(Re)Defining Unemployment

Unemployment rate in the Philippines is at 7.4 percent as of January 2011. Seven years ago it was a two-digit rate. Does it mean to say that we have produced so much jobs  that only a few are left unemployed? Of course not! The drastic decline of unemployment rate from two-digit in 2004 to one-digit in 2005 cannot be attributed to the jobs created and the persons employed. It does not mean that many jobs were created and many were employed in 2005. So what's the reason gthen behind the rosy figure? Read on to find out the trick!       

Redefining Unemployment: What’s the Consequence?

By Jerome Yanson

The Philippine unemployment rate drastically declined to 8.3 percent in April 2005 from 13.7 percent in April 2004. Why the dramatic decrease?

The change in unemployment figure, explained the National Statistics Office and the Bureau of Labor and Employment Statistics, is the result of the adoption of a new official definition of unemployment in the Philippines approved by the National statistical Coordination Board through Resolution No. 15, Series of 2004.

NSCB issued the resolution after a series of briefings and consultations with government statistical agencies was held through the Interagency Committee on Labor, Income and Productivity Statistics, which reviewed the and improved the concept of the old definition of unemployment in conformity with the international standard definition of unemployment as adopted during the 13^th International Conference of Labor Statisticians in October 1982.

In redefining unemployment, NSCB Resolution No. 15 cited the International Labor Organization’s concept of unemployment which defines an unemployed person as one who is without work, currently available for work, and seeking work.

What Makes the Difference?

The change in unemployment figures should have been expected long before the release of the April 2005 Labor Force Survey, according to the governmental statistical agencies, since as early as February 2004, the NSCB has informed the public of the ongoing review of the old definition of unemployment.

NSO used to base the past labor force survey rounds on the concept of unemployment, which provides that unemployed persons are “all those who are 15 years old and over as of their last birthday who have no job or business and are actively looking for work, as well as those persons without a job or business who are reported not looking for work because of their belief that no work was available or because of temporary illness/disability, bad weather, pending job application of waiting for a job interview.”

The new definition of unemployment, however, provides that the unemployed includes “all persons who are 15 years old and above as of their last birthday and are reported as: 1) without work, meaning the person has no job during the reference period; 2) currently available for work, meaning the person was available and willing to take up work in paid employment or self-employment during the basic survey reference period, and/or would be available and willing to take up work in paid employment or self-employment within two weeks after the interview date; 3) seeking work, meaning the person had taken specific steps to look for a job or establish business during the basic survey reference period; or not seeking work due to the following reasons: tiredness or belief that no work is available, awaiting results of previous job application, temporary illness or disability, bad weather, and waiting for rehire of job recall.”

Survey Says…

In the old definition of unemployment, a person has to satisfy only two criteria during the survey to determine whether or not he or she is unemployed, namely: 1) did not work or had no job/business; and 2) actively looked for work or did not look for work because of the five valid reasons mentioned earlier. A person who satisfies the two criteria is automatically counted as unemployed.

In the new definition, however, a third criterion was added, that is, 3) availability for work. A person is considered unemployed only if he or she satisfies the three criteria; otherwise that person would be counted as economically inactive or not in the labor force.

Had the availability criterion been adopted as early as the January 2005 Labor Force Survey round, around 1.5 million would have been counted out from the unemployed, with a corresponding drop in the labor force participation rate, according to the NSO. The unemployment rate at 11.3 percent as of January 2005 would have been reduced to 7.3 percent. (Published in the ILS News Digest, Volume XVIII No.1, January-June 2005)