The Labor Market

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The Basic Concepts

Basic Concepts
Employed = any person 16 years or older (1) who works for pay, either for someone else or in his or her own business for 1 or more hours per week;
One who works without pay for 15 or more hours per week in a family enterprise; One who has a job but has been temporarily absent with or without pay.

Basic Concepts
Unemployed = A person 16 years old or older who is not working, is available for work, and has made specific efforts to find work during the previous 4 weeks.

Basic Concepts
Not in the labor force = A person who is not looking for work because he or she does not want a job or has given up looking.

Basic Concepts
Labor Force = Employed + Unemployed Population = labor force + not in the labor force

Basic Concepts
Unemployment rate = unemployed/(employed + unemployed)

Types of Unemployment
Frictional unemployment
The portion of unemployment that is due to the normal working of the labor market; used to denote short-run job/skill matching problems.

Types of Unemployment
Structural unemployment
The portion of unemployment that is due to the changes in the structure of the economy that result in a significant loss of jobs in certain industries.

Types of Unemployment
Cyclical unemployment
The increase in unemployment that occurs during recessions and depressions.

Labor Supply and Demand Curve

S

WAGE RATE

W0 W
1

D0 D1 L1 L0

UNITS OF LABOR

Sticky Wages
S UNEMPLOYMENT
W0 W*

WAGE RATE

D0 D1
L1

L*

L0

UNITS OF LABOR

Social/Implicit and Explicit Contracts

Social/Implicit Contracts - Unspoken agreements between workers and firms that firms will not cut wages. It is one of the explanations of downwardly sticky wages. Explicit Contracts Employment contracts that stipulate workers wages, usually for a period of 1 to 3 years. Wages set this way do not fluctuate with economic conditions.

The Phillips Curve

Current Labor Market in the Philippines

Labor Force Participation Rate

Labor Force Participation Rate

Philippines April 2009 April 2008

Population 15 years and over (x1000)

59,074

57,700

Labor Force Participation Rate (%) (i.e. students, retirees) LFpop = U + E

37,807 (64%)

36,466 (63.2%)

Employment Rate (%)

34,971 (92.5%)

36, 465(92.0%)

Unemployment Rate (%)

2,835 (7.5%)

2,917 (8.0%)

Underemployment Rate (%) (i.e. underutilized workers, hidden unemployment)

6,609 (18.9% of E)

7,220 (19.8% of E)

Labor Market Facts

The National Capital Region (NCR) has the lowest employment rate (86.5%) and the highest unemployment rate at (13.5%). The ARMM has the highest employment rate (98.5%) and the lowest unemployment rate (1.5%) Other regions that registered an employment rate below the national estimate of 92.5% are:
Ilocos Region (91.7%) Central Luzon (91.5%) Calabarzon (90.1%) Western Visayas (92.1%)

Labor Market Facts

Wholesale and retail trade, repair of motor vehicles, motorcycles and personal and household goods sub-sector make up the largest sub-sector in services (19.1%) Agriculture, hunting and forestry sub-sector make up the largest sub-sector in Agriculture (31.0%) Manufacturing makes up the largest sub-sector in Industry (8.1%)
Services Agriculture Industry

15% 35%

50%

Employment & Unemployment Growth rates

Employment and Unemployment in the Philippines

70,000 60,000
51,280 52,676 53,975 55,248 56,145 57,389 58,657

50,000
47,185

48,405

49,839

40,000

Population 15 years and over (x1000) Participation Rate (x1000)

30,000

Employment Rate (x1000) Unemployment Rate (x1000) Underemployment Rate (x1000)

20,000

10,000

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Employment and Unemployment Growth Rates

30 20

10
2.59 2.96 2.89 2.72 2.47 2.36 2.22 2.21

0 2001 -10 2002 2003 2004 2005 2006

1.62

Population 15 years and over (x1000) Participation Rate (x1000) Employment Rate (x1000) Unemployment Rate (x1000)

