International Labour Office Policy Integration Department The Philippines in the global economic crisis: the social and local dimensions



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International Labour Office

Policy Integration Department

The Philippines in the global economic crisis: the social and local dimensions

Lourdes Kathleen Santos1

A Technical Note for the Policy Coherence Forum

Overcoming the Jobs Crisis and Shaping an Inclusive Recovery: The Philippines in the aftermath of the global economic turmoil

11 – 12 March 2010

Philippines

March 2010



Table of Contents

1. Introduction 3

2. Highlights of the Focus Group Discussions (FGDs) 4

Impact on Displaced Women and Men in Export Processing Zones 4

Impact on Informal Sector Workers and/or Informal Support Service Providers 5

Impact on Displaced Overseas Filipino Workers (OFWs) and on Families

dependent on remittances 6

Impact on Rural Communities 7

Impact on the Young Women and Men 8

Gender Dimension 9

3. Conclusions and Policy Issues 9

Bibliography

Appendices

Appendix 1 Summary Report on the Focus Group Discussions by PIMA Foundation, Inc.

Appendix 2 FGD Guide

Appendix 3 FGD Survey and Handout



1. Introduction

Several national statistics suggest that the country’s economy is holding up relatively well in the global crisis. GDP grew by 1.8 percent in the fourth quarter of 2009, accounting for an annual 2009 average of 0.9 percent, a reasonable performance considering the impact of the global crisis as well the recent natural calamities. The October 2009 Labor Force Survey noted that employment grew by 2.7 percent (i.e. 944,000). Total OFW remittances in dollar terms over the period as of November 2009 grew by 8.9 percent. Services (4.2 percent) led the economy's growth. Manufacturing returned to positive territory during the fourth quarter of 2009 (1.3 percent), after the sharp fallout of the earlier months.

However, several studies and economic analyses point to a bleaker picture, noting weaknesses in the labour market and widespread and even growing poverty. The Philippine labour market was already in distress even before the global crisis. According to the UNDP Regional Centre for Asia and the Pacific report, that in the Asian region, the Philippines is one country where strong economic growth in recent years was not associated with a decline in poverty. Some academics emphasize that statistics that could give a better picture of the Philippine labor market situation are not available. A recent report by ADB showed that since 2003, the number of Filipinos living below the poverty line had risen from 30 percent (24.4 percent of families) to 33 percent (26.9 percent of families) in 2006. Average real household income also fell 3 percent in the same period. And the numbers could have worsened since then.

Hence, the ILO’s Policy Integration Department and the PIMA Foundation, Inc. conducted a series of Focus Group Discussions (FGDs) that covered specific sectors of the population in defined regions in the country. These FGDs were undertaken with the following objectives:



  1. capture the economic and social impact of the global financial crisis on individuals and households by revealing needs, motives, perceptions and attitudes regarding their current experiences in this situation,

  2. validate official information/data on the impact of the crisis with views from the most affected workers and sectors of the population and,

  3. generate ideas on possible areas of assistance, policies or programs that would be most beneficial for the affected sectors of the population.

This technical note highlights the major findings of the focus group discussions (FGDs), which covered groups of women in rural communities, displaced women and men working in the export processing zones, returning Overseas Filipino Workers (OFWs), dependents or household members receiving remittances, informal sector workers and/or informal service providers and the unemployed youth. The FGDs covered five provinces (Tarlac, Batangas, Laguna, Bohol and Cebu) and two cities (Taguig and Pasig).

The note also seeks to provide an analysis on the behaviour and coping patterns of specific sectors of the population and households and how these relate to the overall economic situation of the Philippines. Its ultimate purpose is to support a more informed decision-making by policy makers and practitioners, tripartite constituents, academics and the international community.

2. Highlights of the FGDs

Impact on Displaced Women and Men in Export Processing Zones

Jun (not his real name) had been working for an electronics export company for more than 15 years. His wife stays at home to take care of their four children, who are all of school age. His job is the family’s sole source of income thus the news of changes in his employment was devastating. In October 2009, Jun, along with 320 others working in the company, were informed that they were being retrenched. Those working for 15 to 18 years were offered an early retirement package of a 13-day salary for every year of service.

