Sona 2012: Reviewing Aquino’s “Social Contract” and performance (Part 1)

Aquino promised “inclusive growth” that creates jobs at home. After two years, his administration has turned out to be the largest exporter of Filipino workers (Photo from inquirer.net)

On job creation

On June 30, President Benigno Aquino III will mark his second year in office. Then on July 23, he will deliver his third State of the Nation Address (Sona). How do we assess his performance so far? One approach is to gauge Aquino’s achievements vis-à-vis the promises he made to the people in 2010. This series of articles reviews the performance of the President in terms of his campaign promises on improving the economy and the living condition of the people.

Promises

As reference, we will use the document “A Social Contract with the Filipino People”. In this document, then presidential bet Aquino outlined his platform of government. We will also refer to the Philippine Development Plan (PDP) 2011-2016, which details how Aquino plans to implement his so-called Social Contract.

Among others, Aquino promised to transform national leadership:

  1. From a government that merely conjures economic growth statistics that our people know to be unreal to a government that prioritizes jobs that empower the people and provide them with opportunities to rise above poverty
  2. From relegating education to just one of many concerns to making education the central strategy for investing in our people, reducing poverty and building national competitiveness
  3. From treating health as just another area for political patronage to recognizing the advancement and protection of public health, which includes responsible parenthood, as key measures of good governance
  4. From government policies influenced by well-connected private interests to a leadership that executes all the laws of the land with impartiality and decisiveness
  5. From treating the rural economy as just a source of problems to recognizing farms and rural enterprises as vital to achieving food security and more equitable economic growth, worthy of reinvestment for sustained productivity
  6. From government anti-poverty programs that instill a dole-out mentality to well-considered programs that build capacity and create opportunity among the poor and the marginalized in the country
  7. From a government that dampens private initiative and enterprise to a government that creates conditions conducive to the growth and competitiveness of private businesses, big, medium and small
  8. From a government that treats its people as an export commodity and a means to earn foreign exchange, disregarding the social cost to Filipino families to a government that creates jobs at home, so that working abroad will be a choice rather than a necessity; and when its citizens do choose to become OFWs, their welfare and protection will be the government’s priority

These Social Contract commitments can be categorized into five: (1) Job creation; (2) Provision of social services; (3) Poverty reduction; (4) Agricultural development; and (5) Promotion of private business.

New jobs

Aquino criticized the Arroyo administration for conjuring false growth statistics. In his PDP, Aquino said that his government will aim for inclusive growth. This means economic expansion which translates to more jobs. The PDP has specifically set a target of one million new jobs every year, based on an annual growth of 7-8% in the gross domestic product (GDP).

Using official data from the National Statistics Office (NSO), the average number of jobs in 2010 was about 36 million. It increased to 37.2 million in 2011 and to 37.6 million this year. Aquino, thus, has “created” around 1.6 million new jobs or 800,000 a year. This seems impressive considering that the GDP grew by an average of just 4.5% a year during the period.

But the additional jobs are negated by the increase in the size of the labor force. From 2010 to 2012, the labor force grew by 1.6 million, the same volume as the increase in the number of jobs. Hence, official unemployment did not improve during the period, remaining at more than 7 percent.

Dismal quality

Further, the quality of additional jobs remained dismal. Of the 1.6 million new jobs, more than 800,000 were produced by the services sector, characterized by highly irregular, less productive employment. They include jobs covered by “endo” (end of contract) and “5-5-5” schemes, where workers are hired under rotating 5-month contracts. Aquino has rejected proposals to fully ban contractualization, along with the ₱125 wage hike bill, claiming they will create “more problems”.

Also, more than 500,000 of the new jobs were self-employed and unpaid family workers. This implies that almost a third of jobs created were a result of workers’ own efforts to cope with limited employment opportunities. Meanwhile, underemployment, which captures the unsatisfactory quality of present jobs, increased by about 149,000 from 2010 to 2012. Estimates

Of course, it could be argued that low quality jobs are better than no jobs at all. But what Aquino promised are new jobs that empower the people and give them the chance to get out of poverty. To be sure, part-time, insecure or unpaid jobs do not allow workers to be productive enough and improve their miserable condition. Worse, jobs being created are not only low quality but also insufficient in relation to the burgeoning labor force.

Flawed count

It does not help that NSO data on employment tend to understate domestic job scarcity. Official methodology counts as employed those who “worked” for even just one hour in a week, which artificially bloats the number of employed. On the other hand, it excludes as unemployed the job seekers who are unavailable for work despite an opportunity due to illness, family obligations, etc. This falsely deflates the number of jobless.

