Employment Strategies for Accelerated Economic Growth: The Philippine Experience

Abstract

The paper tried to analyze the experience of the Philippines in terms of the policies and strategies it has adopted to address the problems of unemployment and underemployment. In particular, this was done in relation to the goals and targets set in the country’s various development plans.A review of the past and present policies showed that the industrialization policies implemented in the past generally increased output and investment but their inherent capital bias resulted in the low rate of labor absorption. The manufacturing sector specifically failed to generate new employment necessary to absorb the increasing labor force. This was due to factors like the limitations in the domestic market for output of import-substituting firms, the limitations imposed by the existing pattern of fiscal incentives, the misallocation of investable funds on high-cost industries, and the labor laws which served to raise labor cost and discourage employment.The major problem of adopting an outward-looking strategy is the lack of reciprocal response in the international setting in the face of increasing protectionism and stagnation in developed countries. However, the shift in comparative advantage of the NICs from traditional labor-intensive exports to more skilled and technology intensive activities opens up prospects for ASEAN countries. Nevertheless, there are two obstacles to realizing the above-mentioned objectives. One concerns the matter of sustaining the shift towards export-promotion with the existing incentives which are capital-biased. And the other is the current political and financial crises.Based on the analysis, the following policies are viewed to increase labor absorption. First, what is called for is a system of taxation and protection which is non-factor price distortive. The adoption of the appropriate technology which is more labor-intensive will follow as a consequence. Secondly, economic growth and therefore employment generation can be accelerated with a firmer commitment on the part of the authorities in implementing the structural reforms. And lastly, the outward-looking strategy is worth pursuing.