UNEMPLOYMENT What is Unemployment? • In economics, unemployment refers to the condition and extent of joblessness within an economy • measured in terms of the unemployment rate, which is the number of unemployed workers divided by the total civilian labor force • Hence, unemployment is the condition of not having a job, often referred to as being "out of work", or unemployed Types of Unemployment 1.) Frictional Unemployment - when a person loses his current job and is out looking for a new one - the time period from shifting from one job to another is known as frictional unemployment. 2.) Structural Unemployment - happens because of structural changes in the economy - In this type of unemployment, workers do not match with their jobs or they do not have the skill that is required in doing the work. 3.) Classical Unemployment - Classical Unemployment occurs when real wages for a job rises above the market-clearing level - Because of this, many more people apply to that job but only few vacant slots are available. 4.) Cyclical Unemployment - happens when there is an economic recession, wherein there is less demand for goods and services - During this time more unskilled workers are unemployed due to the fact that demand for labour decreases. 5.) Seasonal Unemployment - happens because there are some jobs that concentrate only at a certain time of the year -Industries that are seasonal may be fruit picking, tourism, hotels and caterings. Factors Affecting Unemployment • • • • lack of employment opportunities lack of investors and businesses fast population growth lack of education Unemployment vs. Underemployment Unemployment • condition of not having a job, often referred to as being "out of work", or unemployed • described as person who is not working or one who does not get paid, but seeks employment Underemployment • “underemployed people” is defined as those holding jobs but who want to work longer hours in their present job, those wanting an extra job, or those who want a new job with longer working hours • described as a person who is working partime but would like to work full time • also means that the workers skill is greater than that of what he is required to do DATA • from July 2010 until around January 2011, the trend of the unemployment rate was increasing • However, starting on April 2011 until October 2011, which is the most recent data on the unemployment rate, the trend was decreasing showing a big drop by .7% What brought about the drop? • 2.1 million new jobs have been created • Although there are many new jobs, there is an issue of quantity versus quality present • Employed vs. underemployed • “…how can we commend this report if out of the two million new jobs, 1.5 million are part-time while half a million are full-time? Underemployed workers were 7.38 million in October, higher than 7.1 million in July.” • SUGGESTION: “If this is the case, then NCSB and the government should go back to the basic definition of a FULFILLING JOB –one that supports at least a family of four, provides family’s daily needs and doesn’t require a person to borrow money just to make up for his salary’s insufficiency.” PROSPECT The two views • POSITIVE – that unemployment will remain in the 7 to 7.5 percent range which is still the worst among the Asean-5 countries. – Have faith in the Aquino administration’s inspirational goal of a rapid and sustained shrinkage from 8 to 7 percent. • NEGATIVE – that the jobs market will continue to deteriorate both in quantity and quality. – That unemployment will follow in-suit to the debt crisis in Europe, the political instability in the Middle East and North African territories, the stubbornly high unemployment worldwide, the triple tragedy in Japan and the apparent weakness in US economy recovery all pointing to a weak and prolonged world economic recovery. The current situation • The latest employment numbers show that the Philippines’ neighboring countries are doing much better: unemployment rate is 0.7 percent (May 2011) in Thailand, 2.6 percent (June 2011) in Vietnam, 3.0 percent (April 2011) in Malaysia, and 6.8 percent (February 2011) in Indonesia. As of April 2011, unemployment rate in the Philippines was 7.2 percent while underemployment rate was 19.4 percent. • The current labor statistics show some disturbing developments. First, the unemployed are mostly young (50 percent are in the age group 15 to 24 years), mostly male (64 percent are males) and mostly college graduates or undergraduates( 43.5 percent). Two sectors that will be in trouble • The young, college-trained working class. – There were 1,249,000 college-trained jobless workers in April 2011 compared to 1,198,000 similarly situated unemployed in April 2008, or a difference of 51,000 college-trained workers. This represents a huge waste of resources. It also means that not only is the number of jobless collegetrained workers large, it is rising. • The agriculture working class. – The number of employed workers in agriculture remains high: 29 percent or 12,188,000 in April 2011 compared to 32 percent or 10,732,000. This represents a decline of 53,000 workers in agriculture. Underemployment • Underemployment is a situation in which a professional is employed in a low-wage, lowskilled position that does not utilize the individual’s professional skills. • More than four of ten underemployed workers – parttime workers who are poorly paid and are looking for better jobs, better in terms of more hours and higher paying – are found in the agricultural sector. And the situation has not improved much since before the world crisis. Some 3,079,000 underemployed workers existed in agriculture in 2008; the number rose to 3,093,000, or by 14,000 underemployed workers. The role of the agriculture sector • In any event, this pattern of employment, where a big segment of the labor force is employed in agriculture, is not necessarily pretty. It does not imply progress. In fact it means that the lowpaying agriculture sector continues to remain the employer of last resort for a big segment of working class. • The more people go into the agriculture sector, the greater the underemployment rate will be. • This is just as bad as unemployment. The plan • The inspirational goal of the Noynoy administration to shrink unemployment from 8 to 7percent is possible if some necessary conditions -- for example, high public investment supported by sustainable fiscal resources, hefty foreign direct investment, strong world economic recovery – exist. For now, these conditions have yet to materialize along with