Redefining the labour force framework: Some inputs from the Philippine experience

REDEFINING THE LABOR FORCE FRAMEWORK:

SOME INPUTS FROM THE PHILIPPINE EXPERIENCE¹

By Editha B. Rivera²

The Philippine Labor Force Survey (LFS) is collected by the National Statistics Office (NSO) since May 1956 undergoing changes through the years from population coverage, reference period and concepts. Currently, it is conducted during the first month of every quarter with a past week reference period and covers about 51,400 households nationwide.

The LFS concepts and measurements fundamentally follow the international standards as contained in the resolution concerning statistics of the economically active population, employment, unemployment and underemployment, adopted by the 13^th International Conference of Labour Statisticians (ICLS) in October 1982.

As a major user of the labor force statistics, the Department of Labor and Employment (DOLE), through its statistical arm, the Bureau of Labor and Employment (BLES), closely coordinates with and provides feedback to the NSO regarding the LFS results. As a major statistical agency in the Philippine Statistical System (PSS), the BLES can influence the kind of labor statistics that data producing agencies generate.

Thus, this paper is prepared from the user’s point of view as regards the limitations of the labor force concepts and definitions with the aim of providing inputs for the review of the labor force framework under Resolution No. 1 adopted by the 13^th ICLS. The issues discussed herein have posed conceptual difficulties in the course of analyzing the labor force statistics for planning, and policy and program development in the DOLE.

UNEMPLOYMENT

New Unemployment Definition

A milestone in recent years of the Philippine labor force statistics was the change in the definition of unemployment through Board Resolution No. 15 passed in 2004 by the National Statistical Coordination Board (NSCB), the national policy making body on statistical matters. The decision to revise the unemployment definition was prompted by the fact that unemployment rate has been frequently used as one of the benchmark for comparing the economic performance and growth potentials of economies around the globe. In 2004, only ten (10) out of 88 countries conducting the labor force surveys were not using the “availability to work “criterion. And the Philippines was one of these countries.

So starting with the April 2005 round of the LFS, those counted as unemployed should satisfy simultaneously the three criteria: (1) without work, i.e., were not in paid employment or self-employment; (2) seeking work, i.e., had taken specific steps in the past reference week to seek paid employment or self-employment; and (3) currently available for work, i.e., were available for paid employment or self-employment in the past week or within two weeks. See flowchart for identifying the unemployed in the next page.). It however retained the relaxation of the seeking work criteria by accepting five (5) reasons as valid for not actively seeking work.

The change was met with so much resistance (even up to this time) especially from economists and analysts as the adoption of the new definition has led to a drop in the country’s unemployment rate by almost two (2) percentage points, and correspondingly, the labor force participation rate by almost three (3) percentage points. Because of this, there was public perception that the change was intended to “mislead data users”.

Nevertheless, the adoption of the new unemployment definition has provided the major statistical agencies the opportunity to educate users and analysts of labor statistics as the NSCB Resolution mandated them to conduct advocacy campaigns in major regional centers of the country. What emerged in these fora was that the most common misconception and conceptual difficulties identified were on the one-hour criterion in the definition of work, unemployment especially the relaxation of the seeking work criterion, underemployment, multiple jobs, and job-vs-employment creation measurement.

Inactive Unemployed

A critical concern is the large proportion of the inactive unemployed in the Philippines. These are persons with no job or business who were not seeking work but were available and willing to take up work. Prior to April 2005, they constituted about seventy percent of the total unemployed. In April 2005 and thereafter, their share went down to a little above fifty percent. (See Annex Table 1.) These inactive jobseekers were mostly non-heads of households (82.9%), very young (46.9%) and with secondary education ((46.3%) and college educated (33.4%). These demographic characteristics indicate that this group can afford not to work, and hence does not exert much pressure on the labor market. Whether this is a universal phenomenon or something unique to the Philippine labor market needs to be validated by statistics from similarly situated countries as the Philippines. Statistics available in websites from these countries do not allow us to compare as there are few notes provided.

Female LFPR

Whether the concepts and definition is “culture sensitive” can not be said at this point. In the Autonomous Region of Muslim Mindanao where per capita regional domestic product has been consistently the lowest and where it is predominantly Muslim, the region has consistently obtained one of the lowest unemployment rates over the years. In one of the consultative meetings with the regional staff of the NSO, we probed on the reasons for this low unemployment rate. The reason forwarded by our informant was that respondents of the LFS were usually male members of the household and they would not admit that their women members are working when it is obvious that Muslim women are engaged in trading or are seen minding stores in the area. Thus, statistics also indicate the low labor participation rate of women in the region.

