SHS

APPLIED ECONOMICS
Quarter 1 -Module VI
EFFECTS OF CONTEMPORARY ISSUES AFFECTING
THE FILIPINO ENTREPRENEUR
Applied Economics – SHS
Quarter I – Module 6: Effects of Contemporary Economic Issues Affecting The
Filipino Entrepreneur

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Regional Director: Gilbert T. Sadsad

Assistant Regional Director: Jessie L. Amin

Development Team of the Module

Writer: Jemima T. Rodriguez

Editors: Romel G. Petajen
Carol P. Gil
Reviewers: Romel G. Petajen
Jesslyn T. Taway
Carol P. Gil
Jogene San Juan
Illustrator: Javine M. Tolledo
Layout Artist: Javine M. Tolledo
Language Editors:Elena V. Carullo
Teresa T. Grebalde
 EFFECTS OF CONTEMPORARY ECONOMIC ISSUES
AFFECTING THE FILIPINO ENTREPRENEUR

Any person or business-minded individual can start a business in the Philippines. The
harsh reality, however, of government regulations such as registration with the Department of
Trade and Industry (DTI), Bureau of Internal Revenue (BIR), Mayor’s Permit, bureaucratic red
tape, capitalization, the inevitable taxes to be paid, etc. somehow dampens anyone’s
enthusiasm to engage in business.

In a matrix form, list down at least 5 factors of economic problems that affect today’s
business and how to deal with each of these factors.

ECONOMIC PROBLEMS HOW TO DEAL WITH IT(SOLUTION)

Provide livelihood trainings/programs such
1.unemployment as pottery, carpentry, blanket making,
farming, etc.
2.

3.

4.

5.

Economic issues in today’s world have significant effect on the economic growth of the
entire industry. These problems include emerging markets, inflation, environment, inequality,
labor issues, investments, taxes, wages, and the impact of new technologies. These are
factors that are out of firm’s control that can affect economic decisions. Firms must have
sensible decisions on how to impose various types of economic activities such as production,
distribution and consumption of goods and services. Economic decisions refer to those made
by consumers (people, business enterprises, or countries) when scarcity occurs. Scarcity
arises when a product or service is available, but the consumers cannot meet their unlimited
wants because of limited means or resources.

✓ Analyze the effects of contemporary economic issues affecting the Filipino

entrepreneur.

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ECONOMIC TERMS

• Inflation – is the continuous increase in the price of goods and services for a period
of time.
• Recession - is a decline in economic activity for two consecutive quarters that can
lead to a period of negative economic growth and heighten the problems of
inequality and unemployment.
• Labor issues – refer to the unemployment and underemployment of individuals.
• Investment - refers to an item acquired on the purchase of goods to generate
income in the future.
• Taxes - must be paid to the government when a good is sold. These are imposed
and collected by the Bureau of Internal Revenues (BIR) and by a local treasurer’s
office at the local level.
• Minimum Wage - refers to a legally mandated minimum remuneration paid to the
workers/employees by the employer for performed task during a given period of
time.
• Economic decisions - refer to those made by consumers [people, business
enterprises, or countries] when scarcity occurs. Scarcity arise when a product or
service is available, but the consumers cannot meet their unlimited wants because
of limited means or resources.

Let’s try to check your knowledge of basic economics before we start our lesson!

Direction: Read carefully the given situation/statement under Column 1 and analyze which
economic problem is being referred to under Column 2. Write your answer on your notebook.

COLUMN 1 COLUMN 2

1. Temporary shutdown of businesses Taxes

leading to the displacement of 100,000 Unemployment
workers. Recession
2. It is considered inflows for the Inflation
government and outflows for a business Wages
and considered a burden for a business or Investment
any small entrepreneurs engaged in a Poverty
business
3. Proposal to increase minimum
wages by the workers were due to the
increasing prices of the basic
commodities that need to be undertaken

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 by the government for a better standard of
living among individuals.
4. This year 2020, the Philippines
experienced decline and negative
economic growth on economy due to
COVID-19 pandemic.
5. As price increases, purchasing
power decreases (if income remains the
same, the purchase of goods and
services must be lesser.)

Do a self-check evaluation as we go on with

this module! Have fun while learning!

Coronavirus disease is one of the socio-economic issues currently affecting today’s

world. Recent pandemic issues on COVID-19 has greatly affected not only the society but
also today’s economy worldwide. Thousands of businesses filed for bankruptcy due to this
pandemic.

In the Philippines, many businesses have temporarily shut down their business
operations because of this pandemic. Based from the Department of Labor and Employment
(DOLE), more than 3 000 business establishments were reported to have temporarily ceased
operations, leading to the displacement of 100,000 workers.
(https://entertainment.inquirer.net/)

Barriers to Philippine economic development are the economic problems such as

taxes, labor issues, wages, recession, inflation, investment and poverty.

