Introduction

Underemployed are persons who expressed 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. It can be

categorized into two, namely: the visibly underemployed and the

invisibly underemployed. The first category refers to those

employed persons who worked less than 40 hours during the reference

week and wanted to have additional hours of work. The second

category applies to persons employed at full-time jobs (those

working 40 hours or more a week) but still want additional work.

The latter is basically a statistical concept characterized by low

income, low productivity and underutilization of skill.

There is another category of underemployed who fall into a

statistical no man’s land. Even though they don’t have a job, they

aren’t counted among the unemployed by the U.S Bureau of Labor

Statistics. Why not? The BLS only includes those who have looked

for a job in the last four weeks. Instead, the BLS calls them

“marginally” attached to the “labor force”. They have looked for

a job sometime during the last year, would like to work, and are

available. Within the group, there is a sub-group who have just

given up looking for work altogether. The BLS calls them

“discouraged workers”. They are also underemployed.

 Underemployment also includes those who work full-time but

live below the poverty level. That’s according to Paul Osterman,

co-director of the MIT Sloan Institute for Work and Employment

Research. This category is also known as the “working poor”.

According to Osterman, “The labor market is just not delivering

for Americans what is should be delivering”. This definition of

underemployment includes everyone who makes less than $11.83 an

hour, according to 2018 poverty level data from the Department of

Health and Human Services.

Body

There were more people with jobs in April compared to the

same period last year, but the number of underemployed workers

also increased, the Philippine Statistics Authority (PSA) reported

on Tuesday, June 5. Underemployment slightly declined in April to

5.5%, 0.2 percentage points lower than the recorded figure in the

same period last year, the PSA said in a statement, citing the

results of the April 2018 Labor Force Survey. The PSA also said

that underemployment increased by 0.9 percentage points to 17% in

April, compared to April 2017. This represents 6.9 million workers

who, by the definition of the PSA, are already working but are

still looking for more work or longer working hours. Underemployed

individuals work for less than 40 hours a week. The number of

jobless Filipinos is estimated to be at around 2.36 million.

Ilocos (7.3%), CALABARZON (6.6%) and the National Capital

Region (6.4%) posted the highest unemployment rate. The National

Economic and Development Authority (NEDA) attributed the slight

improvement in employment to the infrastructure boom in the both

the public and private sectors. “Employment grew partly due to

increased infrastructure spending as the Department of Public

Works and Highways’ road projects and rehabilitation of public

school facilities are already underway nationwide, “NEDA

Undersecretary Jose Miguel de la Rosa said. NEDA reported that the

industry recorded a strong employment growth rate 8.1% equivalent

to 605,000 workers, increasing its total employment share to 19.7%.

The construction sector generated the most jobs at around 468,000.

“In order for us to achieve our employment targets, reforms

in market regulations and tackling structural barriers are

important to facilitate the creation of businesses and to boost

the outputs of firms. These may translate to high-productivity

jobs,” De la Rosa said.

Causes
A recession and the resultant cyclical unemployment as well. When

workers outnumber jobs, they will take anything they can get to

pay the bills.

Technological change also causes underemployment. For

example, ATM machines and mobile banking have replaced the need

for many bank tellers. These used to be the entry-level positions1

for a career in finance and banking. As a result, many college

graduates who were finance majors take what they can. They may

wind up as home health aides, waiters, or Uber drivers. These

positions aren’t easily replaced by digital technology.

Effect

The effects of underemployment are similar to those of

unemployment. First, both cause higher poverty levels. Without

adequate income, families don’t buy as much. That reduces consumer

demand, slowing business growth. As a result, the nation’s gross

domestic product is lower, as is job growth. It’s a vicious,

downward spiral. If underemployment continues, workers lose the

ability to update their skills with on-the-job training. They may

not be able to return to their former field without training. Some

train for different fields. Others downscale their lifestyle and

accept long-term underemployment. That creates structural

unemployment.
 One of the major indicators of an economy’s health status

is the unemployment rate. It measures productivity, as well as the

effects of economic events such as recession. Prior to the Asian

crisis in 1996, the unemployment in the Philippines fell to a low

rate of 8.8%. However, it grew to more than 11% in the early 2000s,

more than twice the level of the surrounding nations. More

recently, in the first quarter of 2013, the Philippine economy is

doing great. The country achieved a booming 7.8% growth, making it

the fastest growing economy in Asia. But despite this, what

remained high is the unemployment. As of April 2013, there are

7.25 million Filipinos underemployed, and another 3 million with

no jobs.

