REDEFINING THE LABOR FORCE FRAMEWORK: SOME INPUTS FROM THE PHILIPPINE EXPERIENCE 1 By Editha B. Rivera 2

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1 1 REDEFINING THE LABOR FORCE FRAMEWORK: SOME INPUTS FROM THE PHILIPPINE EXPERIENCE 1 By Editha B. Rivera 2 The Philippine Labor Force Survey (LFS) is collected by the National Statistics Office (NSO) since May 1956 undergoing changes through the years from population coverage, reference period and concepts. Currently, it is conducted during the first month of every quarter with a past week reference period and covers about 51,400 households nationwide. The LFS concepts and measurements fundamentally follow the international standards as contained in the resolution concerning statistics of the economically active population, employment, unemployment and underemployment, adopted by the 13 th International Conference of Labour Statisticians (ICLS) in October As a major user of the labor force statistics, the Department of Labor and (DOLE), through its statistical arm, the Bureau of Labor and (BLES), closely coordinates with and provides feedback to the NSO regarding the LFS results. As a major statistical agency in the Philippine Statistical System (PSS), the BLES can influence the kind of labor statistics that data producing agencies generate. Thus, this paper is prepared from the user s point of view as regards the limitations of the labor force concepts and definitions with the aim of providing inputs for the review of the labor force framework under Resolution No. 1 adopted by the 13 th ICLS. The issues discussed herein have posed conceptual difficulties in the course of analyzing the labor force statistics for planning, and policy and program development in the DOLE. UNEMPLOYMENT New Unemployment Definition A milestone in recent years of the Philippine labor force statistics was the change in the definition of unemployment through Board Resolution No. 15 passed in 2004 by the National Statistical Coordination Board (NSCB), the national policy making body on statistical matters. The decision to revise the unemployment definition was prompted by the fact that unemployment rate has been frequently used as one of the benchmark for comparing the economic performance and growth potentials of economies around the globe. In 2004, only ten (10) out of 88 countries conducting the labor force surveys were not using the availability to work criterion. And the Philippines was one of these countries. So starting with the April 2005 round of the LFS, those counted as unemployed should satisfy simultaneously the three criteria: (1) without work, i.e., were not in paid employment or self-employment; (2) seeking work, i.e., had taken specific steps in the past reference week to seek paid employment or self-employment; and (3) currently available for work, i.e., were available for paid employment or self-employment in the past week or within two weeks. See flowchart for identifying the unemployed in the next page.). It however retained the relaxation of the seeking work criteria by accepting five (5) reasons as valid for not actively seeking work. 1 Paper prepared for the Seminar on and unemployment: Revisiting the relevance and conceptual basis of the statistics conducted by the International Labour Office on December 2008 in Geneva, Switzerland. 2 Chief Labor and Officer of the Bureau of Labor and Statistics (BLES), Department of Labor and (DOLE), Manila, Philippines. The author is indebted to the valuable inputs of her colleagues, Manuel L. Laopao and Teresa V. Peralta, Officer in Charge and Chief Labor and Officer, respectively, of the same office.

2 2 For Persons 15 Years Old and over who had no job/business Looking for a job/ establish a business? Yes No Reason for not looking for work Tired/believe no work available Awaiting results of previous job application Temporary illness/disability Bad weather Waiting for rehire/job recall Too young/old or retired/ permanent disability Household, family duties Schooling Available for work? (Last wk or w/in 2 wks) No Not in the Labor Force Yes Unemployed Figure 1. Flowchart for Identifying the Unemployed The change was met with so much resistance (even up to this time) especially from economists and analysts as the adoption of the new definition has led to a drop in the country s unemployment rate by almost two (2) percentage points, and correspondingly, the labor force participation rate by almost three (3) percentage points. Because of this, there was public perception that the change was intended to mislead data users. Nevertheless, the adoption of the new unemployment definition has provided the major statistical agencies the opportunity to educate users and analysts of labor statistics as the NSCB Resolution mandated them to conduct advocacy campaigns in major regional centers of the country. What emerged in these fora was that the most common misconception and conceptual difficulties identified were on the one-hour criterion in the definition of work, unemployment especially the relaxation of the seeking work criterion, underemployment, multiple jobs, and job-vs-employment creation measurement. Inactive Unemployed A critical concern is the large proportion of the inactive unemployed in the Philippines. These are persons with no job or business who were not seeking work but were available and willing to take up work. Prior to April 2005, they constituted about seventy percent of the total unemployed. In April 2005 and thereafter, their share went down to a little above fifty percent. (See Annex Table 1.) These inactive jobseekers were mostly non-heads of households (82.9%), very young (46.9%) and with secondary education ((46.3%) and college educated (33.4%). These demographic characteristics indicate that this group can