2007

2008

2009

-20

-30

-40

Role/Contribution of Remittances in the Philippine Economy

Remittances in the Philippines

Remittances contribute as much as 10% to GNP The Philippines has the third-highest rate of remittances from overseas By 2008, there were an estimated 2 million overseas Filipino workers Monthly deployment since May 2008 has been more than 100,000 From $6.0 billion in 2000, remittances reached $16.4 billion in 2008: an annual average growth rate of 13.3% Remittances continue to grow in 2009 despite the global crisis (although the growth rate is slower)

Remittances to the Philippines (in Thousands of US Dollars)

Country TOTAL Landbased Seabased 2000 6,050,450 5,123,773 926,677 2001 6,031,271 4,937,922 1,093,349 2002 6,886,156 5,686,973 1,199,183 2003 7,578,458 6,280,235 1,298,223 2004 8,550,371 7,085,441 1,464,930

Asia Americas Oceania Europe Middle East Africa Others

831,770 4,000,022 21,360 534,684 594,198 4,450 63,966

1,049,551 3,300,327 21,188 406,194 711,918 3,600 538,493

1,116,336 3,537,768 34,793 889,094 1,242,809 3,959 61,397

894,310 4,370,705 44,470 1,040,562 1,166,376 11,371 50,664

918,329 5,023,803 42,600 1,286,130 1,232,069 3,439 44,001

Remittances to the Philippines (in Thousands of US Dollars)

Country TOTAL Landbased Seabased 2005 10,689,005 9,019,647 1,669,358 2006 12,761,308 10,812,018 1,949,290 2007 14,449,928 12,213,565 2,236,363 2008 16,426,854 13,392,301 3,034,553

Asia Americas Oceania Europe Middle East Africa Others

1,172,373 6,605,231 54,573 1,433,933 1,417,491 4,517 887

1,496,120 7,198,212 85,610 2,061,067 1,909,208 10,272 819

1,543,173 8,244,344 121,417 2,351,704 2,172,417 16,027 846

1,883,996 9,213,372 149,423 2,658,726 2,502,639 17,746 952

Labor Market

Cross-Country Analysis

Total Population Ages 15-64 and Total Labor Force, 2007

Source: World Bank data files

Labor Force Participation Rates (aged 1564), Male and Female, 2003

Source: ADB Key Indicators 2009

Unemployment Rate: 2006 to 2009 (1st Qrt.)

Source: ADB Key Indicators 2009

Labor Force by Economic Activity (Employment Share by Sector)

Source: World Bank Statistics

Selected Labor Market Policies and Practices

Labor Unions Indonesia
Malaysia

Minimum Wages $32.8 per mo 2003 Daily = $1.09 (32.8/30)

No minimum wages. Only for cinema workers $40.79 per mo 2003 $4.88 day 2003 (P250 basic including P15 living allowance)

Contract Workers Hire workers on contract basis

Employment Act 1955 contracts for more than one month must be in writing Rampant subcontracting, agency hiring and use of house workers Employs temporary contract labor Weak compliance to Labor Code

Trade Union Act of 2000

Strong labor unions

Philippines

Labor Code provides right to organize, set CBA and to stage strike 2-5% unionized, unions have little power Only 10% of workers are unionized

Thailand

$3.20 per day

Vietnam

S18.70 per mo (for laborers working under the State enterprises) $0.62 per day (18.7/30)

Current Labor Challenges and Issues

Impact of global economic crisis higher unemployment, reduced hours of work, lower earnings, higher informality Labor supply growth Asias labor supply to grow about 1.3% annually (ILO) Globalization, technical change and competition Wage-setting policies, regulations affecting hiring and firing Taxes on labor and social security Informal and formal employment

Data Sources
BPS-Statistics Indonesia (www.bps.go.id) Department of Statistics Malaysia (www.statistics.gov.my/eng/) National Statistics Office (www.census.gov.ph) National Statistical Office (web.nso.go.th) General Statistics Office of Viet Nam (www.gso.gov.vn/) Bangko Sentral ng Pilipinas (http://www.bsp.gov.ph/) Asian Development Bank (http://www.adb.org/) Wikipedia (http://en.wikipedia.org/)

THE END!