With a family to support, Jun realized he needed to find a regular source of income. With his retirement benefits still partially unpaid, Jun decided to accept an offer from his company to return to work at a reduced salary (a 60% reduction) and workload. He was left with no choice but to work for only 2 days per week at this lower rate. To supplement his income, he rented his neighbour’s jeepney and earned as a jeepney driver. His wife also accepted a part time job as a worker in a small fashion accessories house offering free food and transportation allowance but with a daily salary below minimum wage.

Their eldest daughter, 20 years old, who was about to graduate from college in two years, had to stop schooling to look for work to help augment food expenses particularly for the three younger children. The youngest, a 3 year old boy, had to contend with brown sugar diluted with water instead of milk. The other two kids often had to skip school when there was no money for their transportation and food allowance. To further cope with their situation, Jun decided to have his family stay at his parent’s home in order to save on their monthly apartment rentals. It was also common for them to resort to self-medication when their children got sick.

Jun’s story is just one of the many stories of displaced women and men in the export processing zones (EPZs) who have been severely affected by the global crisis.

The length of time working in export manufacturing companies seems to have a direct relationship in the adjustment experienced by the worker and his/her household. This is particularly true for companies with extensive benefits and a compensation package that is tenure based. As observed, displaced workers who have been with the companies for some time seem to have a more difficult time coping with the changes as they were more likely to be less educated, did not have savings and were comfortably used to the benefits extended to them and their household.

It is this sector that also seems to have a pronounced need for assistance as their experience was mostly on specialized assembly line work i.e. specific operations in electronics. For some however who worked in garments manufacturing, a number found their skills of sewing could be turned into income generating businesses.

However, the disparity in earnings was very much pronounced. The disruption in regular incomes required major coping strategies for the displaced workers in this sector and within the households that they support. As evident from the FGDs, basic needs tend to be compromised, from basic food, housing, medicines and even education. Debt burden has also increased as this is found by many to be the easiest way out.



Impact on Informal Sector Workers and/or Informal Support Service Providers

Mila (not her real name), 42 years old, has been operating a small food retail business in a major city in the Visayan region for several years. Her “carinderia” is located near a garments factory. She also owns a house where she accepts “boarders” or “renters” working from the same garments factory. She is aware that the factory is downsizing because many of her regular customers have been talking about it and she has observed a steady decline in the number of her boarders. Since her small businesses were highly dependent on the workers of the factory, the loss of jobs of her customer affected her revenues which now decreased to only 25% to 30% of its previous levels. To cope with this drastic cut in income, her family had to cut their daily expenses on food, transportation, energy and communication. She made a major decision of having one of her older sons temporarily defer his college education with the anticipation that her business can recover by tapping other customers. Recently, however, Mila has been contemplating giving up her small businesses and using her savings to pay for placement fees so she can work as a domestic helper in Hong Kong.

The deteriorating returns to employment for informal economy workers are documented in many studies. Field surveys by WIEGO2 were conducted in 10 countries (South Africa, Malawi, Kenya, Peru, Thailand, Indonesia, Pakistan, India, Colombia and Chile). WIEGO carried out 12 focus group discussion on three sectors of the informal economy (59 home-based workers, 52 street vendors and 53 waste pickers) and participated in by a total of 164 informal workers. The surveys highlighted the impact of the crisis on the world’s working poor and provided suggestions for systemic change to alleviate the effects of the crisis and improve the overall situation of the informal economy.

The surveys revealed that much like their formal counterparts, informal economy workers are experiencing decreasing demand for goods and services (around 65% of the respondents reported this decrease), rising cost of inputs (average of 86% of the respondents), and increasing price volatility for goods sold (41% average decrease in prices of goods sold).

However, unlike those in the formal economy, the informal firms and informal wage workers have no social safety nets to address the continuing threats to the stability and quality of their working lives. The informal economy workers work in poverty, and with the increasing pressures of the crisis, are unable to lift themselves out of poverty. They continue to work harder but earn less; hence, they are pushed into deeper poverty.

With the increase in number of workers engaged in part-time employment in the Philippines, (12,450 in 2009 from 11,876 in 2008 signaling a 4.8% increase), these workers would be forced to seek for alternative employment in informal activities. The trend towards informalization of the labour market is not reversed and might be growing even stronger.

