December 2015 No. 9 Employment and Poverty in the Philippines1 Jan J. Rutkowski2 Abstract This study analyzes labor market performance in the Philippines from the perspective of workers’ welfare. It argues that pervasive in-work poverty is the main challenge facing labor policy. Poverty is primarily due to low earning capacity of the poor and to their limited access to regular and productive jobs. Behind these are the two interrelated root causes of in-work poverty— low education of the poor, and the scarcity of productive job opportunities. The labor market is segmented into “good” and “bad” jobs, with the poor working in the latter. They hold jobs that are informal, temporary or casual, and low-paid. Widespread informality means that the poor neither benefit from the minimum wage policy nor from employment protection legislation. They do not benefit from wage growth either, because their bargaining power is weak. “Good” jobs are so few, especially in rural areas, that even better educated workers are often forced to take unskilled jobs and work as low-paid laborers. The reduction of in-work poverty hinges on removing constraints to gainful employment in both supply side (better education and skills) and demand side (better jobs). It is critical that the young poor have improved access to quality education, and be equipped with skills required in the modern sector of the economy. But in parallel, better jobs need to be created, which can be attained from the growth of the formal and higher value added sector of the economy. The process of structural transformation should be supported by effective labor policy. Labor regulations need to be made simpler and more flexible to facilitate the reallocation of labor from less to more productive activities, and from informal to formal sector. Targeted training programs have the potential to address the problem of low skills among the poor workers, especially the young ones. Such programs should be developed on a pilot basis and expanded if proven to be cost-effective. Main Concepts Used in the Note Bad jobs. Jobs are considered “bad” if they are low-paid and informal, and thus are not covered by labor regulations. Jobs can also be bad if they are involuntarily part-time, temporary or casual. As a rule, jobs that are deemed as “bad” are associated with an elevated risk of poverty. “Good” jobs are jobs that pay above the low-pay threshold or are formal, unless they have some characteristics that render them “bad” (e.g. are involuntarily part-time or temporary). As a rule, “good” jobs are associated with low risk of poverty. 1 The Note represents a stand-alone overview of the Philippine Labor Market Review prepared under the World Bank programmatic technical assistance to the Philippines in the social protection and labor area. The report was prepared by a team led Jan Rutkowski and comprising Yuko Okamura, Rosechin Olfindo and Jorge Avalos. Kat Dinglasan provided research assistance. Isabel Ferino edited the text. The team worked under the guidance of Jehan Arulpragasam as the Practice Manager, and Aleksandra Posarac as the Program Leader, in the EAP Social Protection and Labor Global Practice. The report was prepared under the overall direction of Motoo Konishi, Country Director for the Philippines. Peer reviewers were Truman Packard and Erwin Tiongson. Comments were also provided by Rogier van den Brink, Carolina Diaz-Bonilla and Pablo Acosta. The full report will be available in February 2016. 2 Lead Economist, Social Protection and Labor Global Practice. www.worldbank.org.ph 1 Employment and Poverty in the Philippines Earning capacity. A household’s earning capacity is proxied by the household’s labor income per earner. Labor market segmentation and large productivity differentials between sectors give rise to earnings inequality and impede the attainment of shared prosperity objective. The urban/rural and formal/informal divides are particularly Informal employment. Wage workers are categorized as formal if they meet at least two of the following three pronounced. Rural and informal workers earn little, and are at a high risk of poverty. criteria: have a written employment contract, have employer-provided social insurance, or are protected from arbitrary dismissal. Otherwise, they are categorized as informal. Self-employed workers are formal if they maintain a proper To reduce poverty and promote shared prosperity, the Philippines needs to address the twin problems of low skills and bookkeeping system; otherwise, they are informal. Unpaid family members are informal by definition. low productivity jobs. A mechanism also needs to be put in place to ensure that gains in labor productivity translate Low-paid jobs. A job is low-paid if it pays wage that is lower than two-thirds of the median wage. A job is very low-paid into higher wages. Poverty in the Philippines will not be reduced without growth in real wages, especially at the if it pays less than 50 percent of the median wage. The concept of low-pay refers to wage and salaried jobs, but could bottom of the wage distribution. be extended to include self-employment jobs. However, there is no information on earnings of the self-employed in the Philippine Labor Force Survey (LFS). These problems cannot be addressed by means of labor policy alone. To improve labor market outcomes, fundamental reforms are necessary in the areas of education, investment climate, and business environment. The recent Philippine Underemployment. Workers are categorized as underemployed if they would like to work more hours. They are Development Report (World Bank 2013) and the Philippines Skills Report (World Bank 2010) discuss these reforms in categorized as visibly underemployed if they work less than full time (less than 40 hours per week). Otherwise, they detail, while the East Asia Pacific at Work (World Bank 2014) provides a regional perspective. The Philippine Labor are categorized as invisibly underemployed. Market Review builds on these studies, but concentrates on the role of labor policy in improving workers’ welfare.3 Poverty. This Note focuses on the bottom 20 percent (quintile) of income distribution. It aims to determine the The Note focuses on the domestic labor market at the national level. As such, it does not cover important issues of differences in the risk of poverty faced by different worker groups, rather than to determine poverty headcount. The international migration and of regional variation in labor market outcomes in the Philippines. The issue of migration risk of poverty is the likelihood that a person falls into the bottom 20 percent of income distribution, rather than that was addressed in World Bank (2013) and will be addressed in the upcoming Association of Southeast Asian Nations the person’s income is below the official poverty line. The bottom 20 percent of the population is a subset of the (ASEAN) labor migration study. The regional variation in labor market conditions will be covered in the upcoming population below the official poverty line, which is estimated at about 25 percent (2012 data). Mindanao Jobs Report. Unemployment. According to the standard International Labor Organization (ILO) definition, a person The Note is divided into three parts. Part I looks at the nature of jobs and employment in the Philippines and their is unemployed if he/she meets the following three conditions: (a) did not work in the reference period, changes during the course of economic growth. Part II examines the links between labor market outcomes and poverty. (b) is available for work, and (c) is looking for work. In the Philippines, a broader definition is used whereby a person is Part III discusses the effectiveness of labor market policies and programs. considered unemployed when he/she meets the first two conditions, but not necessarily the third one. I. Nature of jobs and employment Work intensity. Work intensity is measured as the product of (a) the proportion of the number of earners to the number of household members of working age, and (b) the average number of hours worked by the earner. Most people work in the Philippines and few are unemployed. Economic