Inclusive growth concerns for the next administration - Eaglewatch by Fernando T. Aldaba

August 01, 2015

IN his last State of the Nation Address, President Aquino triumphantly recapitulated the achievements of his administration. Without question, even among his staunch critics, average economic growth has seen a historic high of 6.3 percent in the last five years, as compared to the moderate growth of 4.8 percent during President Gloria Macapagal-Arroyo’s term. However, it is a consensus even among economists that the current economic advance has largely benefited a small portion of the population, with poverty incidence remaining high and, thus, exacerbating social inequities. In short, aside from sustaining the higher level of growth, the target of making such expansion more inclusive will now be an important agenda of the next administration. The following are the major concerns for inclusive growth and development:
 
Underemployment
 
The Aquino government has improved, albeit gradually, employment creation, with the recent unemployment rate plunging to 6.4 percent, from last year’s 7 percent. But what is alarming is a double-digit unemployment rate, which continually confronts the labor force. The recent estimate of 17.8 percent is hardly unchanged from last year’s 18.2 percent. These underemployment woes suggest that Filipinos’ have jobs that earn relatively small incomes, highly insecure and are generally of low quality. The highest contributor to employment is the services sector, which includes a large portion of informal work. Thus, it is imperative for the next administration to accelerate the growth of manufacturing, as higher-quality jobs are generated from this sector. This also implies that it should seriously pursue an industrial-policy mechanism, where the President regularly dialogues with key representatives of the business sector so that major constraints can be immediately addressed by appropriate agencies.
 
Chronic poverty
 
The major target of halving poverty incidence will not be reached this year. If the next administration seriously wants to make a dent on poverty, it should target the poorest of the poor, Filipinos suffering from chronic poverty. Chronic poverty is a phenomenon whereby an individual or group is in a state of impoverishment over an extended period of time.  It sometimes can also be referred to as intergenerational poverty. They are so poor that they cannot actually contribute to economic growth. And children from these families typically have health and malnutrition issues and are not in school. Recent Philippine Institute Development Studies estimates (Reyes, et al. 2011) show that around 11.1 percent of the population is chronically poor. The next administration must be able to locate where the chronic poor are. According to Reyes, et al. 2011, these people are mostly in Mindanao—in Zamboanga Peninsula, Caraga and Northern Mindanao—and that 85.8 percent of them are in rural areas. The current National Household Targeting System must be further refined to be able to identify the chronic poor. In addition, the focus on Mindanao’s development must be sustained, apart from resuscitating the agricultural sector.
 
Hunger
 
The most urgent problem related to chronic and transient poverty that needs to be addressed is hunger, especially among young children, which has long-term effects on their lives in terms of productivity and incomes. But how can this be addressed by the next government? Again, targeting will be key, such that leakages will be minimized. While feeding in public schools mitigates hunger, not all starving children are in such schools. There is a great possibility that most of them are out of school. The Conditional Cash-Transfer Program is helping alleviate hunger among its beneficiaries, but this is still not sufficient. As there are constraints in government resources, a multi-stakeholder approach to eradicate hunger must be utilized. There are already various technologies and methodologies which the government and non-governmental organizations can tap to address hunger and malnutrition. The next government must establish an effective coordination machinery that will be able to harness public and private resources.
 
Vulnerability
 
Vulnerability refers to the probability to become poor in the future because an individual or a family is confronted by risks and shocks and, simultaneously, the individual or family lacks physical, social and human capital to withstand such shocks. A Filipino family faces many of these—like health shocks, death in the family, disasters, sudden loss of jobs, running away from conflicts, etc. If they are not able to cope, they may fall below the poverty line or, if they are already poor, they may languish in a chronic poverty trap. Vulnerability is very much related to transient poverty, as it is a primary reason for the movement of families in and out of poverty. Thus, the next administration must further enhance social protection. This would entail not only expanded membership in Philippine Health Insurance Corp. but an increase in the actual utilization of this health insurance. This also means that a more effective disaster risk reduction and management programs must be established at the local government levels. Microinsurance can be expanded nationwide as a coping mechanism for families. In terms of jobs vulnerability, active labor-market programs at the local levels must also be implemented more widely. Design of other social-safety nets may also be warranted in areas where many people are exposed to a variety of risks and shocks.
 
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Aldaba is the dean of the School of Social Sciences and professor of Economics, Ateneo de Manila University. The Ateneo Eagle Watch Mid-Year Briefing will be held on August 6 at the Ateneo Rockwell campus. As seats are limited, reserve your seats via eaglewatch.soss@ateneo.edu or call 426-5661, local 5221 or 5222, and look for Riz Jao.