Unemployment: SWS and

DOLE, why the difference?

BELLO FRANCIA MAXIMO TIANCO
Activity
Unemployment
Employment, or the lack thereof, is one of the macroeconomic
problems several countries in the world now face. It is defined as
the situation where people in the labour force — people of legal
working age — are willing and able to work, but are unable to find
employment.
MANY UNEMPLOYED FILIPINOS?
High or rising unemployment is a problem that has to be addressed by
the government as it could lead to serious economic, social and
political problems for the Philippines. Despite rapid economic
expansion for the past two years, millions remain unemployed, and
the situation is worrying with its continuation.
In the last quarter of 2013, the number of unemployed Filipinos swelled to more
than 12 million.
Unemployment rate rose to a 27.5 percent (an estimated number of 12.1 million
individuals)
The working age population in Philippines consists of 59 million.
The labour force, based on a participation rate of 64% consists of 37.8 million.
35 million are employed and 2.83 million remain unemployed.
An additional 6.6 million (18.9%) are underemployed
PROBLEM FOR FILIPINO INDIVIDUALS
● In the case of the Philippines, it is common for those who live in
poverty to resort to illegal methods of earning profit (eg.
stealing/trading drugs) leading to an increase in crime rates.
● This leads to a cycle of poverty, where both adults and teens are
unable to find jobs due to criminal records.
● The increasing rate of poverty means that more children won't be
able to complete basic education.
● Since Filipinos tend to have larger families, funding educational
needs becomes a burden the unemployed/underemployed cannot
carry.
 How does the Government gather data on unemployment?

The Social Weather Stations (SWS) conducts around four surveys every year in order to get the statistics
on the employment, unemployment, and underemployment rates in the Philippines.
Criteria to be accepted as jobless:
Adult joblessness consists of (a) those who voluntarily left their old jobs, (b) those who lost their jobs due to
economic circumstances beyond their control, termed as the retrenched, and (c) those seeking jobs for the
first time.

Before April 2005, the official definition of the unemployed was those who did not work during the reference
week and are looking for work. However, from April 2005 onwards, the official definition was refined as
follows: not working, looking for work, and available for work.
 How does the Government gather data on unemployment?

The Philippine Statistics Office (PSA) gathers under the Philippine Government conducts an Annual
Estimate of the Labor Force Survey (LFS) every year in order to know the statistics of the following:
Population 15 years and over (in 000)
Labor Force Participation Rate (%)
Employment Rate (%)
Unemployment Rate (%)
Underemployment Rate (%)
 How does the Government gather data on unemployment?

The preliminary results of the Annual Labor and Employment Estimates for 2017 based on the average of
the four (4) LFS rounds (January, April, July and October) reported an annual labor force participation rate of
61.2 percent out of 69.9 million population 15 years old and over. This is equivalent to about 42.8 million
economically active population comprising of either employed or unemployed persons. The annual
employment rate in 2017 was estimated at 94.3 percent; annual unemployment rate was 5.7 percent; and
annual underemployment rate was 16.1 percent
Why is there a big difference on the SWS survey?
Besides SWS, there are other sources of information regarding unemployment statistics in the Philippines
● Labor Force Survey (LFS) of the National Statistics Office (NSO)
○ is the official reference of the government and by the World Bank, ADB,
IMF, ILO, and other Philippine development partners
The difference:
● the methodologies of the two surveys are not the same
○ The SWS has a respondent coverage of 1,200 aged 18 years old and
above
○ LFS has a respondent coverage of persons 15 years old and above in
51,000 households.
→ this distinction tends to lower the PSA employment rate, since youth of 15-17 are less at work than adults of 18 and up.
Why is there a big difference on the SWS survey?
The SWS data on joblessness refers to the population of adults in the labor force. This is because
respondents in the standard SWS surveys are those at least 18 years old.

On the other hand, the official lower boundary of the labor force has always been 15 years of age.

