Labor Economics

1. Final Exam- Part 1
in partial completion of IR 220 HRD in the National Level, Prof. Rosa Mercado
ALFREDO V. PRIMICIAS III- UNIVERSITY OF THE PHILIPPINES, SCHOOL OF LABOR AND INDUSTRIAL RELATIONS 1
1. Perspectives on Labor Economics for Development—policy recommendations or
strategies or actionable programs were given by the authors to deal with (1.1)
informality of labor (1.2) labor migration (1.3) gender disparity (1.4) low labor
productivity (1.5) income inequality
The policy recommendations are the following
1.1 Informality of Labor
 Allocate fairer or better capital opportunities for those engaged in informal labor.
Methods can include micro-financing or micro- credit and cooperatives and NGOs
that allocate equal economic opportunities to informal laborers.
 There is strong evidence in Argentina, Brazil and Mexico that young people
participate more in informal labor—this participation declines over time (and as
laborers reach mature age.
 The ‘lighthouse effect’ is largely practiced in Latin America where the minimum
wage has a positive effect on the informal labor market.
 Workers in the formal sector are more educated than workers in the informal
sector— but there is no correlation on education and ability to earn better between
the formal workers and the informal- salaried workers. Johannesburg, South
Africa, has demonstrated an ideal model of providing training to the informal
laborers in the garment industry by providing both technical (how to embroider)
and business (how to manage people; accounting principles) programs.
 There is no ‘one-size fits all,’ a mentality that over simplifies the condition. Policy
makers must reasonably include and actively allow participation of the Informal
Laborers to voice their cause, aspirations and needs.
 Extend social security programs to informal laborers since the impact of social
security bodes well on short- term (decrease poverty levels) and long- term
(productivity and employability) periods.
Finally, based on previous report:
Prof. Marius Olivier (2011) mentioned that there are “45%- 85% working in Asia are
working informally.”1
He further went on to say that, “in social security terms, the reason
why those who work informally are not covered is primarily legal. If you analyze the social
security laws, what is required inherently is the existence of an employment relationship
where you have an employee who works for an employer for remuneration. The impact
of that is dramatic because the moment you have this narrow definition of employment
relationship as basis for social security coverage you exclude many other groups of
workers, including those who are subjected to externalization, casualization and other
kinds of dependency relationships like contracting arrangements.”2
Moreover, social security and protection is a fundamental human right as proclaimed in
the Universal Declaration of Human Rights (UDHR), the International Covenant on
Economic, Social and Cultural Rights (IESCR), the Convention on the Elimination of
1 Page 3, Social Security Coverage of the Informal Sector: Global and Asian Perspective. Prof Marius Olivier, PH Journal of Labor and Industrial Relations, Special
Issue 2011
2 Ibid.

2. Final Exam- Part 1
in partial completion of IR 220 HRD in the National Level, Prof. Rosa Mercado
ALFREDO V. PRIMICIAS III- UNIVERSITY OF THE PHILIPPINES, SCHOOL OF LABOR AND INDUSTRIAL RELATIONS 2
Discrimination Against Women (CEDAW and various ILO conventions, shared by
Rosalinda Ofreneo, 2011):
Art 22: Everyone, as a member of society, has the right to social security and is entitled
to realization through national effort and international cooperation and in accordance with
the organization and resources of each State, of the economic, social and cultural rights
indispensable for his dignity and the free development of his personality.
Art 23 (3): Everyone who works has the right to just and favourable remuneration
ensuring for himself and his family an existence worthy of human dignity, and
supplemented, if necessary, by other means of social protection.
1.2 Labor Migration
 Policy makers must try to device an equilibrium between geographic disparities in
economic opportunities and migration cost.
 The effects of brain- drain and brain- gain in countries must be seriously
considered. Outside the financial gains of the migrant workers and the skills-
benefits of the receiving nations, policy makers must create substantial steps to
harmonize these two.
 Create immigration and laws and policies less restrictive and by illuminating
ensuring human trafficking and labor exploitation.
Additionally, migration according to Lee (1965) is a “permanent or semi permanent
change of residence.”3
He even included a move across the hall from one apartment to
another, as to moving from India to the US. He further gave us four factors of migration
which I then figured can then be combined with Exit, Voice and Loyalty of Hirschman
(1970)4
and Wage, Voice, Exit, and Public Policy: a study on the mobility of labor in the
Philippines of Sale (2012):
 Factors associated with the area of origin
 Factors associated with the area of destination
 Intervening obstacles
 Personal factors
In the Philippine context, according to Dean JP Sale of the School of Labor and Industrial
Relations, University of the Philippines, “(i) enterprises are fully mobile and will move to
the community where their set preference patterns are best satisfied; (ii) enterprises have
full knowledge of differences among revenue and expenditure patterns; (iii) a large
number of communities exist in which enterprises may choose to operate; and (iv) bigger
enterprises choose to operate in NCR while small enterprises choose to operate outside
NCR because of certain factors.
Assimilating these with other models on labor mobility are Kochan’s (1980), James March
and Herbert Simon’s voluntary turnover model and Hirschman’s, where “voluntary
3 Ibid. Page 49.
4 Exit or leaving without trying to fix things. Voice or speaking up and trying to remedy the defects. Loyalty or modify the response causing one to stand and fight
(voice) rather than to cut and run (exit).

