Towards an Inclusive Recovery from COVID-19 Impacts A POLICY BRIEF Nadia Belhaj Hassine, Sharon Faye Piza, and Francine Claire Fernandez |1 Summary Points COVID-19 partly reversed gains made in three decades of sustained decline in poverty and a decade of accelerated reduction in inequality. In 2020, the pandemic halted economic growth momentum and unemployment shot up in industries that require in-person work. In 2021, poverty rose 1.4 percentage points to 18.1 percent despite substantial government assistance to households and firms. Although the economy is recovering gradually, there are signs that the recovery may be uneven. In March 2022, employment in wage work was lower than its pre-pandemic level; meanwhile, the share of workers in agriculture, self-employment or unpaid family business was higher than it had been before the COVID-19 crisis. These trends have been concentrated among youth and the least educated, which suggests an uneven recovery. Income recovery also seems to be slower for the poor. While households in both the richest and poorest quintiles reported income loss when the crisis began, by May 2022, 40 percent of households in poorest groups reported income decline compared to 19 percent in the richest. The sectors where the poor work, the sluggish recovery of nonfarm businesses, and the fall in domestic remittances have in varying degrees slowed the recovery of incomes of the poor. The COVID-19 pandemic may have long-term negative impacts on development of human capital. To manage the pandemic shock, a considerable number of poor households have relied on such adverse coping mechanisms as reducing food consumption, which may aggravate already prevalent child malnutrition and stunting. The challenges associated with distance learning during the pandemic could also have an adverse effect on the educational attainment and learning outcomes of youth. Children from poorer households are placed at even greater disadvantage because they had less access to resources that could help support remote learning. Policy needs to be directed to support an inclusive recovery and to address enduring medium to long term impacts of the COVID-19 pandemic. Policy priorities can be structured around healing the pandemic’s scars and building resilience, and setting the stage for a vibrant and inclusive recovery. Policies can provide vulnerable groups with enough support that they can absorb shocks as the crisis unfold and increase their resilience through: increasing booster vaccination uptake; strengthening social protection programs; mitigating the impact of inflation on vulnerable households; and overcoming the pandemic-related learning losses. Policies for a strong and inclusive recovery can include: reskilling and upskilling of the workers most affected by labor market disruptions to support their redeployment and increase their resilience; boosting skills for a transition to a more productive economy; promoting women’s employment through more flexible work arrangements; and expanding opportunities for women’s re-entry to the labor market. |2 Immediate Impacts of COVID-19 on Poverty and Inequality COVID-19 partly reversed the gains the Philippines made in reducing poverty and inequality. Economic growth faltered in 2020 when gross domestic product contracted by up to 9.6 percent, setting back three decades of gains in poverty reduction. A microsimulation model to assess the poverty and distributional impacts of the pandemic estimates that poverty worsened from 16.7 percent in 2018 to 20.3 percent in 2020, increasing the number of poor by 4.9 million (Figure 1). The government recently released poverty estimates for 2021 that show poverty creeping back up to 18.1 percent. With economic recovery in 2021–24, poverty is expected to start a slow decline, though remaining higher than it was pre-pandemic. Inequality is also projected to increase. Figure 1. Poverty, Inequality, and GDP Growth, 1985–2024, Percent 60 10 Simulation 49.2 50 45.3 45.2 45.3 42.3 5 Poverty rate & Gini (%) 40 42.4 GDP growth (%) 30 0 20 20.3 20.7 19.3 -5 16.7 10 0 -10 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2019 2020 2021 2022 2023 2024 National poverty rate GINI coefficient Source: Family Income and Expenditure Survey (FIES) 1985–2018. |3 Strict containment measures adopted when the pandemic began helped curb the initial spread of the virus but caused a severe shock to employment and incomes. About 8.1 million Filipinos employed in January 2020 had lost their jobs by April (Figure 2). The unemployment rate jumped from 5.3 to 17.7 percent during this period, while labor force participation dropped 6 percentage