growth creates jobs, but hardly improves their quality. It largely reproduces the existing traditional employment structure, with a high share of low-skilled and informal jobs. Reals wages do not grow, despite growth in labor productivity. Wage inequality is high, with a Employment and Poverty in the Philippines large share of the workforce in low-paid employment. On a positive note, young workers move to more productive activities. They are better educated than the older generation, although the share of poorly educated, low-skilled One does not need to be an economist to conclude that low-quality employment, inequality and poverty are big issues youth is still relatively high. Moreover, many youth are idle, i.e. are neither in employment nor in education. in the Philippines. The problems are obvious even to a casual observer. However, one needs economic analysis to determine the causes of poor labor market outcomes, and to suggest remedies. This Note sets out to analyze labor Economic growth has created enough jobs to absorb the increase in the working age population but market performance in the Philippines from the perspective of workers’ welfare. Its main goal is to identify labor has failed to improve jobs quality market constraints to reducing poverty and sharing prosperity, and to suggest ways to address them. To this end the Note focuses on three areas. First, it looks at the nature of jobs and employment in the Philippines, and how it Economic growth during the last decade created enough jobs to absorb the growing labor force. Employment has changed during the course of economic growth. Second, it examines the links between labor market outcomes grew at roughly the same rate as the population of working age. New entrants to the labor market were finding and poverty. Finally, it analyzes the effectiveness of labor market policies and programs, and suggests measures to employment, and there was no increase in unemployment. Contrary to what was claimed in some earlier studies, enhance their performance. economic growth was not jobless (Figure 1a). The Note finds that in work poverty is pervasive in the Philippines. On the one hand, it is caused by low labor Economic growth did not bring about wage growth. Although labor productivity was growing at a relatively high productivity, which reflects low education and skills of the workforce. On the other, it is caused by lack of productive pace, real wages remained stagnant in the last decade.4 Economic growth created jobs, but failed to improve their job opportunities. This may give rise to a vicious circle: workers have little incentives to invest in skills because there are few jobs requiring advanced skills. At the same time, skill-intensive jobs are not being created because workers 3 The Philippine Development Report (PDR) and the Philippine Labor Market Review (PLMR) differ in terms of focus and scope. The PLMR addresses the main question on how to reduce in-work poverty, whereas the PDR addresses how to create more and better jobs (although dif- lack the required skills. The economic growth in the last decade has not improved this situation much. It has created ferent, both questions are obviously related). Accordingly, the PLMR focuses on worker protection and labor policy, whereas the PDR focuses jobs, but it has hardly brought about structural change. The newly created jobs are still “bad” jobs – they are informal on jobs and development policy. The PLMR covers issues related to labor market performance, whereas the PDR covers a wider range of issues and precarious, pay little and often do not lift workers out of poverty. Although younger workers are better educated related to Philippines economic development. than older ones, there is still a large fraction of youth, especially those with poor background, who lack education and 4 Changes in the average wage mask substantial diversity in wage dynamics by industry and occupation. In many occupations and industries, skills that would allow them to take more productive and better paying jobs. But even better educated workers often wages were rising while in others they were falling. Highly skilled workers such as engineers (computer, electrical, mechanical, chemical, etc.) and accountants saw considerable real salary increases during the period 2006-2014. In contrast, unskilled and low-skilled workers, such as end up in low-skilled and “bad” jobs, implying that there is not enough “good” jobs. Strikingly, real wages remained freight handlers, saw their wages fall. The picture is mixed for middle-skilled occupations. For example, motor vehicle mechanics and heavy flat despite growth in labor productivity, a stark contrast to strong wage growth in other countries in the region. truck drivers experienced large wage hikes. At the same time, production clerks, salesperson, tailors, etc. saw some decline in their real wages. (Source: Structure of Earnings Survey, various years). 2 PHILIPPINE SOCIAL PROTECTION NOTE www.worldbank.org.ph 3 Employment and Poverty in the Philippines average quality. Most workers, especially informal ones, have not benefitted from growth in terms of higher real Many jobs require little skills, with laborers being the largest occupational group. One in three workers is a laborer wages (World Bank 2013). This is in sharp contrast to developments in other Asian countries, which saw a considerable and has a job that requires no skills (farmers are a separate category). Even outside agriculture and in urban areas, increase in real wages (Figure 1b). Why labor productivity growth did not translate into wage growth in the Philippines unskilled workers account for nearly one-fourth of total employment. The prevalence of low-skilled employment is an important question. This is intriguing given the growth of the minimum wage relative to labor productivity. One reflects both the scarcity of skilled jobs, and the relatively low educational attainment of the workforce. As many as 44 possible explanation is weak bargaining power of low-skilled workers vis-à-vis monopsonistic employers in a large percent of workers have less than secondary education, which is substantially higher in rural areas (57 percent), but is segment of the economy, especially in the informal sector. Another possibility is a downward pressure on wages high even in urban areas (30 percent). exerted by new labor market entrants (Box 1). As such, employment growth came at the expense of the lack of real wage growth. There is a shortage of skilled jobs. Educated workers are often forced by necessity to take unskilled jobs, and work as laborers. About 30 percent of workers with secondary education hold unskilled jobs, and 35 percent of laborers have Figure 1. Dismal wage performance despite growth in labor productivity at least a secondary education. This suggests that the scarcity of “good” jobs is not caused by insufficient supply of a. Growth trends (2005 = 100) b. Real monthly earnings (2001 = 100) middle-skilled labor. Instead, there seem to be not enough “good” jobs because the demand for middle-skilled labor 170 145 is weak in the Philippines. 160 135 150 125 Young workers move to better jobs. Young workers are better educated and are more likely to be employed outside 140 agriculture and in the wage-and-salary sector (Figure 2). But they hardly migrate to urban areas; the share of urban 115 130 employment among younger age cohorts is only marginally higher than among older ones. Although not dramatic, 120 110 105 the changes in the employment structure by age are noticeable. Young workers are more likely to be employed in the 100 95 services and industry, and to hold wage and salary jobs than older workers. For example, the share of wage-and-salary 90 85 employment among the 20 to 29 age cohort is 20 percentage points higher than among the 40-49 cohort. Young 80 75 workers are more likely to hold both highly-skilled (professional) and low-skilled jobs, than older workers. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Real GDP (constant 2000 prices) Indonesia Malaysia (manufacturing only) Real Wage Unemployment Employment Philippines Thailand Singapore Changes in employment structure contribute to poverty reduction. Workers employed outside agriculture and in the wage-and-salary employment earn more, and run a lower risk of poverty than the agricultural workers and the self- Sources: National Accounts, Philippine Statistics Authority (various years); Yearbook of Labor Statistics (various years), Current Labor Statistics, Bureau of Labor and Employment Statistics; Global Wage Report 2014-2015, International Labor Organization; employed. What is perplexing, however, is the negligible increase in the share of urban employment among young World Development Indicators, World Bank. workers, which limits the potential gains in poverty reduction because urban jobs are better than rural jobs. Note: 2014 real wage data is average of January and April 2014. Figure 2. Younger workers have better jobs Box 1. Demographic pressure on the labor market a. Employment by sector and age cohort b. Employment by work status and age cohort Each year almost 2 million young people, below 20 years of age, enter the labor market in the Philippines. About 100% 100% 55 percent become economically active, either already employed or looking for jobs by the time they reach the age 10 7 6 7 8 9 of 20. The labor market absorbs them remarkably quickly—44 percent of the cohort are employed by the age of 14 80% 41 80% 29 20, 65 percent by the age of 25, and 70 percent by the age of 30. Unemployment falls fast with age. Over 6 percent 58 57 54 53 49 38 45 of youth aged 20 are looking for work, compared with less than 3 percent of those aged 30. 60% 60% 55 While the large cohort of new labor market entrants find employment quickly, it is likely to exert a substantial 9 70 downward pressure on wages. This may partly explain the lack of real wage growth despite the growth in labor 40% 13 11 40% 16 76 productivity that was observed in the Philippines during the 2000s. The increase in employment has come at the 18 17 64 56 price of the lack of wage growth. 20% 41 50 20% 49 37 30 34 24 26 21 0% 0% 20 to 29 30 to 39 40 to 49 50 to 59 60 to 64 65 and 20 to 29 30 to 39 40 to 49 50 to 59 60 to 64 65 and above Bad jobs are widespread, but young workers move to better jobs above Wage workers Self-employed Unpaid family work Agriculture Industry Services Employment structure remains traditional, and the modern sector of the economy is still relatively small. The Sources: Source: Labor Force Survey 2013; Bank staff calculations. service sector is the largest employer (about half of total employment), followed by agriculture (one-third of total employment), while industry plays a relatively minor role (World Bank 2013). The size of the wage-and-salary sector Low educational attainment among youth from poor background remains an issue is still modest. Wage and salary workers represent about 60 percent of total employment, whereas the self-employed and unpaid family members account for the remaining 40 percent. The relatively high share of non-wage employment Younger workers are better educated than older ones, but there is still a sizable group of poorly educated youth. is another symptom of a traditional employment structure, since economic development is associated with a growth Nearly 30 percent of workers in the 20-29 age cohort have not completed secondary education (Figure 3a). This in the share of formal wage and salary employment. proportion is substantially lower than among older age cohorts. This indicates an improvement in access to education among the youth. Nonetheless, the pool of poorly educated young workers remains large. Informality looms large. Around three-quarters of all jobs, and two-thirds of urban jobs are informal. Among wage workers, 6 out of 10 are hired informally. About 50 percent of informal workers are wage workers, 40 percent are self- The problem of low educational attainment is particularly pronounced among youth from poor families, most of employed, and 10 percent are unpaid family members. Informal wage workers lack employment contracts and social whom live in rural areas. In the bottom income quintile, 60 percent of young workers lack full secondary education, insurance, and are not protected against unfair dismissal. All else being equal, their wages are significantly lower. and 40 percent in the second quintile (Figure 3b). These high percentages are very relevant from a poverty perspective Informal non-agricultural jobs require lower skills than formal ones, and are disproportionately held by less-educated because workers with less than secondary education face substantially worse labor market prospects than those who workers. completed high school. Their earnings are significantly lower, and the risk of poverty is much higher. 4 PHILIPPINE SOCIAL PROTECTION NOTE www.worldbank.org.ph 5 Employment and Poverty in the Philippines Persistently high wage inequality and high incidence of low-pay Figure 3. Younger workers are better educated but education agenda is unfinished a. Employment by educational attainment and age b. Educational attainment by income quintile and share of Wage inequality is moderately high in the Philippines by international standards. While wage inequality is higher rural employment, 20-29 years old in the Philippines than in most developed European countries, it is in the middle of the developing economies range. 100% 100% 2 High earners (top decile) earn about 7 times more than low earners (bottom decile). In the most equal countries, this 10 11 5 9 18 18 14 14 13 4 6 14 12 24 ratio is less than four, and exceeds 10 in the most unequal countries. The relative earning status of low-paid workers 7 Complete 80% 18 11 9 9 13 80% 31 18 47 is modest. The bottom decile worker earns about 40 percent of the median wage. This is much less than in low 23 26 20 8 Incomplete inequality countries, where the bottom decile worker earns over 60 percent of the median wage. However, it is more 60% 33 24 15 36 9 26 60% 42 Complete than in inequality countries, where the bottom decile worker earns around 20 percent of the median wage. 37 11 21 secondary 40% 46 12 12 25 24 40% Incomplete 12 21 15 39 secondary Wage distribution changed little in the last 15 years. Economic growth did not improve the relative status of low-paid 12 16 17 20% 32 7 11 25 39 20% Complete workers and hardly reduced the incidence of low-pay. If anything, wage inequality slightly increased, which resulted 19 primary 0% 9 12 15 24 11 12 7 24 Below from an increase in relative wages of the top 10 percent of wage earners rather than from a decrease in wages of the 7 Total 20 to 29 30 to 39 40 to 49 50 to 59 60 to 64 65 and above 0% 12 5 3 2 3 2 1 primary bottom 10 percent of wage earners. First Second Third Fourth Below primary Complete primary Incomplete secondary (poorest) (richest) Complete secondary Share of rural 84% 74% 60% 44% 33% The incidence of low-pay is high. As many as 30 percent of all wage workers earn less than two-thirds of the median wage, which is a standard low-wage threshold. In countries where wage inequality is lower than the Philippines, Sources: Labor Force Survey 2013; Bank staff calculations. the incidence of low pay is within the 10 to 20 percent range. The high incidence of low-pay translates into the high incidence of in-work poverty. There is room to improve utilization of labor resources in the Philippines Low-pay and informality go hand-in-hand On the face of it, labor resources are almost fully utilized in the Philippines. Employment rate, as defined by the ratio of employment to working age population, provides a summary measure of the utilization of labor resources. The incidence of low-pay is particularly high in the informal sector. In the informal sector, majority of workers The 60% employment rate (Table 1) is average by international standards, but is lower than most ASEAN countries, (56 percent) are low-paid, with only a minority (7 percent) in the formal sector. Low-paid employment is almost where employment rate is above world average. The modest employment rate is primarily due to the low labor force tantamount to informal employment. About 90 percent of all low-paid jobs are informal.5 The high