Seeking Work for Overseas Jobs

The phenomenon of overseas employment impacts positively on the Philippine labor market as it has created an avenue for more employment opportunities for Filipino workers abroad. It has also changed the perspective of new entrants to the labor force as it broadens their choices of labor market. Further, it has influenced their career decisions by enrolling in college courses that will give better chances of working abroad.

In the present LFS, the intended labor market is not asked of jobseekers, whether their job search is confined to local market or for overseas. This development must be considered in redefining the labor force framework.

UNDEREMPLOYMENT

In the Philippines, underemployment is a more serious problem than unemployment. Statistics in Annex Table 2 indicate that regions with low per capita GDP have higher underemployment rates.

According to the Philippine NSO, underemployed persons are those employed persons who express the desire to have additional hours of work in their present job or in an additional job, or to have a new job with longer working hours (NSO, 2005). Operationally, it is measured by asking respondents whether s/he wants more hours of work or s/he look for additional hours of work during the past week. The underemployment rate is estimated by getting the proportion, expressed in percent, of the underemployed to total employed persons. On the other hand, the time-related underemployment or visible underemployment is the underemployed working less than 40 hours during the reference week. This is considered the working hours threshold except for agriculture and fishery which could be lower than forty hours.

As defined therefore, underemployment is not a useful analytical concept because it is subjective, that is, it only captures the respondents’ expression of desire to have additional hours of work or to have another job with longer working hours, without probing further whether there have been concrete steps taken to seek to work additional hours and/or whether they were available within specified subsequent period to work additional hours.

It is indeed unfortunate that the Philippines, despite the potential usefulness of these data in view of the kind of labor market that exists, has not been able to adopt the recommended measurement embodied in the resolution adopted by the 16^th ICLS in 1998. While discussions were made on the possible review of the underemployment definition including that of discouraged workers, the review did not materialize because priority was given to the revision of the unemployment definition and subsequently following it up with the revision of the underemployment concept would put the entire labor force concepts into public scrutiny again. Added to this is the difficulty of operationalizing the concepts as contained in the 16^th ICLS resolution.

THE CONCEPT OF NATIONAL AND DOMESTIC LABOR FORCE

Due to the growing importance of overseas employment to the Philippine economy (contributing to about nine percent of total national output) and in providing alternative employment to the local labor market, the concept of national and domestic labor force was studied as early as in 2003. Borrowed from the SNA concept of Gross National Product and Gross Domestic Product, the national labor force is the broader concept that includes Overseas Filipino Workers (OFWs) while the domestic labor force refers to the concept as defined by resolution adopted by the 13^th ICLS (1982).

Following the “activity principle” in the concept of employment prescribed by the ILO, the OFWs are classified as employed. Hence, the building block below illustrates the components of the proposed labor force framework. However, Dr. Farhad Mehran of the ILO remarked in a technical session during a mission to the Philippines in 2003 that technically, the working age population should include members of the Filipino households residing overseas which may be difficult to capture. In the Philippine LFS, overseas Filipino workers are listed as members of the household only for purposes of estimating the household population but are excluded from the labor force.

Using the above framework, the LFS results for 2007 (See Annex Table 3) show that while the OFWs comprised only about two percent (2%) of total household population 15 years old and over, unemployment rate was chipped by a measly 0.2 percentage point when OFWs were included. However, the national LFPR increased by some 0.8 percentage point. According to the Commission on Filipinos Overseas, there are about five million OFWs worldwide, including some 900,000 undocumented ones who managed to find work abroad. It must be emphasized however that the intention of the proposal was to supplement the present set of data so as to enrich the analysis of the labor market dynamics by including the impact of overseas employment.

SOME ISSUES FOR CONSIDERATION IN THE REVISION OF THE LABOR FORCE CONCEPTS

The intent of resolutions passed by the ICLS is to provide standards in the definition and measurements of labor market indicators. Based on the country’s experience, there are difficulties encountered in trying to adopt the guidelines set in the resolution.

First, any change is met with misgivings by users, especially if the change processes involved political exercises such as consultations with various sets of users. Even if technical people have pored studies on the subject, some sectors will still find malice even in the best of intentions. The redefinition of unemployment therefore took a long time to materialize as the technical people involved considered the timing and political climate so as not to be misconstrued as a political ploy.

Translating the international standards into local applications considering national circumstances is difficult as well. It is doubly harder if the concepts and measures are new such as the one on decent work. One should take into account that the technical staff working on these would only rely on manuals (if there are available) provided by the ILO. Technical advice is therefore crucial. If technical assistance is not possible, the issuance of guidelines and advisories might help.

