Labor force must step up

A large part of the Philippine labor force needs to be readied for the anticipated economic leap that the current government is aiming for. The issue of a skills lack is only too glaring with the high number of employed engaged in elementary occupations, or those involving unskilled labor.

A cursory look at the profile of workers from the 2019 Labor Force Survey issued in March by the Philippine Statistics Authority shows that one out of every four employed Filipino could either be a street vendor, construction site worker, cleaner, domestic helper, or a farm hand.

While it can be assumed that most of these people are employed on a payroll basis, they often earn on minimum – or even sometimes below minimum – wages that are way not enough to support their families or offer hope of a better life.

With a quarter of the working population at this productivity and income level, no wonder that the World Bank’s most recent Philippine Economic Update had stated that the country is still “a long way” from becoming a middle class society.

GNI vs GDP

This is not to be confused with recent proclamations by the administration that the Philippines will join the upper middle-income country status within the year. The latter is based on gross national income (GNI) per capita, while the former is computed on gross domestic productivity (GDP).

Joining the upper middle-income country league is our reward for three decades of reforms, one that has raised our GNI on a per capita basis at par or higher than $3,940, which currently is what Algeria has in the list published by the World Bank in 2017.

In effect, we are just about to join a list that has had Thailand as a member many years ago. In 2017, Thailand’s GNI per capita was already at $5,950, while the Philippines was at $3,600 – which just shows how much work we have to exert to get anywhere near Thailand’s level.

Currently, the World Bank puts upper middle-income economies as those that have a GNI per capita of between $3,896 and $12,055.

To become a middle class society, though, we need to at least double our GDP from $330 billion through sustained economic growth. By the most optimistic projections, this could only happen by 2026 based on a six to seven percent productivity improvement per year.

Raising skill level vs. higher minimum wage

Semantics aside, the issue at hand (and in time with tomorrow’s Labor Day celebration) is the need to raise the productivity of a quarter of our working population so that they can earn more, and in the process, break free of their poverty.

Instead of eyeing a higher minimum wage, which is already now the highest compared to our competitors in the region, raising the skill level of our workers is seen as a better alternative to ensuring better-paid labor.

The World Bank enumerates several measures that need to be undertaken by the Philippine government to institutionalize inclusive growth for those that are trapped in the poverty cycle, stressing that the need to attract more investments in the manufacturing sector.

No overnight inclusive growth  

This realistically will not and cannot happen overnight.

We have seen how the second part of the administration’s tax reform initiative is stalled, and despite assurances that measures to streamline tax incentives will be beneficial to business, apprehensions remain. This has affected expansion plans of existing companies and the investment decision of interested investors.

The current government can be credited for passing a number of pro-business laws, one among them being the Ease of Doing Business Act which aims to cut bureaucratic red tape and corruption at the local and national government levels.

Implementation, however, is taking a long time, although such delays are often accepted as part of the laid-back environment that characterizes governance in the country.

Skills and knowledge building

There is a need to equip majority of our working population with better skills and knowledge through an improved educational system and other learning interventions.

For example, the government’s Build Build Build infrastructure program, much like elections, are revenue-boosting opportunities for Filipinos, and even if they do not offer long-term jobs, the shortage of capable workers is already a problem.

The introduction of technology is acutely needed in the agriculture sector, where mechanization will not only improve productivity yields but also increase the income derived from food production to benefit both the landowner and tenants.

Preparations are, likewise, needed to meet the demands of a much-anticipated artificial intelligence era where many low-paying jobs are in danger of being replaced. Not only is this true for the business process outsourcing sector, but also for manufacturing.

Polishing our strengths

Meanwhile, we must take advantage of and further polish our strengths as a premier labor market in the world, one that has sent to more than a hundred countries – even at the height of the last global financial crisis – millions of skilled Filipino workers.

We have a large and growing young population that is willing to be trained given the right opportunity. Our labor force’s high literacy rate is comparable to some of the most affluent countries in Europe and North America.

Filipinos have an average English proficiency level next only to Singapore’s and Malaysia’s. We are also the world’s third largest English-speaking country, a big factor for investors looking for labor pools that are easy to train.

Our extensive educational system coupled with high population growth churns out hundreds of thousand of graduates a year, unmistakably a human resource that presents immense value.

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