First published at The Philippine Online Chronicles
Another batch of over 500,000 college graduates will soon leave the halls of their academic institutions, eager to enter the dynamic world of work. But with Philippine unemployment rate rising to a nine-month high at 7.5 percent in January, will they have good chances of landing a job?
Getting a diploma is no assurance of getting employed immediately as the latest jobs data reveal that one-fifth (19.8 percent) of jobless Filipinos were college graduates, while 34 percent were high school graduates.
The latest jobless rate, which is an increase from last year’s 7.1 percent, could be even higher as the January labor force survey did not cover the provinces in Eastern Visayas that were heavily devastated by super typhoon Yolanda.
The unemployment picture does not coincide with the Philippine economy’s strong performance, which is currently next only to China’s sustained growth. Last year, the country’s gross domestic product (GDP) surpassed projections as it grew by 7.2 percent.
Such jobless growth has baffled even President Benigno Aquino III, who pressed his Cabinet on the results on the action plan for poverty reduction. But a closer look at foreign capital flows may provide a hint why robust economic growth rates did not translate to more jobs for Filipinos.
Aside from overseas remittances, private capital flows are providing the added buoy to the Philippine economy, albeit on a temporary basis. Private capital flows include foreign direct investments (FDIs) and portfolio investments or hot money. Between the two, FDI has the potential to create jobs as portfolios are as good as fictitious capital.
Last year hot money inflows, which include stock market shares and bonds grew by 8 percent to $4 billion, the highest since 1999. This large amount money never crossed to the real economy, say for example to finance the construction of new factories or offices, as portfolio investors are interested in generating returns in the shortest time possible. On the other hand, FDI surged to 20 percent to $3.86 billion in 2013. More than half of this FDI went to debt instruments, meaning parent companies mainly lent to their local subsidiaries either to finance existing operations or for expansion.
Folly of FDI
But FDIs do not necessarily lead to job generation based on the Philippines’ experience. Think-tank Ibon Foundation noted that the cumulative FDI stock has doubled from US$10 billion in 1995 to $19 billion in 2007, yet the unemployment levels hardly changed.
“FDI supposedly goes towards building a strong productive economic base. However, there is nothing to indicate that all that FDI has contributed to creating a strong domestic economy able to create jobs on a sustainable basis. On the contrary, the number of jobless Filipinos has continued to rise, and the 2001-2008 period is already the worst eight-year period of recorded unemployment in the country’s history,” IBON Foundation said.
Such data on jobs and FDI dispute claims by those staunchly pushing Charter change (Cha-cha) which seeks to lift constitutional limits on foreign ownership.
FDI, if channeled to productive sectors, are also mostly going to manufacturing, transport and storage within special economic zones outside Metro Manila where wages are very low and where working conditions are dismal.
BPO industry a bright spot?
Part of FDI inflows also go to the business process outsourcing (BPO) industry, which is known to be paying above average salary levels in the country. Is the BPO industry still a bright spot for 2014 graduates?
While the industry is a friendly refuge to college graduates, college undergraduates and even high school graduates, BPO companies are racing to the bottom in terms of pay scales. An industry source disclosed that the current starting salary for call center agents in known BPO firms could be as low as P13,000 a month, which is close to the monthly pay of a minimum wage worker in Metro Manila.
BPO companies are also looking outside Metro Manila either for relocation and expansion to further save on labor costs, under the “New Wage Cities” program. Call center agents in the regions are paid much lower than their metro counterparts. For instance, a call center agent working for a big BPO firm in Camarines Sur is only paid P6,000 per month.
BPO work has also been associated to several occupational health issues. A 2010 study by the International Labor Organization (ILO) revealed that 4 out of 10 BPO employees suffer from health concerns such as sleep disorders, fatigue and voice problems.
Another booming sector is construction and real estate development. But jobs in the sector are highly temporary in nature and are low-paying, not to mention the occupational health and safety risks which construction workers live with each day.
Nowhere to go but out
Faced with dim job prospects at home, Filipinos understandably look overseas for jobs to meet the needs of the family. It is then not surprising that the ranks of overseas Filipino workers who are mostly laborers and domestic helpers swelled to 10.5 million in 2012. Such huge army of workers toiling overseas could not be better indication of a failed domestic jobs market.
The country need not rely on foreign investments to generate jobs, nor simply rely on overseas remittances to prop up economic growth. Such paradigm is certainly unsustainable and highly prone to external shocks. What the country needs is a solid national development blueprint that is based on creating national industries and implementing genuine agrarian reform. The latter will tap the full potential of peasants in tilling productive lands, creating immense opportunities in the countryside and ensuring inputs to industries. Likewise, the rise of national industries like steel and chemicals industries will produce far higher job opportunities than current special economic zones can, as these industries will have strong forward and backward linkages to the domestic economy.
Question is, is this vision of the economy somewhere near President Aquino’s? Unfortunately, the chief at the Palace is more interested in continuing the failed jobs paradigm of his predecessors, hoping that it will produce a different result. Albert Einstein has a term for this, you know it.