Wanted: City development strategy

Last week’s 2012 employment report tells us that the country had 62.985 million people who are 15 years old or older. Out of this total, 64.2 percent or 40.4 million were considered part of the force out of which 90 percent or 36.7 million were employed, leaving 7.0 percent or 2.8 million unemployed. However, 20 percent of the employed or 7.5 million were underemployed. Half of the unemployed were in the 15 to 24 age group. By education, among the unemployed, high school graduates comprised 33.3 percent, college graduates, 19.6 percent; and elementary graduates, 7.4 percent.

Of the underemployed, 43.1 percent where in agriculture, which is closely followed by the services sector with 41.0 percent. The underemployment rate in the industry sector was placed at only 15.9 percent. If we assume that on average the underemployed workers worked only half of their time, then this would mean that, overall, unemployment in the country was around 17 percent last year. This is not a joke because that also means a foregone output of about 17 percent of the gross domestic product (GDP).

When many people are unemployed or underemployed, it would be also hard for workers to demand higher wages. Failing to get higher wages would also mean that, overall, the share of the workers out of the total income of the country would relatively be much lower than those going to the capitalists or owners of business enterprises. And this explains also the wide gap in income between the rich and poor in the country and the widespread poverty which remains high at about a fourth of our population.

The situation is aggravated by the fact that one–third (33.4 percent) of the total employed were laborers and unskilled workers whose pay is usually pegged to the minimum rate in the region where they work. In many cases, workers are also forced to receive pay much lower than the minimum for lack of other employment opportunities

By sector, more than half (52.6 percent) of the employed workers were in the services sector. Agriculture had 32.2 percent the industry sector had 15.3 percent. Now it is interesting to see how productive our workers are in the different sectors relative to each other. Looking at the GDP in 2012, the services sector which employed 52.6 percent of the workers accounted for 56.42 percent of the GDP or total final output of goods and services in the country. Agriculture which employed 32.2 percent of the workers accounted only for 11.06 percent of the GDP while industry which employed 15.3 percent of the workers accounted for 32.06.

From these data, I find that each worker in industry can produce more than twice or 2.13 times the average labor productivity in the country. The least productive is agriculture where each worker can produce only up to 34.3 percent of the national average. On the other hand, labor productivity in services turns out to be just about 7 percent higher than the national average.

From the above information, I conclude that the agriculture sector, which up to a third of people still depend for their living, is a neglected lot despite the Agriculture and Fishery Modernization Act that we proudly announced when it was passed in 1997 and which many of our senators and congressmen claimed to author or support.

I also find that industry which provides much higher income per worker than agriculture and services is also neglected because its share out of the total number of workers in the country is the smallest. The services sector is where most of our workers usually go but there is also nothing much to gain from this sector when most of it workers are just receiving the minimum wage in low skilled jobs or working part time like those in the agriculture sector.

Going forward, the implication is that if we do nothing to the present structure of our economy, there is not much hope for many people in the country to live a good and fulfilling life. More of the same will not build a strong Philippines despite our eagerness to meet the aggression of China in our seas headlong.

Pushed by poverty in the countryside and attracted by neon lights in the city, many of our people are now moving to the cities. World known development economist Arthur Lewis, in his analysis of the dual economy that characterized many poor countries, expected and actually wanted this to happen. What he proposed was for the cities to attract more investments and create more jobs in industries to take advantage of the unlimited supplies of cheap labor from the countryside. In this way, according to him, lowly paid rural workers will now receive higher wages in the cities. Eventually, when the number of workers become scarce in the rural areas, wages will also rise there so that overall the nation will have higher income for all than in the past. That is when real development comes.

The Lewis theory is sensible. What is not sensible, however, are our leaders. Until now, we really have no concrete plans to develop our cities in the sense that Lewis envisioned. The result as we are seeing now is a country with more than half of the people living in urban areas but in conditions not much better than in the rural areas when it comes to meeting one’s needs for a secure job, housing and other basic needs. Failing to create jobs in the cities, we only transfer the poverty of our people from rural to urban which only creates more problems in cities.

What we need now is a sensible city development strategy. China has that since it opened itself to the world after the death of Mao. Since then, China’s GDP grew by leaps and bounds and moved many of its people out of poverty. This is also the same idea that growth guru Paul Romer wants implemented through the building of chartered cities.

Where is our city development strategy?