the capital needed for these big investments. Attracting back OFWs… HOW? • PNoy’s 1 Million Jobs Project – Created to open more opportunities to the jobless and attract the OFW community back to the Philippines – Some goals: • Attracting both domestic and int’l investors to open up more job opportunities • Coordinating the DepEd with the Department of Labor and DOLE and reforming the education system in order to prepare students for jobs that will demand upon graduation • Using Phil-Jobnet, the Labor Department’s online jobapplicant matching system to reach out to the jobless • Benefits: – Will provide students with better quality education in the various fields students choose to pursue – Will equip them with sought-after skills – Open opportunities in booming markets – Increase job opportunities and investors • Progress Report: – Found success in getting foreign investors – Chinese investments worth 1.2 or 1.8 billion dollars for the country – Several European and Middle Eastern firms involved in business process outsourcing (BPO), energy, food, mining, oil exploration, personal care, and tourism Sectors that will generate the additional jobs • Labor and Employment Secretary Rosalinda Dimapilis-Baldoz : “the government will improve the business environment, develop our industries, and focus more incentive package on key job generating areas, such as tourism, business process outsourcing, mining, housing, agri-business, logistics, shipbuilding, infrastructure, and other high-potential industries that include production of home style products (furniture and furnishings, holiday décor, houseware, woodcraft, wearables, motor vehicle parts and components, garments, and construction and related materials.” • Objective: to increase exports and encourage foreign and domestic investments in these sectors so that they generate more jobs as they expand • Infrastucture projects such as irrigation, reforestation, drainage and sewage systems, and seaport development are prioritized – they support the development and job generation capacities of the agriculture and tourism sectors – 2012: The government is set to bid out 16 PPP (Public Private Partnership) projects • Edgardo B. Lacson, president of the Employers Confederation of the Philippines (ECOP), said that “the recovery of lost jobs would come from the infrastructure sector, which has a big multiplier effect.” • He concludes that unemployment would not be worse in 2012 • “employment opportunities will be available for highly-educated workforce, such as accountants, lawyers, human resource exporters, marketing consultants, graphic artists, content developers, doctors, radiologists, and other professionals” as a shift to a more higher-value services will be seen Factors of inflation • Inflation, in economics, is an increase in the general level of prices • There are 2 factors of inflation (1) Demand- Pull Inflation. Demand pull inflation happens when price levels go up because there are problems concerning supply and demand. (2) Cost push inflation. Cost push inflation happens when the general prices of products rise, due to increase in raw materials or wages. Relation of inflation to unemployment • There is an inverse relationship between inflation and unemployment. • When unemployment is high, inflation is low but when Inflation is high, Unemployment is low. Inverse Relationship of Inflation and Unemployment • When Unemployment is low and Inflation is high - As more people work, the national output increases, causing wages to increase, causing consumers to have more money and to spend more, resulting in consumers demanding more goods and services, finally causing the prices of goods and services to increase. DATA • country’s annual inflation eased in December to its lowest level in 11 months • consumer prices dropped by 0.2 percent in December due to lower prices of heavily weighted food items such as rice, cooking oil, vegetables, and sugar in many regions including the National Capital Region (NCR) • According to the National Statistics Office, all commodity groups except furnishing, household equipment, and routine house maintenance; recreation and culture; and education indexes posted either slower annual increment or negative annual rate during the month • the general downward adjustments in the prices of gasoline and diesel nationwide, along with lower electricity charges in the NCR, contributed to the decline in month-on-month inflation • the 2011 inflation figure is well within the government’s target range of between 3 and 5 percent for the full year, said the National Economic and Development Authority (NEDA) • Benjamin E. Diokno of the UP School of Economics: “The slowing inflation is good news. It is consistent with the view that growth, rather than inflation, should be the focus of policymakers.” • The government said it would soon announce its 2012 and 2013 inflation targets • average figure was within the central bank's 3.0-5.0 percent target for 2011-2013 • As the purchasing power of the average Filipino appears to be generally unaffected by problems abroad, consumers will be encouraged to continue buying goods which, in turn, will support businesses and keep workers occupied • BSP Governor Amando Tetangco said the December inflation data reinforced the central bank’s view that inflation would remain manageable over the policy horizon, giving policymakers room to adjust interest rates if needed. • Authorities remain watchful of developments abroad, including geopolitical risks in the Middle East, because of their impact on inflation, he said. – The Philippines imports most of its crude oil requirements from the Middle East. • “Philippine inflation may become elevated due to oil supply-related issues such as geopolititical tensions in Iran and other countries in the Middle East, but the average rate should remain within target” • threatened to respond to sanctions over its nuclear program by shutting the Strait of Hormuz, a transit route for a fifth of the world’s oil • Despite higher food prices due to crop damage from recent bad weather, DBS expects Philippine inflation to trend toward 4 percent by March, and average at the same level throughout 2012 Policies to reduce inflation 1.) Monetary Policy - The regulation of money supply and interest rate by a central bank, such as the BSP (Bangko Sentral ng Pilipinas), in order to control inflation and stabilize currency. 2.) Fiscal Policy - Decisions by the government, usually relating to taxation and government spending with the goals of price stability and economic growth.