Study: Industry Churning, the Labor Market and Workers’ Welfare

(Angelo King Institute, De La Salle University)

Main Findings

1. Low re-employment rates: Only 32% of laid off workers found a wage job at anytime in the five years following layoff. For those who did, it took an average 12 months to land a new job. At the time of survey, or five years after layoff, only 16%were holding on to a wage job. Workers cite “age limit” as the most important reason for their difficulty in finding a new job.

2. Temporary or contractual work: Most of the jobs found were contractual or piece-rate work. The exception was government jobs but these were few and far between. The temporary and non-standard nature of employment available to displaced workers partly explains the low employment rate of displaced workers five years after layoff. They found it increasingly difficult to hold on to temporary or contractual jobs.

3. Significant and persistent earnings loss: Even for those who found jobs, wage or earnings losses were significant and did not diminish over time. A major reason for this huge wage loss can be traced to the fact that contractual work pays less than standard, regular work regardless of the worker’s extra effort.

4. Self-employment and entrepreneurship: At survey date, 22% of workers engaged in self-employment, slightly higher than the proportion employed in formal wage jobs. Does self-employment and entrepreneurship then offer a way out for displaced workers? Our discussion with affected workers does not give us this impression. Self-employment is generally seen as employment of last resort, marked by irregular earnings and uncertainty of business. Long-term sustainability is a key issue for micro businesses.

5. Early exit from the labor force: Five years after they were laid off, the majority (61%) of workers faced open unemployment or early exit from the labor force. This is significant considering that most of the workers in our sample were women only in their late 30s or early 40s at the time of layoff, half of whom were married, had young and old dependents, and in many cases, were the main breadwinners in their families.

6. Heightened economic insecurity: irregular work hours and earnings, dependence on other family members, anxiety due to economic insecurity resulting in stress, deterioration in relationship with spouse and family members, and inability to secure the future of the family.

7. Loss of social protection: drastic decline in health status of workers, resulting in deaths in a few cases, loss of health care for young children, loss of access to credit resulting in children taken out of school, vulnerability to economic contingencies.

8. Policy recommendations:

a. Free extension of PhilHealth membership for 5 years after layoff
b. Education loans for workers with children in tertiary level or inclusion in CCT for those with children in primary and secondary levels;
c. Some form of income support from the social security system may need to be explored;
d. Promoting entrepreneurship in the context of a growing economy may have some merit, but not during a slow down or recession;
e. Strategic focus on generating adequate productive employment to improve re-employment possibilities; public employment programs may be necessary in the short-term.