At the close of 2019, in what seems to be a lifetime ago, the Philippines was one of the most dynamic economies in the Asia-Pacific region. With increasing urbanization, a large and young population, and a growing middle class, the vibrant labor market was supported by strong consumer demand. The unemployment rate was at its lowest in contemporary history, at 5.3%, and so was underemployment, at 14.8%. The spread of the contagious coronavirus disease (COVID-19) in 2019, however, led to an economic and labor market shock affecting not only the production of goods and services but also consumption and demand. Businesses of all sizes faced serious challenges and while the Philippine government deployed wage subsidy schemes to minimize job losses, most micro, small and medium enterprises’ (MSMEs) liquidity plummeted. Travel bans, quarantine restrictions, and costly sanitation measures as well as the loss of the purchasing public due to the growing environment of uncertainty and fear led most firms to delay the hiring of workers or, worse, retrench its employees. As of last January, an estimated 17.6% of Filipinos were unemployed and without any source of income.
Even before COVID-19 accelerated the demise of archaic institutions and traditional ways of doing work, the fourth technological revolution has likewise challenged the Philippines’ reliance on industrialization and its capacity to generate high-paying jobs as a path towards economic growth. The Philippine labor market, now more than ever, is in need of investment in training, skills, and support to help displaced workers transition into new and even better jobs.
It is time to build a new job market for the new normal.
Policy reform need not focus just on recovery alone. The Philippines needs a better labor market: an inclusive and sustainable one with a view towards the low-paid workers, young and inexperienced graduates, women, ethnic minorities, self-employed, informal, and fixed-term workers. The following strategies can be deployed as the Philippines needs a “whole of society” approach in combining quick acting measures with lasting solutions involving government workers, private enterprises, and taxpayers.
Firstly, investment in skills development is a must — either in terms of reskilling, upskilling, or training in highly technical and soft skills. Current initiatives in Congress such as the reforms in the Apprenticeship Program and “21st Century Skills Act” or House Bill No. 7671 by Albay Representative Joey Salceda — are good platforms in bridging the skills gap of Filipino workers to match the increasingly modernizing and technical labor demands. These programs need not be targeted to new entrants in the labor market only, but, due to the layoffs caused by the economic effects of COVID-19, expanded to include the unemployed and underemployed. Government should invest in the cost apprenticeship training, either in terms of reducing on-site training cost, providing incentives to companies that embark on upskilling programs, or employment facilitation to support those who cannot be hired by employers or looking to transition to new jobs.
Secondly, there is a need to strengthen unemployment insurance to improve income security while employees transition to new jobs or train to acquire new skill sets. Marikina Representative Stella Quimbo’s House Bill No. 7028 or the “PhilJobs Act of 2020” can aid in providing a cushion of, at most, three months salary payments to an employee to provide for a means for subsistence during his/her job search or a training allowance during the upskilling or reskilling period. Tripartite dialogue measures should also be conducted to include and improve on the portability of pension benefits for retiring employees.
Finally, and similar to the business stimulus granted by Vietnam, the government can set up local economic zones called “Special Employment and Recovery Zones” to be placed in labor-intensive, relatively low-skilled plants in high density and/or high unemployment areas. Major features of these special recovery zones would be fiscal incentives for employers to invest in or borrow loans against the government to set up new enterprises within the zone, provide for flexible wages and tenure arrangements based on competency programs or certifications, with health and labor standards to be overseen by a zone Commissioner. If pilot zones prove successful in generating investment and employment, nationwide deployment and labor reforms can be the next step.
The COVID-19 pandemic has rewritten institutional and social narratives; it is also time we rewrite our economic and policy models. While the current economic downturn has gutted obsolete and non-essential industries, it is time to usher in new labor markets for the new normal and not by ignoring structural inequalities but forming inclusive and sustainable skills markets by “building back better.”
Kristine C. Francisco-Alcantara is the Managing Partner of Abad Alcantara and Associates and is a Member of the Board of Trustees of the Foundation for Economic Freedom.