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One of the major sources of skepticism of
high economic growth of the Philippines is the persistent high unemployment and
underemployment rates. As of the latest labor force survey, October 2012
result, some 25.8 percent of the total labor force of the country were either unemployed
or underemployed. See previous discussion here, Rise in unemployment not
exactly bad.
There are two main reasons why a person is
unemployed. One is that he is rejected due to under-qualification or
over-qualification (may demand higher pay later on), and two, he chose not to
be hired at a particular job description and pay. The first is involuntary
unemployment, outside the control of the job applicant while the latter can be
considered as voluntary unemployment, within the control of the job applicant.
One news report, Lots of jobs for
college grads, but do they want the work? cited, “more than 40 percent of the unemployed
college graduates cited ‘no job opening in field of specialization, no interest
in getting a job, starting pay is low, and no job opening within the vicinity
of residence.’ as reasons for unemployment.”
This explains the “voluntary unemployment”
phenomenon. There are jobs available for many college graduates but they chose
not to take those jobs, at least temporarily, hoping that a job related to
their course, or a higher paying job, or a job near their house or city, would
be available soon.
Here are more numbers, notice the high
incidence of unemployment among college graduates.
Table
1. Philippine unemployed by educational attainment, October rounds, 2006 to 2012
Source: National Statistics Office, www.census.gov.ph
Most economic literatures analyzing the unemployment
phenomenon focus on what the government should do to improve the employability
of the population, the college graduates especially. Thus, the favorite policy
interventions and proposals are higher spending in government education from
elementary to tertiary. The K+12 education has recently been implemented. This
is the mandatory kindergarten + 12 years in elementary and high school, or 13
years of schooling before a student can go to college.
There are several problems with this
approach. One is that there is high focus of training students to become
employees, to be “more employable” someday and less as entrepreneurs and job
creators themselves.
Two, there is lack of trust in self-learning
by students with the help of modern technology. Self-learning as augmentation
to school education is a good training ground for self-employment and
entrepreneurship someday. Instead, students are mandated to spend more years in
the schools, in government elementary and secondary schools especially.
And three, there is high additional cost to parents
as well as to public spending with the extension of mandatory elementary and
secondary education to 12 years. As if there is no huge budget deficit every
year and the public debt stock is not rising every year.
Both voluntary and involuntary unemployment
among college undergrads and graduates would have been lower if these young
people were trained for self-employment and entrepreneurship early on, and if
government policies are more business friendly than they are now.
This means that government business permits
and bureaucracies, business taxes and fees, both at the local and national
government levels, should be reduced and/or made simpler. The high incidence of
informal economy or underground sector micro and small entrepreneurs is a clear
proof that government business bureaucracies and taxes are simply high and
complicated.
Another important policy that the
government should undertake to improve domestic labor productivity and
employability is to open up the economy more to foreign competition in trade
and investments. In a PIDS discussion paper on Philippine Productivity Dynamics in April 2012, Dr.
Gilberto Llanto wrote,
“Openness
of the economy measured as exports to GDP ratio and the foreign direct
investments are significant positive influences on labor productivity. In this
regard, the government should… strengthen the export markets and bring in more
foreign direct investments. The competition provided by discriminating
(foreign) export markets creates incentives on domestic firms to become more
productive and competitive, otherwise the export market or destination will be
lost to competitors. On the other hand, foreign direct investments bring into
the domestic markets new products, new processes, innovations, and a host of
complementary institutions, e.g, efficient supply chains, that motivate labor
productivity.”
The key to reduce unemployment, both
voluntary and involuntary, is more entrepreneurship, more business competition,
freer markets in all factors of production – labor, capital, technology, land –
and not more government debts and bureaucracies, more stifling taxes and fees.
-----------See also:
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
Fat-Free Econ 38: Jobless Growth vs. Jobless Non-Growth, February 12, 2013
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