Job creation is not a walk in the park

The economy is growing but jobs are not increasing. Jobless growth is widespread in many countries. It is a worry in the European Union and the United States, and a deepening concern of President Aquino. In the past, economic growth is highly correlated with job creation. This is no longer the case. This lack of correlation runs counter to inclusive growth.

What will the government do? Which sector will it focus on?

According to the government, the total labor force grew 1.92 percent (775,000) to 41.177 million in July 2013 from the previous year’s 40.402 million. Employment expanded by a slower rate of 1.65 percent (620,000) to 38.175 million from 37.555 million a year ago, lower than the labor force growth.

Thus, the unemployment rate in July 2013 rose to 7.3 percent, higher from last year’s rate of 7 percent. The number of unemployed persons rose by 5.44 percent (155,000) to 3.002 million.

Job growth occurred in all three economic sectors but in varying degrees. Services expanded year-on-year by 1.9 percent (+383,000). Industry employment growth decelerated by 1.0 percent (+62,000) due to the decline in manufacturing (-28,000) and mining and quarrying (-14,000), which dampened the gains in construction (+101,000).

Employment in agriculture, fishery and forestry rose by 1.5 percent (+173,000). The gainers include farmers, forestry workers and fishermen (+118,000). Job growth in industry and agriculture fell short as the labor force grew by 1.9 percent.

How can the government spur job creation?

Let us focus on agribusiness, the sector that cuts across many sectors. Nearly half of manufacturing value-added is contributed by food processing from rice milling to meat processing. A Japan International Cooperation Agency (JICA) report (2012) estimated agribusiness at 25-30 percent of the gross domestic product (GDP) of the Philippines, which seems very conservative.

Agriculture is at 12 percent of GDP, while food and beverage manufacturing is 10 percent of GDP. They add 22 percent to GDP. Total services comprise some 53 percent of GDP.

Assuming that combined agriculture and food manufacturing account for only a fourth to a third of services, that means 13 to 17 percent may be added to 22 percent, making agribusiness account for 35 percent to 39 percent of GDP. Thus, investment in agribusiness has large multipliers.

There is a strong connection in the value chain of farming, food manufacturing and logistics. When farm output increases, food manufacturing output also goes up. Increasing production can be done in two ways: improving farm productivity, and expanding areas of existing and new crops.

Job creation in agriculture averages about one worker per hectare of physical land, or 12 million workers on 12 million hectares of farmlands. But, many of them may be considered underemployed workers given the seasonality of agriculture production.

Let us take several examples from industry players. The numbers are ballpark figures.

Rice farming needs about 70 to 80 man-days a hectare per season for both rainfed and irrigated farming. They are similar as the former requires labor for weeding. Taking 4.7 million hectares of harvested area in 2012 and 70 man-days a hectare, the total employment would be 329 million man-days, or 1.4 million equivalent full-time employment using 240 man-days per year. Thus, rice farming has an effective job creation of one full-time job every 3.3 hectares.

Corn needs about 50 to 60 man-days a hectare per harvest, including about 20 man-animal days in Bukidnon. In Isabela, the country’s corn basket, the provincial agriculturist estimated that white corn production of 3.7 tons/hectare requires about 60 man-days per harvest, yellow corn at 5 tons/hectare needs 70 man-days, and genetically modified corn at 7 tons/hectare employs 71 man-days.

Taking an average of 60 man-days and 2.6 million hectares of harvested area in 2012, the total job creation would be 156 million man-days, or 650,000 full-time jobs. Thus, the job creation of corn would be about one full-time job every four hectares. Therefore, job creation will follow if there will be additional areas cultivated. Yield increase will not ramp up employment that much.

Coconut employment is dismally low due to low farm yield and limited intercropping. On the average, a purely coconut farm can only employ about 40 man-days a year—good for one harvest every quarter. Given 3.57 million hectares in 2012, the total job creation would be 143 million man-days, or about 600,000 full-time jobs equivalent. This translates to only one full-time job for every six hectares.

