Joblessness is falling, but…

IN THE last few weeks there has been so much good economic news from the Social Weather Survey for the fourth quarter, and for 2015 as a whole. Personal optimism and economic optimism are at record highs. Poverty and hunger have been falling.

Earlier this week, SWS reported that Joblessness of Filipino adults in the fourth quarter of 2015 was 21.4 percent of the labor force. (That’s Joblessness with a capital J, since it’s defined by SWS in a different, more meaningful, way than official Unemployment, spelled here with a capital U—see “Joblessness: the realistic picture,” Opinion, 11/14/15.)

The plurality of the Jobless, 9.6 percentage points, already had jobs, but left them voluntarily. Such persons were not suffering from lack of work per se, but from lack of compensation or a decent career path. This indicates a labor market unresponsive to the needs of workers.

The next most common Jobless, 8.0 points, were involuntary separations. Such persons had been laid off, or else their contracts had not been renewed, or else their employers had closed. This indicates an insufficiently dynamic economy.

The least common Jobless, 3.6 points, were first-time jobseekers. This is a reflection of excessive population growth. The few unaccounted Jobless did not give a response about their job history.

The Jobless, as surveyed by SWS, are those that say they don’t have a job (walang trabaho) at the time they are interviewed, and say that they are looking for a job. The meaning of walang trabaho is whatever it means to the survey respondents. SWS does not ask how much time respondents had worked for income in some past period. However long or short they worked in the past, if they presently consider themselves walang trabaho, SWS accepts them as such.

Average Joblessness in the four quarters of 2015 was 21.9 percent of the labor force, the lowest in 11 years. The average percent Jobless had been 25.4 in 2014, 25.2 in 2013, 28.8 in 2012, 23.6 in 2011, 22.5 in 2010, 29.1 (the record high annual average) in 2009, 28.6 in 2008, 25.2 in 2007, 26.4 in 2006, and 22.5 in 2005.

For a lower average Jobless rate, one has to go back to 2004—when it was 15.8 percent—and earlier; the SWS quarterly series on Joblessness started in September 1993. A few years ago, more than one-fourth of the labor force were Jobless. By 2015, however, the Jobless rate was down to just over one-fifth.

I put the word “but” in the title of this piece for two reasons. One is to dampen the tendency of quickie readers to extrapolate from the headlines—i.e., to suppose that a newly reported trend will last indefinitely. There is no shortage of spin doctors eager to exaggerate every gain, if they are pro-administration, and every setback, if they are pro-opposition.

The second, and more important reason, is to emphasize that the scale of the problem remains quite large. One-fifth Jobless is not as bad as one-fourth Jobless, but it is quite serious.

What might be confusing are the official Unemployment statistics that make the problem seem minimal. The latest official figure for Unemployment, from the October 2015 Labor Force Survey, is a miniscule 5.6 percent of the labor force. This means that 94.4 percent is the official Employment rate. In the past decade, official Unemployment has been between 5 and 7 percent; hence, official Employment was between 95 and 93 percent of the labor force.

The real reason that official Unemployment is so low is this: A mere one hour of gainful work in the week before being interviewed is enough for a Labor Force Survey (LFS) respondent to be classified as Employed. I discussed this extensively in “Is 1 hour a week a job?” (Opinion, 5/6/12), “Jobless, but Employed” (Opinion, 2/15/14), and “One-fourth have no real job” (Opinion, 5/31/14).

The shorter the official work period that classifies persons as Employed, the more the official Unemployment rate can be reduced. During the authoritarian regime of Ferdinand Marcos, for instance, a person working for only one hour in the past month was already classified as Employed; this made official Unemployment vanish completely.

This is akin to setting a poverty line unrealistically so low that one can make the poor statistically disappear. In Marcos’ time there was no official poverty line at all. The poor were simply those in the lowest 30 percent with respect to income. So the poverty proportion could neither rise nor fall. It was statistically permanent.

The meaninglessness of the one-hour definition of Employment becomes obvious when one examines the official LFS data on the Underemployed, which refers to persons Employed but nevertheless looking for work, either for more hours or for better pay. Now, if persons who are already employed are still looking for work, it follows that they don’t consider their employment good enough to be called trabaho.

In October 2015, Underemployment was 17.7 percent of the Employed. Thus, it was equivalent to 16.7 percent of the labor force (0.177 x 0.944 = 0.167). Therefore, Underemployment was triple the size of simple Unemployment.

The sum of official Underemployment and Unemployment, in October 2015, was 22.3 percent of the labor force (0.167 + .056 = 0.223). It was four times the size of simple
Unemployment alone. This sum is generally consistent, both conceptually and empirically, with the SWS proportion of Joblessness.
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