First Quarter 7.8% annual growth in Ph economy: The Bottom Line

Reports of economic growth in the Philippines as measured by its Gross Domestic Product (GDP) reaching an annualised 7.8 percent in the first quarter of the year is sending waves of optimism rippling across Philippine society. One of the centrepieces of the newly-booming economy put up by recent reports on this economic phenomenon such as that of Reuters‘s is the nation’s brand-new playground for the world’s high rollers, Solaire Resort & Casino. The $1.2 billion hotel was said to have employed 400 returning overseas foreign workers, their return made out to be “a sign of confidence” in the Philippine economy.

So is the Philippines on the path to a future that might see the sort of prosperity that long eluded it?

That depends.

To create a prosperous society where people are able to earn a decent living, you need an economy that is on a development trajectory that not only generates employment but generates good quality employment in a sustainable manner. For that you need a productive labour force — productive in the real sense of the term. To see productivity gains in a country’s labour sector, the value of the aggregate output of the workforce must increase vis-à-vis the aggregate cost to employ them. For an enterprise such as, say, a manufacturing company to achieve this, it should ensure that;

(1) its workers’ skills are continuously upgraded (through training and by capitalising on experience accumulated by long-term staying employees); and,

(2) it progressively upgrades the tools and equipment used by its workers.

The above two are forms of capital expansion; capital that is created in the form of (a) workers’ education and (b) improvements in the efficiency of the overall system within which they work respectively.

Note that increasing production output by employing more workers does not result in efficiency gain. It results in more employment but not necessarily an increase in output per employee. In a labour market where available jobs are mainly ones that involve low- or un-skilled work, enterprises tend to invest less on uplifting workers’ skills and upgrading their tools and equipment. This is because low- and un-skilled jobs are easily replaceable, specially in economies where an enormous labour supply vastly exceeds demand. Indeed, this is the phenomenon observed by my fellow author Corey who remains frustrated with the unimpressive way Filipino staff deliver even the simplest services in the country’s many retail chains. Many big Philippine enterprises are, in fact, mainly employment mills for low-end work invovlving highly-replaceable commodity staff.

Indeed, this was the bottomline of the Reuters report cited at the beginning of this piece…

In the latest World Competitiveness Report by the Swiss-based Institute for Management Development, the Philippines moved up five places to 43 out of 60 economies, overtaking Indonesia and India.

While it showed improvements in economic performance, and government and business efficiency measures, the gains were not accompanied by job generation. It was down seven places in employment, one notch down in overall productivity and two rungs down in labour productivity.

To be fair, this being the bottomline message of the report, it was mentioned last — after all the gushing and feel-good messages were dispensed with. Interesting, considering this is pretty much the only aspect of this much trumpeted “economic growth” that really matters to the ordinary Filipino.

That’s entertainment, so to speak.

[Photo courtesy ArabianBusiness.com.]

benign0

benign0 is the Webmaster of GetRealPhilippines.com.