Labor Econ 8: SWS on Unemployment Survey

* This is my article yesterday in the online magazine TL. The two charts are not part of the original article, I just added them here.
http://www.thelobbyist.biz/perspectives/less-gorvernment/1317-unemployment-and-sws-sensationalism
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High un-employment is a clear indicator of social failure as a big portion of a very important resource in this planet, human minds and labor, are not optimized and lying idle. Political oppositions and rebels highlight this to lambast an incumbent administration, while some survey outfits can sensationalize this.

This is what happened when the Social Weather Station (SWS) reported in its First Quarter 2012 Social Weather Survey, reported in BusinessWorld last May 21 that “adult unemployment hitting a record-high 34.4%, equivalent to about 13.8 million individuals.”

This was reposted in interaksyon that day, echoing that “Over 13 million Filipinos were reported jobless as adult unemployment hit a fresh record-high in the first quarter of 2012,”

This is sensationalism by the SWS. Just imagine, more than one-third, 34.4 percent, of Filipinos above 18 years old are unemployed, have no jobs, “not working and looking for work.” Can one believe that? Even the three European economies with heavy debt problems and have the worst unemployment situations, Portugal, Greece and Spain, have unemployment rates of only 15 to 24 percent. And the Philippines has 34.4 percent even though we are far out from such debt and financial turmoil as currently experienced by these countries.

A profile of the SWS unemployed is even more alarming for some sectors.

· * 55.9 percent of those aged 18 to 24 years old, and 45.4 percent of those 25 to 34 years old, are jobless. Can you believe that?

· * 43.0 percent of the females and 27.6 percent of the males are jobless. Can you believe that too?

The figures cited by the SWS and were echoed by the local media is theoretically improbable on two grounds.

One, if so many people have no jobs, many of them and their family will go hungry if not starving already, so they will take even the low-paying jobs, and that will quickly reduce the unemployment rate. Graphically, the labor supply curve will move to the right and it will result in declining average wage rate.

Two, if average wage rates have declined as more workers have become desperate and snap even low-paying jobs, more entrepreneurs will hire more people as the cost of labor is declining, especially for the labor-intensive sectors, and unemployment rate will decline. Graphically, the labor demand curve will also shift to the right,

Empirically, these things did not happen. Local wages are not falling, they are in fact rising, both at the micro and firm levels, and at macro or national levels with the recent rise in wages as approved by the regional productivity boards.

The SWS though also issued a pacifying statement, "if the official definition is applied, then the unemployment rate is 26.1percent." This official definition as adopted by the National Statistics Office (NSO) in its quarterly Labor Force Survey (LFS) means that a person is (a) not working, (b) looking for work, and (c) available for work. By adding the third factor, SWS unemployment rate declines from 34.4 to 26.1 percent. Still, this is a very high figure, even worse than the worst in Europe and the rest of the industrialized world, Spain’s unemployment rate of nearly 25 percent.

How did the SWS exaggerate the unemployment rate in this country? Simple, by removing the distinction between the unemployed and the underemployed among those who have work.

Official NSO data, as of January 2012 LFS showed that (a) unemployment rate is 7.2 percent, and (b) underemployment rate is 18.8 percent. The underemployed are those people who have jobs already, full time or part time employed, but are still looking for additional work, mainly to augment their income.

So adding NSO’s unemployed + underemployed = 26.0 percent of total labor force, constituting nearly 10 million Filipinos. This is similar to the SWS’ unemployment rate of 26.1 percent.

From the SWS media release posted in their website, they did not introduce the term “underemployment” or the “underemployed.” There are only employed and unemployed people. Their definition of employed are those who are currently working (“may trabaho sa kasalukuyan”).

In many surveys, there is a tendency among respondents to exaggerate their bad plight while understating their positive condition, perhaps hoping that the government will give out more dole outs that may benefit them later. This is similar to people reporting less or no income, hoping that government will not go after them via personal income tax.

So someone who is working five to ten hours a week on average, say a tricycle driver who only brings a few students to and from the school five days a week, would chose to be considered as unemployed rather than employed. Or a person who is taking care of his/her younger siblings at home, a case of “unpaid family worker” would consider him/herself as jobless if asked to answer only whether unemployed or employed.