➢ Taxes. Who will shoulder the taxes? The seller or the buyer? Taxes must be paid
to the government when a good is sold. It is considered inflows for the government and
outflows for a business and considered a burden for a business or any small entrepreneurs
engaged in a business.

Businesses apply either a percentage tax on gross receipts of 3% or value added of

12%. Businessmen pays their business taxes every month and income tax quarterly. For
instance, if annual gross receipts reached Php500,000.00, this is around 30% of its gross
sales of Php40,000.00 – Php50,000.00 monthly. On the other hand, the buyer possibly
shoulders a bigger portion of the tax burden. This happens when a buyer cannot do away
with the consumption of a good and thus considers it essential.

For example, government levies a 100% sales tax on a bottled of soft drinks. If the
price is Php6.00 per bottle, the consumer must pay Php12.00 on account of the tax.

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 Increasing the Excise
Task of Automobiles

Expanding VAT

Lowering Personal
Income Tax
Increasing the Excise
Tax of Petroleum
Products
TRAIN LAW
Tax Reform for Acceleration
Simplifying the estate
and donor's tax and Inclusion Act

Introduction of the
Increase tax of
sugar-sweetened
beverages

➢ Labor issues. Unemployment and underemployment are two of the most considered
labor problems in the Philippines. These serve as the key indicators of an economy’s
status. According to Felipe, J., & Lanzona, L. Jr., 2006, unemployed workers are
estimated to be 4 million workers (about 12% of the labor force) and for underemployed,
an estimated of 5 million (around 17% of those employed).
• Underemployment occurs when individuals who are employed in less
than full time hours or regular hours for 40 hours per week such as part-timer
individuals.
• Unemployment occurs when individuals are actively seeking a job but
are unable to find one. These are individuals who do not have a job. Unemployment
is not only considered as economic problem but also a social problem. With the current
COVID-19 pandemic, 100,000 Filipino workers were added up to the increasing rate
of unemployment. According to Felipe, J., & Lanzona, L. Jr., 2006, one example of
unemployment is the Reserved Army workers because of the incapacity to provide
jobs in the formal sector to its growing labor force. Unemployment leads to income
losses, social and psychological problems such as stress, alienation, low income and
feelings of failure in the future.

➢ Wages

On June 9, 1989, the Philippine Congress enacted Republic Act No. 6727 otherwise
known as the “Wage Rationalization Act”. Each region in the Philippines has a unique
minimum wage set by the Regional Tripartite Wages and Productivity Boards. Minimum wage
refers to a legally mandated minimum remuneration paid to the workers/employees by the
employer for a performed task during a given period of time. The objective of the approved
increased minimum wage is to change the lives of ordinary workers but in reality, the impact
of this brings unemployment due to the increasing cost on the part of businesses. Salary/wage
increases also trigger rise in commodity prices.

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Minimum Wages in Philippines remained unchanged at 537 PHP/day in 2019 from 537
PHP/day in 2018.

Is there a need to set-up a minimum wage? Why or why not?

Will setting a minimum wage result to a surplus of workers? Why is
there a need to set a different minimum wages per region when in fact
the prices of commodities are much higher than in the NCR due to
other overhead costs added to the commodities such as freight?

➢ Recession. A severe recession in 1984-1985 happened when Philippines experienced

-7.3% economic decline. Similarly, early in 1998 when the country suffered again It’s
almost the same with our current economic situation for its two (2) straight quarters due to
COVID-19 pandemic. In the inquirer.net published on July 26, 2020, “First-quarter gross
domestic product (GDP) shrank by 0.2 percent year-on-year. With two straight quarters of
GDP contraction, the country fell into a recession during the first half — the first time since
the full-year recession in 1998 with a 0.5-percent drop in GDP.” During the first full month
of April during the Enhanced Community Quarantine (ECQ) imposed in Luzon and other
parts of the country with high COVID-19 cases since mid of March, exports and imports sunk
rapidly. Likewise, the Labor Force Survey (LSF) for April round had shown a 15-year-high
unemployment rate of 17.7 percent—equivalent to 7.3 million Filipinos without work.

A recession is a decline in the economic activity for two consecutive quarters that can
lead to a period of negative economic growth and heighten the problems of inequality and
unemployment. When demand falls, firms lay off workers.

➢ Inflation. In the Philippines and some developed countries, inflation is a normal setup.
It refers to continuous increase in the price of goods and services for a period of time. As
price increases, purchasing power decreases (if income remains the same, the purchase of
goods and services must be lesser) and can no longer suffice to meet their basic needs.
Likewise, as lenders increase their interest rates in reaction to increased prices, the cost of

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borrowing by businesses and individuals will also increase. The negative result of a period of
high inflation includes high unemployment and slow economic growth.

The Gross Domestic Product (GDP) in the Philippines was

worth 376.80 billion US dollars in 2019, based from the
official data from the World Bank. The GDP value of
Philippines represents 0.31 percent of the world economy.

