Module 6: Basic Economic

Problems in the Philippines

EXPECTATIONS
• After going through this module, you are
expected to:
• 1. identify the basic economic problems of
the country;
• 2. discuss the causes of economic problems;
and
• 3. explain how applied economics can be
used to solve economic problems.
Economic Problem
• Economic problem exists because of
imbalances of resources and satisfaction
of human needs and wants.
• Resources are limited to suffice the
unlimited desires of the society.
Because of this, all societies are not
excused with the economic problem.
• Philippines is one of the competitive
countries in the world. In the past years, the
economy has been increasing and stable.
• According to the study of World Bank in
2019, the Philippine economy remains
strong and is projected to grow 5.8% in
2019, before recovering to 6.1% and 6.2% in
2020 and 2021, respectively.
• Filipinos are very
proactive to attain these
figures. However, there
are hindrances to meet
this goal –and these are
economic problems.
• It is hard for the
Philippines to fully
eradicate poverty,
unemployment and
other problems because
of the resources.
 Unemployment
• As per NSCB Resolution No. 15
dated October 20, 2004,
unemployed consists of persons in
the labor force who are reported
as:
• (1) without work
• (2) currently available for work
• (3) seeking work or not seeking
work because of the belief that no
work is available, or awaiting
results of previous job application,
or because of temporary illness or
disability, bad weather or waiting
for rehire or job recall.
• The latest unemployment report
posted by Philippine Statistics
Authority (PSA) was in April 2020.
According the report, unemployment
rate increased to 17.7 percent with
7.3 million unemployed Filipinos in
the labor force in April 2020.
• This is a record high in the
unemployment rate reflecting the
effects of Corona virus disease 2019
(COVID-19) economic shutdown to
the Philippine labor market.
Unemployment rate in January 2020
was 5.3 percent, while in April 2019
it was recorded at 5.1 percent.
• This global pandemic has a great
effect not only in our country but the
rest of world.
Major Causes of
Unemployment
• There are reasons why
unemployment occurs.
• These causes are categorized
as:
• 1. Frictional Unemployment
• 2. Structural Unemployment
• 3. Cyclical Unemployment
• 4. Seasonal Unemployment
1. Frictional
Unemployment
• It is transitional unemployment due to
people moving between jobs because of
the many factors.
• Frictional unemployment can be both
voluntarily leaving from their jobs and
new entrants in the labor market.
• Workers quitting their job to look for
better pay adds to frictional
unemployment.
• In other cases, workers may resign from
their job to go back to school or learn a
new skill because they believe they need
the skill to earn more income.
• Others might leave the workforce for
personal reasons, such as to care for a
family member, sickness, retirement, or
pregnancy.
2. Structural Unemployment
• This happens when there is a long-term
decline in demand in an industry leading
to fewer jobs as demand for labor falls
away.
• This type of unemployment exists
because though jobs are available,
there’s a mismatch between what
companies need and what available
workers offer.
• Technology tends to worsen structural
unemployment. Jobs on a production
line being replaced by robots e.g. motor
manufacturing, online banking and
online retailing.
• Thus, structural unemployment is long-
lasting unemployment due to shifts in
an economy.
3. Cyclical Unemployment
• Cyclical unemployment is the
impact of economic recession or
expansion on the total
unemployment rate.
• This is also known as Keynesian
unemployment or demand-
deficient unemployment.
• During recession, there’s an
increase in unemployment
because of business closures
and failures that would result to
mass lay-offs.
• Firms are likely to reduce
employment to cut costs and/or
maintain profits – this is called
“labour shedding" or “down-
sizing"
4. Seasonal Unemployment
• The concept of seasonal unemployment
describes a situation when workers
experience unemployment at certain times
of the year when the demand has
decreased.
• Although unemployment is always
problematic, the upside is that seasonal
unemployment doesn’t last–eventually, the
peak season of a given industry arrives and
many workers become employed once again.
• Many workers adapt to seasonal
unemployment by working quite a bit when
demand is high and saving up much of their
earnings, then living off of those savings
