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Source: Asia Development Bank

After a difficult year during the pandemic, there are encouraging signs that workers in the Philippines will not only find employment but thrive in the post-COVID-19 labor market.

The COVID-19 pandemic has had significant economic and labor market impacts worldwide, including in the Philippines. The measures used to contain the spread of the virus have effectively shut down major sectors of the economy and had an immediate and sweeping impact on employment.

Our analysis shows that by the end of 2020, around 2.1 million workers may have lost their jobs, relative to the pre-COVID baseline scenario. About 1.5 million of these workers (about 68%) may become unemployed, raising the unemployment rate from 5.1% in 2019 to 8.5% in 2020. An additional 389,000 workers (about 18%) may drop out of the labor force altogether. Finally, about 288,000 workers could shift to other sectors, mainly to agriculture.

Such labor reallocation following economic shocks is typical in the context of developing economies. Without adequate social protection, displaced workers cannot afford to remain unemployed and, therefore, shift to lower productivity employment in agriculture or informal employment in low productivity services.

Industry exhibits the largest decline in employment (8%), which translates to around 500,000 job losses in construction and another 100,000 in manufacturing. We find the steepest drop in employment in areas of the services sector reliant on tourism. We estimate job loss north of 500,000 in wholesale and retail, 265,000 in accommodation and food, and a drop of about 100,000 jobs in transport, public administration, and other services.

Overall, estimates indicate a decline in employment across tradable sectors, such as manufacturing and transportation and storage, due to declining global demand. However, we find higher job losses in non-tradable industries (construction, wholesale and retail, accommodation and food, and public administration) due to the lockdown measures imposed during this crisis.

Recent labor force surveys confirm the damage wrought by the pandemic on the country’s labor market. Preliminary numbers show that around 3 million workers may lose their jobs in 2020. Approximately 74% of workers who may lose their jobs would become unemployed, raising the unemployment rate in 2020 to about 10.4% from 5.1% in 2019. Around 322,000 workers may drop out of the labor force, and about 456,000 may shift to lower productivity sectors, mostly agriculture.

Most affected sectors in terms of job loss are similar to the projected estimates but fall short in magnitude. Projections underestimate the job losses in accommodation and food, manufacturing, other services, and transport by as much as 1.2 million in total. The underestimate reflects the nature of the measures imposed to contain the COVID-19 crisis in the country, which has effectively shut down all non-essential businesses beginning mid-March. The Philippines has maintained one of the most stringent containment policies in the region, considering it also had one of the highest COVID-19 cases in Southeast Asia.

The pandemic also significantly impacted hours worked—a sharp rise in part-time work and those employed who did not work. The decline in full-time employment is especially severe in the arts and recreation (-54%), accommodation and food (-44%), and real estate (-41%). There is an increase in workers who worked part-time, notably in agriculture, wholesale and retail, education, and construction.

The most marked change in 2020 is the sharp rise in all sectors of workers reporting they had a job but did not work during the reference period. This is worrying given that some of these workers likely earned no income during the period of inactivity.

Indeed, the COVID-19 pandemic had significant labor market impacts, including massive job losses and unemployment, a decline in labor force participation, and reductions in hours worked. Moreover, our analysis indicates that job loss disproportionately affected low productivity sectors such as construction, transport, tourism, and wholesale and retail that employ many low-skilled workers.

Despite the grim data, there are signs that a pick-up in the job market is underway. Unemployment numbers have improved as the economy has gradually reopened—from a high of 17.6% in April 2020 following stringent lockdown measures, to 10% in July, and 8.7% in October. Given the strong economic rebound projected by ADB in 2021 (6.5% growth), we can further expect a boost in the country’s employment numbers.

The government responded to the profound and widespread labor market impacts by providing relief measures for displaced workers such as wage subsidies, cash assistance, and unemployment benefits. These direct income transfers have helped mitigate the short-term economic costs of the lockdown measures.

Over the medium-term, policies to spur and save jobs, help struggling firms, help displaced workers to find reemployment, and to boost spending, will be critical to ensure a resilient and robust recovery.

There are further reasons to be hopeful. The government’s push to intensify its infrastructure development program, maintain an environment of stable inflation and low interest rates, and the impending availability of COVID-19 vaccines, should enable a faster economic recovery and boost job creation.

Moreover, intensified efforts to improve education and training will help to enhance the skills of workers whose livelihoods have been affected by the pandemic. Together, these measures are encouraging signs that workers will not only find employment but thrive in the post-COVID-19 labor market.

MIL OSI Global Banks