Threat to jobs not yet over, says ILO

Employment in developing countries, including the Philippines, will continue to drop in the near term despite early signs of economic recovery, the International Labor Organization (ILO) said in a report released yesterday. The ILO advised governments to continue spending to stimulate the economy and focus on creating jobs even at the expense of wider budget deficits to avoid threatening the job scenario. Local economists sought for comment backed the forecast, saying the impact of recent storms and current political uncertainty would also deter firms from rehiring. "Employment in high [output]-per-capita countries is likely to return to pre-crisis levels only in late 2013, with a return in medium [output]-per-capita countries forecast much sooner (end of 2010)," the ILO’s World of Work Report 2009 stated, basing the forecast on experience from earlier crises. Firms are also likely to increase working hours of existing employees first and delay hirings, it added. The Philippines, in particular, will likely take two years to recover as will Indonesia, the report said. The country’s unemployment rate has so far slightly widened to 7.6% in July versus 7.4% the same month last year, latest official data showed. Rene E. Ofreneo, a professor at the University of the Philippines-School of Labor and Industrial Relations, concurred with the ILO projection. "Recovery in the financial sector has been seen but it doesn’t follow that there will be recovery in the real sector," he said. The destruction wrought by recent storms and the uncertainty caused by the coming elections will further delay a pickup in the real economy, Mr. Ofreneo added. University of the Philippines economist Benjamin E. Diokno said in a text message that the ILO forecast was "vaguely relevant for the Philippines" as demand for workers overseas slows and job opportunities fail to keep up with the new labor entrants. In the meantime, at least five million jobs across the world that were retained partly due to government support could be lost if firms stop resorting to flexible employment and if pump-priming efforts were discontinued, the ILO said. This will come on top of the over 20 million jobs that roughly 40 countries have been losing -- 10.7 million in poorer states and 10.2 million in developed ones -- since the third quarter of 2008. "To a certain degree, job losses have been mitigated by working-time reductions and other employment retention practices... The issue arises of whether job retention can continue for much longer," the ILO said. "The risk is high as firms and government budgets are increasingly constrained and the policy of partial benefits and similar measures are phased out or retracted," it added. The Philippines has breached its P250-billion deficit ceiling for the year, with spending hitting P266.1 billion as of October. Analysts expect the yearend deficit to hit P300 billion. The ILO report went on to warn against immediate moves to cut government spending, noting that cutting deficits could increase employment losses, which in turn affect consumption and eventually hurt prospects of an economic recovery. It would be cheaper to incur debts now than to face more pressure later on from workers -- discouraged by the long bout of unemployment -- dropping out from the labor force. Mr. Ofreneo supported the prescription. "All pump-priming efforts are deficit-causing so make sure every centavo counts," he said in a telephone interview, proposing that further stimulus funds be directed to labor-intensive construction of roads, irrigation, flood control and mass housing. "Just address wasteful spending, reduce corruption and the political and economic uncertainty," the economist said. -- BusinessWorld