A nation of employers

I was invited to speak at an economic forum a few weeks ago alongside the BSP, World Bank, IMF and other economic experts. And after all the macroeconomic indicators were presented, the message ultimately centered around job creation.

In business, what’s most fundamental is its unit economics. At the core, the basic product or service you provide customers minus all expenses must be profitable. You begin to realize how crucial this is when you start scaling the business. Because if the unit economics don’t hold up, then it’s time to rethink the business model altogether.

The same can be stated regarding what the Philippines’ unit economics might be. The most important product that the government can provide its citizens is its ability to create jobs. In other words, the no. 1 priority of the government is to put money directly into people’s pockets. The government, in turn, earns taxes. And then reinvest it in infrastructure to generate more business and, you guessed it, more jobs. More jobs, more taxes, more infrastructure, more business; a progressive loop.

Companies are established and, as a result, people are employed. Businesses pay taxes and people earn money, purchase goods and services that contain value-added tax. The taxes earned by these transactions are used to fund infrastructure projects, education programs, health care improvements and industry development. This is the business of a country. Job creation not only provides a means of subsistence, but it also drives GDP growth, creates consumers, builds infrastructure and attracts more business and investments (local or foreign).

As I mentioned in my speech, there is nothing wrong with having a nation of employees – it makes sense and is even more efficient to focus on a handful of companies to create millions of jobs and generate billions of taxes. Most governments around the world are the largest employers and the largest corporations pay the biggest taxes. According to a Civil Service Commission study from 2017, our government employs over 2.4 million people.

But there is a new paradigm emerging. Many nations have opted to create a country of employers – a nation of startups and entrepreneurs.

In Israel, for example, there are 7,000 startups. That equals to one company for every 1,300 people. 97 of those firms are unicorns (companies that are valued at least $1 billion). That’s one unicorn for every 100,000 population. The United States is another example, where 64 percent of new jobs come from small businesses based on a 2022 study.

We too can envision a day when we no longer rely on the government and a few corporations to keep the economy running. Let us diversify our prospects and be home to thousands of millionaires (possibly hundreds of billionaires) fuelled by both local and foreign venture capital. Creating more companies to employ more people doesn’t only redistribute risk but also have the added benefit of decreasing the wealth gap even further.

Angkas for example has opted to focus on the sector of 18 million motorcycle owners. Setting itself apart from traditional ride hailing companies, the company’s focus is to generate more jobs for each biker in the platform. Our goal is to be a large enough fleet operator and create economies of scale on its entire fleet. Optimizing for different kinds of jobs ranging from transport, deliveries as well as custom built financial services such as loans and insurance aims to help bikers make a better living.

Each biker is a micro entrepreneur and enjoys a whole ecosystem of jobs, a host of products and services and still owning his own time for his family. It not just about making a decent living but with equal focus to also having quality of life.

Many platforms, both digital and non-digital, such as GrowSari, Kumu and Great Deals, create armies of entrepreneurs that are retailers, content creators and even traditional franchisees. Though franchising has existed for many years, technology-enabled platforms have exponentially increased the sheer size of the marketplace. It has broken down barriers to entry, allowing almost anyone, equipped only with a dream, to start earning a living.

The government can further aid in job creation by providing support to building this community of entrepreneurs, similar to how the BPO industry was nurtured by the Philippine Economic Zone Authority (PEZA) into the economic juggernaut it is today. The BPO industry now employs over one million people and generates over $30 billion in annual revenues. An estimated 50 percent of this goes to salaries that put money directly into people’s pockets.

Perhaps, we can build a PEZA for startups and entrepreneurs that can create another pillar of sustainability – adding yet another peg on which our nation’s economy can stand.