Last week I was fortunate enough to be invited by the World Bank to a dialogue on "Creating More and Better Jobs." Speakers and attendees were a cross section of senior people from the World Bank, the government sector, labor organizations, business groups, civil society, academe and media. While there were numerous ideas presented, it was a general consensus that in spite of the high GDP growth of the Philippines in recent years, inclusive growth has remained elusive.
Just as a background, as of 2012 there are 10 million Filipino who are either unemployed ( 3 million ) or underemployed ( 7 million ) and for the next four years an additional 1.15 million Filipino will enter the labor force every year. In the last decade, only 1 in 4 new job seekers gets a good job. Of the 500,000 college graduates every year, only 240,000 can be absorbed in business process outsourcing, manufacturing, finance and real estate. The balance eventually find jobs abroad after several years. The remaining 650,000 job seekers without college degrees mostly end up in the informal sector with jobs characterized by low wages and low productivity.
The World Bank is projecting that even If the Philippines can sustain a 7% GDP growth rate, by 2016 around 12.4 million Filipinos would still be unemployed, underemployed, or would have to work or create work for themselves in the informal sector. The big question is why our economy cannot create more and better jobs in spite of accelerating growth? The sad answer to this question is that we have not been able to develop and grow our agriculture and manufacturing sector in the last sex decades.
Among the points raised by the World Bank are "lack of competition in key sectors, insecurity of property rights, complex regulations, and severe underinvestment by the government and the private sector has...failed to provide good jobs to majority of Filipinoa and has led to a substantial outmigration for many of the country's best and brightest people."
To achieve inclusive growth, this means creating jobs for everyone. One of the points raised on the floor was our onerous minimum wage system which is one of the highest in the region and does not distinguish between qualifications of the worker.
Our minimum wage is applicable regardless if you are a college graduate or if you did not even finish grade school. With such a high minimum wage, the chances of a poorly qualified job seeker finding a job in the formal sector is quite remote, thereby ending among the ranks of the unemployed.
Instead of raising agricultural productivity paving the way for the development of a vibrant labor-intensive manufacturing sector, and susquently of a high-skill services sector, the converse has taken place in the Philippines. Lack of investment in the agricultural sector can be traced to the structural deficiencies in the transport network, storage facilities, peace and order situation, insufficient government support and detrimental government intervention such as land reform program. Without the growth in the agricultural sector; the manufacturing sector GDP shared stagnated to about 25% since the 1960s.
Without the growth in manufacturing sector the services sector became the catch basin that absorbed excess labor from agriculture. According to the World Bank "the service sector has been the largest employer since 1997. However, more than three quarters of the services sector is composed of low-pay or low-skill jobs, such as petty retail trade and public transportation, and as such, there has no corresponding significant increase in productivity in the service sector."
The reluctance of new investment into the Philippines reflects the country's weak investment climate with investor concerns on corruption, infrastructure deficiencies and inefficient government bureaucracy. Philippine business regulations are complex and the costliest in the region. Starting, operating and closing a business coupled with the difficult tax compliance regime deter new business entry and expansion. The most detrimental effect is on micro, small and medium enterprises ( MSMEs ).
It is about time our government steps in and looks for more permanent solutions to solving our poverty situation instead of just giving handouts. Our government should be using that money to stimulate the conditions that will create more and better jobs. 

Source: Manila Bulletin - September 19, 2013