3. Final Exam- Part 1
in partial completion of IR 220 HRD in the National Level, Prof. Rosa Mercado
ALFREDO V. PRIMICIAS III- UNIVERSITY OF THE PHILIPPINES, SCHOOL OF LABOR AND INDUSTRIAL RELATIONS 3
turnover is influenced by ease of leaving and desirability of leaving” while other may
consider “voice since there are existing mechanisms that work in the present workplace.”5
I simply understand these models because as an HR practitioner, I’ve seen a lot of our
employees (particularly when I was working both in the Hotel and Restaurant industry
and BPO Industry) leave the country for ‘greener pastures’. In fact when I did my 2010
year-end report where compilation of results of exit-interviews were delivered to top
management, a staggering 63% of our high performers leave because of job opportunities
abroad despite of the fact that they would be demoted in terms of rank or level, but
definitely promoted in terms of salaries and benefits.
The microcosmic view above is fully supported by outmigration of our talented Filipino
workers. OFWs leave because of the high “demand from other countries that can offer
employment and comparatively high pay combined with high population growth and with
a lack of attractive opportunities in the Philippines due to modest growth of both the
industry and service sectors.”6
The Philippine government totally supports this by
institutionalizing outmigration as protected by the Labor Code in 1974 and formation of
agencies like POEA and OWWA to facilitate bilateral agreements with other host
countries. As a positive economic consequence that made the Philippines as the world’s
third largest recorded remittance recipient. However, it must be underscored that these
remittances are used more on consumption rather than direct investment which can yield
more prospects of job- generation.
However, some economists predict that this trend would not be a sustainable solution.
The Marcos regime (as followed by his predecessors Aquino and Ramos), although had
created structures to assuage deployment of OCWs (overseas contract workers as a
former term for OFWs), considered this as a temporary economic solution since
Agriculture and Manufacturing as the paramount economic tickets. Therefore prediction
then, as foretold by today’s reality that the, “demand for Filipino workers has been rising,
but vacant overseas jobs are becoming more difficult to fill. Data from POEA show that
nearly 72 percent of approved job orders were unfilled in the second quarter of 2011. The
gap is prominent among semiskilled jobs, such as welders, plumbers, and electricians.
POEA’s field survey finds that applicants fail to get overseas jobs because of i) lack of
experience (at least two years of experience in their respective fields is often required),
ii) limited years of formal education (i.e., 10 compared to 12 years of basic education), iii)
lack of license, iv) lack of vocational-related training, and v) insufficient work experience
abroad. In summary, while overseas migration is a testament to the competitiveness of
Filipino workers in the global market, it also reflects a domestic economy that is unable
to provide good jobs to the majority of its people. A number of factors explain the country’s
weak employment record, slow progress in reducing poverty, and rising outmigration.
Foremost is the lack of structural transformation in the Philippine economy, as evidenced
by its weak agriculture and manufacturing sectors — the two sectors that could have
provided jobs to the poor.”7
5 Page 2, Wage, Voice, Exit and Public Policy: A Study on the Mobility of Labor in the PH, JP Sale, 2012.
6 Page 16, Leveraging Service Sector Growth in the Philippines, Raja Mitra, ADB, 2013.
7 Op Cit. Page 79, Philippine Development Report- Creating More and Better Jobs.

4. Final Exam- Part 1
in partial completion of IR 220 HRD in the National Level, Prof. Rosa Mercado
ALFREDO V. PRIMICIAS III- UNIVERSITY OF THE PHILIPPINES, SCHOOL OF LABOR AND INDUSTRIAL RELATIONS 4
In 2015, ASEAN integration would allow several markets to open principally of goods and
services that will eventually affect each partner- counties’ employment rate as caused by,
among other things, the deluge of global and regional talents competing with local talents.
Rightly so, the focus of Sale’s (2013) Social Security and Migrant Workers in the
Philippines: Social Protection for the Country’s Economic Protectors started with a daring
and soul-searching question, “Imagine if the PH has no safety net called ‘OFW
remittances’? No … Filipino workers remitting around US$2B a month?” The 10M strong
OFWs have provided sustenance funds for families back home, consequently creating a
consumption- led and service- led economy.
With this commercial paradigm, over the years government has relented to build
structures that will protect our migrant workers, “The 1987 Constitution of the Republic of
the Philippines lays down the basic policy framework. It requires the state to provide full
protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.”8
As a result, the structures
that the government instituted are the following:
 Occupational safety and health measures
 Employees Compensation and State Insurance Fund
 Social Security
 Government Service and Insurance System
Moreover, Sale (2013) mentioned that the PH has ratified three ILO conventions related
to social security, namely:
 C165 Social Security Convention, 1987 (seafarers- revised)
 C157 Maintenance of Social Security Rights Convention, 1982
 C118 Equality of Treatment Convention, 1962 (social security)
Then the unfortunate plight of OCW Flor Contemplacion paved the way for the Republic
Act 8042 to be passed and billed as The Migrant Workers and Overseas Filipino Act of
1995. As an outcome:
 laws are established to have higher standard of protection and promotion of
welfare
 laws are enlarged to the meaning of illegal recruitment and increased the penalties
 laws are provided to deregulate and phase-out POEA (but eventually repealed)
More governmental protection measures:
 PH will only deploy migrant workers to countries with existing labor and social laws.
 The host country is a signatory to and or a ratifier of multilateral conventions,
declarations and resolutions.
 The host country has concluded a bilateral agreement or arrangement with the
government.
8 Page 169, Social Security and Migrant Workers, JP Sale, 2013.