Those already operating micro businesses and those who were already in the informal sector suffered much more compared to the employees retrenched. The high dependence of micro-entrepreneurs and informal sector service providers on their target clientele affected their business operations greatly, implying a need to consider developing other market or engaging in several alternative businesses or for some, like Mila, working abroad is an option. Further, because of a lack of social safety net, the informal sector workers and operators are left with fewer options. They would continue working in the informal economy and would just shift to other areas to look for clients or engage in other informal business activities.

Impact on Displaced Overseas Filipino Workers (OFWs) and on Families dependent on remittances

According to the Philippine Overseas Employment Administration (POEA) in 2008 alone, almost 1.2 million Filipinos were deployed to overseas jobs, an average of 3,400 a day. Half were deployed to the Middle East (most to Saudi Arabia and the United Arab Emirates), with another 18 percent in Asia (most to Hong Kong, Singapore and Taiwan). About 22 percent were sea-based. Contract labor migration, an institution dating to the 1970s, has resulted in an estimated 9 million Filipinos – or one-fourth of the overall Philippine workforce – working in more than 190 countries.

Migrant workers’ remittances have been the lifeblood of the Philippine economy and have helped the country survive past crisis. However, with the current global crisis the concern about migrant workers and their remittances is growing. Globally, labour migration outflows are expected to decline.

Take the case of Ana (not her real name), an OFW who was laid off in 2009 from her work in Dubai where she had worked for more than two years. She was one of 400 employees of different nationalities (comprising of Filipinos, Thais, Indians, Malaysians) in a factory in Dubai. More than half of the employees are Filipinos. She is supporting two kids, an unemployed husband and an extended family i.e. her parents and unmarried siblings. She shared that the system for laying off people was inconsistent and confusing but everybody had no choice but to accept the company’s decision. As she shared, “It is dangerous to file a complaint especially when you are in a foreign country.” Ann has come back to her home province trying to cope with the loss of a relatively good salary in Dubai. She is trying to make ends meet by retailing gasoline by the liter together with her husband which yields them about Pesos 3,000 every month. This is a far cry from the Pesos 16,000 monthly she used to earn as an OFW.

Several dependents of OFWs reported noticeable decreases in the amount of remittances they received. As shared by an FGD participant, her regular Pesos 12,000 monthly decreased to Pesos 10,000 in early 2009 and had further declined to Pesos 3,000 for the month of August 2009. It was also shared that even if remittances sent were the same amount, it seemed that delays in their remittances happened quite often the past year.

As remittances are usually intended for the education of children, delays and reductions in the amounts sent meant adjustments for education spending. Options to manage education have been considered. This included completely foregoing or stopping schooling, deferring enrolment, looking for work after high school (or secondary level education) to augment the household income and choosing or shifting to shorter courses i.e. from a four-year nursing course to a shorter caregiver course or from a full 4-year course in a university to a two-year specialty course.

But, despite the challenges of working abroad, still many Filipinos would choose this life for higher wages and a hope for a better future for their families. More and more Filipinos are being driven to leave their families and seek employment abroad because they find no opportunities for them at home – hoping that better lives await them and their families in a foreign country.

Impact on Rural Communities

For most families living in the rural areas, the global crisis is not extraordinary. All the participants of the FGDs from the rural communities noted that their current difficulties during what has been termed “global crisis” is but a normal occurrence of recurring economic difficulties where the times call for their usual coping mechanism. Having to rely on the 5-6 financing scheme, resorting to part-time, low wage work or micro livelihoods during off-farm season, young female family members migrating to cities to work as domestic helpers in private households, and setting short-term mindsets of daily earnings are among the major coping strategies of families in rural communities.

Despite reports of GDP growth, pervasive poverty still exists in rural areas. Poverty still affects over a third of Filipinos. The Philippines poverty incidence is at 33% based on 2006 data. Three out of four Filipinos (73%) reside in rural areas with agriculture as their main source of income.

Agriculture has been regarded as the bedrock of the Philippine economy, or so they say, and yet it has been neglected for the past twenty or so years. Along with construction, agriculture recorded a negative 5.8 percent growth in 2009.

Further, with the expected increase of urban to rural migration, retrenched workers from factories in cities go back to their provinces jobless and had limited savings, a decrease in domestic remittances puts further pressure on rural communities and families to make ends meet.