points (pp; Figure 2). Areas under stricter containment measures (urban centers, particularly Luzon in the National Capital Region (NCR), and peripheral areas) lost more jobs. Unemployment increased gradually in NCR to reach its peak of 15.8 percent in the third quarter of 2020 before reversing, though it continued to swing with waves of the pandemic and the resulting mobility restrictions; ultimately unemployment has remained higher than it had been pre-pandemic. In contrast, though unemployment surged in Mindanao at the onset of the crisis, it then fell quickly approaching its pre-pandemic level by 2021. Industry and low- end services were the sectors most affected by job losses, but within these broad categories, industries that require in-person work were hit hardest by the mobility restrictions and closure of businesses. In particular, there was a dramatic contraction of jobs in construction, accommodation and food services, transportation and storage, and wholesale and retail trade. As a result, the monthly household per capita income declined by about 13 percent between the first two quarters of 2020. The sweeping effect on income loss was more pronounced among middle-income and urban households because they were concentrated in areas and sectors that were hit hardest (Figure 3). Figure 2. Unemployment Rates, 2019–22, Percent Figure 3. Average Monthly Per Capita Household Income, First Two Quarters of 35 2020, Percent 0 30 -2 Unemployment rate (%) 25 -4 -6 20 -8 15 -10 10 -12 -14 5 -16 0 -18 -20 20 -Q1 20 -Q2 20 -Q3 20 4 20 -Q1 20 -Q2 20 -Q3 Ja 4 F e 21 M 1 Ap 1 M 21 Ju 21 21 Au -21 Se 1 O 1 No -21 De -21 Ja 1 Fe 2 M -22 2 20 -Q -Q 2 -2 2 2 2 2 -2 Poorest Q2 Q3 Q4 Richest Rural Urban Philippines n- b- r- - n- g- p- c- n- ar ay l ct v b ar 20 19 19 19 19 20 20 Ju 20 Quintiles Area National Women High Medium Low Youth (15-24) Urban Restriction Restriction Restriction Source: Annual Poverty Indicators Survey (APIS) 2020, PSA. Source: Labor Force Survey (LFS) 2019–21 and Philippines Statistics Authority (PSA). |4 Uneven Signs of Recovery Are Emerging Employment has been recovering as the economy slowly rebounded, but it is still volatile, and a firm recovery has yet to take hold. In March 2022, unemployment was down to 5.8 percent but was still slightly higher than pre-pandemic. Though high, youth unemployment declined rapidly in 2022 but women’s unemployment held at about 2 pp higher than pre-pandemic. Although sectors that had shed a lot of jobs, particularly construction and wholesale and retail trade, saw a rapid return of workers in early 2021, by March 2022 the progress had been reversed, particularly in construction. Employment recovery in accommodation and food services and in transportation services was much slower; in both sectors employment shares are still lower than they had been pre-pandemic. At the onset of the pandemic agriculture had picked up, with employment up from 23 to over 26 percent; though it declined throughout 2021, by March 2022 it was back up above 25 percent. Overall, employment declined in low-end services and industry, down by about 2 pp in March 2022 from January 2020 (Figure 4). Wage employment had recovered to its pre-pandemic level in February 2022 then dropped back again in March; self-employment and unpaid work in family businesses was up from 33 percent in January 2020 to over 36 percent in March 2022 (Figure 5). Figure 4. Employment by Sector, 2020–22, Percent Figure 5. Employment by Class of Work, 2020–22, Percent 45 70 39 65 40 65 37 61 35 60 30 55 25 50 25 23 21 45 20 20 40 36 18 15 17 35 33 10 30 2020-Q1 2020-Q2 2020-Q3 2020-Q4 Jan-21 Feb-21 Mar-21 Apr-21 Jan-22 Feb-22 Mar-22 1 2 3 4 21 M 1 1 1 22 M 2 2 -Q -Q -Q -Q 2 -2 r-2 2 -2 n- b- n- b- ar ar 20 20 20 20 Ap Ja Fe Ja Fe Low-end services High-end services 20 20 20 20 Industry Agriculture Wage work Self employed/Family business Source: LFS 2021, PSA. Note: Low-end services are food and accommodation, transportation, trade, Source: LFS 2021, PSA. and other household services. High-end services are public administration, ICT, financial services, real estate, human development, and other professional services. |5 Flexible work arrangements seem to have upped women’s participation in the labor market, but family responsibilities continue to deter employment of women. Labor force participation has rebounded quickly for women, even exceeding pre-pandemic levels (54 percent in March 2022 compared to 48 percent in January 2020). Flexible work arrangements, such as home-based work and telecommuting, seem to have helped women’s economic activity to recover. About 17 percent of women who had new