In the SWS surveys, persons with jobs are those who have a job at present (“may trabaho sa kasalukuyan”),
including unpaid family workers. The question does not use any past reference period. The SWS
joblessness figures are consistently based on the traditional definition of joblessness as fulfilling two
requirements: without a job at present and looking for a job. Those without a job but not looking for one,
such as housewives, retirees, differently abled, and students, are excluded from the labor force.
Why is there a big difference on the SWS survey?
On the other hand, the official Labor Force Survey (LFS) definition of employed include all those who,
during the week before the interview date, are 15 years and over as of their last birthday and are
reported to be either:

1. At work. Those who do any work for at least one hour during the reference week for pay or profit, or
work without pay on the farm or business enterprise operated by a member of the same household
related by blood, marriage, or adoption; or,
2. With a job but not at work. Those who have a job or a business but are not at work because of
temporary illness/injury, vacation, or other reasons. Also, persons who expect to report for work or to
start operation of a farm or business enterprise within two weeks from the date of the enumerator’s
visit are considered employed.
DEFINITIONS
Three of the major concerns of macroeconomics are...

1. Output growth
2. Unemployment
3. Inflation and deflation

**”Government policy makers would like to have high output growth, low
unemployment, and low inflation”
LABOR FORCE

• the total number of workers

• including both the employed and the unemployed

**those who are no longer looking for a job are not

considered in the labor force
**OFWs are not considered in the labor force
EMPLOYED
• Any person 16 years old or older who worked as
a) paid employees
b) worked in their own business
c) worked as unpaid workers in a family member’s
business
d) temporarily absent with or without pay due to
vacation, illness, etc.
EMPLOYED
Philippines
a) wage and salary workers
b) self-employed workers without any paid employee
c) employers in own family-operated farm or business
d) unpaid family workers

Full-time workers refer to those who worked for 40 hours or more during
the reference week
Part-time workers worked for less than 40 hours
UNEMPLOYED
• Any person 16 years old or older who
a) not employed
b) available for work
c) tried to find employment during the previous four
weeks
UNEMPLOYED
Philippines
: 15 years and over as of their last birthday
a) without work and currently available for work and
seeking work
b) without work and currently available for work but not
seeking work due to temporary illness, tired or
believed no work available and etc.
UNDEREMPLOYED DISCOURAGED WORKERS
• employed persons who • have given up looking for
express the desire to a job but would like to
have work
a) additional hours of
work in their present
job
b) additional job
c) new job with longer
working hours
LABOR-FORCE PARTICIPATION RATE
• “the percentage of the adult population that is
in the labor force”
• ratio of labor force to the total population (16
years old or older)
EMPLOYMENT RATE
UNEMPLOYMENT RATE
• ratio of unemployed to the total labor force
• a key indicator of the economy’s health
• imply that the aggregate labor market is not in
equilibrium

NATURAL RATE OF UNEMPLOYMENT

the normal rate of unemployment around which the
unemployment rate fluctuates
UNEMPLOYMENT RATE

OR
UNDEREMPLOYMENT RATE
2 MAJOR TYPES
1) Equilibrium/ Voluntary
unemployment
• move from job to job
or into and out of the labor
force
• can also be called frictional
unemployment because
people cannot move
instantaneously between
jobs
VOLUNTARY TYPE
1) Frictional Unemployment
• result of the time it takes for worker to search
for jobs that best suit their tastes and skills
2 MAJOR TYPES
2) Disequilibrium/
Involuntary unemployment
• labor market or the
macroeconomy is not
functioning properly
• qualified people who
are willing to work at the
going wage cannot find
jobs
2 INVOLUNTARY TYPES
1) Structural Unemployment
• signifies a mismatch between the supply of and the demand for
workers
>occur because the demand for one kind of labor is rising while the
demand for another kind is falling and markets do not quickly adjust

2) Cyclical Unemployment
• overall demand for labor declines in business-cycle down-turns
2 OTHER TYPES
1) Hidden Unemployment
• group of unemployed individuals that are not counted in the
unemployment figures
• only include people that are unemployed, but actively seeking a new
employment opportunity

