Surging underemployment to push poverty up

Two years since President Arroyo vowed to step up job creation, the jobs crisis has taken a turn for the worse. Job creation has been weak, keeping unemployment and raising underemployment. The sustained weakness in the labor market threatens to push poverty up.

This assessment of President Arroyo's job performance was made by the Alliance of Progressive Labor (APL) and the Labor Education and Research Network (LEARN) on the eve of her State of the Nation Address before Congress on Monday. The report was presented by Clarence Pascual, an economist working with the two labor organizations.

At the start of her contested second term in 2004, Arroyo pledged to generate 10 million jobs in six years. In the last two years, the economy generated some 1.5 million jobs, less than half the 3 million jobs needed to meet the government target.

"Job creation has been weak on account of lackluster economic growth," according to the two labor groups. GDP growth during Arroyo's second term has averaged 5.3%, below the 7-8% growth required to meet the government's jobs target.

"Inadequate job creation has ensured that unemployment stays at near record levels," notes Pascual. Unemployment stood at 11.3% in the first two quarters of 2006, down from a high 11.8% in 2004. This brings the number of jobless workers to over 4.1 million in 2006, slightly lower than the 4.2 million in 2004.

The two labor groups continue to use the old official definition of unemployment since there are no comparable figures with the revised figures before April 2005. The new definition of unemployment shows a much lower rate of 8.3%. It gives an unemployment level of 2.9 million, 1.3 million less than the old definition.

"There has been a serious deterioration in the labor market," notes Pascual, citing surging underemployment since April 2005. Total underemployment went up from 9% in 2004 to 12% in 2005 and 14% in the first half of 2006.

Invisible underemployment, that is, the proportion of full-time workers wanting additional work hours, appears to have stabilized to 9.6% in April 2006 compared with 9.8% in the April 2005.

But visible underemployment, the proportion of part-time workers wanting additional work hours, remains on the uptrend, hitting a 20-year high in the first half of this year.

"Surging underemployment is important because it may indicate rising poverty incidence," argues Pascual, "something that is not yet reflected in currently available income statistics."

"Underemployed workers are likely to join the ranks of the working poor, their incomes insufficient to carry themselves and their families above the poverty line," according to the group. The APL/LEARN cited past studies on poverty which noted that underemployment is strongly associated with poverty. Regions with high underemployment also tend to be the poorest.

Until recently, the lack of jobs has not made a dent on poverty as visible underemployment has been contained. Invisible underemployment or full-time workers wanting additional work hours even declined.

Unemployment, which has hovered above 11% since 2000, has largely hurt non-poor and middle-income families. Between 1997 and 2003, real incomes fell faster among non-poor families than poor families, based on data from the National Statistical Coordination Board (NSCB).

With unemployment kept at high levels, surging underemployment this time is likely to hurt poor families. This could have a negative impact on the poverty incidence.

Pascual traces the surge in underemployment to the low quality of jobs the economy is creating. Bulk of the new jobs came from agriculture, followed by jobs in services like vending. Agriculture accounted for 48% of jobs created in the last two years. Retailing contributed 25% of new employment. Most of these are part-time, low-paying jobs.

At the same time full-time jobs are being lost, resulting in record visible underemployment. Full-time jobs fell by 1.3 million in April this year from its year-ago level, while part-time jobs rose by close to 2 million.

Today, there are 12 million unemployed and underemployed Filipinos, up by 2 million in two years.

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