jobs in January 2021 engaged in home-based work, essentially in wholesale and retail trade, compared to 5 percent of men. Overall, between January and April 2021 women’s engagement in home-based work expanded from 16 to 22 percent (Figure 6). The World Bank high-frequency surveys (HFS) show that 39 percent of women reported working from home in May 2022, and the proportion was 42 percent for women who had children under 5. Another 5 percent drew on hybrid work modes. However, care responsibilities continue to constrain women’s employment. Over 33 percent of women cite family and care duties as the main reason for not having a job, compared to 7 percent or fewer men (Figure 7). This proportion nearly doubles among married women and those with children under 5. Women with young children in better-off groups seem to fare better than those in poorer groups: their employment rate is higher (85 vs 46 percent) and they are less constrained by care duties (only 7 percent of those not working cite care duties as the main reason compared to 36 percent for those in the poorest quintile). Figure 6. Work Arrangements by Gender, Figure 7. Reason for Not Working, 2021–22, Percent 2021, Percent 100 100 80 80 60 60 48 74 40 40 2 36 7 27 41 20 20 7 0 Men Women Men Women 0 Poorest Richest Total Men Women Married Men Women quintile quintile Jan-21 Apr-21 Women Women with young child Work place Telecommuting Home-based work LFS (Apr-21) HFS (May-22) Job rotation/mixed Reduced hours COVID-19 related Business closed/seasonal Care child/ill Other Source: LFS 2021, PSA. Source: LFS 2021, PSA and HFS 2022, World Bank. Poor households are slowly recovering jobs but remain vulnerable. Since August 2020 employment rates among poor households have increased, having risen 9 pp by May 2022. However, the increase was much slower than for better-off households, widening the gap between the poorest and richest groups (Figure 8). The sectors where the poor work contribute to the precarity of their employment. In May 2022, 54 percent of Filipinos in the richest quintile were employed in high-end services, which not only offer higher incomes but are also more likely to afford workers the option for telecommuting, which reduces their risks of exposure to both the virus and business closures. In stark contrast, poorer households are more engaged in sectors that rely on in-person work, leaving them more vulnerable to surges of COVID-19 cases and to lockdowns. In addition to their employment in agriculture (16 percent), Filipinos in the poorest quintile also work in food and accommodation (14 percent), construction (12 percent) and domestic and other low-profile services (30 percent). The prevalence of the poor in informal employment further complicates their situation: informal workers are particularly vulnerable to job, income, and other social insecurities and have no access to the benefits and safety nets offered to formal workers. |6 Figure 8. Work Status by Income Group, 2020–22, Figure 9. Income Loss by Income Group, 2020–22, Percent Percent 70 90 80 60 80 60 72 51 50 70 61 50 47 61 43 60 57 58 53 40 49 40 50 32 40 30 30 19 20 20 10 10 0 0 Poorest Richest Poorest Richest Poorest Richest Poorest Richest Aug 2020 Dec 2020 May 2021 May 2022 Aug 2020 Dec 2020 May 2021 May 2022 Aug 2020 Dec 2020 May 2021 May 2022 Poorest quintile Richest quintile Source: HFS 2020–22, World Bank. Source: LFS 2021, PSA and HFS 2022, World Bank. While richer households have seen improvements in income as the economy rebounded, a considerable share of the poorest households continue to suffer from income loss. While both the richest and the poorest households suffered substantial income losses in August 2020, the patterns since have been very different. In August 2020, six months after the initial and most stringent lockdown, 60 percent of households in the poorest quintile and 50 percent in the richest reported having less income. By December 2020, as COVID-19 cases declined and mobility restrictions were eased, the proportion of households reporting income loss declined for both the poorest and richest quintiles. When mobility was again restricted in response to the steep rise in COVID-19 cases in early 2021, income loss in both groups rose again in May 2021, then started to decline. By May 2022, the proportion of those who reported income loss in the poorest quintile (40 percent) was more than double that of those better-off (19 percent; Figure 9). Sluggish recovery in nonfarm businesses was an important factor in the slow recovery of income for the poor. Over 60 percent of households reported income losses from farm businesses between March and