3 3 afford not to work, and hence does not exert much pressure on the labor market. Whether this is a universal phenomenon or something unique to the Philippine labor market needs to be validated by statistics from similarly situated countries as the Philippines. Statistics available in websites from these countries do not allow us to compare as there are few notes provided. Female LFPR Whether the concepts and definition is culture sensitive can not be said at this point. In the Autonomous Region of Muslim Mindanao where per capita regional domestic product has been consistently the lowest and where it is predominantly Muslim, the region has consistently obtained one of the lowest unemployment rates over the years. In one of the consultative meetings with the regional staff of the NSO, we probed on the reasons for this low unemployment rate. The reason forwarded by our informant was that respondents of the LFS were usually male members of the household and they would not admit that their women members are working when it is obvious that Muslim women are engaged in trading or are seen minding stores in the area. Thus, statistics also indicate the low labor participation rate of women in the region. Seeking Work for Overseas Jobs The phenomenon of overseas employment impacts positively on the Philippine labor market as it has created an avenue for more employment opportunities for Filipino workers abroad. It has also changed the perspective of new entrants to the labor force as it broadens their choices of labor market. Further, it has influenced their career decisions by enrolling in college courses that will give better chances of working abroad. In the present LFS, the intended labor market is not asked of jobseekers, whether their job search is confined to local market or for overseas. This development must be considered in redefining the labor force framework. UNDEREMPLOYMENT In the Philippines, underemployment is a more serious problem than unemployment. Statistics in Annex Table 2 indicate that regions with low per capita GDP have higher underemployment rates. According to the Philippine NSO, underemployed persons are those employed persons who express the desire to have additional hours of work in their present job or in an additional job, or to have a new job with longer working hours (NSO, 2005). Operationally, it is measured by asking respondents whether s/he wants more hours of work or s/he look for additional hours of work during the past week. The underemployment rate is estimated by getting the proportion, expressed in percent, of the underemployed to total employed persons. On the other hand, the time-related underemployment or visible underemployment is the underemployed working less than 40 hours during the reference week. This is considered the working hours threshold except for agriculture and fishery which could be lower than forty hours. As defined therefore, underemployment is not a useful analytical concept because it is subjective, that is, it only captures the respondents expression of desire to have additional hours of work or to have another job with longer working hours, without probing further whether there have been concrete steps taken to seek to work additional hours and/or whether they were available within specified subsequent period to work additional hours. It is indeed unfortunate that the Philippines, despite the potential usefulness of these data in view of the kind of labor market that exists, has not been able to adopt the