Despite efforts to subscribe to international standards, there would still be differences on concepts and measures in deference to national circumstances. Comparative analyses of major indicators among countries are useful especially if the statistical system of a country wants to adopt concepts and definitions in accordance with international standards. However, related statistics are not easily available even in statistical websites, and if there are, have few notes to facilitate interpretability of the statistics and thus allow meaningful comparison. Thus, there might be a need for ILO, specifically the Bureau of Statistics to come up with adjustment methods so that similar indicators can be compared across countries. Likewise technical notes on concepts and measures used by countries would indeed be a useful guide for countries that wish to review their own sets of indicators. When we did our review, we wanted to compare our unemployment figures with those in the region. Further, our experience showed that despite the change in the unemployment definition, our unemployment rate is still higher than countries of comparative economic performance or similar labor market characteristics.

More importantly, in view of the impact of globalization, cross country movement of labor is a reality. This expands the labor force framework beyond territorial boundaries. This is the case of some islands in the most southern part of the Philippines (Tawi-tawi) wherein Filipinos commute daily or weekly to work in foreign land (Sabah, Borneo). This might be true in countries of the European Economic Community and such poses a measurement problem. A labor force framework integrating this phenomenon should be included in the review. International labor migration has grown in importance especially among developing countries.

International Labour Office. Resolution Concerning Statistics of the Economically Active Population, Employment, Unemployment and Underemployment, adopted by the Thirteenth International Conference of Labour Statisticians (October 1982). The Thirteenth International Conference of Labour Statisticians.

--- Resolution Concerning the Measurement of Underemployment and Inadequate Employment Situations. Adopted by the Sixteenth International Conference of Labour Statisticians (October 1998). The Sixteenth International Conference of Labour Statisticians http://www.ilo.org/stat

Philippines, Bureau of Labor and Employment Statistics, Department of Labor and Employment. A Concept Paper on the Monitoring of Overseas Employment in the Labor Force Survey, 2003.

Philippines, Bureau of Labor and Employment Statistics, Department of Labor and Employment. LABSTAT Updates, Volume 10 Numbers 5-9, “The Philippine Overseas Employment: Understanding its Trend and Structural Change (Parts 1-5), May 2006

Philippines, Bureau of Labor and Employment Statistics, Department of Labor and Employment in collaboration with the National Statistics Office. Primer on Labor Force Survey (LFS), November 2008.

Philippines, National Statistics Office. January 2007 Labor Force Survey, Enumerator’s Manual. 2007.

ANNEX TABLE 1
Inactive Unemployed and their Demographic Characteristics
Philippines: 1998 - 2007
(In thousands except percent)
YEAR/INDICATOR		Total Unemployed
		Number				Inactive Unemployed
						Number				Percent to Unemployed/Total
	1998	3,043				2,173				71.4
	1999	3,017				2,103				69.7
	2000	3,459				2,380				68.8
	2001	3,653				2,445				66.9
	2002	3,874				2,611				67.4
	2003	3,936				2,710				68.9
	2004	4,249				2,992				70.4
	2005	-				-				-
	January	4,030				2,798				69.4
	April	2,909				1,532				52.7
	July	2,715				1,421				52.3
	October	2,619				1,336				51.0
	2006	2,829				1,450				51.3
	2007	2,653				1,459				55.0
	HOUSEHOLD STATUS	2,653				1,459				100.0
	Head	397				249				17.1
	Non-Head	2,257				1,210				82.9
	AGE GROUP
	15 - 24 Years	1,335				685				46.9
	25 - 34 Years	763				401				27.5
	35 - 44 Years	279				164				11.2
	45 - 65 Years	276				211				14.5
	HIGHEST GRADE COMPLETED
	No Grade Completed	18				16				1.1
	With Elementary Education	401				280				19.2
	With High School Education	1,222				676				46.3
	College	1,013				488				33.4
	Undergraduate	534				276				18.9
	College	479				212				14.5
Note: Averages for 2005 cannot be computed due to the adoption of the new unemployment definition.
Source of basic data: National Statistics Office, Labor Force Survey.

¹ Paper prepared for the Seminar on “Employment and unemployment: Revisiting the relevance and conceptual basis of the statistics” conducted by the International Labour Office on 04-05 December 2008 in Geneva, Switzerland.

² Chief Labor and Employment Officer of the Bureau of Labor and Employment Statistics (BLES), Department of Labor and Employment (DOLE), Manila, Philippines. The author is indebted to the valuable inputs of her colleagues, Manuel L. Laopao and Teresa V. Peralta, Officer in Charge and Chief Labor and Employment Officer, respectively, of the same office.