August 2020; from May 2021 to May 2022, the proportion declined to less than 50 percent for both poor and better-off households (Figure 10A). Recovery was slower, however, for nonfarm businesses operated by poor households, eroding their incomes further. The proportion of households reporting income losses from nonfarm businesses did go down significantly, from about 64 percent in August 2020 to 39 percent in May 2022. But most of the improvements occurred among households in the second and third quintiles; households in the bottom quintile continued to suffer from much larger nonfarm income losses than those in the richest quintile (Figure 10B). Due to the lack of customers, nonfarm businesses are facing income declines particularly in transport and trade and other informal services. Uneven declines and recoveries in wage income illustrate the widening income inequality. While wage income fell across all sectors when the COVID-19 crisis began, the fall was most severe among those working in industry and low-end services. Wage income has since slowly recovered, but it has remained below pre-pandemic levels—as of April 2021, wage income for low-end services was 84 percent of pre-pandemic levels and for industry was still just 87 percent but wages in high-end services reached 91 percent. This suggests recovery has been slower for low-end services and industry, both of which employ a larger share of less-educated workers. Reflecting this recovery pattern, the wage Gini |7 Figure 10. Change in Household Income, 2020–22, Percent A. Households with farm business B. Households with nonfarm business 100 100 90 13 36 18 90 18 18 25 18 41 37 35 80 47 34 80 46 44 41 70 70 60 60 41 50 50 58 60 76 69 67 47 59 40 40 51 45 48 54 30 36 45 30 46 45 34 20 20 10 19 10 22 17 12 8 13 14 11 16 4 7 8 6 8 7 7 0 0 Aug20 Dec20 May21 May22 Aug20 Dec20 May21 May22 Aug20 Dec20 May21 May22 Aug20 Dec20 May21 May22 vs vs vs vs vs vs vs vs vs vs vs vs vs vs vs vs Mar20 Aug20 Dec20 May21 Mar20 Aug20 Dec20 May21 Mar20 Aug20 Dec20 May21 Mar20 Aug20 Dec20 May21 Poorest quintile Richest quintile Poorest quintile Richest quintile No income Less than usual The same as usual Higher than usual No income Less than usual The same as usual Higher than usual Source: HFS 2020–22, World Bank. coefficient fell after the immediate shock before reverting to an upward trend, which suggests that income inequality is widening as the economy recovers from the COVID-19 crisis. Though social assistance programs did substantially deter the worsening of poverty and inequality, they were not enough to fully compensate for income losses from the pandemic. In response to the COVID-19 crisis, the government put in place the Bayanihan to Heal as One Act (Bayanihan 1) and the Bayanihan to Recover as One Act (Bayanihan 2), which provided widespread support. A World Bank microsimulation model found that without the massive response from the government to households and firms, poverty would have been almost 4 pp higher in 2020, which would have pushed about 4.1 million Filipinos into poverty (Figures 11A and B). With substantial transfers to low-income households, these measures helped to keep inequality about 1.6 pp lower than it would otherwise have been. However, with the phasing-out of Bayanihan transfers, poverty may continue an upward trend in 2021 and then start a slow decline. Despite expected sustained high economic growth, poverty may still be almost 3 pp higher in 2024 than it was pre-pandemic. Figure 11. Impact of COVID-19 on Poverty, 2015–24 A. Poverty Rate Projection, Percent B. Number of Poor Projected, Millions 30 30 26.7 24.8 24.2 23.6 24.0 23.2 25 25 24.3 22.0 21.2 20.4 19.8 21.9 23.8 23.6 22.6 23.1 22.6 20 16.7 20 17.7 17.9 16.4 21.1 20.7 20.3 20.0 19.3 15 15 17.7 17.3 16.7 15.8 10 10 2015 2018 2019 2020 2021 2022 2023 2024 2015 2018 2019 2020 2021 2022 2023 2024 Actual Poverty Actual Number of Poor Projection COVID19-Uncompensated Projection COVID19-Uncompensated Projection COVID19-Compensated (perfect targeting) Projection COVID19-Compensated (perfect targeting) Projection COVID19-Compensated (random targeting) Projection COVID19-Compensated (random targeting) Source: Projections based on FIES 2018, using macro-microsimulation model. |8 Longer-Term Effects on Human Capital The combination of income loss and precarious employment has led poor households to adopt adverse coping strategies that could jeopardize the human capital development of their children. Increasing food prices and reliance on adverse coping mechanisms like eating less creates the risk of serious long-term consequences, particularly for the basic health and nutrition