5. Final Exam- Part 1
in partial completion of IR 220 HRD in the National Level, Prof. Rosa Mercado
ALFREDO V. PRIMICIAS III- UNIVERSITY OF THE PHILIPPINES, SCHOOL OF LABOR AND INDUSTRIAL RELATIONS 5
In fact, in the past two decades, “the services sector remained to be the major engine of
economic growth, particularly in the modern marketing and financial services sector. This
is in contrast to the paltry performance of the manufacturing and agriculture sectors. The
services sector is a dominant source of employment and has increasingly absorbed labor
for the period 1991- 1997. This pattern was reversed between 2000 and 2006, particularly
in the community and personal services which account for the primary share of services
employment. By contrast, the agriculture sector, which took up a declining share of the
employed labor force between 1991 and 1996, has filled in the slack in the services sector
for the period 2000- 2006.”9
Furthermore, “overseas migration may be a significant outlet for educated workers.”10
This is an important measure to underscore primarily on the relevance of the
government’s policy and implementation programs to address literacy and productivity by
advancing education in the community as a way to pursue development of the country’s
human capital. “The major priority reforms in education have been spelled out in the
Basic Education Sector Reform Agenda (BESRA). Implementation of the agenda
involves: school- based management; enhanced learning efficiency such as through the
K+12 system; quality assurance and accountability; and complementary learning
interventions.”11
In 1986 (post Marcos regime) agriculture has the highest number of employment among
industries with a value of 49.94%. However since then agriculture faced a consistent
decline in employment despite of Pres. Corazon Aquino’s determination to enact the
Comprehensive Agrarian Reform (where in contrast it was in Pres. Noynoy Aquino’s
presidency where the distribution of Hacienda Luisita occurred). Moreover, the loss in
agriculture sector is gained in the services sector- being the main employment driver of
the economy: 36.71% in 1986, 39.73% in 1990, 40.54% in 2005 and 51.44% in 2009. To
mirror this is an illustration coming from the NSCB (2012) and BSP (2013) that showed
GDP contribution of three sectors between 2004 and 2009.
Finally, only when our economic architects and lawmakers fundamentally recognize a
sustainable economic program (from design to implementation) can we then make sense
of protection or regulatory functions of the government.
1.3 Gender Disparity
 In poorer countries where agriculture is a dominant economic driver, participation
of women is higher. Yet protection to LFPRW (labor force participation of women)
is rather missing. Policy makers must therefore provide fundamental social
protection to the LFPRW.
 Demolish barriers for women to participate in productive work as evidenced in
industrialized nations where women earn equally as compared to men performing
the same job.
9 Page 3. Stubborn Unemployment and Employment Vulnerability in the Midst of Economic Growth: The Philippine Case, Cabegin, Dacuycuy and Alba; Policy
Brief- DLSU.
10 Pages 30 and 31, Assessing Development Strategies to Achieve MDGs in the Republic of the Philippines, Roehlano M. Briones, UN Department for Social and
Economic Affairs, 2011.
11 Page 28, In Pursuit of Inclusive Growth- Philippine Development Plan 2011- 2016.

6. Final Exam- Part 1
in partial completion of IR 220 HRD in the National Level, Prof. Rosa Mercado
ALFREDO V. PRIMICIAS III- UNIVERSITY OF THE PHILIPPINES, SCHOOL OF LABOR AND INDUSTRIAL RELATIONS 6
 Provide mother- friendly policies where women can still work at home during
pregnancy or after pregnancy (post mandatory maternity leave).
1.4 Low Labor Productivity
 Low quality of human capital results to low levels of labor productivity ergo,
governments must focus on upgrading skills and competencies of its workers
making them competitive and more prepared to perform global job requirements.
 Policy makers must develop programs that take better care for malnourished
children, women and workers. Kenya is a good example where nutrition is
delivered through the school system paving way for better health, improved school
attendance, higher academic results and enhanced earnings in the labor market.
1.5 Income Inequality
 If a country’s income distribution is highly skewed then this can result to social
unrest.
 It is viewed by some economists that income inequality is necessary to generate
the right incentives to encourage investments that have the potential to produce
economic growth.
 There are conditions where countries who are economically robust can still suffer
from income inequality due to deprivation since policy makers are unable to make
laws that solves fairer redistribution processes eg minimum wage, pensions and
collective bargaining.
 Conditional cash- transfer interventions by governments in Mexico and Brazil are
pictures of helping reduce incident of poverty.