PH risks squandering advantage in demographics

THE PHILIPPINES risks squandering the advantage of its demographic golden age if the government fails to create the right conditions for more aggressive job creation in the next decade and a half.

Private think-tank Capital Economics said the country’s working-age population was projected to peak in the coming years, giving the Philippines an advantage over its aging Asian neighbors.

“That said, this doesn’t mean that the Philippines can simply wait for the benefits to arrive,” the firm said in a report released Friday. “The challenge for policymakers will be to ensure that a growing labor force can be put to good use.”

Experiences of Asia and Latin America over the last few decades showed that demographics did not determine the path of economic development.

In the 1980s, Latin America and Asia had similar demographic profiles. While Asia set out on a long boom, the 1980s became Latin America’s “lost decade,” Capital Economics said. “And things have not gotten much better for the region since,” it added.

According to forecasts from the United Nations Population Division, the working age population in the Philippines was expected to rise by more than 40 percent between 2010 and 2030, which was more than in any other country in the region.

Meanwhile, the proportion of the population aged either too old or too young to work was expected to fall from 64 percent in 2010 to 55 percent by 2030.

“Simply put, growth in the working age population means more workers, which, all other things being equal, means more output,” Capital Economics said.

More workers could have an impact on national savings since working-age people normally save more cash than retirees. This increase in savings should lead to higher investments, the firm said.

“If the Philippines is to avoid frittering away its demographic dividend it will need to provide enough good employment opportunities for the people who are set to enter the workforce in the coming years,” the firm said.

The economy has a poor record in this respect, Capital Economics pointed out, noting that 8.5 millions Filipinos currently work abroad and the domestic unemployment rate was one of the highest in the region.

“Crucial to turning this around will be the development of the manufacturing sector, which historically has been the only sector capable of creating enough productive jobs to absorb a country’s rising workforce,” the firm said.

Fortunately, there have been some signs of improvement in the manufacturing sector. After lagging behind the rest of Asia during the years before the global financial crisis (2008-2009), manufacturing output in the Philippines was now growing faster than in the region as a whole, Capital Economics said.