of those in vulnerable households. While households in both the bottom and top quintiles resorted to adverse coping strategies,1 the proportion of poorer households is much larger. In May 2022, 72 percent of households in the poorest quintile reported reducing food consumption compared to 55 percent of those in the richest quintile. Reduced mobility, facility closures, and the fear of contracting COVID-19 may have also kept patients from seeking needed care: average monthly utilization of essential health services decreased by 25 percent in 2020 compared with the same period pre-pandemic; poorer households were more likely to forgo care. UNICEF estimates that at least 2 million Filipino children may miss out on immunizations due to the pandemic (UNICEF 2020). In May 2022, most adult Filipinos (88 percent) were vaccinated for COVID-19, but only 25 percent were fully immunized with booster vaccination; the share of fully immunized drops to 17 percent in rural areas and 12 percent in the poorest quintile. Moreover, less than 40 percent of the population were planning to get the booster. Poorer households are more likely to suffer persistent food insecurity. Data from the Social Weather Stations (SWS) surveys show that at the onset of the crisis, hunger rose to unprecedented levels. The incidence of hunger, estimated at 8.8 percent in December 2019, had shot up to 30.7 percent by September 2020. The HFS data indicate that while both poor and better-off households suffered from food insecurity, the situation improved much faster for the better-off. More importantly, at the onset of the pandemic about 57 percent of households in the poorest quintile were already suffering from severe food insecurity (i.e., ran out of food, went a whole day without eating) compared to 34 percent of the richest households; more than two years later, the proportions fell slightly among households in the poorest quintile (to 46 percent), while declining considerably for households in the richest quintile (to 11 percent). Greater food insecurity can aggravate already prevalent child malnutrition and stunting, which can have significant future impacts on child learning and economic prospects. Comparisons within income groups of households that have and have not experienced an income shock suggest that the economic shock from the pandemic has put households at greater risk of food insecurity. 1 Primary adverse coping strategies are reducing food consumption, selling assets, and increasing debt. |9 The COVID-19 pandemic has placed considerable strain on the country’s education system and may have long-term scarring effects on human capital. Data from the UNESCO 2020 global monitoring of school closures show that between March 2020 and February 2021 about 24.9 million Filipino students from pre-primary to upper secondary had no in-person instruction (UNICEF 2021). Even though the beginning of school year (SY) 2020–21 was deferred from August to October 2020, as of January 2021 total enrollment for K-12 students was still estimated to be almost 6 percent lower than it was in SY 2019–20 (World Bank 2021a). By mid-November 2021, about 100 pilot schools had reopened for face-to-face learning, but as of April 2022 only about 20 percent of schools in the country had shifted to in-person classes. Building on 36 studies across the world, Patrinos et al. (2022) demonstrated that due to school closures during the first wave of COVID-19, on average students lost about one-third to one-half year of learning. That study also found that inequality in learning between more and less advantaged groups is likely to grow over time. These learning losses, if not remedied, may impact a student’s entire education trajectory because the lost learning is likely to limit opportunities to advance to higher levels of schooling. There are also long-term future earnings losses associated with lost human capital. Preliminary estimates for the Philippines indicate that extended distance learning is expected to have reduced the learning-adjusted years of schooling by over a full year. The challenges associated with distance learning could have an adverse effect on the educational attainment and learning outcomes of youth. With schools adopting distance learning since the beginning of SY 2020–21, the Department of Education (DepEd) identified multiple modalities to support remote learning. Despite the variety of options, a substantial number of students have relied primarily on paper- based modules for distance learning—the December 2020 round of the HFS showed that 80 percent of households with students enrolled continue to utilize paper-based modules