Since there is this tendency among survey respondents, it would be wise to keep the distinction between the unemployed and underemployed. But the SWS opted not to make such delineation. The result of its very high unemployment rate figure naturally put the SWS on major headlines once more. Similar to Bayan Muna and other sensationalist groups begging for more media mileage, to issue the most scary, the most far out scenarios, which many media outlets tend to buy more.

That 34.4 percent or 26.1 percent unemployment rate by the SWS is simply theoretically and empirically not possible. Because of this, the SWS has unintentionally contributed to economic miseducation of many Filipinos.
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See also:
Labor Econ 1: What Determines Wage? May 26, 2006

Labor Econ 2: Labor Laws and Employee Forever, May 04, 2010

Labor Econ 3: Wages and Marginal Product of Labor, April 18, 2011

Labor Econ 4: Minimum Wage Law is Wrong, July 05, 2011

Labor Econ 5: On Extending Minimum Wage Law Abroad, July 09, 2011

Labor Econ 6: Labor Rights and Employee Forever, May 05, 2012

Labor Econ 7: Unemployment in Advance Economies, May 06, 2012

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

Lifestyle Diseases 3: Causes of Mortality in the Philippines

The Department of Health (DOH) posted in their twitter account two tables, the leading causes of morbidity (diseases) and mortality (deaths) in the Philippines. These are old data actually, average for 2000-04 and 2005. The National Statistics Office (NSO) released its Death Statistics 2007 early this year. Check my earlier paper, Lifestyle Diseases 2: Killer diseases in the Philippines, March 16, 2011.

Nonetheless, these data are still useful. The top 3 killer diseases in 2005 here are similar with NSO's killer diseases in 2007. Numbers 4, 5 and 6 are Pneumonia, Accidents and Tuborcolosis. In the NSO data, #s 4, 5 and 6 are Pneumonia, Tubercolosis and Chronic lower respiratory diseases. I do not know the reason for the discrepancy in ranking here.

And here are the main causes of sickness in the Philippines until 2005. The top 5 are: Acute Lower Respiratory Tract Infection and Pneumonia, Bronchitis, Diarrhea, Influenza and Hypertension.

Many of the diseases here are preventable if proper and healthy lifestyle are observed. Like having a clean house and surrounding, not over-drinking, over-smoking and over-eating.

Prevention of dengue and other mosquito-born diseases can be helped by the DOH and local government units through mass fogging and spraying of insecticides in a wide area of communities. But it is still personal responsibility that can ward off mosquitos away from our houses, schools and offices. Like taking out stagnant water where mosquitos can breed.
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On December 16, 2009 I wrote this:

Healthcare is personal responsibility

I got this chart somewhere, I forgot to take down the exact source and web links, but the author of this chart is Dr. Indur Goklany, an Indian intellectual who wrote the book, "The improving state of the world" published a few years ago.

This chart supports my personal view, that healthcare is first and foremost, personal and parental responsibility. Government responsibility in healthcare is a far second.

Of the top 12 global health risk factors in 2004 in the above chart, 9 are related to personal and parental irresponsibility:

1. unsafe sex
2. alcohol use
3. unsafe water, hygiene
4. high blood pressure
5. tobacco use
6. high blood glucose
7. overweight and obesity
8. physical inactivity
9. high cholesterol

and only 3 are socio-economic, or health risks mainly due to poverty:

1. underweight (malnutrition)
2. sub-optimal breastfeeding
3. indoor smoke from solid fuels (due to lack or absence of LPG, electricity, etc.)

A few weeks ago, I heard a talk by the Medical Director of a pharmaceutical company here in the Philippines. He said that 7 of the top 10 causes of mortality in the country are directly or indirectly related to smoking.

The Top 10 Leading Causes of Mortality, 2000 to 2005 (and probably until now) are:

1. Diseases of the heart
2. Diseases of the vascular system
3. Malignant neoplasm
4. Pneumonia
5. Accidents
6. Tubercolosis, all forms
7. Chronic lower respiratory diseases
8. Diabetis militus
9. Conditions from perinatal period
10. Nephritis, nephritic syndrome

Only #s 5 and 9 above seem to be external or not related to smoking. I don't know which is the 3rd disease above that is not related to smoking.

Anyway, if most people are dying because of over-smoking, and almost related, due to over-drinking, over-eating fatty food, over-sitting in sedentary lifestyle, etc., then those people really have no right to demand that "healthcare is a basic right" and the government should provide it to them at the lowest cost possible, if not free.

