Jobless Growth, Trade and Globalization

With its considerably large population, labor should be the key
component of Philippine development. It is surprising then that
employment has declined recently, even as the economy has improved.
Annual growth in the Philippine Gross Domestic Product increased from
3.3 percent in 1999 to 3.9 percent in 2000. However, the unemployment
also rose from 9 percent in the January 1990 to 9.5 in the same period
in 2000 and then to 11.5 in 2001. How can we account for the fact that
the increased economic growth recorded has resulted in greater
unemployment? Could this be the dreaded “jobless growth” that everyone
keeps talking about?

By far the most puzzling aspect of this negative relationship between
growth and employment is why this occurred only after the Asian
financial crisis in 1997, whose full effects were really experienced in
1998. In the last ten years, the highest employment registered was 92.6
percent
in 1996 when the economy also grew fastest at 5.8 percent. Perhaps,
part of the explanation for the strange negative relationship between
growth and unemployment maybe the poor administrative performance of
the Ejercito government as compared to the previous administration, and
the political uncertainty associated with the former period.

However, despite the lamentable performance of the Ejercito
administration, a key element of the puzzle is still the ebullient
growth of 6.4 percent recorded in the agricultural sector in 1999, and
the impressive growth of 3.6 percent of the industry sector in 2000,
which made up for the somewhat slackened growth of 3.4 percent in the
agricultural sector. Furthermore, in both years, the growth rate of the
service sector, which comprises the largest bulk of the country’s
employment, was steady at roughly 4.0 percent.

This paper will provide an explanation to the observed loss of jobs
despite the economic growth. The first section will look into some
conventional approaches in explaining this phenomenon, and indicate
their lack of empirical support to explain this event. The second and
third section will discuss the possible roles of the Philippine trade
liberalization and globalization in this issue, factors that are not
associated with unemployment. The paper argues that despite
discriminatory trade policies, the Philippines is still affected by
increasing international market integration mainly because of the
increased mobility of capital. This situation ultimately leads to
greater capital intensification and ultimately reduced employment. The
last section then provides policy directions to address these problems.

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