as their primary modality for remote learning (World Bank 2021a). The HFS also revealed that among the myriad challenges students face with distance learning, the top barriers to effective learning were the lack of access to learning devices (e.g., iPad, PC); children’s inability to focus on remote learning without adult supervision; and the lack of internet access or insufficient mobile data. The limited access to resources that could help support remote learning placed students from poor households at a further disadvantage, making it even more challenging to keep learning outcomes to their pre-pandemic levels. On average, over half of Filipino households estimate that their children learned from remote learning less than half what they would have learned from face-to-face schooling. The HFS of May 2022 asked households “How much on average did the children learn from online or remote learning, compared to full face-to-face classes?”— about 56 percent of respondents estimated their children learned less than half; of those, 21 percent estimated the children learned less than 30 percent. The proportion increases to 68 percent among poor households and to 64 percent in rural areas (Figure 12). About 25 percent of poor households mentioned their children attended the majority of classes (90-100 percent) compared to 57 percent in the richest quintile. Lack of interaction with teachers and other students and the inability of students to focus were the main reasons respondents gave for the limited effectiveness of remote learning. Poor households were more affected than better-off ones by the inability of students to focus; better-off students were more affected by limited teaching capacity (Figure 13). | 10 Figure 12. How Much Children Learned on Figure 13. Main Reasons that Remote Learning Is Less Average from Remote vs F2F Learning, 2022, Effective than F2F, 2022, Percent Percent 100 100 80 80 60 60 40 40 68 64 56 20 50 46 20 0 Poorest quintile Richest quintile Rural Urban 0 Philippines Poorest Richest Rural Urban Income group Area quintile quintile Philippines Income group Area Lack of online learning materials Limited teaching capacity Lack of devices Students' inability to focus Less than 50% 50-80% 80-100% Lack of interactions with teachers/peers Others Source: HFS May 2022. Source: HFS May 2022. Note: F2F = face-to-face. Note: F2F = face-to-face. In addition to short-term economic losses, the pandemic could also have longer-term consequences for the competitiveness of the country’s workforce. The increased domestic responsibility to oversee children’s education as they study at home could influence a parent’s decision to participate in the labor market, possibly resulting in forgone earnings. In addition to the short-term costs, the long-term economic cost of learning loss could also be substantial—the World Bank (2021) estimates that learning loss, which erodes the productivity and competitiveness of the country’s workforce, could decrease the average annual earning of each student by $893– $1,137 (2017 PPP$). | 11 What Can Policy Do? Although GDP projections for 2021–24 look to a resumption of economic growth, rebound does not necessarily mean recovery. While economic growth is a necessary condition, it is not likely to be sufficient to prevent the scars the pandemic has left on the economy and the people. Economic growth is central to reversing poverty and inequality, but inclusive recovery and long-term resilience need to be complementary goals. Policy needs to focus on healing the pandemic’s scars, and setting the stage for a vibrant and inclusive recovery. Policy priorities can be structured along two overlapping pillars: providing vulnerable groups with enough support that they can absorb shocks as the crisis unfolds and increase their resilience, and enhance skills development to promote more inclusive and stronger recovery. Healing the Pandemic’s Scars and Building Resilience ◊ Increase booster vaccination uptake, particularly in remote areas. The decline in COVID-19 cases in the Philippines, in large part due to the massive government vaccination effort, has made it possible to loosen mobility restrictions, allowing the economy to largely reopen and spurring the recovery of jobs. This highlights the importance of expanding booster vaccination efforts to strengthen population immunity and address vaccine hesitancy, particularly in remote areas and among the poor. Preliminary results from a study on reducing vaccine hesitancy in the Philippines suggest that providing those who are vaccine hesitant with simple messaging that speaks to either personal or social vaccination benefits