Intercropping with cacao and banana can bring it to one full-time job per hectare a year, or six times the job creation. Tree crops like cacao can take two years to bear fruit. The potential for job creation in coconut lands is very high.

Sugarcane farming, on the average, employs about 500,000 workers: 1.2 workers per hectare, but they are unemployed nearly five months of each year. Assuming labor requirements of 100 man-days per hectare and total area harvested in 2012 of 433,000 hectares, the total job creation would be 43 million man-days.

This translates to about 180,000 full-time jobs, or one full-time job every 2.4 hectares. This could go down as many workers avoid cane harvesting, and then replaced by mechanized harvesting.

With zero tariff under Asean Free Trade Area in 2015, job creation in sugar farming would likely decline.

The banana export industry has about 80,000 hectares. One plantation with 700 hectares has about 1,300 farm workers and 500 workers in the packing house. This means about two farm workers per hectare and 0.7 factory worker a hectare. Thus, the direct job creation of the industry would be about 160,000 full-time workers, plus another 112,000 workers in the downstream, or 3.4 jobs a hectare. These exclude the logistics from farm to port.

The total of 172,000 full-time jobs is almost identical to sugarcane, which is some five times bigger in area. By far, banana is the most labor-intensive activity among the major crops.

The pineapple export industry has about 40,000 hectares. An integrated pineapple plant for 18,000 hectares employs some 5,700 full-time farm workers, and 4,100 full-time cannery workers. This translates into one worker every three hectares of farmland and 0.7 worker in the factory.

Thus, the industry directly employs about 13,000 full-time workers and some 7,000 cannery workers, excluding the outsourced truckers. The job creation would be one worker for every two hectares.

A modern rubber estate uses about one worker every three hectares. A 1,400-hectare farm has 500 tapper-workers, or one job every 2.8 hectares. The primary processing plant for the 1,400 hectares will employ 60 workers. Primary rubber processing is less labor-intensive compared to farm production. The labor intensity occurs in finished products manufacturing such as vehicle tires.

A modern bangus farm requires one pond aide every six hectares as compared to one for every 30 hectares for traditional farming. A modern factory can employ up to 1,500 workers processing about 6,000 tons of fish. The farms employ about 400 workers versus 1,500 factory workers. Fish processing is labor-intensive.

This confirms the data at a dory fish (pangasius catfish) plant in the Mekong Delta, Vietnam producing about 50,000 tons of fish fillet a year with 20,000 factory workers and only about 1,500 farm workers. Given that there are about 230,000 hectares of brackish water ponds in the Philippines, the job creation potential is high.

A cannery in General Santos can process 100 tons of fresh tuna a day and directly employs up to 1,000 cannery workers. The seven canneries in the area employ at least 7,000 direct workers. The jobs created in the fishing fleet would be 1,400 workers at the very least. Add to these are perhaps at least 10,000 jobs in the ancillary functions: carrier boats, cold storage, fish port workers, ship repairs, and other related industries.

Taking the total job creation of the main industries (rice, corn, coconut and sugarcane), the total is about 2.7 million full-time jobs equivalent. They comprise about 90 percent of the harvested areas. Therefore, the underemployment among the 12-million agriculture labor force is likely very high. But, this is partly cushioned by non-farm jobs.

The challenge of job creation is to increase productivity and diversify farm production. This will have an impact on the farm, on processing/manufacturing, and on logistics and trade. Today, many agri-manufacturing industries are operating below capacity due to limited supply of raw materials. In the medium- to long-term, market intelligence and agriculture research are strategic to productivity and diversification.

Finally, investments create jobs. A strategic imperative is how to disperse investments to the countryside. Farm investments typically range from P100,000 to P250,000 a hectare. Many small farms are unproductive. Without management expertise and access to capital, they could not create the full-time jobs for the rural work force. Thus, the business climate must be addressed to attract private investments.

(The article reflects the personal opinion of the author and does not reflect the official stand of Management Association of the Philippines. The author is executive director of Center for Food and AgriBusiness of the University of Asia & the Pacific. Feedback at [email protected] and [email protected]. For previous articles, please visit map.org.ph)