All talk about job creation

The problem with job creation is that everyone is talking about it but nothing really gets done that’s palpable. Government, labor unions and private sector business all have said something about the importance of job creation and somehow the problem remains formidable.

It is Labor Day and everyone is talking once more about the dignity of labor. There will also be some talk about the need to create jobs and alleviate the cruel impact of poverty upon a great number of our people. The onus of having done something significant about the problem falls, as usual, on government.

Poverty statistics were released last week and even P-Noy seems in denial. He complained about the stats not reflecting the effects of his flagship anti poverty programs. Like many of us, P-Noy has an exaggerated expectation of what government programs can do in just two years.

Indeed, while government policies have a large impact on job creation, it is the private sector that can create those jobs. Lila Shahani, who helps run the Poverty Reduction Cabinet Cluster, observed in an op/ed piece last week that government “cannot be expected to be the sole agent for dealing with poverty.”

 Ms. Shahani reminded that “one glaring fact must be kept in mind: the government is responsible for generating under 15 percent of our Gross Domestic Product (GDP). In contrast, the private sector’s contribution to GDP is over 85 percent, but most of this wealth continues to be monopolized by corporations and better-off families.”

Ms. Shahani rightfully pointed out that “as some economists have argued, government agencies the world over have a limited capacity to create jobs. Job generation ultimately happens through the invisible hand of the economy itself, although it can certainly be buttressed by programs for inclusive growth.”

But here in the Philippines, there seems to be a belief in the omnipotent power of government to create jobs. Just listen to the candidates for public office specially those running for the Senate and hear them promising to create jobs. They are all charlatans of course, but if you are the jobless, impoverished parent of 10 starving children, your only choice is to believe and hope… and give your vote.

Of course nothing much will happen after the election. Job creation after an election is about winning politicians getting their supporters employed by government. This merely bloats the government payroll unnecessarily. Many of those political hires do no real work at all. This is not real job creation in the economic sense. This is plain and simple patronage politics.

The thing is… there are some pretty tough structural hurdles in our economy and political system that make job creation and poverty fighting really difficult. Dr. Arsenio Balisacan, NEDA’s director general, has cited such problems particularly of the agricultural sector to include poor commodity prices, market access, land reform, etc that are responsible for massive underemployment.

Job creation is also hampered by our inadequate social investments in health and education. This administration is spending a lot more on these areas, but the lingering impact of past neglect will be hard to shake off any time soon.

The Labor department keeps on saying there are available jobs, but our jobless are not qualified to take these on. That ADB study of Norio Usui has pointed out that the majority of our jobless are not able to get jobs in the two legs of economic growth in our country: overseas work and business process outsourcing. Both require more training and education. We need the private sector to create new manufacturing jobs to absorb excess farm labor not trained for much else.

 Ms. Shahani points out in her piece that vigorous economic growth requires the generation of jobs by the private sector. “Unfortunately, much of this sector’s growth has come largely in the form of luxury real estate development and elite consumption of non-essential products, which only accrue benefits to those who are already wealthy rather than generating badly-needed jobs for the poor.”

In contrast, she cites the examples of “the booming economies of Malaysia, Thailand, Singapore and India, where the economic elites have stepped up to invest in domestic manufacturing. This has led not only to higher GDPs in general but also to a significant improvement in both the quality of labor and amount of income generated for their workers.”

But private risk capital will not create those jobs unless they see a stable regulatory environment where rules don’t whimsically change in midstream. Unless they are confident that our government is fair in its rules and we have a judiciary that is not for sale to the highest bidder, local and foreign investors will tend to sit on the sidelines.

Thus we see over P2 trillion worth of local capital idle in BSP’s SDA accounts. Foreign capital is coming in mostly as “hot money” in our stock market because that allows for easy entry and exit. We need capitalists ready to commit for the long term, investors who actually create jobs.

Organized labor also has a big responsibility in job creation. The tragedy of our local labor unions is that they are primarily focused on the minimum wage rate and other benefits that their employed members enjoy. But this focus hurts the creation of more jobs to benefit the jobless and the underemployed. No one speaks for them.

In our not so distant past, highly ideological labor unions have created such a militant atmosphere, and violent strikes have actually caused factories to close down. We missed the industrialization era Thailand enjoyed because at a time when Japanese and other manufacturers were looking for alternative manufacturing bases, we were burdened with a bad labor reputation that scared off investors, local and foreign.

Today there is more harmony on the shop floor and we have started to attract investors in manufacturing industries again. But there is this problem about our high labor rates compared to our neighbors in the Asean region. We are second highest, the DTI Secretary told me, next to Singapore.

We need our labor unions to work together with government and the private sector industries to address these problems that keep investors reluctant to risk their capital here. Former Economic Planning Secretary Gerry Sicat, my colleague in PhilStar’s business section, had proposed a labor free enterprise zone where labor rates and some of the more burdensome DOLE rules can be relaxed. The objective is to create as many new jobs as possible specially in areas of the country where poverty is most stifling.

In other words, we just need to be more creative and have more open minds. It makes no sense for labor unions to protect ideological purity and keep jobs for the few but neglect the many looking for jobs. Fighting poverty needs all of us working together.

Our tragedy is that for many of us, we are no longer shocked by the visual evidence of poverty within our midst. Neither are we bothered by poverty statistics, unless you are the President who has promised to drastically reduce poverty.

The reality for P-Noy is that he will find the poverty stats by the end of his term likely to be pretty much where they are today, thanks to our population growth rate. He may have improved the lives of more than a few by giving them a better chance through the CCT and other poverty fighting programs. That’s no small consolation.

But P-Noy must convince organized labor and the rich social elite that control local capital to join him in a concerted drive to create those jobs. Speeches on Labor Day are meaningless unless everyone with the power to create meaningful jobs work as one to create those jobs.

In the end it is to everybody’s interest, the elite specially, that jobs are created and poverty licked. No economy or society can be stable unless its people enjoy the basic needs of life and some of its amenities as well. This is why inclusive economic growth is sought and this is why our current path is unsustainable.

The Firm

Someone texted me this take on a recent development about trouble in a leading law firm:

The Firm is now going to be called The Soft.

That’s at least better than The Limp.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco