Paving Noynoy’s Straight Path with Bent Statistics

Faced with growing outrage over President Aquino’s ham-fisted attempts to establish authoritarian rule and desperately needing some good news on the economic front, the Administration PR machinery was quick to herald the latest unemployment statistics as evidence that Peenoy’s agenda, whatever it is, is putting the country back on the daang matuwid. The unemployment rate in October, according to Economic Planning Secretary Cayetano Paderanga, hit a four-year low of 6.4%, with 2.1 million new jobs created in the 12 months since October 2010. The rate of under-employment also declined, from 19.6% to 19.1%.

For comparison, the US — with a labor force 1 ½ times the size of the Philippines’ entire population — had an unemployment rate of 8.6% and job additions of approximately 1.57 million for the same reference period. Unlike the Philippines, however, the US economy, while not exactly healthy by anyone’s definition, has not had four straight quarters of declining GDP growth, nor GNI that has slipped into negative territory. So naturally this raises a bit of skepticism about the glowing figures somehow conjured by the Aquino Administration:

2.1 million jobs were created, but 1.9 million people were added to the labor force: In effect, this means a net of only 200,000 jobs were created, meaning the government inflated the positive figure by a factor of 10.

Although the raw number of 2.1 million new jobs may be correct (which is a big assumption), new jobs must continuously be added to the labor market, or otherwise the unemployment rate would constantly increase as new workers are continuously added to the labor force. “Jobs added” is only meaningful in terms of a surplus against the amount of available labor.

500,000 of those added jobs “were in the nature of unpaid work in family-owned businesses”: This is a convenient way to boost statistics that is commonly used labor ministries everywhere, but it is a definition that is fraught with ambiguity, which is why comparative statistics that rely on more well-defined sources like surveys of establishments and (in places unlike the Philippines) unemployment insurance claims leave the “unpaid work” factor out of the equation. Averaging the two sets of figures generally provides a more “realistic” picture of employment.

In terms of jobs added, then, if the “unpaid work” jobs are eliminated, that reduces the 2.1 million jobs created to 1.6 million — which results in a net loss of 300,000 jobs. Averaging the conflicting figures provides an adjusted jobs-created figure of 1.85 million — which still results in a net loss of 50,000 jobs.

But here’s the kicker: if the “family business” accounts for the labor cost of the unpaid family member contributing to the business — as it should, since the care and feeding of the employee deducted from the gross revenues of the business are a legitimate business expense — that worker then becomes a paid worker. They may be receiving payment in kind under these circumstances, but it is still pay. The business has the option of not accounting for it, but if that is the case, then the person is simply a dependent, and not a worker. Therefore, it is very likely that none of the “unpaid work in family business” jobs should be counted.

The actual unemployment rate, therefore, is 7.6%, not 6.4% as claimed: The number of people in the labor force was given as 41.2 million, thus an unemployment rate of 6.4% results in 2.64 million unemployed workers. But if the “unpaid work” jobs are adjusted out as they should be, 500,000 jobs must be deducted, meaning that there are actually 3.14 million functionally unemployed.

Under-employment is more than 3.5% higher than the government claims:  Under-employment is a real issue, but one that is incredibly difficult to accurately define. This is what the US Bureau of Labor Statistics has to say about it:

“Because of the difficulty of developing an objective set of criteria which could be readily used in a monthly household survey, no official government statistics are available on the total number of persons who might be viewed as underemployed. Even if many or most could be identified, it would still be difficult to quantify the loss to the economy of such underemployment.”

Which suggests that the Philippine government would perhaps be better off avoiding putting their official stamp on this particular statistic, but since they went there I will as well: The implication of Professor Diokno’s observations on the latest statistics is that the 1.5 million additional part-time jobs are not counted in the under-employment figure of 19.1%; if they were, it would have been mathematically impossible for that figure to decline. The same is true of the 500,000 “unpaid work in family business jobs” that should not be counted as employment in the first place.

The government figure of 19.1% under-employment in a labor force of 41.2 million means that 7.87 million workers are under-employed. Add to that the two million part-time and “unpaid work in family business jobs,” however, and that figure becomes 9.87 million, which results in a true under-employment rate of 22.7%.

Straight path? Here’s Peenoy’s pledge, the second point in his agenda spelled out by his “Contract on the Filipino People”:

“2. From a government that merely conjures economic growth statistics that our people know to be unreal to a government that prioritizes jobs that empower the people and provide them with opportunities to rise above poverty.” [emphasis added, just in case droll is something you’re not used to]

So, Mr. President, any ETA on when we’re actually going to see that government? No? Didn’t think so.

BenK

I write a column for The Manila Times on Tuesdays, Thursdays, and Saturdays. Most of the energy sector and the heads of several government agencies probably wish I didn’t.