Aquino is aware of this anomaly. In one of his press briefings prior to official proclamation, he said one of the first things he will do is to clarify how government counts the jobless. This, according to Aquino, will let government design a more reliable employment program. Alas, Aquino chose to continue the unreliable NSO methodology began by the Arroyo administration in 2005 in an obvious attempt to hide the worsening jobs crisis.

Deteriorating crisis

Fortunately, independent surveys, such as the one regularly conducted by the Social Weather Stations (SWS), provide us a more dependable picture of the domestic labor market. In its latest (March 2012) survey on adult unemployment, the SWS reported that 34.4%, or about 13.8 million workers, are jobless. Using SWS surveys, it appears that the incidence of unemployment is worst under Aquino, averaging 26.8% in his first two years. During the term of Gloria Arroyo, it averaged 19.6%; Joseph Estrada, 9.2% and; Fidel Ramos, 10.3 percent. Unemployment is on its way to triple its level from just two decades ago.

The current jobs crisis is the result of the accumulated impact of decades of defective and destructive economic programs implemented by previous regimes such as trade and investment liberalization, neoliberal restructuring of agriculture, etc.

Aquino is not expected to fully reverse this long-term trend of deteriorating job scarcity in two years. But instead of laying down the groundwork to address the jobs crisis such as reviewing and scrapping laws that liberalized key sectors of the economy, it’s business as usual under the Aquino administration.

No industrialization plan

Export-oriented, foreign capital-dependent industries that are vulnerable to global boom and bust continue to be promoted under the PDP 2011-2016. Local micro, small and medium enterprises (MSMEs), which account for around 61% of employment, remain marginalized as policies continue to favor big and foreign corporations.

There is no plan to reverse trade and investment liberalization that destroyed local industries and jobs, especially MSMEs. There is no industrialization plan anchored on vibrant domestic production and consumption. MSME development is still geared towards linking them to the highly volatile foreign markets and as subcontractors of mostly foreign firms. Thus, the potential of MSMEs to massively and sustainably contribute to domestic job creation remains greatly hampered.

Also, Aquino does not have a genuine land reform agenda, which is another program that can create a huge number of jobs. Instead, he has been promoting public-private partnership (PPP) in agriculture that tends to displace farmers and farm workers, while peddling the deception of the Comprehensive Agrarian Reform Program Extenstion with Reforms (Carper).  (More on this in a separate article.)

Largest exporter of workers

Indeed, this administration does not have a comprehensive and sustainable job creation plan to speak of. Contrary to the Social Contract’s pronouncement that it will create jobs at home and will not treat our workers as export commodities, Aquino has turned out to be the largest exporter of Filipino workers among all Presidents. In the past two years, Aquino has aggressively pursued new bilateral deals with various countries to create additional market for Philippine labor export. It has recently lifted the deployment ban in politically turbulent countries like Libya, Sudan and Nigeria as well as in Iraq and Afghanistan.

Data from the Philippine Overseas Employment Administration (POEA) show that the deployment of overseas Filipino workers (OFWs) under Aquino has already reached around 1.4 million a year. During Arroyo’s time, annual deployment was pegged at 1 million; Estrada, 0.84 million; Ramos, 0.69 million; and Cory Aquino, 0.47 million. OFW deployment has already almost tripled since the administration of Aquino’s mother.

Neglecting OFW welfare

Worse, Aquino has been remiss even in his commitment to ensure the welfare and protection of OFWs. Migrante International noted in a report that the 2012 budget for OFW welfare and services has been cut by ₱792 million. Per OFW, the Aquino administration is allocating a measly ₱262 for welfare and services. Meanwhile, it is collecting a huge ₱20,000 from each OFW for various fees and taxes.

Aquino’s neglect of migrant workers is further illustrated in the inept evacuation of OFWs from MENA (Middle East and North Africa) countries undergoing political turmoil, not to mention the four Filipinos executed abroad in the past two years.

Part II: How the rich is getting (scandalously) richer under Aquino

PH economy in 2011 (Part 2): The elusive “inclusive growth”

Activists mark today's (Jan. 6) Three Kings feast by reminding the Aquino administration to address the pressing economic issues facing the people and not only squeeze political brownie points from the Corona impeachment trial

First published by The Philippine Online Chronicles

(Read part 1 here)

Government’s so-called “inclusive growth” outlined in the Philippine Development Plan (PDP) 2011-2016 rests on a target of 7 to 8% annual expansion in the gross domestic product (GDP). But due to various factors, GDP growth for 2011 – the first full year of the Aquino administration – is hoped to grow, at best, by 5.5%. This is the official forecast of the interagency Development Budget Coordination Committee (DBCC), an optimism that is not shared by most analysts and institutions. Both the International Monetary Fund (IMF) and the World Bank, for instance, project a moderate growth of just 3.7% in 2011. (Read here and here.)