According to NEDA Deputy Director-General Emmanuel Esguerra,

“there is a need to improve the employability of worker applicants,

particularly those with secondary and tertiary education.” The

Philippine Government addressed this problem by implementing the

K+12 education program. Students are required to go through

kindergarten classes, and two more years of high school, where

technical and vocational courses are introduced. With this, A

Filipino student, after junior and senior high school, will already

be certified to work. However, the question still remains: How

significant is this new educational framework to the overall

unemployment? Will the growth in economy be sufficient to provide

jobs?

Since 2009, the Philippine economy has been feeling the impact

of global recession. According to the SWS Survey, there are now

about 4,200 Filipinos (compared to 3,200 two years ago) leaving

the country for jobs. The National Statistics Office’s labor force

survey showed that as of October 2012, the country had

approximately 63.3 million Filipinos aged 15 years old and above.

Out of this, 40.3 million were in the labor force. The labor force
participation rate decreased from the 66.3 percent last October

2011 to 63.9 percent recorded in the same month of 2012.

TOTAL LABOR FORCE IN THE PHILIPPINES

In the labor market, when there is more unemployment, there is

less activity going on with the exchange and/or production of such

resources. There are numerous reasons why, one of which is fewer

goods sold due to the less purchasing power of the laid off

workers. The unemployed cuts back their extra expenses like movie

or concert tickets. This decrease in spending would affect

businesses which could then lead to laying off workers resulting

in more unemployment. In addition to fewer transactions, there

will also be less growth in infrastructure due to the inability of

the government to pay for them because of the decrease in revenue

from income taxes. (Blanchard, 2011)

Conclusion

The objective of this paper is to determine the effects of

educational attainment, inflation, household consumption, and GDP

growth on the unemployment rate. Despite the recently fast economic

growth, the question as to why unemployment is still high in the

Philippine remains. From the model in this study, an increase in

general price level and GDP both decreases unemployment. However,

secondary school enrolment only makes it worse. Since the model in

this paper did not specify the statistics of job availability and

job mismatches, we can only assume that the GDP growth cannot keep

up with the increasing labor force. Unemployment is not solely

reduced by secondary school enrolment alone because not all high

school graduates can afford college. Particularly, not all

students who enroll in high school actually graduate. Moreover,

even if they do finish college, they still don’t have the assurance

that they will be hired right away.

According to Education Assistant Secretary for Planning Jesus

Mateo, the Department of Education originally proposed a Php 334

billion budget for next year but the Malacanang decided to give a

Php336.9-billion allocation, which is 14.8 percent higher than its

current budget. With this, the department would be able to hire

1,500 principals and 33,194 teachers next year with P9.5 billion

of their proposed budget according to Mateo. The government highly

invested in education, but focused less on the availability of

jobs for the future graduates. This causes an oversupply of

potential laborers. This would not only result in more

unemployment, but underemployment as well.

Recommendation

As a recommendation, although it is evident to some cities

now, the government should be particular with scholarship

programs. The amount of subsidy given should be dependent on the

supply of jobs on that specific field of study. Also, the K to 12

programs is in fact a one step in addressing the issue in the

country. This makes high school graduates more versatile to jobs

ergo less unemployment in the future because vocational courses

are already included in the curriculum. Even if the students cannot

afford college, as soon as they finish secondary school, they are

already certified to work.

With regards as to why the household consumption seems to be

counterintuitive, The Random Walk Model of Consumption by Robert

Hall best explains this. According to Hall, if the Permanent-

Income Hypothesis of Fischer is plausible, and if consumers have

rational expectations, then changes in consumption over time

cannot be predicted. When changes in the variable are

unpredictable, it follows a random walk. He further reasoned that

people try to smooth their consumption based on their current

expectation of their lifetime incomes. Because of this, they change

their consumption for the reason that they receive some news that

makes them modify their expectations. Therefore, since changes in

consumption are due to unpredictable events, consumptions is also

unpredictable.

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In Partial Fulfillment of the Requirement

for the Subject Economics

A Case Study about Underemployment

in the Philippines

Submitted by:

Castro, Rizza Joyce S.

Abalos, Loreliza R.

Macatulad, Daniella P.

BEED III-A

SUBMITTED TO:

Mrs. Elena Vicencio Commented [R1]:

Subject Instructor
Documentation

UNDEREMPLOYMENT IN THE PHILIPPINES