Sabal: Is there a future for the Filipino Youth?

IT'S been a while since I wrote an article about Christmas Prices last December of 2018. I have been thinking of plausible topics that I can passionately discuss. Few days back, I was invited to talk about the economic prospects of the Filipino Youth. While I was reflecting on what would be the substance of my talk, I asked several questions to myself, “Is there really an economic prospect for our youth? Especially during the time of Duterte?”

Let me answer that by explaining first the economic landscape of our country. As of 2018, the Philippine grew at 6.2% ahead of Indonesia (5.2%) and Thailand (4.3%) but behind India (7.7%), Viet Nam (7.1%), and China (6.6%). Looking at recent trends, our country’s gross domestic product (GDP) is greatly influenced by the industrial sector and trade. We are a highly importing country in most years from 1960 to 2016.

According to World Bank, we are categorized as a lower-middle income country together with Indonesia and India. Malaysia, Thailand, and China are upper-middle income countries, while Brunei and Singapore are high-income countries. Our economic managers are optimistic that we’ll become an upper-middle income country by end of the year!

Looking at the growth of our fellow lower-middle class countries, our growth is almost similar to Indonesia but behind India. Comparing to upper-middle income nations, we are at the bottom defying the classic growth theories that poorer countries should grow more than richer ones. Reasons to this include the massive investments of richer countries on total factor productivity (TFP), education, research, technology, and innovation.

Our unemployment rate is just at 5.2% of the total 72.52 million labor force, which is around 2 million unemployed as of January of 2019. The catch is, our unemployment rate is the highest among our neighbors (particularly Malaysia, Thailand, Indonesia, and Viet Nam) for the past years.

The silver lining to that, part two of my article, is that our population is growing at 2%, which is one of the highest in the world. Our growing population is composed mostly of young people, in which, around 65% are at ages 15-64. However, our Association of Southeast Asian Nations (Asean) neighbors have also a higher proportion of younger population in their labor force. Among ages 15-64, Singapore and Thailand have 72%, around 70% for Malaysia and Viet Nam.

What are now the opportunities that our government can derive from a younger population?

One is demographic transition, a shift from high-mortality and high-fertility to low-mortality and low-fertility. Developed economies like South Korea, Japan, and Canada experienced this phenomenon. This transition is driven primarily by having more women, who are educated, in the labor force. Some economists claim that the key to progress is to put women at work. Having more educated women lowers child mortality.

Likewise, women with higher economic opportunities tend to postpone their pregnancy since their trade-off of having a child is high. Giving the young, especially women, more opportunities may lead our country to demographic transition –an important indicator of progress.

Another opportunity is for the government to invest more in health, education, and innovation. The younger population should be provided with necessary skills to prepare our country to the fourth industrial revolution in 2020. This is a new era of advanced robotics, autonomous transport, artificial intelligence and machine learning, biotechnology and genomics. With neighbors whose population is composed of younger groups, what is the edge of our youth to other Asean youth?

Lastly, is to offset the unintended consequences of several landmark government policies. According to a study released by the Philippine Institute of Development Studies, our existing free-education program will reduce the quality of tertiary education as it will drive-out competition among universities. Most students will flock to state-owned institutions to take advantage of the free-tuition. Increasing minimum wage and endo are disadvantageous for the young, inexperienced, less-educated, and women. Firms will experience higher cost, which will lead to laying-off workers to maintain the existing level of production.

Workers who will likely be removed first are those with poorer credentials. To reiterate, government should do something to offset the unintended consequences of these policies and protect the youth.

The Philippines will grow no matter who the President is, but the extent of growth depends on the strength of our institutions and quality of our policies. In 10-15 years, our labor force will likely remain to be young. How competitive will be the Filipino youth’s skills-set to the world? Can we still catch-up to richer nations? It all depends on how we develop our younger population!

(Jhon Louie B Sabal is the OIC-Chairperson of the Department of Economics of Xavier University-Ateneo de Cagayan. Mr Sabal is a graduate of MA in Economics at Ateneo de Manila University.)


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