2) Underemployment
• employed persons who express the desire to have additional
hours of work in their present job, or to have additional job, or
to have a new job with longer working hours
EFFECTS
A. Unemployment-Type Specific Effects
B. Impact on the Economy
C. Impact on Society
D. Impact on the Government
EFFECTS
A. Unemployment-Type Specific Effects
i. Frictional Unemployment
• Not harmful to an economy
• increase in frictional employment means more people
are moving towards jobs that are better-suited to them
• decrease in frictional unemployment can
1) Increase labor costs, resulting in cost-push inflation
2) Increase wages and lessen income inequality
EFFECTS
A. Unemployment-Type Specific Effects
ii. Structural Unemployment
• more harmful to an economy as its effects can reach the long-
term
• erode the skills of an individual and may seem questionable to
the employers
• “Can trap workers into lifelong patterns of irregular work”,
especially if one is afflicted by long terms of unemployment “at
the beginning of one’s career” (Damme & Schwenninger, 2010)
EFFECTS
A. Unemployment-Type Specific Effects
iii. Underemployment
• bias from employers when seeking full-time
employment, preventing opportunities
• erode the skills of an individual
• Negatively impacts “both material and social resources
at the community level” (Newman & Pedulla, 2011)
EFFECTS
B. Impact on the Economy
• Decrease in overall economic performance
• Firm productivity decreases
• Output quality can also decrease, affecting demand
• Wasted human capital = economy not performing on its PPF
• “Inefficient allocation of resources” = market failure
• Fall in GDP and potential GDP
• Increase in income inequality, poverty
EFFECTS
C. Impact on Society
• “Social unrest”
• High migration rate (brain drain)
• Increased risk for crime, stress, health complications
• Impacts on unemployed as consumers
• Decreased living standards/quality of life
• Less consumption of goods and services whose prices are
income-elastic
• Discouraged-worker effect
EFFECTS
D. Impact on the Government
• Government spending increases
• Decrease in tax revenue because less people are in
work
SITUATIONS IN THE PHILIPPINES
1) The country’s employment growth is not enough to decrease the
number of unemployment due to the rapid growth of the
population, rise in the labor force participation and the slow
formation of jobs
a) Philippine employment rate is at 93.4 percent as of January 2017 (PSA)
b) As of 2015, the population has gone up to 100.98 million from 76.51 million in
2000, with an annual increase rate of 1.72 percent (psa.gov.ph)
c) The problem is that job formation has struggled to keep up with the growing
population and the increasing number of people entering the labor force
d) The number of people entering the job market is greater than the number of jobs
available
SITUATIONS IN THE PHILIPPINES
2) In the 93.4% of the employed population, a huge portion of these
come from the people employed in elementary occupation, which
include jobs that are considered as low-paying and informal workers.
a) Despite being employed, most people remain poor because their jobs
can be precarious and low-paying
b) The underemployment rate is still consistently high especially in the
rural areas, due to the fact that productive job opportunities are scarce
c) The minimum wage policy and employment protection legislation are
still since inadequate
SITUATIONS IN THE PHILIPPINES
3) Youth unemployment in the Philippines is high and is
considered as a “policy challenge” for the government (ADB)
a) According to the current statistics, about 16.5% of the
unemployed come from college graduates. Another survey
found that college students took a year to find work and high
school graduates took up to three years
b) Skills mismatch could lead the youth to seek better
opportunities abroad
ANALYSIS
Two factors can be pinpointed as the reasons behind
the relationship of an increasing population and
unemployment rate:
1. Poor reproductive health
2. Slow public spending
POOR REPRODUCTIVE HEALTH
a) It is said by both the UN and WHO that the Philippines’
reproductive health is the worst in SE Asia.
b) Without any access to materials and services with regard to
reproductive health, especially family planning, the population
is expected to rise exponentially in the years to come.
c) Poorer families can benefit from having access to universal
reproductive healthcare, as they are usually the ones that
have large families.
SLOW PUBLIC SPENDING
a) The government plays a huge role in the process of labor and
employment, as they could greatly affect demand through
public spending.
b) As current situations and statistics suggest, the government
cannot keep up with the speed at which the population is
rising.
c) Along with that, other factors such as leakages could be the
cause of slow public spending.
ANALYSIS
The scarcity of productive, well-paying jobs, especially in the rural
areas results to an increase in the number of informal jobs which
could be caused by the lack of necessary skills and education of the
applicant or workers.
a) Applicants or workers settle for bad jobs due to the intense competition
to acquire good jobs.
b) According to Jan Rutkowski “-- 30% of workers who finished
secondary education hold unskilled jobs and work as laborers”
c) According to former Labor Secretary Rosalinda Baldoz, only 10 out of
1,000 Filipino applicants are getting hired because many lack the
necessary skills needed for the jobs available in the market.