➢ INVESTMENTS. Businesses invest to generate future income and to meet future

demands. Investment refers to an item acquired on the purchase of goods to generate
income in the future. It can be either be a long-term or short-term investment. Long-term
investments include the purchase of bonds, stocks, or real estate property among, several
others. Short-term investments include savings and time deposits. Investment entails risk for
a business especially if you expect that it will generate income in the future, but it does not
pan out or it falls short. If demand is falling, then firms will cut back on investment. For
instance, investing in a company that ends up going bankrupt or in a project that fails. Saving
is accumulating money for future use that do not entail risk.

➢ POVERTY. In the Philippines, poverty has proven to be one of the most significant
challenges facing the Filipino people. The United Nations (U.N.) reported that the Republic of
the Philippines is one of the highest poverty rates in Asia despite a steady decline in recent
years. According to the Asian Development Bank report, there are major factors that causes
poverty. These are low economic growth, weak agricultural sector, increased population rates
and a high volume of inequality that make it difficult for Filipino to live and survive.

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 In the introductory activity, you have listed down at least five (5) factors, rank it from 1-
5, with 5 is the highest impact to the Filipino entrepreneur and 1 as the lowest impact to the
Filipino Entrepreneur.

ECONOMIC PROBLEMS
5
4
3
2
1 unemployment

Based from the above activity, which economic problems the government should
focus on? Why?

How do you think Economics might be of help to understand these problems?

You will be guided by the five-point

rubric for essay. Good luck!

5-POINT RUBRIC

5 = A Comprehensive/Analytical Essay – discusses extensive information.

4 = Well-written/include some analysis – discusses strong information.
3 = Well-written but lacks balance/lacks analysis – limited outside information
2 = Weak Essay/lacks organization/no analysis – little outside information
1 = Poorly written/barely addresses question – no outside information, factual errors

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Analyze the following questions below and explain your answer. Be guided with the
rubric presented below.

1. Identify and discuss which of the six (6) economic factors has an extreme impact to
the economy that affects the Filipino entrepreneur?
a. Taxes
b. Labor Issues
c. Recession
d. Inflation
e. Investment
f. Poverty

2. Which factor should the government focus on in addressing each of the economic
problems in the Philippines?

3. How do Filipino entrepreneurs contribute to the growth of the Philippine economy

despite these economic problems?

5 POINT RUBRIC
5 = A Comprehensive/Analytical Essay – discusses extensive information.
4 = Well-written/include some analysis – discusses strong information.
3 = Well-written but lacks balance/lacks analysis – limited outside information
2 = Weak Essay/lacks organization/no analysis – little outside information
1 = Poorly written/barely addresses question – no outside information, factual errors

Explore more and retain ideas

clearly by doing your assignment.

ASSIGNMENTS (Short Bond Paper)

Research on government programs and actions that address one of the following
issues:
1. Issues affecting OFWs
2. Unemployment
3. ”Brain drain”
Describe a specific issue related to your chosen topic, outline related problems and
issues, and discuss the government actions taken to address it. Make a report detailing the
results of your research.

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ANSWER KEY

PRE-TEST

1. unemployment
2. taxes
3. wages
4. recession
5. inflation

Let’s Do it No. 1

ECONOMIC PROBLEMS
5 Poverty
4 Unemployment
3 Taxes
2 Inflation
1 Recession

You can Do it No.1

Based from the table above, poverty should be given priority by the government.
Filipinos having hard time in such as conditions such as inability to afford housing,
malnutrition, child labor, etc. resort to crime and thievery to survive. Major causes of
poverty lead to low economic growth, increased in population rates, and high volume
of inequality.

You can Do it No.2

With the help of economics, it teaches us how we can manage our resources in
the most helpful way in saving time and money such as our savings, expenditures, and
other money-related issues.
Check Your Understanding
1. Taxes as one of the state’s police powers, are inevitable, and no one can escape
from them. Recession and inflation are economic cycles that are bound to to
come on certain times. They are unavoidable, and businessmen have to brace
or prepare for their eventuality. An example of this is the COVID-19 pandemic

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 resulted to a shut down in economy. Out of six (6) economic factors, poverty has
an extreme impact to the economy that affects the Filipino entrepreneur. It leads
to malnutrition, inequality, unemployment, child labor, and crimes such as
stealing to provide for their living. The major causes of this poverty include the
low economic growth, a weak agricultural sector, increased population rates and
a high volume of inequality that affect the business.

2. Poverty should be given priority by the government to be able not to rely on the
assistance/aid given by the government. Livelihood trainings/program should
be provided and financial assistance for their livelihood opportunities, but strict
monitoring should be done.

3. Despite these economic problems, Filipino entrepreneurs can still contribute to

the growth of the Philippine economy by paying the right taxes and helping the
community in providing employment.

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