From APEC HRDWG Wiki

In support of the Jakarta conference relating to the Human Resource Impacts of the Economic Crisis, the Philippines has submitted a case study draft of the impacts of and their responses to the economic crisis.

The Impact of the Global Financial Crisis on the Labour Market: The Case of the Philippines

Jenny D. Balboa and Melalyn C. Mantaring^[1]

Despite the limited direct channel of transmission of the global financial crisis in the Philippines, the crisis took a toll in employment, wages and take-home pay, particularly in the manufacturing sector. There was also a reported higher poverty incidence and hunger in the economy at the peak of the impact of the crisis in 2008, and there are projections of higher poverty incidence in 2010. 

Impacts on Employment

Displaced workers mostly came from the Manufacturing Sector. Among its subsectors, electronics suffered hardest with close to 9,000 displaced workers in 55 establishments. This figure comprises 2.1 percent of total employment in the Electronics industry. The second largest number of retrenchment was found in the Mining industry with 5,359 workers affected, followed by Garments with 4,117 displaced workers.

A reported 5,332 Overseas Filipino Workers (OFWs) were reported to be affected and displaced by the crisis. More than 4000 workers, or close to 80 percent of this figure, were OFWs in Taiwan working in the electronics, metal works and semi-conductor industry. Displaced workers in Korea mostly come from the electronics sector. Fifteen seafarers were displaced in US as a result of bankruptcy in companies. A number of construction workers were also retrenched due to suspension of construction projects in countries like the Kingdom of Saudi Arabia, Macau and Russia.

Government responses to the crisis

The Philippine government responded to the crisis with a detailed Economic Resiliency Plan (ERP). The ERP is a comprehensive plan that seeks to ensure stable growth, save and create jobs, provide assistance to the most vulnerable sectors (i.e. the poorest of the poor, returning overseas Filipino workers, and workers in export industries), ensure low and stable prices, and improve competitiveness in preparation for the global economic rebound.

With regard to job preservation and expansion of social protection programs, various projects and programs had been implemented. To save and create jobs, the ERP’s response is a comprehensive livelihood and emergency employment program (CLEEP). CLEEP is a government nationwide effort to protect the most vulnerable sectors from the effects of reduced or lost income resulting from global economic crisis by providing emergency employment and funding and supervising livelihood projects. Beneficiaries include, but are not limited to the poor, returning expatriates, workers in the export industry, and out-of-school youths.

The impact to export firms and their workers, as well as the OFWs, had been anticipated and prompted the government to take the necessary actions. However, while the government was keen to respond and develop the appropriate strategy, the fragile fiscal situation posed as a binding constraint in creating a strong and sustainable fiscal stimulus package. The government committed to a P330 billion package ($6.3 billion). However, critics of the plan said that the government does not really have sufficient funds to commit to a package this large, given the large deficit and weak fiscal position.

On the bright side, programs aimed at job creation and social protection yielded modest results. CLEEP and similar programs were able to create 375,000 new jobs by the last quarter of 2009. While these are mostly short term, low income jobs, this is compensated by increase in percentage wage of workers from 51 percent to 55 percent. Moreover, the government continuously provided assistance to displaced workers through legal assistance, emergency employment, livelihood, skills training, job referral and job placement.

Suggestions for the Future

The crisis highlighted the structural constraints in the Philippine economy. It also showed the weakness in the manufacturing sector, which was in the eye of the storm during the crisis and pushed the most number of people to unemployment. Hence, the government should come up with policies that will help this sector and formulate policies that will improve employment generation without compromising the sector’s efficiency and productivity. Moreover, the government should continue to carry out policies that will address other pressing issues such as the mismatch between education and employment opportunities, making the workforce more responsive to the labor market, high supply of labor and insufficiency of jobs, and protection of Overseas Filipino Workers. The government should also continue to pursue policies that will promote growth that create employment and reduce poverty, and continue to address other important issues that affect the Philippines’ economic performance, particularly high population growth, corruption and support to small and medium enterprises.

1. ↑ Supervising Research Specialist and Project Development Officer V, respectively, of the Philippine Institute for Development Studies/Philippine APEC Study Center Network. The authors would like to acknowledge the excellent research assistance provided by Ms. Rebysarah Tambaoan and Ms. Ma. Bernadette Agna.