Unemployment, ‘visible’ and ‘invisible’ underemployment, and poverty

Recently, the World Bank undertook an assessment of the unemployment problems plaguing the Philippine economy. This analysis makes comprehensive use of Philippine labor data, notably those produced by the NSO (National Statistics Office). I will use this more recent analysis to explain the unemployment problem as an introduction to next week’s discussion of labor policy issues.

“The unemployment, underemployment, ‘visible’ and ‘invisible’.” According to the census of 2010, the population of the Philippines was 92.3 million. From the two census periods, 2000 to 2010, the population grew annually at the rate of 1.9 per year, the highest in the East Asian region.

At this rate of annual growth, Philippine population by 2013 is around 97.5 million. Around 63 percent of the population is dependent on the labor force, which is 37 percent of the total population. The whole labor force by this year is around 36 million workers.

In 2012, 10 million workers were out of good jobs. Good jobs are “quality jobs”, those that “raise real wages and bring people out of poverty.” Of these, three million laborers were actually unemployed and seven million underemployed. They represent around 29 percent of the labor force!

Philippine labor statistics define “unemployment” as a situation of workers at least 15 years old and over who are without work but currently seeking work. Included with this case are workers who seek work but believe no job is available, who await the results of a job application, a rehire or job recall or who are temporarily ill.

“Underemployment” covers those employed persons who are still looking for work but could not find one satisfactorily. “Visible” underemployment involves laborers who work for less than 40 hours per week. “Invisible” underemployment includes those persons who work 40 hours or less per week. (40 hours per week represent the average 8 hour workday for five days of the week.)

Not included in the definition of the labor force are full time housewives and students who are classified as dependents of the labor force, and retirees.

“The unemployed.” Unemployed and most underemployed laborers get the worst deal in life. Some are dependent temporarily on their hard-earned savings accumulated before, but others are dependent on other members of the family for support.

The age group that suffers most from unemployment is the young, those in the ages of 15 to 24 years. They account for half of all unemployed workers in the labor force. In actual terms, 16 percent of them are unemployed compared to the average unemployment rate of 10 percent of the labor force.

The next age group among 25 to 34 years old in the labor force suffers around eight percent unemployment, which is just a tad below the unemployment rate in the labor force which is in the range of nine to 10 percent in recent years. So, the youngest members of the labor force suffer the most as unemployed.

When educational attainment, and not age, is used as the classifier of the labor force, those who have the highest education (college schooling, including those with degrees) suffer from an unemployment rate of 10 to 11 percent. This suggests a grand mismatch of jobs with formal training.

Those with high school background suffer a slightly lower unemployment rate, but experience an unemployment rate that is close to the national average. Those with skills are those who should have no problems with employment. But in terms of unemployment statistics, they are the ones who suffer the most.

The less skilled, those with the least education – those who do not even finish elementary grades – have an unemployment rate of around five percent. Laborers who did not finish elementary school, including those without any at all, have an unemployment rate of around three percent. They find work at the low end of the wage stream.

“Cosmetics or no cosmetics.” The government uses the “unemployment rate” as an indicator of the government’s employment record.

During her administration, Gloria Macapagal Arroyo redefined unemployment which resulted in an improvement of the employment rate by one-and-a-half percentage point.

Cosmetics do not change the gravity of the unemployment situation. Using the old definition of unemployment, the unemployment problem has not shown any improvement at all. Unemployment is the festering issue that confronts the nation.

“Most worrisome: the poor and the poorest among the underemployed.” The unemployment rate is insufficient as a true measure of working conditions, especially among developing countries.

The underemployed workers in the Philippine economy represent 19 percent of the labor force. This means that one out of five workers suffer from poor quality jobs just to be able to subsist.

Underemployment has no easy meaning: 62 percent of the underemployed (or 12 percent of the labor force) are visibly underemployed. The remaining 38 percent of the underemployed (or eight percent of the labor force) are invisibly underemployed.

The underemployed workers – around 75 percent of them – are found mainly in the informal sector of the economy. Many informal activities are found within the services sector of the economy – retailing is the most obvious of these! The informal sector and the services sector – these are the catch basin of low productivity jobs, the sponges for disguised unemployment.

The unorganized sector is the one where everyone is essentially out for himself, a sector hardly touched by government regulations or by private enterprises that undertake their activities within the organized rules of the legal framework. The informal economy is where most people work in even worse possible income position.

These numbers convey very significantly the magnitude of the country’s unemployment and underemployment situation.

“Yolanda further aggravates the problem.” The Yolanda’s path of destruction in the Visayas aggravates the government’s unemployment problems even more.

The full extent of that unemployment impact arising from Yolanda’s damage is not fully known but it could reach at least half a million heavily dislodged workers.

Many workers in agriculture, small scale industry and the distributive trades have lost major household assets and, worse, also their jobs. Those in large establishments that suffered major damage will experience forced layoffs of workers until they recover from their disaster.

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