Indeed, the promised inclusive growth of President Benigno S. Aquino III remains elusive as ever. Unlike the common criticism, however, the poor GDP showing in 2011 is not simply the result of government underspending. Rather, the slowdown actually highlights the structural defects of the economy that has since time immemorial depended too much on the volatile world economy. Further, beyond the quantitative failure to meet the target for inclusive growth are the far more important qualitative issues hampering long-term development and poverty alleviation in the country.

Slow GDP growth

The National Statistical Coordination Board (NSCB) reported in November that the GDP for the third quarter of 2011 grew by just 3.2 percent. While slightly higher than the recorded 3.1% in the previous quarter, the latest data continued the downward trend in the country’s economic performance. Since peaking at 8.9% in the second quarter of 2010, GDP growth has progressively decelerated. Also, the average GDP growth through the three quarters of 2011 is pegged at 3.6%, way below the 8.2% it posted during the same period in 2010. (See Chart)

2010, of course, was an election year. As such, it artificially boosted consumption and production due to election-related spending (including the cost of greasing the contending politicians’ fraud machineries). There was also the base effect of the low growth in 2009 due to the global recession. However, the huge drop of 4.6 percentage points in GDP growth last year was equally compounded by the continuing and worsening crisis facing the world economy.

Export-oriented domestic production is thus vulnerable. Philippine exports from January to October 2011 declined by 4.3% compared to the same period in 2010, according to the National Statistics Office (NSO). Electronic products, which comprised more than 50% of the total value of exports, fell by 21.9 percent. Almost 74.5% of electronic exports were semiconductors, which contracted by 24.9 percent.

Falling demand in the country’s major foreign markets explain the decline. Some 45.3% of Philippine exports in 2011 went to Japan, the US and Europe, which all confronted a substantial slowdown in their economy this year. The country’s total exports to the European Union (EU) – currently dealing with a grave sovereign debt crisis – fell by 19.5% while exports to the US fell by 6.9 percent. These significant declines offset the 15.5% increase in exports to Japan. Meanwhile, exports to its Southeast Asian neighbors, which accounted for 18.4% of total exports, declined by a huge 23.3% this year. Many of these exports actually end up in Japan, the US and Europe, accounting for the big drop.

Unemployment

But despite the slowdown, government claims that economic growth is becoming more inclusive as unemployment supposedly eased last year. The October 2011 round of the Labor Force Survey (LFS) of the NSO reported that the jobless rate declined to 6.4% from 7.1% in the same period last year. For the whole year, official unemployment rate averaged 7%, which was lower than 2010’s 7.4 percent.

Official employment data, like the poverty data, are unfortunately not a reliable yardstick to measure the extent of joblessness. The NSO, for instance, does not count as unemployed those who are seeking work but for one reason or another (e.g. school or family obligations, illness, etc.) will be unavailable for work despite an opportunity within two weeks after the survey.

Despite this defect in determining the volume of jobless, trends in the quality of employment in official statistics still could not conceal a deteriorating jobs situation. Underemployment worsened to 19.3% last year, according to NSO data, from 2010’s 18.8% or an increase of 525,000 workers. Underemployed refers to all employed persons who want to have additional hours of work in their present job or an extra job, or to have a new job with longer working hours.

Still using the NSO data, between 2010 and 2011, the share of productive sectors to total employment declined. Industrial jobs fell from 15% to 14.8%, with manufacturing falling from 8.4% to 8.3 percent. Similarly, the share of agricultural jobs declined from 33.2% to 33 percent. In contrast, the share of services to total employment increased from 51.8% in 2010 to 52.2% this year. While these annual changes may seem small, they continue the long-term trend of declining employment in the productive sectors.

Also, the services sector accounted for the largest number of workers permanently displaced and firms resorting to permanent closure/retrenchment due to economic reasons last year. January to June 2011 data from the Bureau of Labor and Employment Statistics (BLES) show that out of 14,598 workers displaced due to economic reasons, 8,697 (59.6%) were service workers. In addition, out of the 968 firms that closed shop or retrenched workers, an overwhelming 729 establishments (75.3%) were from the service sector. In 2010, services accounted for 67.9% of workers displaced and 76.5% of firms resorting to permanent closure/retrenchment due to economic reasons. These numbers highlight the unsustainability of job creation that has been increasingly relying on the less productive service sector.

Meanwhile, a more realistic count of unemployed is provided by the Social Weather Stations (SWS). Unemployment rate this decade, based on compiled SWS survey results, has averaged by almost 20% a year from just 10% in the 1990s. In its last survey on adult unemployment in March 2011, the SWS reported that 27.2% or around 11.3 million workers are jobless.

