Just a statistical milestone

Ordinary mortals like most of us find it difficult to understand some economic metrics. Often, definitions sound strange, even wrong, based on what we can see with our own eyes.

Consider the definition of what is employed in determining the unemployment rate. The International Labor Organization (ILO) defines “employed” persons as those who performed work for pay or profit for as little as one hour in a week.

They justify this international statistical standard as a way to ensure that all types of work (including casual, part-time, irregular and temporary jobs) are accounted for, and to accurately measure total labor input for gross domestic product (GDP) calculations.

But for non-economists, it is ridiculous to give your lazy brother-in-law a reason to declare himself employed just because he was paid to clean a neighbor’s backyard for an hour last week.

Worse, this ILO number is being used by government technocrats and propagandists to claim low unemployment rate.

ILO realizes this so it complements this standard by tracking those who worked less than full-time but are seeking to work more hours. This is called underemployment. This is the better measure of how successful a government has been in creating jobs.

For us today, our unemployment rate is 4.7 percent from 4.1 percent over a year ago while underemployment rate is 15.2 percent from 14.6 percent last year.

Over the past week, Dr. Jose Ramon Albert of the Philippine Institute for Development Studies (PIDS) was getting very frustrated at the negative media and public reaction to the announcement that we have become an upper-middle income country (UMIC).

Dr. Albert explains that the measure is not wrong. It’s just not perfect. It is just a measure that helps economists compare countries and ourselves across time. The World Bank measures average income, “and of course, it is not robust and is sensitive to outliers. That is, average income is affected by the incomes of billionaires. But that does not mean an average is useless.”

Dr. Albert insists it is wrong to say we have not progressed over time even if it took us 39 years to achieve this new status. He points out that “we know that internet access, mobile phone ownership, access to safe water and sanitation have increased over time.”

Dr. Albert believes that “achieving this average, per capita GNI, is a success story but it should also let us rethink how we do things as business as usual will not make us become an advanced economy by 2050.

“Further, we could have reached upper- middle income status earlier if we just made the right choices. We can’t change the past but we can change the future amid global mega trends.

“BPOs will get hit hard by AI within the next two to three years. We can’t just keep exporting our people. Climate change is an existential threat. Fertility rates have fallen dramatically and that means we may get older before we get richer. Quality education and affordable health care must be available to all.

“Our chaebols supported by the government must lead the path to industrialization and not just stay in non-tradable services. We must embrace renewable energy and actively invest in regional development.

“We must make the right choices for policy reform and we must have stronger institutions that will execute our plans properly. These reforms must start today as we can’t undo the mistakes of the past. We have to choose good leaders also to help steer the course.”

Indeed, many economists, Dr. Albert included, are right to say that the UMIC status is just a statistical milestone reflecting past progress, not an indication of current widespread prosperity. He agrees that economic success is measured not by GDP figures alone, but by how well gains translate into stability for ordinary people.

That’s the lesson learned from PNoy’s experience with consistently respectable GDP growth rate and even achieving investor grade credit rating. Neither resonated with ordinary people.

It is also important to note that Vietnam achieved the same upgraded status with us, but differently. Vietnam leveraged post-Ðoi Mói export-oriented policies, including a sharp rise in high-tech manufacturing output that cleared the income threshold.

The World Bank notes the Philippines advanced through broad-based change across sectors. In the absence of an overriding industrial policy, it seems our economic growth just happened, like an expanding amoeba.

The other lesson learned from Vietnam is that workforce capability must match new opportunities. World Bank’s Human Capital Index (HCI) data shows Vietnam’s score is 41 points higher than the Philippines’, with education outcomes accounting for 24 points of that gap.

HCI directly estimates how a country’s current health and education outcomes will impact the productivity of its next generation of workers.

Higher HCI scores correlate directly with long-term GDP growth.

Modern economies require high-skill digital and technical competencies. The education metrics within HCI show if a workforce can handle complex, high-paying industries or remains stuck in low-wage manual labor.

The health metrics (stunting and survival rates) indicate future economic drag. High stunting rates signal a future workforce with permanent cognitive deficiencies, leading to lower earning potential and higher public health care costs.

Foreign investors look at human capital when relocating supply chains. Countries with higher education and health metrics attract higher-value foreign direct investment (FDI).

There is also something else. A 2026 Gallup survey revealed Filipino respondents are angrier today than counterparts in the region. Some 29 percent of Filipino employees experienced anger a lot over the previous day. The Southeast Asia regional average is 19 percent and the global average is 22 percent.

And Filipinos felt sadder too. This probably means that the social volcano is starting to grumble and our leaders and economic elite must not be complacent about Filipinos remaining indefinitely patient with the hardships they are experiencing.

In the end, it is the quality of people’s lives that count.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco