Toward more and better jobs

Latest estimates show some recovery in the Philippine labor market to pre-pandemic levels. Unemployment rate for the first three months of 2023 averaged 4.8 percent. However, the actual number of unemployed Filipinos is still around 2.4 million in March. The underemployment rate also declined to 11.2 percent in March. This is the lowest level of underemployment since April 2005. However, this means that around 5.44 million Filipinos are still looking for an extra job, or additional hours of work, on top of their current employment.

The need for more and better jobs is highlighted in Pulse Asia’s survey, which found that increasing the pay of workers and creating more jobs are, respectively, the second and third topmost urgent national concerns of Filipinos.

Challenges faced by Filipino workers. Despite the slowdown in inflation to 6.6 percent in April 2023, food and public transport costs remain high. Inflation is correlated with the need for more and better jobs since higher prices reduce the purchasing power of wages. Higher interest rates used to combat inflation also make it more expensive to supplement one’s income with loans.

Government strategies and efforts. The previous administration signed into law Republic Act No. 11466 to increase the pay of government employees. The last tranche of the wage hike took effect in January 2023. To ensure that public sector wages are competitive with their private sector counterparts, the current administration allocated P48 million to conduct a study on the compensation structure of government employees. Several bills have also been filed in Congress to legislate wage increases in the private sector.

Last year, new incentives for doing business through the Foreign Investments Act, the Retail Trade Liberalization Act, and the amendments to the Public Service Act were also approved by the government to attract more investments and help generate more and better jobs.

Recommendations to improve wages and job quality. Both the demand for and supply of labor must be addressed to further improve the welfare of Filipino workers. From the demand side, we recommend the following:

1. Pass the proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery bill to help address the liquidity and solvency problems of micro, small, medium enterprises (MSMEs). This will help MSMEs retain their workers during times of distress.
2. Step up efforts in publicizing the new incentives for doing business in the Philippines.
3. Make the Philippine ambassadors and attachés of the Department of Trade and Industry more involved and accountable in attracting more jobs by continuously following up on investment pledges secured by the President.
4. Continuously improve the business climate in the Philippines to attract more job-generating businesses through efforts like curbing red tape by digitizing the process of obtaining business permits and other requirements to set up a business, investing in better infrastructure and transport systems, improving access to high-speed internet connectivity, and continuously working on reducing power costs.

From the supply side, we recommend the following:

1. Review the K-12 program to make it more responsive and relevant to students’ needs. The existing technical-vocational programs of Technical Education and Skills Development Authority should be updated in line with technological developments.
2. Further incentivize and promote existing incentives under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act for reskilling and upskilling. There are incentives in the CREATE law to encourage the private sector to reskill and upskill their workers.
3. Provide bridging programs or additional training to improve the soft skills and practical job skills of new graduates.
4. Start efforts to upskill/reskill Filipino workers whose sources of livelihood may be adversely affected by the advent and application of artificial intelligence in the Philippines.
5. The Legislative-Executive Development Advisory Council should rigorously monitor the P26.9 billion budget of Department of Labor and Employment and regularly ask for updates on whether such public investment has translated to improvements in labor outcomes.

We likewise support continuing the present system of allowing the regional tripartite wages and productivity boards to recommend wage adjustments instead of mandatory wage increases that might be arbitrary and need to be modified occasionally to changing conditions.

Additionally, policymakers should consider profit sharing as a practical mechanism to increase the real wages of Filipino workers instead of mandatory wage increases regardless of performance.

Profit sharing enables an employee to receive a percentage of company profits/earnings over a set period of time (e.g., quarterly or annually). Profit sharing policies are currently being applied by some OECD member countries.

Previous and current lawmakers have also filed bills on profit sharing and productivity incentives. Passing some of these into law could be a feasible and effective way of improving the purchasing power of Filipino workers.

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Gary B. Teves served as finance secretary under the Arroyo administration.