did not conform with the high economic growth in the
third quarter, when the Philippines' gross domestic product (GDP) grew a
surprising 7.1 percent, the second highest in Asia. If growth was high, it
means that there were lots of economic activities that occurred over the last
quarter and hence, more jobs must have been created, whether temporary or
permanent. So what went wrong?
In the table below are the numbers over the past three
years. We show both the actual numbers and percentages. Take note that in
the fifth column, the increase or decrease in absolute numbers from October
2011 to October 2012.
Source: NSO, www.census.gov.ph
Here are the notable points:
a) There were 1.08 million new Filipinos who entered the
labor force, whether looking for work, already working, or still studying.
b) Labor force participation though has declined by 0.76
million, meaning less people are actually working or are seeking work, or more
people have retooled themselves by going back to school and postponed entering
the labor force. The significant decline in labor force participation rate from
66.3 percent to 63.9 percent also shows this.
c) Employed people - whether employers, employees,
self-employed or unpaid - declined by 0.88 million. And whether fully
employed or underemployed, which is a bit worrying.
d) Underemployed people also declined by 0.22 million,
which implies that the fully employed people declined by 0.66 million.
e) Unemployed people increased by 0.12 million. We will
have a longer discussion of the term “unemployed” below.
f) Unemployed and underemployed combined declined by 0.1
million people.
From a layman’s perspective, points (b), (c) and (e) are
bad news, while points (a), (d) and (f) are good news.
We now compare this year’s numbers with those two years
ago: (a) employment rate is higher, (b) underemployment rate is lower, and (c)
unemployment rate is lower. This means the labor force data are better this
year compared to two years ago, but mixed compared to last year.
The NSO has defined the unemployed people as: “persons who are 15 years and over as of their last birthday and
are reported as: (1) without work and currently available for work and seeking
work; or (2) without work and currently available for work but not seeking work
for the following reasons: ( a) Tired/believed no work available,
(b) Awaiting results of previous job application, (c) Temporary
illness/disability, (d) Bad weather, (e) Waiting for rehire/job recall.”
This does not easily conform with the layman definition
of an unemployed as someone who is “seeking work but is not hired”, as the
above definition includes people who are “not seeking work” because of the five
reasons given. Which means that many of the unemployed are people who generally
have chosen to be unemployed temporarily. Someone who is offered to work at
say, P30,000 per month gross pay has chosen to be unemployed temporarily
because he is awaiting possible employment in another company that will give
him P40,000 or higher per month in gross pay.
In this case, to be “unemployed” is not exactly a bad
situation. It is “unemployment by choice” and not due to structural problems in
the economy.
It is highly probable that many Filipinos have opted to
be unemployed temporarily, say at the time the survey was conducted because
they were awaiting job placement or hiring abroad. They want to be ready to
leave any day without the hassle of seeking management permission to resign,
get office clearance and related burdens.
The figures for OFW remittances seem to conform with this
hypothesis: $19.24 billion in 2009, $20.74 billion in 2010, $22.35 billion in
2011, and projected to reach $24-plus billion this year. There is
generally higher pay abroad than here, despite the continued appreciation
of the peso relative to the US dollar and other major currencies.
In short, a higher “reservation wage” abroad or here - as
a result of anticipated faster economic growth and more business activities -
is among the reasons why many Filipinos have opted to be temporarily
unemployed. An increase in unemployment rate from 6.4 to 6.8 percent does not
appear to be bad after all.
-------------See also:
Fat-Free Econ 30: BPOs and Obama, November 14, 2012
Fat-Free Econ 31: On the Kasambahay, Solo Parents Welfare Bills, November 26, 2012
Fat-Free Econ 32: GDP Growth, Stockmarket and Rule of Law, December 01, 2012
Fat-Free Econ 33: Institutions and Why Governments Fail, December 09, 2012
Labor Econ 6: Labor Rights and Employee Forever, May 05, 2012
Labor Econ 7: Unemployment in Advance Economies, May 06, 2012
Labor Econ 8: SWS on Unemployment Survey, June 08, 2012
Labor Econ 9: On 4-months Maternity Leave, June 14, 2012
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