# **1. Labor market performance in the Philippines**

Despite decent economic growth, labor market performance in the Philippines was less than satisfactory in the past five years. Real wages slightly declined and new job creation lagged behind the rapid increase in working-age population. Compared with other countries in East Asia, the employment rate is relatively low in the Philippines.

# _1.1 Changes over time_

Based on the Labor Force Survey (LFS) data for 2003-2007, the labor force participation rate, the employment rate, and the real wage rate all declined over the period, while the working age population rate increased marginally (Table 1).<sup>1</sup> In the context of a slight increase in workingage population, a 2 percent decline in the participation rate and the employment rate suggest a worrisome trend of limited job creation for a rapidly growing population. A 5 percent decline in real wages stands in contrast with the rapid economic growth. On average, 66 percent of the population was in the working age range, of which 62 percent participated in the labor force and 58 percent were employed. The mean daily wage was 195 PHP in 2000 constant terms.

**-** **<u>Table 1: Labor Market Indicators in the Philippines (2003 2007)</u>**

||**Working Age**<br>**Population**|**Labor force**<br>**participation rate**|**Employment rate to**<br>**working-age population**|**NSO unemployment**<br>**rate to participation**|**Daily wage**<br>**(2000 PHP)**|
|---|---|---|---|---|---|
|2003|65.5%|63.0%|59.2%|6.2%|201|
|2004|65.9%|62.2%|58.0%|6.8%|197|
|2005|66.4%|63.2%|58.5%|7.4%|194|
|2006|66.8%|62.2%|57.7%|7.3%|190|
|2007|65.8%|61.2%|57.4%|6.3%|193|
|**2003 - 2007**|**66.1%**|**62.4%**|**58.1%**|**6.8%**|**195**|

_Source:_ LFS, 2003-2007.

_Note:_ We employed the definitions of the National Statistics Office (NSO) of the Philippines for active (workingage) population, participation rate, employment rate and unemployment rate. Active population rate is the ratio of working-age population (aged 15 years and above) to the country's total population. Labor force participation rate is the ratio of the working-age population that is either employed or unemployed to the overall size of their cohort (national population of the same age range). Employment rate is the percentage of work force that works or has a job to return during the reference period. Compared with ILO, the NSO employs a broader definition of unemployment as the proportion of labor force that does not work, is available for work and (1) is actively looking for work or (2) is not looking for work because of following reasons: (a) belief that there is no job available; (b) awaiting results of previous job application; (c) temporary illness; (d) bad weather, and (e) waiting for job recall. According to the LFS, daily wage is measured as the basic pay per day of the employees of private household, private establishment, government (corporation) and own family-operated business.

# _1.2 International comparison_

From a cross-country perspective, the Philippines’ labor market indicators are middling among other East Asian countries (Table 2, Table 3 and Table 4). The participation rate in the Philippines as percent of total population in 2007 (61 percent) was low compared to other East

> 1 There are four rounds of Labor Force Survey each year in January, April, July, and October. We use only the October round for this study. We use the pooled data as if they were a single sample from a larger survey fielded over a longer period to calculate the mean level for 2003-2007; and use the single round data to calculate the mean level of each year and examine the changes over time.

2