Rural employment and development policies need not be treated in isolation since there are no blueprint solutions to the complex problem of rural poverty. Inspite of the statistics on growth and the announcements of programmes for recovery, for women and men working and living in rural communities, everyday is a day of crisis, struggle and coping. Global crisis or not, the realities of everyday poverty is faced by poor rural families and coping is a regular activity.



Impact on Young Women and Men

Youth unemployment rate in the Philippines is already high with every 10 unemployed persons, five (49.2%) were in the age group 15 - 24 years while three (30.3%) were in the age group 25 – 34 years.

Majority of the youth participants of the FGD have not been employed since graduating school and have not expressed clear intentions of looking for a job or pursuing further studies. However, the young women were more likely to express willingness to get a job or to pursue higher studies but reported that opportunities for them are lacking. They feel that there were many barriers for them in transition from school to work such as, such as networks and limited information on available job opportunities.

Another concern expressed by the youth was the age limitation or age specifications of certain occupations. The 15-24 years old are perceived to be too young and inexperienced for certain occupations while the 25-34 year old FGD participants said they had to “compete” with fresh graduates who had better education for some of the available jobs.

Due to the global crisis, there is a common feeling among the youth that they will have to struggle more in finding jobs notwithstanding the fact that it is already difficult to look for a decent job even during normal times. There is an expectation that there will be less job vacancies and if there are, these jobs would be low-paid, contractual and not suited to the skills that the youth have acquired. Further, most of the youth participants prefer to explore jobs abroad for higher wages.

Young people are more vulnerable to the economic cycle: they are the last to be recruited during expansionary periods and the first to be laid-off during economic downturns. In the context of the current economic crisis this implies that employment outcomes of young people are not only worsening more than those of their adult counterparts but also that it will take longer for them to benefit from the economic recovery. Even in good times, young women and men find it hard to get the right foothold in the labour market. Hence, the job search period for the youth during crisis may double or even triple.

The seemingly low motivation of the youth participants of the FGDs to look for a job are brought about by many factors: (i) their parents are still supporting them so there is no pressure for them to look for a job, (ii) their strong belief and general sense of hopelessness that there are limited opportunities available for them (particularly if they do not have a college education) and (iii) their preference to explore overseas employment which is perceived to be better paid and offers better career growth opportunities.

But, this is just one segment of the huge youth population in the country. The other youth group is the poor and disadvantaged youth. These young people, due to the effects of the global crisis and persistent poverty, had to stop schooling and are forced to work to help supplement income. Others would remain unemployed for a long period, making them less attractive for the labour market, while others would take on any job, with low pay, poor working conditions and lack of security because they cannot afford to be unemployed.



Gender Dimension

Women who were laid-off from their previous jobs had much more difficulty in finding work and usually supplemented their income by engaging in home-based businesses or part-time employment in jobs requiring lower skills than what they were trained for i.e. domestic help, laundry services, baby-sitting, etc. Men, on the other hand, were more likely to be able to find a job or engage in a business that utilized their skills, i.e. tricycle driver, carpenter, painter, etc.

Also, when dual income households were affected by the crisis, it was the father who usually found work to sustain while the (previously-working) mother took care of the children at home. This was observed even among women who were holding relatively more responsible jobs than their husbands in their previous work.

This validates the dominant gender roles present in the country – the male breadwinner and the female caregiver. Care work or unpaid care work remains to be the responsibility of women in Philippine society. Having to quit their jobs is a coping mechanism since most households with dual income earners employ domestic staff for care and household work. But, this also leads to the detachment of women from the labour market. This poses a constraint on women’s mobility and paid employment opportunities.



3. Conclusions and Policy Issues

First, in this crisis, those who are termed “near-poor” or those who are slightly above the poverty line were found to be the most affected – displaced women and men in the EPZs, those operating micro and small enterprises, overseas Filipino workers and their families. This will exacerbate poverty in the country. Hence, immediate action to provide assistance to them is necessary. Among the desired assistance that the FGD participants suggested are the following:



  1. creation of jobs and/ or opportunities for livelihood or business assistance that will ideally make use of their existing skills,

  2. among migrant workers returning from foreign assignments, a job continuation program that will assist and actively search for employment opportunities abroad,

  3. for livelihood assistance, availability of collateral free loans to start up and expand businesses,

  4. scholarships or even part-time jobs for students to enable continuous education at the college level

Second, the FGDs revealed that only one among twenty participants was knowledgeable of existing programmes responding to the global crisis. Further, there was a higher level of awareness of the programmes in the National Capital Region compared to other areas. For those who are aware of these programmes, the skills training and livelihood assistance were said to be the most appreciated. Hence, easy access to information about these programmes is required.