from getting the vaccine could nudge people to get vaccinated (World Bank 2021b). ◊ Strengthen social protection programs and provide well-targeted assistance, particularly in regions where recovery is projected to be slow. Bayanihan 1 and 2 transfers did help to mitigate the impact of COVID-19 in poorer regions, but many of these social protection programs have either lapsed or are about to expire. With projections showing a slow decline of poverty in several regions, compounded by the increase in food prices, targeted social assistance programs could do much to prevent more Filipinos from slipping into poverty. Policy could be directed to enabling active enrollment of new program beneficiaries—the already poor who are not covered by social assistance benefits and those newly impoverished by the pandemic— while facilitating the graduation of beneficiaries who have matured into self-sufficiency. Priority should be given to improving social assistance benefits in regions where recovery is likely to be sluggish. The social protection framework can be upgraded to help Filipinos prepare, cope with, and adapt to shocks without jeopardizing the national fiscal position. | 12 ◊ Use digital technology to improve the targeting and efficiency of social protection. The rollout of social protection measures in Bayanihan revealed gaps in implementation but also led to rapid improvements in delivery, such as use of digital payments (Cho et al. 2021). The country is currently rolling out the Philippine Identification System (PhilSys), a new digital ID system that would both remove paperwork burdens on Filipinos and help register the previously unregistered population who lacked such documents. Building on these improvements, service delivery can be better-targeted, reaching the households that are most in need and allowing for faster responses to localized challenges, such as natural disasters. ◊ Closely monitor inflation in order to anticipate and minimize its impact on poor households. During 2021 and in the first three months of 2022, inflation rates reached the upper bound of the government’s target of 2–4 percent (BSP 2022). With pressures on global food and energy markets likely to rise with the continued crisis in Ukraine, monitoring inflation will be crucial for recovery. Reining in the impact of food inflation on households will be particularly important: rising food prices hurt the poorest households most and may worsen food insecurity. The East Asia and the Pacific (EAP) economic update of October 2022 suggests that more efficient social protection with targeted transfers to low-income households would better mitigate the poverty impacts of rising inflation at a lower fiscal cost than price controls and subsidies (World Bank 2022a). ◊ Support schools as they assess student learning and provide learning recovery programs. Students have over the last two years had widely different learning experiences. As students return to face-to-face classes, it is critical to assess each student’s learning level and adjust teaching as needed to support their learning recovery. This will require training for teachers to help them prepare for classes where learning inequality could be severe (World Bank 2021). Effort should also be placed in reaching out to students who have dropped out of school to encourage them to return or enroll in alternative learning options. These measures could help mitigate the disproportionate impact that the COVID-19 crisis has had on children from poorer households, particularly as the pandemic heightened already existing barriers to learning and human capital development (World Bank 2022b). Setting the stage for a vibrant and inclusive recovery ◊ Support the reskilling, redeployment and resilience of workers disproportionately affected by the pandemic. The COVID-19 crisis has caused both job loss and a notable share of workers in need of income who have transitioned to lower-productivity sectors and occupations. Youth and workers with less education have been especially affected—both unemployment and underemployment have increased among youth and through 2021 remained persistently higher than national levels. Meanwhile, early patterns of recovery suggest slower recovery for low-end services and industry, both of which employ large shares of workers with less education. Expanding skills development programs that aid with reskilling and upskilling could help workers transition to more productive jobs, hastening the recovery of the economy from the pandemic. The government has undertaken reforms to support the recovery of workers and businesses and to address long-lasting effects