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Skills mismatch, not graduate influx, better explains rising joblessness, economists say

DUALTECH/HANDOUT/PHILSTAR FILE PHOTO

By Diego Gabriel C. Robles

THE RISE in unemployment baked into the government’s economic assumptions for next year points to a skills mismatch within the labor pool, with many unfilled positions in the construction industry alone, economists said, after the government claimed that joblessness will swell largely because of the influx of graduates from the Kinder to Grade 12 (K to 12) program.

“It is predominantly a case of (skills) mismatch. There are thousands of jobs unfilled in the construction industry with the ‘Build, Build, Build’ program of the government and real estate boom in some sectors of housing. But there are not enough carpenters, masons, electricians, plumbers, etc. because of the obsession with college diplomas of both parents and students,” University of Asia and the Pacific Economist Bernardo M. Villegas said in an e-mail.

“We have to give a higher budget to TESDA (Technical Education and Skills Development Authority) so that more and more technical vocational schools can be put up.”

The 2023 Budget of Expenditures and Sources of Financing projects an unemployment rate of between 5.7 and 6.8% next year, against this year’s expected range of 5.1-6.5%.

“The reason for that is a large number of our population is expected to enter the labor force, especially those who are in K to 12. Many of them will join the labor force when they graduate next year. That’s the major pattern that we are seeing,” Socioeconomic Planning Secretary Arsenio M. Balisacan told a House Committee on Appropriations hearing on Aug. 26.

In a television interview with BusinessWorld Live on Monday, National Economic and Development Authority (NEDA) Undersecretary Rosemarie G. Edillon added that this might be the case for the next two years.

“It’s really because of the K to 12 program and the free tuition fee in the SUCs (state universities and colleges); they were encouraged to first go to school and now they will be in the labor market,” she said, noting that an estimated 1.5 million new entrants will enter the labor force next year, against the 600,000 in typical years.

Despite a growth assumption of 6.5-8% in 2023 which will involve significant job creation, Mr. Balisacan said the sheer number of new entrants will offset this, even with a greater labor force participation rate as the economy enters a “sustained growth path.”

Ms. Edillon said NEDA has proposed the expansion of the government’s reskilling and retooling programs under TESDA, the Department of Trade and Industry (DTI), and the Commission on Higher Education.

“We have been encouraging the new graduates to acquire micro credentials. This is a way of addressing the fact that they were undergoing online or blended learning these past two years, so it will actually be to their advantage to enroll in these micro credential programs being offered by the TESDA,” Ms. Edillon added.

In the 2023 proposed National Expenditure Program, the allocation for the TESDA declined by 2.24% to P13.71 billion. The proposed budgets for the DTI and SUCs were also reduced by 6.6% and 6.2% respectively.

“The new projections in our country on unemployment are partly based on the assumption that inflation and debt issues will continue to hamper the prospects of the economy.  But these can all be traced to the government’s poor COVID-19 response,” said Leonardo A. Lanzona, professor of economics at the Ateneo De Manila University.

Inflation accelerated to 6.4% in July, the fourth consecutive month that the indicator has exceeded the central bank’s 2-4% target band. The seven-month average stood at 4.7%, reflecting the impact of rising transport, fuel, and food expenses.

At the same time, the government’s debt-to-gross domestic product ratio stood at 62.1% in end-June, with expectations that it will ease to 61.3% by next year. Both are beyond the 60% threshold prescribed by multilateral lenders for developing markets.

“On the part of the economic management team, it was really wishful thinking to say that the country has already recovered. In fact, while the infections may have subsided, the negative economic effects continue to linger,” said Mr. Lanzona in an e-mail.

On the supply side, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that higher inflation and higher interest rates globally, as well as the risks of a US recession, are slowing down economic growth vis-à-vis job creation.

“In view of the constantly changing economy and work setting amid increased digitalization of business transactions and processes, the education system needs to also constantly adapt to the requirements of the job market or better matching the skills required for new graduates,” Mr. Ricafort added in a Viber message.

“Increased priority of the new administration in boosting the productivity of the agricultural and industrial sectors, both of which account for more than 40% of total employment and also more than 40% of the economy, would also lead to the creation of more employment opportunities, including for new graduates, especially for both sectors,” he said.

There is also the problem of attracting both domestic and foreign investors, according to economist John Paolo R. Rivera of the Asian Institute of Management.

“This is an issue of the capacity of the Philippines to attract investors to put money (and) establish enterprises that will generate jobs,” he said in a Viber message, noting that recent reforms, such as the amendments to the Public Service Act and the Foreign Investment Act, will take time before their full impact is felt.

“Employment rates can be improved by making the economy conducive for investment that will generate jobs. Development should also reach industries that were neglected, like agriculture,” he added, while also citing the potential of the tourism sector for job creation.

Mr. Rivera said the business process outsourcing (BPO) industry holds the potential for more job growth if the Philippines cements its position as a BPO hub.

“The BPO sector has been a bright spot since the pandemic, continuing to generate new jobs, as the pandemic partly led to more outsourcing by global companies in able to cut costs and remain competitive, made more urgent by economic downturns,” Mr. Ricafort added.

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