ANALYSIS
According to ADB, there are 2 reasons for high youth
unemployment
a) “On the demand-side, the number of jobs generated each year
falls short of what is needed to both absorb new entrants into
the labor force and the 2.5 million unemployed”
b) Mismatch education and skills in the labor market
i. limited types of job available in the market
ii. Low demand of the service in the Philippines due to high supply of
workers of homogeneous job.
RECOMMENDATION
How do we reduce unemployment?
The main thing to do when there is unemployment is of course to create new
jobs. So how do we create new jobs that are needed to reduce unemployment?
1. REDUCING OCCUPATIONAL IMMOBILITY
2. EMPLOYMENT SUBSIDIES
3. FULL DEVELOPMENT OF SMALL SCALE, LABOR-INTENSIVE INDUSTRIES
4. CHOOSING APPROPRIATE LABOR-INTENSIVE TECHNOLOGIES OF PRODUCTION
5. CREATING A MORE DIRECT LINK BETWEEN EDUCATION AND EMPLOYMENT
6. REDUCE RURAL MIGRATION
7. REMOVE CAPITAL INTENSIVE BIAS
8. EMPLOYMENT STRATEGY PACKAGE
9. BETTER REPRODUCTIVE HEALTH
REDUCING OCCUPATIONAL
IMMOBILITY
• Occupational mobility is defined as the ability of labor to switch between
different occupations or the manner by which workers can switch career fields
to find other employment or meet the labor needs.
• Usually labor resources are occupationally immobile because it takes time for
people to learn the skills needed for working in a certain industry
• By reducing occupational immobility we can reduce unemployment because
workers can switch career fields and work in other industries -- they will not be
stuck in their field and they will have more options for work
• Government can provide retraining programs for the unemployed
• Oversupply of workers and a lot of graduates every year fall into
EMPLOYMENT SUBSIDIES
• This is a method by which subsidies are given by the government to
the firms that will hire workers that are unemployed
• This can help reduce unemployment because more jobs will be
available for the unemployed. Given the subsidies that the
government is willing to give, firms will be more enticed to hire
workers
FULL DEVELOPMENT OF SMALL SCALE,
LABOR-INTENSIVE INDUSTRIES
• There are small scale labor-intensive industries but it is not fully
developed and it is not being maximized.
• Developing small scale labor-intensive industries in both urban and
rural areas will create more jobs and help reduce unemployment
• Can be done in two ways: first is directly through government
intervention and second is indirectly through investment incentives
for the private sector. Investment incentives
CHOOSING APPROPRIATE LABOR-INTENSIVE
TECHNOLOGIES OF PRODUCTION
• One of the main factors inhibiting or blocking the success of any long-run
program of employment creation both in urban industry and rural agriculture is
the almost complete technological dependence of Third World nations on
imported machinery (typically labor saving) and equipment from the developed
countries
• Both domestic and international efforts must be done to reduce this
dependence by developing technological research and adaptation capacities in
the developing countries themselves.
• develop small scale, labor-intensive rural and urban enterprises.
• focus on the development of low-cost, labor-intensive methods of
meeting rural infrastructure needs
CREATING A MORE DIRECT LINK BETWEEN
EDUCATION AND EMPLOYMENT
• The appropriateness and significance of the educational
system, more importantly at the higher levels is being
questioned because of the number of educated that are
unemployed. This shows that though they are educated not
all can land jobs.
• Present educational system patterned to that of the
Western system focused on teaching students how to
function in a small modern sector.
CREATING A MORE DIRECT LINK BETWEEN
EDUCATION AND EMPLOYMENT
• The creation of attractive economic opportunities in rural
areas would make it easier to redirect educational system
toward the needs of rural development. This is a strategy to
expand the options for work and not just be confined in
urban setting.
REDUCE RURAL MIGRATION
• Urbanization in this country steadily reducing the population of
those who used to work in the agricultural sector
• people from the province migrates to the urban areas with the belief that
more job opportunities awaits them
• problem of urban unemployment goes up.

• Reduce rural migration by making more economic opportunities in

the rural areas and create more jobs.
• convince the people to go back to their provinces where they will have jobs
instead of staying in the urban areas unemployed.
REMOVE CAPITAL INTENSIVE BIAS
• Urban industrial sector fails to provide more jobs
• overall scarcity of capital
• excessive concentration in large-scale industries using increasingly capital-
intensive technologies

• Slow expansion in the demand for labor is due partly by policies

which biased industrialization in capital-intensive directions
• neglects agriculture particularly the food sector which could have been
fertile grounds for employment
BETTER REPRODUCTIVE HEALTH
• The increasing population is also a big factor in unemployment.
• Hold the increase in population. More importantly, for the people
who are already unemployed and cannot sustain a larger family.
• Teach people to be mindful of their actions and think of their future.
If people are educated about proper reproductive health, they will
know the right thing to do based on what they can handle.
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