Labor export

As always, labor export has filled in a portion of the gap in domestic jobs available and labor supply due to lack of a long-term and effective government program. Deployment of overseas Filipino workers (OFWs) from January to October 2011 increased to 1.35 million from 1.28 million during the same period in 2010. Furthermore, OFW remittances have also become a significant contributor to domestic consumption, propping up an otherwise cash-strapped consumer market. From January to October last year, OFW remittances reached $16.53 billion, which was 6.9% higher than 2010’s similar period.

But again, because of the deteriorating crisis and worsening overall global economic condition, labor export is becoming less and less reliable as a source of remittances and even jobs. Compiled data from the from the Philippine Overseas Employment Administration (POEA) show that from an annual deployment growth of 6.9% in the 1990s, the figures have slowed down to 5.6% in the 2000s, and to about 4.3% in the past two years. OFW remittances are slowing down even more sharply, based on data from the Bangko Sentral ng Pilipinas (BSP). From a robust 23.2% annual growth in the 1990s, it has declined to 10.3% in the 2000s, and to just about 7.6% in the last two years.

The still increasing, albeit slower, deployment of OFWs amid the declining economic opportunities abroad means even more intense exploitation and oppression for desperate migrant workers in the form of depressed wages, harsher working conditions and other forms of abuse. According to Migrante International, more than 120 OFWs are in death row while some 7,000 are in jail in various countries worldwide. Every day, as high as 10 migrant workers are being sent back home dead due to various causes. Crisis and poverty are forcing more and more migrant workers to illegal activities including drug trafficking that led to the execution of four Filipinos in China last year alone. The sorry plight of migrant workers is aggravated by government neglect like budget cuts and missing funds for OFW welfare. #

To be concluded (read here)

On college graduates and the labor market

PUP students protest 1,567% tuition hike (photo from Kabataan partylist as posted by Bulatlat.com)

Thanks to the intense and “fiery” student protests, the Commission on Higher Education (CHED) chair was forced to issue a statement he will not allow the planned hike in the Polytechnic University of the Philippines’ (PUP) tuition by an outrageous 1,567 percent (P12 to P200 per unit). Otherwise, incoming PUP freshmen, which the PUP administration claims are the ones to be affected by the tuition hike, will be forced to pay exorbitant fees.

And worse, these freshmen – like those before them – will discover four, five years later (if they manage to graduate amid the progressively increasing tuition and other costs) that no job awaits them. This is another dimension in the increasingly commercialized tertiary education in the country – as state colleges and private universities squeeze students and their parents dry, government could not even guarantee employment for the college graduates.

Consider these numbers. For every 2 new college graduates produced in the last 8 years, only 1 job that befits the skills and qualifications of these degree holders is added  to the domestic labor market. And they will have to compete for this job with the unemployed college graduates from previous years.

Dr. Romulo Virola, Secretary General of the National Statistical Coordination Board (NSCB), devised a method to estimate the capacity of the labor market to absorb the graduates of tertiary schools. He related the number of tertiary graduates with new hires by major occupation group.

Virola deducted the employment for laborers and unskilled workers, farmers, forestry workers, fishermen, and plant operators based on the assumption that college graduates will apply for work only in the other occupation groups. He estimated the number of new hires by obtaining the difference in employment between the present year and the previous year. Finally, Virola divided the number of new hires with the number of tertiary graduates.

Using this method,  processed data from the Labor Force Survey (LFS, January rounds) of the National Statistics Office (NSO) and the CHED will show that from 2003 to 2010 (variables for earlier years are incomplete), the number of new hires as a percentage of the total number of college graduates is pegged at only 63 percent per year.

This suggests a very tight labor market for the country’s new graduates, which reach more than 439,000 annually in the last eight years. The number of new jobs created every year in occupation groups where the college graduates may want to apply for such as officials of government and special interest organizations, corporate executives, managers, managing proprietors, and supervisors; professionals; technicians and associate professionals; clerks; service workers and shop and market sales workers; and trade and related workers is pegged at only less than 270,000.

Note also that the portion of college graduates among the ranks of the unemployed has been increasing through the years. Available data show that from 15.8 percent in 2004, the portion of college graduates among the unemployed has increased to more than 18 percent annually in the last four years.

So where will our college graduates go? Call center? New call center jobs are expected to drop dramatically this year – from 50,000 in 2008 to just 10,000 in 2010, according to an ANC news report. Work abroad? The number of newly hired land-based overseas Filipino workers (OFWs) declined by 30 percent between 2007 (306,383 new hires) and 2008 (216,803). Or just follow former National Economic and Development Authority (NEDA) chief and now Liberal Party senatoriable Ralph Recto’s advise to graduates last year  – “do not look for work, go back to school” – because the backward Philippine economy and the recession-hit global economy could not produce jobs?

Congratulations, graduates. Welcome to the real world.