Phl needs ‘jobs strategy’: IMF cites formula for inclusive growth

MANILA, Philippines - Developing countries – such as the Philippines – which enjoy fast growth need to create more jobs to make economic growth more inclusive in the face of aging populations and globalization, the International Monetary Fund (IMF) said.

“With over 200 million people unemployed globally and youth and long-term unemployment very high in many countries, urgent actions are needed to improve the demand for labor,” IMF said in a report titled “Jobs and Growth: Analytical and Operational Considerations for the Fund.”

A “jobs strategy” will need to be developed to make growth more inclusive, it said, as well as ensure that countries do not fall into the “middle income trap”– or the inability to move up the value chain to high paying jobs.

The Philippines, which posted above-target growth of 6.6 percent last year, said efforts are being made to ensure economic success is felt on the grassroots level. Unemployment rate rose to 7.1 percent from 6.8 percent last January.

Essentially, the IMF said the private sector will create the “vast majority” of jobs in an economy and that the government is there only to ensure policies and the correct working environment is there.

Rules should not undermine job creation, it said, pointing out that more than macroeconomic stability, companies are also looking for labor policies that “plateau” or are not over-changing through time.

Arguments were also offered against both overvalued and undervalued currencies. The former, for instance, could promote “Dutch disease”– or the phenomenon of not being able to move up from an agriculture-led economy to an industrialized nation.

“Even if feasible (though), undervaluation generates ‘beggar thy neighbor’ effects and hence is undesirable from a global welfare perspective,” IMF said.

The multilateral agency also said tax incentives could be offered to firms to hire more workers, who in turn may be given “social benefits”— both mandated and extra—to boost their morale and working conditions.

Employee incentives are necessary, the IMF said, especially since with an expected “demographic bulge” as a result of globalization and old age, female workers— most of whom are also mothers— need to be protected.

Financial inclusion or ensuring access to credit and risk insurance products is also necessary, the agency explained.

The IMF, however, was quick to clarify that focus on jobs should not replace ensuring macroeconomic stability persists as a “pre-condition” for inclusive growth.

It said having years of sustained economic expansion provides the platform for an “effective poverty reduction strategy” that tackles income inequality among population groups.

“Creating productive employment opportunities throughout the economy is an important way to generate inclusive growth,” the IMF said.