incidence of low- participation rate among youth and women. Only one in two women is economically active in the Philippines. There paid employment is thus an upshot of widespread informality. is a 27 percentage point difference between the labor force participation rate of women and men. The high incidence of low-pay among informal workers is closely related to the characteristics of informal jobs. Among the employed, one in five persons is underemployed. The underemployed would like to work more to increase Informal wage jobs are concentrated in rural areas in the services sector, and in low-skilled occupations. Over 50 their earnings. Close to 60 percent work less than full-time, largely because they do not have access to regular full- percent of all low-paid jobs are in the services sector, and 36 percent of service and sales workers have low paid jobs. time jobs. The unemployment rate is relatively low. The standard ILO unemployment rate, which includes only the The incidence of low-pay among skilled manual workers is three times lower. jobless who are actively looking for work, is less than 3 percent. The unemployment rate is around 6-7 percent (Table 1) using a broad measure of unemployment, which includes persons available for work, but not actively looking for The incidence of low-pay is significantly higher among women than men. As many as 37 percent of women are in work. In addition to underemployment and unemployment, outmigration of Filipino workers and substantial overseas low-paid employment compared with 25 percent of men. This large difference may be due to women being more employment indicate that labor resources are not utilized to their full potential domestically (World Bank 2013). likely employed in low wage industries and occupations. Almost 80 percent of women are employed in the service sector compared with less than 50 percent of men, who are more often employed in the better paying industry sector. Table 1. Employment and unemployment rates, 2013. However, discrimination seems to play a role. All else being equal, women earn less than men. Total Urban Rural Male Female Wage inequality is driven by labor market segmentation. The low-paying lower tier of the labor market is informal Percent and casual, and mostly rural. The well-paying upper tier is formal, secure, and mostly urban. Workers in the lower Employment/Population 15+ 59.5 57.5 61.0 71.9 47.3 tier are poorly educated and hold low-skilled jobs, while those in the upper tier have at least secondary education Unemployment rate a 7.1 8.6 6.0 7.5 6.5 and hold middle- and high-skilled jobs. Wage differentials between labor market segments are large, with average Underemployment rate b 21.0 16.0 24.5 23.6 16.8 formal workers earning more than twice than informal workers. Urban workers earn 50 percent more than their Sources: Labor Force Survey 2013; Bank staff calculations. rural counterpart. Workers with tertiary education earn 3.4 times more than those with primary education, and a Broad definition of unemployment, including persons who are available for work, but not looking for a job. skilled manual workers earn 70 percent more than laborers. Results of regression analysis indicate that urban/rural b Underemployment rate is the share of workers who want to work longer hours in total employment. residence, formality status, education, and skills level (proxied by occupation) are the four most important factors that independently contribute to wage inequality. A large fraction of Filipino youth is idle. One out of four persons aged 15-24 is not in education, employment or training (NEET). This is a high proportion by both international and regional standards. Only 14 percent of young people who are II. Labor Market Determinants of Poverty NEET are actively seeking employment. The high NEET rate is associated with poverty. The percentage of idle youth is the highest in the first two income quintiles (bottom 40 percent), and the lowest in the top income quintile. This undermines People are poor in the Philippines because they earn little, not because they do not work. Having a job does not the hypothesis that the Filipino youth are idle because of the high reservation wages due to remittances. This is not the provide a pathway out of poverty, and in-work poverty is pervasive in the Philippines. It is the quality of a job that case for majority of idle youth. Discouragement from the lack of productive job or education opportunities is a more convincing explanation of youth idleness. The NEET rate is virtually the same in urban and in rural areas. 5 The reverse is not true. Many informal jobs are relatively well-paid. For example, one in four informal jobs pays more than the median wage. 6 PHILIPPINE SOCIAL PROTECTION NOTE www.worldbank.org.ph 7 Employment and Poverty in the Philippines matters. Workers employed in low-productivity jobs run a higher risk of poverty than the unemployed. Such “bad” Rural workers and agricultural laborers represent majority of working poor jobs are common. They tend to be informal and casual, and do not pull workers out of poverty. The prevalence of low- productivity jobs means that the earning capacity of many households is low, which is the primary cause of poverty In-work poverty is mostly, although not exclusively, a rural and agricultural phenomenon. Rural workers, who in the Philippines. Contrary to a common myth, poverty is not a result of idleness. Members of poor households are account for the bulk of the working poor, run a much higher risk of poverty than urban ones. The average rural workers not jobless; they do work, but they hold casual, low-paying jobs. Hence, the reduction of poverty in the Philippines are almost four times more likely to be in the bottom income quintile than their urban counterparts. As a result, 84 hinges on increasing the earning capacity of the poor by investing in their education and by improving their access to percent of all working-poor live in the rural areas. The same is true for agricultural workers, who are much more likely productive jobs. to be poor than their counterparts employed in industry or services. Worker characteristics and poverty Contrary to common perception, industrial workers are somewhat more likely to be poor than service workers. The difference in poverty risk between industrial workers and service workers is rather small (3 percentage points), but still In-work poverty is pervasive in the Philippines. The working poor are characterized by having low educational attain- significant. Service jobs are not necessarily worse than manufacturing jobs, and not all manufacturing jobs are “good”. ment, residing in rural areas, and having informal jobs that are often temporary, casual, or part-time. The majority of The industry and service sectors are heterogonous in the Philippines as elsewhere, providing both “good” and “bad” the working poor work as laborers in unskilled occupations. In-work poverty is not limited to rural areas; it also occurs jobs. in urban areas and outside agriculture. The key factor behind urban poverty is informality, where the vast majority of low-paying jobs are. Informal workers, both wage workers and the self-employed, face an elevated risk of poverty. Non-wage workers are predominant among the working poor. The self-employed and unpaid family workers represent 52 percent of the bottom income quintile (Figure 5). The self-employed also run a higher risk of poverty than the wage High incidence of in-work poverty workers, in both urban and rural areas. The rural workers are predominant among the poor wage workers. Almost 40 percent of rural wage workers fall into the bottom income quintile, compared with less than 10 percent of urban ones. Labor force status has little impact on the risk of poverty in the Philippines. The employed are as likely to be poor This characteristic of in-work poverty has important implications for the minimum wage policy. as the economically inactive, and paradoxically, more likely to be poor than the unemployed (Figure 4a). Because low-paying jobs are plenty, having a job does not protect one from poverty. Two-thirds of the working-age poor are Figure 5. Wage workers in rural areas are the single largest group among the working poor employed, while the unemployed account for a tiny fraction of the working-age poor. Distribution of workers by status in employment and per capita income quintile Unemployment does not mean poverty. The unemployed are often well-educated young persons from 100% 9 7 5 12 better-off families, who look for jobs that meet their professional aspirations. This does not mean that 18 17 11 80% unemployment is not a social problem in the Philippines. It is a problem because it lowers the returns to 27 22 14 14 investment in human capital, and implies underutilization of the well-educated labor force. It also entices 60% 30 7 10 22 some of the well educated workers to seek job opportunities abroad rather than in their home country. 