Inflation vs. unemployment

The Social Weather Stations (SWS) reported that based on a Dec. 3-7 survey last year, the proportion of adults without work had risen to 24% from 20.2% three months earlier—equivalent to an estimated 9.7 million Filipinos. According to Malacañang, this SWS figures were not consistent with the result of the last Labor Force Survey (LFS) in October that showed a much-lower unemployment rate of 6.4 percent, down from 7. 1 percent in the same month in 2009. Based on the October LFS, only 2.644 million Filipinos were unemployed.

We should not be surprise by the difference. The two surveys differ in many aspects. For example, the SWS included in the survey those who were at least 18 years old while the NSO includes those who where were 15 years old and above. The former also uses the traditional definition of unemployment as comprising those not working and at the same time looking for work while the latter defined unemployment include all persons who are 15 years and over as of their last birthday and are reported as: (1) without work and currently available for work and seeking work, or (2) without work and currently available for work but not seeking work for the following reasons: (a) Tired/believed no work available, (b) Awaiting results of previous job application, (c) Temporary illness/disability (d) Bad weather, and (e) Waiting for rehire/job recall. Another difference is that SWS has 1,200 individual respondents while the NSO has 54,000 households as respondents.

There is one vital information, however, that the SWS does not include in its report— the number of people or percent of those surveyed who consider themselves underemployed and therefore still seeking work. In the NSO October 2009 survey, this reached 19.6 percent of the labor force. When we add this to the 6.4 percent reported unemployment also reported by NSO, we get 26 percent of the labor who are either unemployed or underemployed. This is just about 2 percent higher than the 24% reported unemployed by SWS in its December survey.

But whichever is the case does not really matter anymore. What matters much and which should concern us most is that both represent a loss of about a fourth or fifth of our potential output or income. This is the problem, not which of the SWS or NSO survey is correct or wrong. Having said that, what are we going to do about it? But hey, is this figure not the same figures that we had for many years now? What have we done in the past to increase the number of jobs in the country so as to reduce our high unemployment or underemployment rate? Why are our high unemployment and underemployment rates high until now?

I contend that the government, both now and in the past, has no clear cut policy on job creation. Unlike when the inflation rate rises, when the unemployment ticks up one percentage point higher, no government official or government agency would spring into action to counter the increase. It is different with inflation. When the monthly inflation trajectory points higher, you can immediately see the Bangko Sentral ng Pilipinas planning or actually tightening money supply and credit to curve demand.

This brings me now to the title of this piece. Don’t we find high unemployment equally, if not, more serious national problem than inflation? In the 2012 Cebu Annual Economic Briefing and Investment Forum held last week, I showed to the participants a chart that indicated that since 2000 the country’s unemployment rate exceeded the inflation rate except in 2008. From 2000 to 2011, the average inflation rate was only 5.1 percent while it was 9.6 percent for the unemployment rate. From there, it is obvious we should be doing more to our high unemployment rates than the inflation rate, but we are not, the reason it persists for so long.

Knowing the troubles and waste that come with high unemployment rates, why can we not have a Full Employment Act, like in the US, which mandates the national government and all local government units with respect to their respective areas to do everything in their power to achieve low unemployment rate.

And can we not call on the Bangko Sentral ng Pilipinas also, which is presently so obsessed with the inflation rate to consider also the impact of its policy on the country’s employment situation?