In this case, government therefore, has no justification to declare drug price control, or issue IPR-confiscation policies like compulsory licensing (CL) to have "cheaper medicines" by blaming the multinational pharma companies as the main cause of lack of access to good healthcare by the peope.

The best healthcare is preventive, not curative. Hence, the importance of personal hygiene, healthy lifestyle, vaccines, competitive health insurance system, and economic growth that lift people from poverty.

By focusing on the curative aspect of healthcare, the government and some activist health NGOs are deliberately losing sight of the personal responsibility aspect of healthcare, and the distortionary effects of government multiple taxation of medicines, vaccines and healthcare.

Free Trade 18: Regional Trade and East Asian Model

(This is my article today in the lobbyist.biz, with original title, Philippine Trade and East Asian Economic Model)

Trade, selling what one produces in relative abundance, and buying what one needs but can not produce more efficiently, is among the cornerstones why societies and economies prosper. This philosophy applies both in domestic and international trade.

The National Statistics Office generates the monthly and annual international trade data of the Philippines. The tables though are relatively detailed, like month-on-month and year-on-year changes (value and percentage). I only want to see the cumulative data.

My sister's auditing office has an economics blog, Alas, Oplas & Co. CPAs-RSM. It's cool, short and summarized data, little commentaries. So I used the trade data there in these two tables. The NSO is the primary source of data there.

Of the top 10 or 11 exports market of the Philippines last year, only three are non-Asians: US, Germany and Netherlands. This speaks of the growing regional trade and economic integration in the continent. The main beneficiaries of globalization and global capitalism over the long-term are the neighboring countries themselves, especially if such countries are growing dynamically.

For the top 10 or 11 sources of imports of the Philippines, only the US is non-Asian. Saudi Arabia is also in Asian continent, though the Middle East is much closer to Africa mainland than Asia mainland.

In the first five months of this year, the same top 10 countries in 2010 also ranked in top 10 this year. The difference is that the percentage shares of Germany and Netherlands are shrinking. There is greater regionalism in trade and other economic activities now, than inter-continental trade.

The way the public debt problem of many European and North American economies are dragging and burdening them, slower economic growth, if not economic stagnancy, will be the ultimate result. Governments of welfare states have to retain their high and multiple taxes to sustain those expensive entitlement programs. This process siphons off a big portion of personal, household and corporate income and savings, into state coffers. 

And this brings me to another topic: the East Asian Model (EAM) of economic growth. A friend from Pakistan, Ali Salman, wrote in his article last month, Myth buster: Debunking the clichés in economic policy making". He wrote about certain economic myths like forced collectivism, economic central planning, as “motors” of economic growth in Pakistan and other developing countries. I agreed with many of the things he wrote, except one “myth” which he described as,

"Government should provide everything or at the very least, it should engineer society just like the East Asian Model."

I wrote to him to say that he may have misrepresented the EAM here. The EAM that I know has prospered in recent decades because compared to developed economies of North America and Europe, the EAM is or has:

1. Less welfarist. You don't work, you go hungry. There is little or zero state subsidy for unemployment insurance or food stamps.

2. Less rigid labor laws. Entrepreneurs can hire and fire people easily, the same way that employees can quickly move from one employer to another, or set up own micro or small enterprises.

3. Less environmental dictatorship. Environmentalism and its policies are there, sure, but not as strict as those in Europe and N.America. Thus, many East Asian economies have grown fast via cheap power sources - coal and nuke, especially.

The more that countries and governments attempt to disregard personal responsibility and assert or impose more government responsibility in running the people’s ordinary lives, the bigger will be the long-term restriction on individual and economic freedom, and the larger will be public indebtedness.

As the debt crisis in the US show, BIG governments, socialist or democratic, must learn to step back and scale down their huge bureaucracies and expensive welfare programs. A nanny state that attempts to baby-sit people even if they are already adults, will not help in cultivating more personal responsibility in how people should manage their own lives.

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See also,

Free Trade 12: Trade and World Peace, April 28, 2009
Free Trade 13: Benefits of Dumpiing, June 16, 2009
Free Trade 14: Import Substitution, AFTA, China, January 08, 2010

Free Trade 15: Customs Bureaucracy, November 09, 2010

Free Trade 16: Price Equalization vs. Export Subsidies, May 03, 2011

Free Trade 17: Consumer Surplus and Human Rights, May 27, 2011