5 26 40% 33 38 39 Figure 4. Employment does not lower the risk of poverty, and the quality of employment matters 20% 37 49 26 a. Incidence of proverty by labor force status b. Incidence of proverty by employment/ 9 16 0% Lower middle Middle Upper middle Top undermeployment status Wage workers, urban Wage workers, rural Self-employed, urban 18 35 Self-employed, rural Unpaid family 16 30 14 Sources: Family Income and Expenditure–Labor Force Survey data, January 2013; Bank staff 12 25 calculations. 10 20 8 Poor education and lack of skills are key factors behind in-work poverty 15 6 4 10 Workers with higher educational attainment and more skills have a substantially lower risk of poverty than their 2 5 less educated and less skilled peers. Figure 6 illustrates the pattern of the poverty risk falling with improvements in 0 Employed Unemployed, Unemployed, Out of the labor 0 education and skills, in both urban and rural areas. This suggests a clear policy implication that investment in access passive force Fully employed Invisible underemployed Visible underemployed to quality education is the most effective way to combat in-work poverty. Sources: Family Income and Expenditure–Labor Force Survey data, January 2013; Bank staff calculations. Completing secondary education is critical. Workers with less than secondary education face a high risk of poverty Note: Poverty = bottom quintile of individual per capita income distribution; Visible underemployed = work less than full-time and are preponderant among the working poor. Altogether, they represent nearly 80 percent of the working poor. (40 hours per week) and would like to work more; Invisible underemployed = would like to work more. The completion of secondary education dramatically lowers the risk of poverty. Less than 10 percent of workers with secondary education are in the bottom income quintile, compared with nearly 25 percent of workers with primary From the perspective of poverty, underemployment is a bigger problem than unemployment. The underemployed education (Figure 6a). (those who want additional work) face the highest risk of poverty (World Bank 2013). The visibly underemployed (those who work part-time) are the most vulnerable to poverty. They are twice as likely to be poor as the fully employed (Figure 4b). Underemployment is more pronounced in rural than in urban areas. The underemployed represent about one-third of the working poor. 8 PHILIPPINE SOCIAL PROTECTION NOTE www.worldbank.org.ph 9 Employment and Poverty in the Philippines Figure 6 The incidence of in-work poverty falls with increases in education and skills The incidence of poverty is lower among female workers than male workers. Men comprise two-thirds of the working a. Incidence of poverty by workers’ educational attainment b. Incidence of poverty by workers’ occupation poor. The risk of poverty faced by a female worker is 5 percentage points lower than that of a male worker. Professionals Household characteristics and poverty Clerks Four factors determine a household’s per capita income. First, the number of earners within the household relative Secondary Technicians to the number of household members of working age. Second, the number of hours the earners usually work. These Service & sales two factors combined are referred to as work intensity, and measure the amount of labor that the household supplies Incomplete secondary Skilled manual to the market. The number of earners is referred to as an extensive, and the number of hours worked as an inten- Primary sive margin of work intensity. Third, the household’s earning capacity, which is the amount of labor income that the Unskilled employed household members are able to earn. Finally, the household’s demographic composition or the number of Below primary Farmers household members who are of working age relative to household size. In the ensuing analysis we look the relative 0 10 20 30 40 50 0 5 10 15 20 25 30 35 importance of these factors, focusing on the impact of work intensity and earning capacity, ignoring that of the demo- Workers in bottom quintile, % graphic factor. Sources: Family Income and Expenditure–Labor Force Survey data, January 2013; Bank staff calculations. Philippine households are poor as they are disadvantaged by all four factors that determine per capita income. First, in poor households fewer household members of working age are employed than in richer ones. Second, those who Equally critical is the acquisition of occupational skills. Nearly 30 percent of unskilled workers (laborers) are in are employed, work shorter hours. Third, they earn less. Finally, there are more dependents in poor than in non-poor bottom income quintile, and accounts for close to 60 percent of all working poor. In contrast, workers with mid-level households. vocational skills are much less likely to be poor. Less than 10 percent of skilled manual, or service and sales workers, are in the bottom quintile. The acquisition of higher-level technical skills lowers the risk of poverty still further (only 5 Low earning capacity rather than joblessness is the primary cause of poverty percent of technicians are in the bottom quintile). Differences in earning capacity play the most important role. The impact of differences in earning capacity is greater In-work poverty and informality are closely linked than that of work intensity. First, the differences in earning capacity between the poor and non-poor are larger compared to their differences in work intensity (Figure 8a). Second, all else equal, increases in earning capacity more As expected, in-work poverty is closely linked with low wages. Workers who earn less than two-thirds of the median sharply reduce the risk of poverty than increases in work intensity (increases either in the number of earners within wage face a significantly higher risk of poverty than those who are above the low-pay threshold (Figure 7a). These are the household or in the hours worked). The earning capacity of poor households is much lower than that of non-poor. not surprising results, but imply that reduction of in-work poverty in the Philippines hinges on growth in real wages, or On average, earnings of workers from the bottom quintile households are half of those of their counterparts from the on reduction in wage inequality, or both. Unfortunately, none of these conditions was met in the 2000s. middle income quintile. These are substantial differences, much larger than the difference in work intensity. With low paid jobs concentrated in the informal sector, in-work poverty is closely related to informality. Over An increase in households’ earning capacity leads to a sharp reduction in the risk of poverty. If a household moves 90 percent of all low-paid jobs are informal, and as a result, informal workers are disproportionately represented in from the first to the second earning capacity group, the risk of poverty drops by 18 percentage points.6 However, the the bottom 20 percent. The high incidence of in-work poverty is thus just a mirror image of pervasive informality. increase in earning capacity needs to be considerable to have noticeable reduction in the risk of poverty. To move However, while the majority of the working poor are informal workers, informal employment does not necessarily lead from the first to the second earning capacity