Jobless growth

The United States economy grew by 3.5% in the third quarter of 2009, its first major expansion in more than a year. But the recovery should not be a cause for celebration since it may not be sustainable and it won’t necessarily translate into new employment opportunities anytime soon. Stripped of the fiscal and monetary stimulus measures enacted by the Obama administration, the GDP growth numbers would be "miserable."

US President Barrack Obama tempered the good news about a growing economy with a sober outlook that more people will lose their jobs. He said: "Economic growth is no substitute for job growth. And we will likely see further job losses in the coming days, a fact that is both troubling for our economy and heartbreaking for the men and women who suddenly find themselves out of work." He added: "Positive news today does not mean there won’t be difficult days ahead."

Isn’t it refreshing to hear the president of a country talking candidly, without boasting or sugarcoating, of the true state of economic recovery and the difficulties further ahead?

The views of two noted Nobel Prize-winning economists, Joseph E. Stiglitz and Paul Krugman, are consistent about the US job market. Unemployment rate was at a 26-year record high of 9.8% in September. It is expected to top 10% in October.

Stiglitz, a former chief economist of the World Bank and professor of economics at Columbia University in New York, said: "When we look at if workers can get jobs, if they can work full time, if businesses are able to sell goods they produce, in those terms, we are nowhere near the end of recession."

Krugman, a professor of economics at Princeton University and The New York Times op-ed columnist, wrote: "The good news is that the American Recovery and Reinvestment Act, aka the Obama stimulus plan, is working just about the way textbook macroeconomics said it would. But that’s also the bad news because the same textbook analysis says that the stimulus was far too small.... Unless something changes drastically, we’re looking at many years of high unemployment."

Krugman said that if the economy were to keep growing at 3.5%, and it’s not clear if growth would continue at this rate, "it would take a decade to return to something like full employment."

The first lesson in this unfolding drama is to be truthful in painting the true economic picture. If the leader of a great country like the US can do it, why can’t the leader of an emerging economy like the Philippines do the same? Oftentimes, it pays to be truthful about the harsh realities confronting one’s country, so its people can prepare for them.

The cold reality is that the week’s good news that the US economy in on the recovery path is of little relevance to the Philippines’ true problem: worsening unemployment. When workers can’t find jobs, they have no money to buy food and other necessities, and many go hungry. It’s that simple, in the absence of a comprehensive social protection program.

But even before the world economic crisis, the Philippines was already in the midst of a full-blown unemployment crisis. Close to 10 million workers were either unemployed or underemployed. In addition, some 1.3 to 1.5 million Filipinos join the labor force every year. The July 2009 official labor statistics place the number of unemployed at 2.9 million and underemployed at 7.0 million.

But these numbers understate the seriousness of the joblessness problem. It does not require much to be employed in this country. First, one has to be at least 15 years old and actively looking for a job (about 62 to 64% fall into this category). Second, he must have worked for at least one hour during the two weeks before the survey. That’s all it takes to be considered employed; it is not even necessary that one gets paid. Some 4.2 million Filipino workers fall under this category of unpaid family workers, for example, those who work in the family farm, sari-sari stores, selling something, washing cars, and so on.

The number of employed do not change much even if the work conditions have deteriorated. For example, if as a result of the crisis, the work schedule was changed from a six-day workweek to a four-day workweek, a worker is considered employed under both regimes. Work conditions have changed, take-home pay has decreased, but the number of employed workers remains unchanged.

Worse, the employment condition may have changed and yet the aggregate employment number may even improve. Consider the following example. Assume that one lost his decent, good-paying factory job. On his way home, he bought a hose and other tools necessary to start a car wash family business, using part of his separation pay. He "employed" his two out-of-school sons -- aged 15 and 17 -- to work for him. That’s one good job lost and three poor-quality jobs created: one self-employed and two unpaid family workers. But that’s an illusion.

Here are some numbers to appreciate the extent of the unemployment problem. In the July 2009 labor survey results, of the 38.4 million employed, 11.3 million are self-employed and 4.2 million are unpaid family workers. The total number of officially unemployed persons is only 2.9 million.

The focus of government intervention should be the creation of stable, full-time jobs for its fast growing labor force. An important first step is the revival of the moribund manufacturing sector. It’s too soon to give up on Philippine manufacturing, which has given us a lot of decent jobs in the past. A good start will be on food manufacturing -- after all we still have to worry about feeding a large and rising Filipino population.

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Opinion

Core -- By Benjamin E. Diokno

Jobless growth