WITH two consecutive quarters of gross domestic product (GDP) contraction, the country has officially slipped into recession in the first half. It is the first time since the full-year recession in 1998 that the country suffered a 0.5 percent drop in GDP. Looking at all indicators, the Philippines will most likely experience its worst economic recession since 1985. The hard landing that I have been talking about for the past three months has finally made its presence felt and the results are devastating, especially in the labor and employment front.
Thousands of companies are shuttered and more than 90 percent are classified as micro and small enterprises (MSEs). These are predominantly family owned businesses. Critically, it has imperiled the livelihoods of close to three million workers. Without effective support, many of these closures could become permanent. Based on our information on the ground, we can expect more than 20 percent of these small and medium enterprises to finally throw in the towel before the end of the year. According to reports, more than 400,000 overseas Filipino workers have already been displaced, a big chunk from the tourism sector. Some have returned while others have paid for their own passage home, and thousands more are seeking repatriation as the pandemic drags on and companies fail to reopen. It is estimated that 10 to 12 million jobs may be lost in 2020.
According to the Philippine Statistics Authority, the Philippines’ unemployment rate rose to 17.7 percent, accounting for 7.3 million unemployed Filipinos in the labor force in April 2020. This is a record high mirroring the effects of the Covid-19 economic shutdown on the labor market. The highest unemployment rate previously recorded was 14.4 percent in the second quarter of 1991. From 1976 to 1986, under the administration of Ferdinand Marcos, there were no double-digit unemployment rates recorded. With negative record numbers coming into our fragile labor market, the worst is yet to come. The Covid-19 shock has been most severe for discretionary services, from restaurants and hotels to travel and entertainment, which is expected to face a slow recovery but account for a high proportion of employment.
“Before the pandemic, the Philippine employment situation was vibrant, expanding at four percent or 1.6 million net employment generated,” Labor Secretary Silvestre H. Bello III said. “When the global pandemic hit, we feared that employment would be impacted badly. We expected these results given that the health crisis has crippled most of our economic activities. With the imposition of community quarantine, hundreds of thousands of establishments resorted to temporary closures or flexible work arrangements as evidenced by millions of workers affected both in the formal, informal and overseas sectors,” Bello said. “The lockdown during the community quarantine from March to May, which is supposed to be the period for job hunting of our fresh graduates, has put the labor force on hold.” Despite the quarantine level migrating to general community quarantine, the surge of infection has multiplied. At the rate this health crisis is going, we can see the economic bloodbath impacting the labor market, effectively translating to workers being laid off indiscriminately.
Facing imminent bankruptcy, business owners, on the other hand, have found themselves in a precarious situation as well. Most businesses have stopped paying wages for furloughed staff. Others have decided to retrench employees. While some opted to reduce workdays. Most companies surveyed said that with dwindling cash reserves, they could no longer afford to pay workers. They would rather preserve whatever cash they have.
Similarly, based on the survey of my firm W+B Advisory Group, during the past two months, there has been a steady increase in queries related to new labor advisories related to layoffs, pay cuts, retrenchment and equally important are the rights accorded to business owners. Understandably, with all the uncertainty happening, owners are really in a bind, confused, exhausted and overwhelmed. But there is a reassuring message, owners have inherent rights and options protected by law, especially under extraordinary events like this pandemic.
I encourage owners, family members and senior executives to join me on Wednesday, July 29, 2020, at 10 a.m.to 12 p.m. in a Labor webinar/forum entitled,” Know your rights as a business owner.” I have been invited as the moderator and it is my role to solicit as many questions form the attendees so I can share with our resource speaker, top labor lawyer Pol Sangalang, who happens to be one of W+B’s senior labor consultants. This forum is very timely as it will highlight labor issues, economic challenges as well as important policies that owners can apply while leading the enterprise through this difficult period. For inquiries, you may reach Jayson through 0917-324-7216 or send your queries to inquiries@wbadvisoryasia.com.