Sage advice for policy leaders were presented by Vicente B. Paqueo, PhD and Aniceto C. Orbeta Jr., PhD, Research Fellows, of the Philippine Institute for Development Studies (PIDS) presented their special research “Unlocking the Filipino People’s Potential in the Next Six Years and Beyond” at the last week’s round table discussion series of the Stratbase ADR Institute for International Studies.
The presentation cited Professor Klaus Schwab, the Founder and Executive Chairman of the World Economic Forum who has predicted that we are on the brink of a Fourth Industrial Revolution, or FIRe, a combination of digital, physical, and biological upheavals that will “fundamentally alter the way we live, work, and relate to one another.”
The implications of FIRe for an emerging economy like the Philippines are multifarious. However, considering its growing population, the stakes seem to be higher in areas like employment, human development, and social protection.
The predominant economic narrative under former President Noynoy Aquino adds another layer of complexity to the picture: Robust economic growth in the country had not led to a substantial reduction in poverty and inequality, as hoped. With FIRe in the horizon, the question thus gains urgency: What can be done to make a dent in the country’s stubborn poverty rates and find a more just distribution of the created wealth?
To be fair, investment in education steadily increased during the time of the former president. But pouring money into education does not guarantee automatic and clear-cut results. Resources, scarce as they are, need to be spent more efficiently. This means rethinking populist policies, like proposals to provide free tuition at State Universities and Colleges. Moves like these may assuage popular frustration about rising inequality but eventually perpetuate long-term ills to the sector.
While education spending must be pegged at five percent, the government must set the stage for a paradigm shift in the way people perceive technical-vocational jobs.
Social protection, already precarious and unsteady hereabouts, is also expected to face further challenges under FIRe. While radical advances in science and technology are expected to create wealth and generate higher incomes, the same innovations are expected to be characterized by more efficient labor-saving technologies. This means workers will frequently move from one job to another, not necessarily requiring the same skill sets. To benefit from these high-value jobs, workers will thus have to be highly trainable, with an above-average aptitude for new skills.
The resulting rapid job destruction and broader labor insecurities may bring about backlash. There is thus a need therefore to modernize existing social protection systems, including the foregrounding of education and training in the new set-up. One way is through replacing job tenure with income security concepts and wage subsidies. There must be a mechanism to effectively assist the poor and near-poor so they may survive difficult transitions and even thrive under FIRe.
Concretely, this means rethinking regulations that make employment costly and the labor market less flexible than it needs to be. A more productive alternative is the creation of a chain of value-adding high-quality lifelong learning opportunities that are accessible to all. Government must guarantee that workers have not only basic minimum incomes in-between jobs but also the capacity for lifelong learning through the acquisition of new competencies and job information.
The labor market must follow suit by increasing efficiency and flexibility but still safeguarding labor against employer abuse. Economies must thus allow enterprises to deploy and redeploy labor and other resources efficiently and opportunely. Traditional concepts of security of tenure, which underpins the existing labor code, may need to be rethought.
As it is, the Philippines appears to be well-equipped to handle this disruption. Average real wage rates had risen after 2010 for the economy as a whole and specifically for farm workers, regular employees, and temps. This organic rise and increased labor utilization rates could mean that the country is entering the phase of sustained take-off toward inclusive economic growth, a path previously charted by successful East Asian economies.
But the actual realization of this trajectory still largely depends on how the government can stabilize the political and investment climate in the country. Particularly crucial in this light is avoiding regulations that would make Filipino workers uncompetitive and unattractive to employ. With FIRe entering the equation, the task becomes all the more formidable but also crucial.
For policymakers, equipping the country’s workforce in preparation for FIRe should thus occupy the top of their planning agenda. We know the Filipino peoples’ potential; we just need to unlock it.