group, the employed household members would need to double their to poverty. Many informal workers earn above the low-pay threshold and avoid poverty (Figure 7b). earnings. For many poor households such increase is hardly possible given the limited job opportunities that are available to them. Figure 7. Strong link between low-pay, informality, and poverty a. Incidence of poverty by wage level b. Wage distribution by formality Poor households are seldom jobless. In poor households most family members of working age are usually employed. Poverty is associated with joblessness in only a fraction of poor households. However, the proportion of jobless 100% 0.5 Very high 11 7 households is somewhat higher among the poor than among the non-poor. For example, among the poorest 80% households, 11 percent only have one earner per four household members of working age. This is 4 percentage points High 44 48 more than households in the middle income quintile (Figure 8b). But the number of poor households, where few of 60% their members work, is still rather small. Joblessness is not the primary factor behind poverty in the Philippines. Middle 40% 12 The risk of poverty is only modestly reduced with more earners within a household. The relationship between Low 20% 40 poverty and the number of earners in the household is rather weak. For example, if the number of household members Very low 33 employed increases from 2 to 3, the likelihood of poverty drops just by a few percentage points. High work intensity 0% 3 2 does not necessarily protect households from poverty. 0 5 10 15 20 25 30 Formal Informal Workers in bottom quintile, % Very low Low Middle High Very high Workers in poor families work shorter hours than their counterparts in richer families. On average, workers in the Sources: Labor Force Survey 2013, Informal Sector Survey 2008, National Statistics Office; Bank staff calculations. bottom quintile work almost 4 hours per week less than those in the second quintile, and 7 hours less than those in Notes: Very low pay = less than 50% of median wage; low pay = less than 67% of median wage; middle pay = less than 150% of median wage; high pay = less than 3 times the median wage; very high pay = 3 times the median wage or higher. The intervals are right-open and left-closed; the upper endpoint for the lower wage group is the lower endpoint for the higher 6 Households were divided into five groups of equal size (quintiles) that represent different levels of earning capacity, ranging from low to group. middle to high. 10 PHILIPPINE SOCIAL PROTECTION NOTE www.worldbank.org.ph 11 Employment and Poverty in the Philippines the middle, third quintile. These are substantial differences in hours worked, which translate into lower total earnings III. Labor regulations and employment programs of poor households. Labor regulations in the Philippines, on paper, provide workers considerable degree of protection, but in reality, The poor work shorter hours because of lack of opportunities to work full-time. Among the poor the percentage benefit only a small group of workers. This is mainly due to the large proportion of non-wage employment, widespread of workers who would like to work more is significantly higher than among the non-poor. For instance, 33 percent of informality, and non-compliance with labor regulations. As a result, there is a big discrepancy between the de jure bottom quintile workers would like to work longer hours, compared with 10 percent in the top quintile. The poor work and the de facto coverage of worker protection. The labor market is segmented with some workers benefitting from shorter hours not because they choose so, but because they have no other option. There is a shortage of regular—full- regulations, while others do not. And by raising the cost of formal labor, labor regulations contribute to segmentation. time and permanent—jobs accessible to vulnerable workers. There is scope for reducing the distortionary effects of labor regulations in the Philippines, without compromising the important objective of worker protection. The relevant measures include better aligning of the minimum wage with Figure 8. Differences in earning capacity and number of earners according to income group of households worker productivity, and making the regular employment contracts more flexible. Both measures would strengthen a. Average earnings per worker by income quintiles b. Ratio of earners to household members of working age incentives to hire workers formally under regular employment contracts, and thus could increase the actual coverage Earnings of bottom quintile = 1 by income quintile of worker protection. However, because of the employment structure in the Philippines—largely agricultural, informal, and non-wage—labor policies have a limited role in expanding coverage of worker protection as the employment structure changes only with economic development. 6 100% 19 Employment programs implemented in the Philippines broadly target the vulnerable workers, including the youth. 22 Programs are numerous and implemented by many agencies. Fragmentation and weak coordination among agencies 24 26 5 80% 35 are likely to limit program impacts. However, information on program performance is limited, making the assessment 4 60% 55 of program effectiveness difficult. 55 55 53 3 40% 48 2 Labor Regulations 20% 16 15 14 14 1 11 8 7 7 11 6 Labor regulations discussed in this Note encompass employment protection legislation and the minimum wage policy. 0% Bottom 2nd 3rd 4th Top Consistent with earlier studies, this Note argues that labor regulations are stringent in the Philippines (World Bank 0 Per capital income quintiles Bottom 2nd 3rd 4th Top 2013). In addition, it argues that as such, they are likely to contribute to informality, and segmentation of the labor Quintiles of per capita income 1/4 or less 1/3 1/2 1/1 market into “good” and “bad” jobs. Sources: Family Income and Expenditure–Labor Force Survey data, January 2013; Bank staff calculations. Notes: ¼ = one of four household members of working age is employed; 1/1 = all household members of working age are Labor regulations are strict employed. The Philippines is recognized as having one of the most comprehensive labor regulations in the ASEAN region. Low earning capacity is often accompanied by short work hours. Household members who earn little According to the Global Competitiveness Report 2014, the Philippines has a low labor market efficiency score, mostly also work shorter hours. For instance, members of households with the lowest earning capacity work due to the rigid hiring and firing practices, high redundancy costs, and limited flexibility in wage determination. The 13 hours less on average than households with the highest earning capacity. The combination of low Philippines ranked 91st among the 144 economies on the labor market efficiency scale. earning capacity and shorter working hours pushes households even deeper into poverty. The poor cannot offset their low earning capacity by working more because of lack of opportunities for additional work. The minimum wage is high relative to worker productivity. The minimum wage accounts for about 70 percent of the value added per worker in the Philippines, which is high by regional and international standards (World Bank Minimum wage has limited potential to reduce in-work poverty in the Philippine 2013). The minimum wage varies by administrative regions in the Philippines, but on average, it accounts for about 80 percent of the median wage in a region. In some regions, the ratio is even higher. In 9 of 17 regions, the minimum The minimum wage is a policy tool intended to address in-work poverty, and the Government of wage is higher than the median wage. This is due to the fact that the minimum wage is set based on labor productivity the Philippines is actively using it for this purpose. However, the potential of the minimum wage in the formal sector alone.7 policy to reduce in-work poverty is limited for two reasons. First, a large proportion of the working poor are not wage earners. Second, those working poor who are wage earners are usually employed informally. Hence, the majority of the working poor are not covered by the minimum wage policy. Actual coverage of labor regulations is limited Workers covered by the minimum wage policy represent a minority among the working poor. Majority of the The actual coverage of employment protection legislation is limited because of the relatively small size of wage working poor are informal or non-wage workers who are not covered by the minimum wage policy. Wage workers, employment, and widespread informality. Wage and salary employment represents only 60 percent of total who are the target of the minimum wage policy, represent only about half of the working poor (Figure 5), while the employment in the Philippines, and only about 40 percent of wage and salary workers are employed formally. other half includes the self-employed and unpaid family workers. Over 90 percent of low-paid workers are employed informally, and thus are not covered by the minimum wage policy. As a result, less than 2 percent (sic!) of the working poor benefit from the minimum wage policy. The minimum wage policy does little to address in-work poverty in the Philippines. 