4 4 recommended measurement embodied in the resolution adopted by the 16 th ICLS in While discussions were made on the possible review of the underemployment definition including that of discouraged workers, the review did not materialize because priority was given to the revision of the unemployment definition and subsequently following it up with the revision of the underemployment concept would put the entire labor force concepts into public scrutiny again. Added to this is the difficulty of operationalizing the concepts as contained in the 16 th ICLS resolution. THE CONCEPT OF NATIONAL AND DOMESTIC LABOR FORCE Due to the growing importance of overseas employment to the Philippine economy (contributing to about nine percent of total national output) and in providing alternative employment to the local labor market, the concept of national and domestic labor force was studied as early as in Borrowed from the SNA concept of Gross National Product and Gross Domestic Product, the national labor force is the broader concept that includes Overseas Filipino Workers (OFWs) while the domestic labor force refers to the concept as defined by resolution adopted by the 13 th ICLS (1982). Following the activity principle in the concept of employment prescribed by the ILO, the OFWs are classified as employed. Hence, the building block below illustrates the components of the proposed labor force framework. However, Dr. Farhad Mehran of the ILO remarked in a technical session during a mission to the Philippines in 2003 that technically, the working age population should include members of the Filipino households residing overseas which may be difficult to capture. In the Philippine LFS, overseas Filipino workers are listed as members of the household only for purposes of estimating the household population but are excluded from the labor force. Local Indicator Local Overseas = TOTAL EMPLOYMENT Local Overseas Unemployment = TOTAL LABOR FORCE Local Overseas Unemployment Not in the Labor Force TOTAL HOUSEHOLD = POPULATION 15 YEARS OLD AND OVER Figure 2. Building Blocks of the Labor Force (Proposed) Using the above framework, the LFS results for 2007 (See Annex Table 3) show that while the OFWs comprised only about two percent (2%) of total household population 15 years old and over, unemployment rate was chipped by a measly 0.2 percentage point when OFWs were included. However, the national LFPR increased by some 0.8 percentage point. According to the Commission on Filipinos Overseas, there are about five million OFWs worldwide, including some 900,000 undocumented ones who managed to find work abroad. It must be emphasized however that the intention of the proposal was to supplement the

5 5 present set of data so as to enrich the analysis of the labor market dynamics by including the impact of overseas employment. SOME ISSUES FOR CONSIDERATION IN THE REVISION OF THE LABOR FORCE CONCEPTS The intent of resolutions passed by the ICLS is to provide standards in the definition and measurements of labor market indicators. Based on the country s experience, there are difficulties encountered in trying to adopt the guidelines set in the resolution. First, any change is met with misgivings by users, especially if the change processes involved political exercises such as consultations with various sets of users. Even if technical people have pored studies on the subject, some sectors will still find malice even in the best of intentions. The redefinition of unemployment therefore took a long time to materialize as the technical people involved considered the timing and political climate so as not to be misconstrued as a political ploy. Translating the international standards into local applications considering national circumstances is difficult as well. It is doubly harder if the concepts and measures are new such as the one on decent work. One should take into account that the technical staff working on these would only rely on manuals (if there are available) provided by the ILO. Technical advice is therefore crucial. If technical assistance is not possible, the issuance of guidelines and advisories might help. Despite efforts to subscribe to international standards, there would still be differences on concepts and measures in deference to national circumstances. Comparative analyses of major indicators among countries are useful especially if the statistical system of a country wants to adopt concepts and definitions in accordance with international standards. However, related statistics are not easily available even in statistical websites, and if there are, have few notes to facilitate interpretability of the statistics and thus allow meaningful comparison. Thus, there might be a need for ILO, specifically the Bureau of Statistics to come up with adjustment methods so that similar indicators can be compared across countries. Likewise technical notes on concepts and measures used by countries would indeed be a useful guide for countries that wish to review their own sets of indicators. When we did our review, we wanted to compare our unemployment figures with those in the region. Further, our experience showed that despite the change in the unemployment definition, our unemployment rate is still higher than countries of comparative economic performance or similar labor market characteristics. More importantly, in view of the impact of globalization, cross country movement of labor is a reality. This expands the labor force framework beyond territorial boundaries. This is the case of some islands in the most southern part of the Philippines (Tawi-tawi) wherein Filipinos commute daily or weekly to work in foreign land (Sabah, Borneo). This might be true in countries of the European Economic Community and such poses a measurement problem. A labor force framework integrating this phenomenon should be included in the review. International labor migration has grown in importance especially among developing countries.

