WB cautions vs scrapping contractual work practice
MORE quality jobs should be created to lift additional Filipinos out of poverty, the World Bank said on Friday, while cautioning against ending contractualization amid growing calls to abolish the practice.
World Bank Philippines country director Mara Warwick, citing the multilateral lender’s latest “Labor Market Review: Employment and Poverty in the Philippines” report, said that “contrary to some perceptions, economic growth in the last 10 years has created enough jobs to absorb the growing labor force.”
Warwick, however, pointed out, that “many workers [in the country] remain underemployed.” Latest government data showed that the underemployment rate remained high, at 18.4 percent in April, up from 17.8 percent a year ago as well as higher than the target of 17 percent for this year.
The number of underemployed reached about 7.3 million in April, mainly coming from the agriculture and services sectors, the National Economic and Development Authority has said. The government defines underemployed as “employed persons who express the desire to have additional hours of work in their present job, or to have additional job, or to have a new job with longer working hours.”
“The Philippine economy has been growing at around of 5-6 percent, while the working population and jobs have been growing at an average of 1.8 percent and 1.9 percent, respectively. However, many of the newly created jobs are precarious and low-paying,” Warwick told a press briefing.
“Labor productivity has also been growing at 3.4 percent a year. However, the growth of real wages has yet to catch up with the rising productivity. Hence, the main challenge is sustaining the country’s efforts to generate more ‘good’ jobs that can lift people out of poverty,” she added.
Warwick nonetheless said the Philippines was well-positioned to deal with employment amid sound macroeconomic fundamentals and strong growth.
“What the Philippines needs is not more jobs but better jobs … The quality of jobs being created was not meeting aspirations of young people entering labor market,” said Jan Rutkowski, lead economist at the World Bank’s Social Protection and Labor Global Practice and author of the report.
Rutkowski said in-work poverty was pervasive in the Philippines partly due to scarcity of productive jobs.
“Low-earning capacity of the poor reflects their low education and skills, limited access to formal jobs, and low bargaining power of informal workers. The scarcity of ‘good jobs’ reflects the structure of the Philippine economy, where low value-added activities predominate. This is partly due to constraints in the investment climate and the high cost of doing business in the formal sector,” he said.
According to the report, “pervasive poverty among those who have jobs is primarily due to low earning capacity of the poor and their limited access to regular and productive jobs.”
The poor are usually locked in “informal, temporary or casual and low-paid” jobs, the World Bank said.
Rutkowski also lamented the practice of subcontracting and contractualization in the country, but pointed out that this practice is also a problem in developing countries amid intensified competition among firms due to globalization.
He said he did not recommend ending contractualization, but stressed that its abuse should be limited. However, contractualization should not be allowed when workers are economically dependent on their employers, he said.
In general, “it’s the right proportion in regular employment and subcontracting that matters,” he said.
“This problem is widespread but definitely the way is not to make contractualization illegal—that will do more harm than good because there are some activities that are genuinely contractual in nature,” Rutkowski said.