7 The minimum wage is determined through collective bargaining between formal sector employers, which tend to represent large firms, and trade unions, which represent formal sector workers. The reference wage for the negotiations is the average wage of formal workers, who are defined as full-time workers with permanent employment contracts. As a result, the statutory minimum wage in the Philippines does not repre- Workers who benefit from the minimum wage are not necessarily poor. Nearly 50 percent of low-paid workers come sent wage conditions in the informal sector. from relatively well-off families (top 60 percent), and less than 30 percent from the poorest families. Accordingly, minimum wage increases benefit many non-poor workers. At the same time, the high minimum wage may limit the chances of the poor to be employed formally as discussed in Section III below. 12 PHILIPPINE SOCIAL PROTECTION NOTE www.worldbank.org.ph 13 Employment and Poverty in the Philippines Accordingly, employment protection legislation effectively covers only about one-quarter of the workforce. There is Figure 10. Minimum wage cuts deep into the wage distributiona thus a considerable discrepancy between de jure and de facto coverage of labor regulations (Figure 9). Informality limits the actual coverage of the minimum wage policy. Among employees of private firms, less than half (45 percent) are employed in firms that are formal. Among those who are employed in formal firms, about 25 percent are paid less than the minimum wage. Accordingly, only about one-third of workers in private firms benefit from the minimum wage policy. Poverty threshold Average regional minimum wage Figure 9. Informality and non-compliance limit the coverage of worker protection Median wage Sources: Bank staff calculations based on the Labor Force Survey 2013 and the minimum wage rates. a Wages reported by employees of private establishments. Note: About 33 percent of workers employed in private establishments earn less than the minimum wage, and about 25 percent earn less than the poverty threshold. High minimum wage may exclude low-productivity workers from formal employment. The minimum wage is not a major problem for formal firms, which tend to be larger and employ more skilled workers. In the formal sector the minimum wage accounts for about 60 percent of the sector’s average wage, which is high, but not dramatically high. However, it is a major problem for informal firms, which tend to be small and employ less-skilled workers. In the informal sector the minimum wage accounts for about 115 percent of the sector’s average wage. This means that Sources: Informal Sector Survey 2008; Bank staff calculations. the cost of formalization for such firms could be prohibitively high, because they would have to pay their workers substantially more than they are paying as informal firms. This is relevant given that as many as 70 percent of informal Strict labor regulations are likely to contribute to labor market segmentation wage workers are paid less than the minimum wage. While informality confines the effective coverage of labor regulations, strict labor regulations contribute to There is scope to enhance workers’ welfare by reducing the distortionary effects of labor regulations informality.8 This is because strict regulation raises the cost of formal labor relative to informal. As such, it discourages employers from hiring workers formally. This effect is particularly strong in the case of low-productivity workers. There Making regular employment contracts more flexible could reduce segmentation. The increasing incidence of temporary is thus a trade-off between the strictness of labor regulations and their actual coverage. By reducing the strictness employment contracts indicates that regular contracts are no longer a satisfactory option for many employers. One of labor regulations, the Government could encourage formal employment, and thus expand the actual scope of option to consider could be a Single Employment Contract (also referred to as Equal Opportunity Contract), which employment protection and the minimum wage policy. is currently gaining popularity in Europe, as a means to eliminate the duality between open-ended and temporary employment. The idea is that all contracts are open-ended, but the administrative procedures governing dismissals Strict employment protection legislation leads employers to increasingly use temporary employment contracts. As are relaxed, and employment protection is instead provided via severance pay that increases with job tenure. such, it contributes to duality within the formal sector. According to LFS, about 40 percent of employees in private establishments had non-regular employment in 2013. Similarly, a survey conducted among large formal establishments Aligning the minimum wage with worker productivity can improve the chances of less-skilled workers being hired in 2012, shows that about 35 percent of employees were hired either on a non-regular basis, or as independent sub- formally. Setting the minimum wage is a delicate balancing act. On the one hand, the minimum wage is meant to contractors. This is 7 percentage points higher than four years earlier. preclude exploitation of workers by employers, and to prevent in-work poverty. On the other, it should be linked to worker productivity and should not discourage employers from hiring workers formally. Set at its current level, Minimum wage cuts deep into the wage distribution and thus fails to serve as an effective wage floor. Figure 10 the minimum wage in the Philippines favors the first objective, but compromises the second. The policy needs to illustrates the effects of minimum wage in the Philippines by showing the location of the minimum wage, the median be rebalanced in order not to exclude low-productivity workers from formal employment. Finding a satisfactory wage and the poverty threshold in the wage distribution. Set at its current level of about 80 percent of the median wage, solution requires an empirically informed dialogue among main stakeholders, in which the interests of small employers the minimum wage leaves outside its coverage about 33 percent of workers because their productivity (approximated and informal workers are adequately represented. Initiating such dialogue is thus critical, in accordance with the by their wages) is less than the minimum wage.9 Setting the minimum wage at the level of the poverty threshold recommendation of the Philippine Development Report (World Bank 2013). (about 70 percent of the median wage), would increase the effective coverage of the policy by 8 percentage points without compromising the poverty reduction objective. The minimum wage better aligned with worker productivity Labor policies have a limited role in expanding the coverage of worker protection might result in better compliance and a higher proportion of wage workers actually benefitting from the regulation. Improving the enforcement of labor regulations can expand coverage, but only marginally. The coverage of labor regulations is low primarily due to the low share of employment in formal firms. In addition, formal firms do employ 8 Labor regulations are only one factor behind informality in the Philippines, and not necessarily the most important one. It is the whole business workers informally—informal workers account for up to 25 percent of their workforce. Even with perfect enforcement environment (of which labor regulations are part) plus the culture of (in)formality that influence firms’ decisions whether or not to formalize. 