during their seasons of unemployment.
• Employment opportunities are offered only
during holiday seasons, increase in number
of tourists, and agriculture.
Poverty
• Basically, poverty is a condition where
people’s basic needs for foods, clothing, and
shelter are not being met.
• In the final report of Family Income and
Expenditure Survey (FIES) in 2018, the
poverty incidence among population, or the
proportion of poor Filipinos whose per capita
income is insufficient to meet their basic
food and non-food needs, is now estimated
at 16.7 percent.
• This translates to about 17.7 million
Filipinos living in poverty. (PSA, 2020).
• The poverty incidence has been decreased
throughout the years. This is a good
indicator that the economy is really
performing.
Major Causes of
Poverty
• 1. Corruption
• 2. Education
• 3. Natural and
Geographical
Characteristics
• 4. Ineffective
Governance &
Government Policies
1. Corruption
• The World Bank recognizes the
harmful effects of corruption.
Public sector corruption is
defined as the abuse of public
power for private benefit.
• Corruption refers to preferential
access to public goods and
services, gratuitous insuring of
public procurement and
contracts, illegal hiring in the
public sector, bribery or
grafting, abuse of official
information, inconsistent
application of rules etc.
2. Education
• Poverty is not only a problem of low incomes, but it is
a multidimensional problem that includes low access
to opportunities for developing human capital and
education.
• Poor countries increase their poverty level due to lack
of training skills, productive knowledge and
transforms human beings into more valuable human
capital and education.
• Poverty levels are strongly linked to educational
attainment. Two-thirds of poor households are
headed by people with only an elementary school
education or below.
• Access to quality education is identified as a key
pathway out of poverty. Without proper training for
the respective skills and knowledge in the work force
such as read, write, communicate and be able to
choose different alternative choices in more informed
way would lead to low earnings and therefore
increase poverty level.
3. Natural and Geographical
Characteristics
• Many countries are inherently poor due
to their geographic characteristics that
predispose them to weak economic
growth. In the Philippines, the majority
live in rural areas and work in the
agriculture sector.
• Asian Development Bank (ADB)
suggests that there’s a need of
agricultural development for the farmers
and fishermen to generate more income.
• Also recurrent shocks and exposure to
risks such as economic crisis, conflicts,
and natural disasters are the main
drivers of the poverty in the country.
4. Ineffective Governance
& Government Policies
• The ineffective local governance and
government policies seem to prevent the
chronically poor from escaping the
poverty trap.
• In time of high inflation, people can’t
afford to buy goods and services that
they need.
• ADB also highlight that there’s a high
level of population growth in the country.
• Most large families, with six members or
more, are having difficulties to cope with
every living.
• The government needs to put effort in
creating jobs, quality and accessible
education, strong macroeconomic
policies, and programs to alleviate
 POSTTEST

• Directions: Choose
the letter of the best
answer. Write the
letter of your answer
on a separate sheet of
paper.
• 1. Which of the following is an
economic problem?
• a. Poverty
• b. Unemployment
• c. Frictional Unemployment
• d. All of the above
• 2. What is unemployment?
• a. People who are available for work but
do not find any jobs.
• b. These are the people who have no work.
• c. It refers to a person who leave their
current job.
• d. All of the above
• 3. Which of the following is NOT TRUE about poverty?
• a. It is a condition where people’s basic needs for foods,
clothing, and shelter are not being met.
• b. It occurs when people do not enjoy a certain
minimum level of living standards as determined by a
government.
• c. It is a state which the income for a family/individual
is not enough to sustain the basic food and non-food
requirements.
• d. None of the above
• 4. Which of the following is a cause of
poverty?
• a. Exposure to risk such as natural
disasters
• b. High inflation during crisis
• c. Both A and B are correct
• d. None of the above
•5. Which of the following is a cause of
unemployment?
•a. Due to people moving between jobs
•b. Fewer jobs available in the market
•c. Both A and B are correct
•d. None of the above