Third, the social protection system in the country to respond to immediate shocks and mitigate its long term effects is weak. Most of the affected workers resorted to other means to cope with the loss of income, such as going into debt and accessing informal micro finance schemes. As out-of-pocket payments for health and education were the common practice, with disruption in regular incomes, expenditures for these basic needs were compromised. This has long-term effects on human development. As economic shocks of different nature are recurrent, the scarring effects on society are piling up. There is a need for a concrete social protection programme in the country that addresses fully the effects of income shocks.

Fourth, many of the displaced workers choose to find alternative part-time work with lower wages and insecure working conditions. The deterioration of incomes and working conditions has longer term impact that may keep people in the poverty trap. This puts additional pressure to the labor market to create more job opportunities for workers with low skills or with specific skills, i.e. displaced workers in the electronics manufacturing sector. Thus, emergency employment programmes should recognize the diversity in the skills levels of the displaced and affected workers. For instance, for workers with limited or low skills who are available for any kind of work, an employment guarantee scheme may be considered. For workers, with already specific skills, placement services in similar industries may be provided or give them skills training for other industries that are in need of workers.

Fifth, there seems to be two options left for the most affected sectors of the population: (i) resort to informal work, and (ii) pursue overseas employment. This is unfortunate as this leads to a shortage of critical skills and entrepreneurial attributes as those who leave are better educated or more active.

Finally, the results of the FGD discussions show that there is disparity on economic and social indicators at the national, household and individual levels. National level estimates do not necessarily capture the micro level data. The quantitative information available needs to be supplemented by qualitative analysis. For instance, the employment data available discount the fact that despite an increase in the number of people working, the quality of work that they are currently engaged in maybe low-paid, precarious and subject to exploitation. Hence, participatory data collection and research methods may need to be considered so that assessments and analysis can take full account of the realities on the ground and considered in the regular fine-tuning of public policies. Indeed, in the end, a bottom-up approach to policy making may well prove to be the best way to achieve changes at the top.

Bibliography

Asian Development Bank. 2009. Poverty in the Philippines: Causes, Constraints, and Opportunities.

Results of Focus Group Discussions conducted by the ILO and PIMA Foundation, Inc.

National Statistical Coordination Board (NSCB)

National Economic and Development Authority (NEDA)

Bureau of Labor and Employment Statistics (BLES) of the Department of Labor and Employment (DOLE)

International Business Leaders Forum (IBLF)

Philippine Exporters Confederation (PHILEXPORT)

Philippine Overseas Employment Administration (POEA)

National Statistics Office

United Nations Development Programme (UNDP) Regional Centre for Asia and the Pacific. November 2009. The Global Financial Crisis and the Asia-Pacific region: A Synthesis Study Incorporating Evidence from Country Case Studies.

ILO commissioned papers



  • Aldaba, Nandy. 2010. Crafting Coherent Policy Responses to the Crisis in the Philippines

  • Esguerra, Jude. 2010. Assessing Local Policy Responses to the Crisis in the Philippines

  • King-Dejardin, Amelita. 2010. Pay inequality and the gendered nature of low-paid, precarious employment.

  • Rosas, Gianni. 2009. Youth employment measures to counter the negative impact of the economic crisis.


Appendix 1
Summary Report on the FGDs

FGD Research Objectives:

The FGDs were undertaken as part of the Project “Crafting Coherent Policy Responses to the Crisis in Philippines” with the following objectives:



  1. Capture the economic and social impact of the global financial crisis on individuals and households by revealing needs, motives, perceptions and attitudes regarding their current experiences in this situation;

  2. Validate official information / data presented by government agencies on the impact of the crisis with views from the most affected workers and sectors of the population and

  3. Generate ideas on possible areas of assistance, policies or programs that would be most beneficial for the affected sectors of the population.


FGD Operational Details

In operationalizing the FGDs, the various segments and general guide questions were discussed in collaboration with ILO and all consultants involved. The general guide questions shown below were drafted for use of facilitators and the FGD groups were finalized as shown in FGD Participant Profiles.



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