Casual jobs make Pinoys poor, says WB study

A World Bank (WB) study has found that casual work contributes to the poverty of Filipinos, as the low-earning capacity of such jobs cannot lift people out of their indigence. 

Pervasive poverty among those who have jobs is primarily due to the low earning capacity of the poor and their limited access to regular and productive jobs, said the WB in its report “Labor Market Review: Employment and Poverty in the Philippines.”

The reduction of “in-work poverty” hinges on removing constraints to gainful employment through better education and skills and better jobs, the bank said in its report.

It is critical that the young poor have improved access to quality education, and be equipped with skills required in the modern sector of the economy, the report said, noting that the labor market is segmented into “good” and “bad” jobs, with the poor working in the latter, classified as informal, temporary or casual, and low-paying.

The report also noted widespread informality in the labor market, which means that the poor neither benefit from the minimum wage policy nor from employment-protection legislation.

“Good jobs are so few, especially in the rural areas, that even better educated workers are often forced to take unskilled jobs and work as low-paid laborers,” it said.

Better jobs need to be created, which could be attained from the growth of the formal and higher value-added sector of the economy, the report said, adding that the process of structural transformation should be supported by effective labor policy.

The report said most Filipinos, including those with jobs, are poor because the growth of real wages or the monthly take-home pays has failed to catch up with the increases of prices of commodities and services despite the rising productivity of workers.

“Greater investments in workers’ skills and education, coupled with flexible labor regulations, are needed to encourage firms to generate more jobs that offer better pay and social protection,” the report said.

President Aquino boasted recently that Filipinos were “voting with their feet” and returning to the country from their foreign employment due to what he claimed as improved opportunities in the Philippines.

But figures released by the government only last April showed that the jobless rate was back at 6.1 percent, which is among the highest in the region during the month.

The WB study analyzes the labor-market performance in the Philippines from the perspective of workers’ welfare and identifies labor market constraints to reducing poverty in the country.

The Philippines continues to have both the highest unemployment rate of about 6 percent and the poverty level of about 25 percent of the population for the whole of the Asian region.

Still, Mara Warwick, World Bank country director for the Philippines, said the country’s economic growth in the last 10 years has created enough jobs to absorb the growing labor force.

But the problem is that jobs are not paying enough to lift people out of their impoverished state and are merely enough to allow them to get by with their basic everyday needs.

“For many Filipinos, the main challenge is having jobs that can lift them out of poverty. With sound macro-economic fundamentals and strong growth, the Philippines is well positioned to address this challenge,” she said.

The WB report showed that in the last decade, the economy has been growing at an average of 5.3 percent a year, compared to the working population and jobs that have been growing at an average of 1.8 percent and 1.9 percent, respectively, which means that the labor market turns out enough jobs for new workers.

“Labor productivity has also been growing at 3.4 percent a year. However, the growth of real wages or wages adjusted for changes in prices of goods and services – has yet to catch up with the rising productivity. As a result, many workers remain poor.

The report said the prevalence of poverty among workers reflects the scarcity of “good jobs” and the low earning capacity of poor workers.

The report describes good jobs as those that pay better, are found in the formal sector, and provide social protection. Many of the newly created jobs are low-paid, precarious, and informal.

“The low-earning capacity of the poor reflects their low education and skills, limited access to formal jobs, and low bargaining power of informal workers,” said Jan Rutkowski, lead economist at the World Bank’s Social Protection and Labor Global Practice, and leading author of the report.

“The scarcity of ‘good jobs’ reflects the structure of the Philippines economy where low value-added activities predominate. This is partly due to constraints in the investment climate and the high cost of doing business in the formal sector,” it added.

The report noted that around three-quarters of all jobs and two-thirds of urban jobs were informal.

Among wageworkers, six out of 10 are hired informally. Informal wage workers lack employment contracts and social insurance, and are not protected against unfair dismissal.

“Many of the existing jobs require few skills, with laborers being the largest occupational group (apart from farmers). Even outside agriculture and in urban areas, unskilled workers account for nearly one-fourth of total employment,” it said.

As many as 44 percent of workers have less than secondary education, which is substantially higher in rural areas (57 percent), but is high even in urban areas (30 percent).

Among the youth from poor families, those who have not completed secondary education exceed 60 percent.

The completion of secondary education greatly improves job prospects. But even educated workers are often forced by necessity to take unskilled jobs and work as laborers. About 30 percent of workers with secondary education hold unskilled jobs, and 35 percent of laborers have at least secondary education, reflecting the scarcity of good jobs and possibly a skills mismatch.

The report recommended that the government continue investing in the education and skills of the disadvantaged youth to raise their earning capacity, which is particularly important in rural areas.

It also sought the simplification of labor regulations to encourage employers to formally hire more workers; improvement of the investment climate and lowering the cost of doing business in the formal sector to create more and better jobs and sustain high economic growth.

“It is commendable that the country’s policy makers are increasingly investing in children and young people’s future through higher spending on health and education, as well as programs like the conditional cash transfer. Ensuring that all Filipino children have access to good quality education and skills development is a must to eliminate extreme poverty and promote shared prosperity,” said Aleksandra Posarac, lead economist and program leader in the Philippines for the Social Protection and Labor Global Practice. LUIS LEONCIO