6 6 REFERENCES: International Labour Office. Resolution Concerning Statistics of the Economically Active Population,, Unemployment and Underemployment, adopted by the Thirteenth International Conference of Labour Statisticians (October 1982). The Thirteenth International Conference of Labour Statisticians. --- Resolution Concerning the Measurement of Underemployment and Inadequate Situations. Adopted by the Sixteenth International Conference of Labour Statisticians (October 1998). The Sixteenth International Conference of Labour Statisticians Philippines, Bureau of Labor and Statistics, Department of Labor and. A Concept Paper on the Monitoring of Overseas in the Labor Force Survey, Philippines, Bureau of Labor and Statistics, Department of Labor and. LABSTAT Updates, Volume 10 Numbers 5-9, The Philippine Overseas : Understanding its Trend and Structural Change (Parts 1-5), May 2006 Philippines, Bureau of Labor and Statistics, Department of Labor and in collaboration with the National Statistics Office. Primer on Labor Force Survey (LFS), November Philippines, National Statistics Office. January 2007 Labor Force Survey, Enumerator s Manual

7 7 ANNEX TABLE 1 Inactive Unemployed and their Demographic Characteristics Philippines: (In thousands except percent) YEAR/INDICATOR Number Total Unemployed Inactive Unemployed Number Percent to Unemployed/Total ,043 2, ,017 2, ,459 2, ,653 2, ,874 2, ,936 2, ,249 2, January 4,030 2, April 2,909 1, July 2,715 1, October 2,619 1, ,829 1, ,653 1, HOUSEHOLD STATUS 2,653 1, Head Non-Head 2,257 1, AGE GROUP Years 1, Years Years Years HIGHEST GRADE COMPLETED No Grade Completed With Elementary Education With High School Education 1, College 1, Undergraduate College Note: Averages for 2005 cannot be computed due to the adoption of the new unemployment definition. Source of basic data: National Statistics Office, Labor Force Survey.

8 ANNEX TABLE 2. Per Capita Gross Regional Domestic Product, Poverty Incidence, Unemployment Rate and Underemployment Rate by Region, Philippines: (Unit in Pesos except Rates) Region Per Capita GRDP (P) Poverty Incidence 1 (%) Unemployment Rate Underemployment Rate Per Capita GRDP (P) Unemployment Rate Underemployment Rate PHILIPPINES 14, , National Capital Region 37, , Cordillera Administrative Region 18, , Region I - Ilocos Region 7, , Region II - Cagayan Valley 8, , Region III - Central Luzon 11, , Region IV-A - CALABARZON 14, , Region IV-B - MIMAROPA 12, , Region V - Bicol Region 6, , Region VI - Western Visayas 13, , Region VII - Central Visayas 13, , Region VIII - Eastern Visayas 6, , Region IX - Zamboanga Peninsula 10, , Region X - Northern Mindanao 15, , Region XI - Davao Region 14, , Region XII - SOCCSKSARGEN 11, , Caraga 6, , Autonomous Region in Muslim Mindanao 3, , Note: 1. Per Capita GRDP is at Constant 1985 prices 1 The proportion of the population with per capita income less than the per capita poverty threshold to the total population. Sources of data: National Statistical Coordination Board, Gross Regional Domestic Product and 2006 Official Poverty Statistics of the Philippines. Bureau of Labor and Statistics.

9 9 ANNEX TABLE 3. Labor Force Statistics (Including Overseas Workers) Philippines: 2007 Labor Force Survey (In thousands except rates) Indicator Jan April July Oct Total Population 15 Years Old and Over 57,400 57,746 58,110 58,480 - Overseas Workers 1,255 1,335 1,253 1,635 National Labor Force 37,650 37,731 37,395 37,553 Domestic Labor Force 36,395 36,396 36,142 35,918 a. National 34,800 35,039 34,571 35,307 - Domestic 33,545 33,704 33,318 33,672 - Overseas 1,255 1,335 1,253 1,635 b. Unemployment 2,850 2,692 2,824 2,246 Not in the Labor Force 19,750 20,015 20,715 20,927 Population Ratio (%) - National (Overseas Workers Included) Overseas Workers Only Labor Force Participation Rate (%) - National LFPR Domestic LFPR Rate (%) - National Domestic Unemployment Rate (%) - National Domestic Source of basic data: National Statistics Office, Labor Force Survey.

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