of the pandemic on the labor market. As the Philippines continues its recovery from COVID-19, it is important to speed up reforms. Priority actions could focus on scaling up skills development programs like the online training offered by the Technical Education and Skills Development Authority (TESDA); broadening the reach of training to disadvantaged groups; and using apprenticeship programs to support youth employment. ◊ Boosting skills for a transition to a more productive and innovative economy. Digitalization is changing the nature of work and the pandemic has given added impetus to this transformation, bringing the future ever closer. These changes may accelerate the shift of labor demand away from low-and middle-educated to higher-educated and skilled workers. Delay in adapting the supply of skills to changing demand may | 13 aggravate the already large skill premium, which would worsen income inequality. Revising education and training systems so that they emphasize skills that will be most in demand in the digital era will be critical to harnessing technological changes to promote more inclusive—and stronger—economic growth. Policy measures can be directed to enhancing foundational and noncognitive skills in basic education, increase access to quality tertiary education, strengthen collaboration between government and the private sector to reform tertiary and technical vocational education, and close the quality gap in tertiary education to increase the return of students from poorer households. ◊ Support women’s employment through more flexible work arrangements. The pandemic has accelerated the adoption of remote work models, which seem to incentivize more women to enter the labor force because they provide flexibility that is compatible with care responsibilities. The Philippine House of Representatives has proposed amending the Telecommuting Act (Republic Act 11165) to expand work- from-home capabilities, which would be a useful step forward. Increased adoption of remote work models offers a real opportunity to women who would otherwise be unable to join the labor force due to domestic work and childcare—and to women who lost their jobs in the pandemic. However, if they lack the skills to benefit from this shift, they may not be able to take advantage of this opportunity. Scaling up efforts to provide women, especially women in low-income groups, with a chance to acquire new skills in ICT and other STEM-related fields could help them to secure more productive work as the labor market changes. ◊ Encourage firms to expand opportunities for women who wish to reenter the labor force. Returnship programs, which typically provide women with mentorship and skills training, could ease the process. | 14 References BSP (Bangko Sentral ng Pilipinas). 2022. Monetary Policy–Inflation Targeting: The BSP’s Approach to Monetary Policy. https://www.bsp.gov.ph/Pages/PriceStability/TheInflationTarget.aspx. Department of Education. 2022. “On the Expansion Phase of Limited Face-to-face Classes.” https:// www.deped.gov.ph/2022/02/02/on-the-expansion-phase-of-limited-face-to-face-classes/. Cho, Yoonyoung,Yasuhiro Kawasoe, Ruth Reyes Rodriguez, and Myra Valenzuela. 2021. “COVID-19 G2P Cash-Transfer Payments: Case Study: Philippines.” World Bank Group, Washington, DC. http://documents.worldbank.org/curated/en/368351625163110870/COVID-19-G2P-Cash-Transfer- Payments-Case-Study-Philippines. Patrinos, Harry Anthony, Emiliana Vegas Rohan and Carter-Rau. 2022. “An Analysis of COVID-19 Student Learning Loss.” Policy Research Working Paper No 10033. World Bank, Washington D.C. UNICEF. 2020. “2 million Filipino children may miss out on vaccinations in 2020 amidst COVID-19.” https://www.unicef.org/philippines/press-releases/2-million-filipino-children-may-miss-out-vaccinations- 2020-amidst-covid-19. ———. 2021. “COVID-19 and School Closures: One Year of Education Disruption.” https://data. unicef.org/resources/one-year-of-covid-19-and-school-closures/. World Bank. 2021a. “The Philippine Basic Education System: Strengthening Effective Learning During the COVID-19 Pandemic and Beyond.” – Philippines COVID-19 Monitoring Survey Policy Notes. Washington, DC: World Bank. ———. 2021b. “Reducing Vaccine Hesitancy in the Philippines: Findings from a Survey Experiment.” Washington, DC: World Bank. http://www.worldbank.org/philippines/covidmonitor. ———. 2022a. East Asia and the Pacific Economic Update October 2022 Edition: Reforms for Recovery. Washington, DC: World Bank. ———. 2022b. “Here’s a Remedy for COVID’s Legacy of Growing Inequality.” https://blogs. worldbank.org/voices/heres-remedy-covids-legacy-growing-inequality.