Labor and fiscal crises pose double whammy on labor

Labor groups slammed the country’s economic managers for refusing to recognize the crisis in the labor market. Latest official statistics show that recorded unemployment and underemployment rose in April. Job creation is better than last year but still inadequate to absorb a fast growing labor. It is also showing signs of slowing, according to the Labor Education and Research Network (LEARN) and the Alliance of Progressive Labor (APL).

Rising joblessness has been made worse by the government’s growing fiscal problem, according to LEARN and APL. The twin crises pose a double whammy to workers. The widening deficit has undermined government’s ability to provide basic social services and social protection to workers. At the same time, proposed tax measures unduly burden workers already reeling from the lack of jobs, rising prices and stagnant wages. And government plans to implement job cuts to reduce it wage bill.

The ailing labor market and fiscal sector have proved resistant to accelerating economic growth. The economy has consistently expanded in the last five years. It posted its strongest performance in 15 years in the first three months of 2004. But the labor and fiscal crises have only intensified.

The labor groups warn that the growing disconnect between economic expansion, on the one hand, and job creation and tax collection, on the other, is bound to worsen lest the country’s economic managers do something. The government should wean the economy away from excessive reliance on growth in agriculture, informal services, and low value-added exports. These sectors have failed to generate sufficient quality jobs. Nor have they boosted government revenues since activities in these areas are tax-exempt.

Government must also examine its own economic policies that have undermined job creation and revenue generation. Fiscal incentives have burned a big hole in government coffers in a largely futile attempt to attract foreign investment. Tax reforms of recent years have not yielded the promised revenue increase. Trade liberlization on imports has also resulted in a permanent loss of a major source of revenue. This has weakened domestic industry, leading to job losses and further narrowing government’s tax base.

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