Assessment of the macroeconomic policy framework for employment generation in the Philippines

This paper assesses the macroeconomic policy framework as it affects employment and income generation and proposes guidelines to link the USAID/P assistance strategy to the current package of World Bank-sponsored reforms for industrial employment. Industry has expanded at only a modest rate in recent years and has remained capital-based in production and organization. Out of an average annual increase of 600,000 in the labor force, only l0% find jobs in manufacturing. The World Bank"s industrial restructuring program attacks these problems by expanding light-manufactured exports, reducing tariffs for import-substituting industries, and reforming the fiscal incentive program which favors capital-intensive production. The net effect of the entire package, according to the author, will be to raise the share of manufacturing employment in total employment from the present ll% to about l4%. Among the recommendations for raising manufacturers" share of employment to at least l6% by l985 are: (l) link the proposed light-manufactured exports to domestic industry to increase the likelihood of secondary employment effects; (2) increase the role of the Philippine Labor Ministry in the economic planning process to improve labor relations between government and labor leaders; (3) make domestic industry more efficient by establishing a center to study productivity trends and assist individual firms to improve their operating procedures; (4) devote productivity gains to expansion of employment rather than to consumption or increased wages; and (5) strengthen policies to improve the rural share of labor. Included are six appendices related to wage and employment trends in the Philippines.