9 In a competitive labor market, workers are paid wages equal to their marginal product. However, if employers have some monopsony power and full compliance, the coverage of labor regulations would increase only by 6 percentage points to reach the still they can set a wage below the marginal product of labor so that workers are exploited. Even if workers in the Philippines are paid less than their modest 30 percent. marginal product, Figure 10 shows that the fraction of workers whose productivity is below the minimum wage would still be large. 14 PHILIPPINE SOCIAL PROTECTION NOTE www.worldbank.org.ph 15 Employment and Poverty in the Philippines There is more to be gained from formalization of employment. Informality among businesses is a larger constraint to • Reallocation of labor from less to more productive activities, which involves labor moving from agriculture to expanding worker protection than non-compliance among formal firms. There is potential to expand the coverage of services and industry. worker protection by encouraging informal firms to formalize their businesses. While there is some scope to reduce • Improvement of the effectiveness of the existing labor policies. the cost of formal employment by making labor regulations more flexible, labor reforms can play only a secondary role in promoting formalization. The primary role in promoting formalization is to be played by investment climate reforms The first three objectives lie beyond the realm of labor policy. Specific interventions to advance these objectives are reducing the costs and enhancing the benefits of doing business in the formal sector. extensively discussed in (World Bank 2013, and 2010). As regards the fourth objective, measures to improve the effectiveness of labor policy include: More gains in the coverage of worker protection will be achieved with the increase in the share of wage employment. Because labor regulations are designed for wage and salary work, significant expansion of worker protection coverage • Simplification of the Labor Code, including making regular employment contracts more flexible. This could reduce can be achieved if the non-covered workers (self-employed and contributing family workers) move to wage employment. segmentation by lowering the costs of hiring workers formally. The introduction of Single Employment Contract Such reallocation of labor hinges on the expansion of the modern sectors of the economy. could reduce duality within the formal sector by making all contracts open-ended. • Revision of the minimum wage policy to factor in productivity of informal workers. The minimum wage better Employment programs aligned with productivity of all workers would strengthen incentives for employers to hire low-productivity workers formally, and would thus increase the effective coverage of the policy. Such revision should be based The two largest groups of programs being implemented in the Philippines are direct job creation and training on empirically informed dialogue among all stakeholders, including those representing the interests of small programs, which are broadly targeted at vulnerable workers and the youth. The size of direct job creation programs employers and informal workers. is substantially larger than that of training programs.10 The programs benefit mainly the better skilled among the • Overhaul of employment programs to enhance their cost-effectiveness and impact. This includes programs vulnerable workers, leaving out the most disadvantaged, who lack the basic skills. However, the low-skilled workers consolidation to decrease fragmentation; better coordination among government agencies; improving targeting are often covered by other government programs targeting the poor, which also aim to improve the employability of so as to better cover vulnerable workers; strengthening and instituting program monitoring and evaluation, and the beneficiaries.  using evaluation results to improve program performance and expand programs that are have the largest impact. This also includes strengthening the capacity of the Public Employment Service Office to deliver effective job Programs are fragmented and information on their performance is scant. It is difficult to assess the performance of search assistance and counseling services. employment programs in the Philippines due to the paucity of data. Different programs are administered by different government agencies, and coordination among agencies is limited, which leads to program fragmentation.11 Monitoring and evaluation of program performance is underdeveloped, which limits evidence on their actual coverage, targeting References efficiency, cost-effectiveness, and impact. World Bank (2010), Skills for the Labor Market in the Philippines, World Bank, Washington DC. Instituting program monitoring and evaluation and using the results to allocate resources to programs that are World Bank (2013), Philippines Development Report: Creating More and Better Jobs, World Bank, Manila. best performing could enhance their impact. There is scope for improving the impact of employment programs by World Bank (2014), East Asia Pacific at Work: Employment, Enterprise, and Well-being, World Bank, Washington, DC. enhancing coordination among implementing agencies, and by developing a monitoring and evaluation system. The World Bank (forthcoming), Philippine Labor Market Review: Employment and Poverty, World Bank. results of monitoring and evaluation should guide the policy and allocation of resources. One possible policy direction would be to focus resources on cost-effective training programs, which equip the beneficiaries with employability skills demanded in the labor market, and as such have the potential to enhance their long-term employment prospects. This is particularly relevant given that poor skills of vulnerable workers are the main obstacle to their taking more productive jobs. Conclusions Widespread in-work poverty is the main challenge facing labor policy in the Philippines. The working poor are poorly educated and have informal jobs that offer no workers protection. Most of them live in rural areas, where productive job opportunities are few. This points to two interrelated root causes of in-work poverty—low education among vulnerable workers, and scarcity of “good” jobs. Addressing these two constraints requires reforms on both the supply side (education and skills) and demand side (jobs) of the labor market. These reforms have four objectives: • Improvement in the workforce education, especially among young cohorts entering the labor market, so that workers have the skills required in the modern sector of the economy. • Structural transformation which entails the development of more productive formal wage and salaried employment sector, including an increase in agricultural productivity. 10 The so called livelihood assistance program, which is a small business start-up support program, covered about 500 thousand persons in 2014. Among the youth bridging programs, 180 thousand persons benefited from a hiring subsidy, and 20 thousand from government internship program in 2014. Public infrastructure programs vary in size. They are expanded during economic downturns to act as a social safety net. For example, about 400 thousand workers were hired under the road construction program, and 5 thousand under the road maintenance program in 2014. 11 There are over 45 implementing agencies, of which only 15 report to DOLE. About 50 direct job creation programs were reported to DOLE in 2014. 16 PHILIPPINE SOCIAL PROTECTION NOTE www.worldbank.org.ph 17