Scar-crossed Labors

January 17, 2022

by Sonny Africa

Striking an optimistic note, the economic managers recently raised the country’s economic growth target for 2021. The government patted itself on the back for “effective management of COVID-19”, and projects annual gross domestic product (GDP) growth for the year at a higher 5-5.5% range from the previous target of 4-5 percent.

The fourth quarter and annual 2021 national accounts will be released by the end of the month. We will likely hear claims of strong economic performance, early recovery, and returning to a path of rapid and inclusive growth.

But the thing is, labor force and poverty figures for 2021 already show how any claims like that will just be bluster or, worse, blind to the daily experience of millions of Filipinos. The reality is that the majority of Filipinos started 2022 still struggling with the aftermath of the government’s lockdowns.

Pseudo-employment

The National Economic Development Authority (NEDA) cheered how the labor market showed “significant improvements” when the November 2021 labor force survey figures came out. There are a couple of things awry with this.

The first is how “labor market” is actually inapplicable to a large part of the country’s working class. In the country’s current backward conditions with so much informality and self-employment, a huge portion of the labor force isn’t bought or sold in a textbook open market. The latest November 2021 labor force survey for instance has four out of ten (39%) in self-employment (28%) or working in family-operated farms or businesses (11%).

Having said that, labor market scarring is most acute in wage and salary work in private establishments which decreased to 21.4 million in November 2021 from 21.9 million in January 2020 on the eve of the pandemic.

The distinction is important to not overstate recent reported increases in employment as meaningful recovery in labor conditions (as the economic managers do). At first glance it seems very favorable that November 2021 employment is 2.9 million higher than in January 2020.

However, by class of worker, the largest net employment increases are in self-employment which increased by 1.5 million and in unpaid family workers which increased by one million; employment in family farms and businesses grew by 133,000.

There was a 496,000 increase in public sector employment and 270,000 increase in work in private households. However, work in private establishments fell by 457,000.

Lower incomes

The government unfortunately doesn’t collect income data frequently enough nor even with much granularity. But there are still enough signs that the hyped employment increase does not mean high, regular or stable incomes.

For instance, by hours worked, the number of part-time workers (i.e., less than 40 hours) bloated by a huge 3.1 million and those deemed with a job but not at work by 203,000 since January 2020. In contrast, those in full-time work (i.e., 40 hours and over) fell by 389,000. Mean hours worked also fell from 41.3 hours to 39.6 hours. Part-time work generally means lower incomes.

Low earnings can be further inferred from how the biggest net employment increases by sector are in agriculture (1.5 million increase) and wholesale and retail trade (1.4 million), with administrative and support services a distant third (268,000). The last time the government reported average daily basic pay, for January 2018, agriculture and trade were the two lowest earning specific subsectors.

This is enough information to establish the impact of the government’s protracted lockdowns and refusal to implement any meaningful fiscal stimulus.

Between January 2020 and November 2021, the Duterte administration’s economic mismanagement caused huge net employment losses in transport and storage (541,000 less), accommodation and food services (494,000), and manufacturing (266,000).

Millions of Filipinos were driven to try and find work wherever they can to support their families. They crowded into already extremely low-earning agriculture, even if our land and fisheries resources are already at their limits. They have also resorted to whatever sort of buying-and-selling they can manage in the trade sector no matter how marginal the incomes from this.

The latest first semester 2021 poverty figures give a very partial view of how their efforts have yielded inadequate results. The number of officially poor families increased by over 700,000 (18% family poverty incidence) and of poor Filipinos by some 3.9 million (23.7% population poverty incidence). This is only a partial view because it just looks at those with incomes less than the national average poverty threshold of Php79 per person per day.

Amid such generally poor employment conditions, it is very likely that the country’s 18-21 million poorest and most vulnerable families saw their incomes fall. The Bangko Sentral ng Pilipinas (BSP) for instance reports the proportion of households without savings increasing drastically to seven out of ten households (69.8%) by the fourth quarter of 2021, equivalent to some 18.4 million families. A Social Weather Stations (SWS) September 2021 survey meanwhile had some 79% of families reporting themselves as poor (45%) and borderline poor (34%); this is almost 21 million families.

Greater wealth

There isn’t enough income data to make any precise conclusions about worsening income inequality in the Philippines since the onset of the pandemic and the government’s poor COVID-19 response. Nonetheless, out of 26.4 million families in 2021, the aggregate collapse in incomes and savings of the poorest 18-21 million families is glaring.

It’s likely that many of the upper income balance 5.4-8.4 million families also saw their incomes fall since the pandemic. While this group has relatively more resources to absorb the lockdown-driven shocks, many are still not very well off and will still be feeling an economic pinch. Even among Filipino families with deposit accounts these are mostly actually very small. For instance, the BSP’s latest 2018 report on this noted a median balance of just Php5,000 and an overall average balance of only Php35,000.

Inequality has doubtless worsened especially with the super-rich pulling even further away from the poor majority. On one hand, the conditions of the poorest 70-80% have worsened in aggregate from job losses and possibly even pay cuts. But their micro difficulties from lost incomes are also stark and not experienced by the country’s wealthiest families.

Poor families have eaten less and pulled children out of school. The Food and Nutrition Research Institute (FNRI) reported some 62.1% or some 15.5 million households going hungry in 2020 with SWS continuing to report millions of hungry families throughout 2021. Department of Education (DepED) data showed K-12 enrollment in private schools dropping by 2.1 million between school years 2019-20 and 2020-21. With only a 192,107 increase in public schools over the same period, total enrolment fell by 1.9 million indicating a drastically worsening education gap with likely longer-term implications for livelihood prospects.

Many have likely also had to increase borrowing from relatives, friends and informal moneylenders or even sold assets to survive. This is probably worst among those whose medical expenses have increased especially from coming down with COVID-19 but also from other medical conditions; PhilHealth support has been sparse. The number of families delinquent in paying utility bills, rent and debt must also be increasing. There is also a likely discriminatory impact on women, persons with disabilities, Moro and indigenous peoples, and urban poor.

But not everyone felt heightened economic distress.

The country’s billionaires have gotten richer despite lockdowns contracting the economy, collapsing household incomes, and increasing poverty. The 40 richest Filipinos increased their collective wealth by Php842.6 billion or 29% since 2020 to Php3.8 trillion in 2021, according to Forbes and converting to pesos at prevailing exchange rates.

This wealth increase corresponds to a huge amount that would go far if mobilized to give ayuda, help struggling small entrepreneurs and victims of Typhoon Odette, and put rational public health measures in place.

While most Filipinos grapple with low and uncertain incomes, the stock market is recovering and the Philippine Stock Exchange index (PSEi) of over 7,200 today is already 52% higher than its lowest in March 2020. But this will only matter for the fraction of 1% of families who are invested in listed shares.

As it is, IBON estimates that the richest 1.3% likely hold as much wealth as the poorest 88 million Filipinos who make up the poorest 80% of the population.

Economics matters

The poor jobs situation and worsening inequality should temper enthusiasm about GDP growth as indicating recovery. For now, the country is rebounding at best and in a grossly inequitable manner at that.

The economic managers should be keener on looking at development indicators that really matter for the people. This may prompt them to become more sensitive and conscious about taking policy steps that really matter. Barring such a shift, the working class will find their efforts to lift themselves up thwarted by outside forces that should be the first to help them.

Sonny Africa is the executive director of IBON Foundation.