EGALITARIAN| Macro fundamental of the country for development

WHENEVER economists would make big excuses for the snag happening to a country, they would say the macro fundamentals are in place. Then they would continue to mutter on figures and forecast values that may sound very strangely to the ears. But what are the macroeconomic fundamentals that they are talking about?

There are six basic macroeconomic variables. These are the Real GDP, unemployment rate, inflation rate, interest rate, stock market and the exchange rate.  These are the variables that determine the health of the country.

The real GDP is the measure of the economic activity that happens in the country over the year but unlike the nominal GDP, real GDP is adjusted for the changes in the current price level.  The common measure, though not really indicative of good economic performance is when the GDP is divided by the number of workers in the economy. This is not a reflective measure of well-being because the GDP is a measure of final output, not of distribution of the country’s wealth. Our country’s GDP growth has been steadily increasing for 15 years with an average of 5%; this growth rate is far bigger than Japan and the United States on similar years.

The limitation of the GDP as measure of welfare stem from the fact that employment rate in the country is at dismal condition over the last 36 years. There are four basic types of unemployment.

Frictional unemployment refers to those unemployed because they wanted to change jobs, or the fresh graduates waiting for opportunities. The cyclically unemployed are those who find jobs when businesses are expanding such as during holidays, and are losing jobs when the businesses are on lean months. The structurally unemployed are workers who cannot cope up with the required skills and competencies of the industries, given that their productivity is low yet wages could be high, better for them to be bought out by offering them separation pays. Then there are also those who are seasonally unemployed. Period of harvest and plating season they are asked to tender work, in between, they would wait for anything that would come.

The size unemployment rate is becoming bigger not by percentage incidence but by magnitude of the unemployed. Statistical figures would play between 7% to 10%; however, the debate is not on the percentage but on the size of the number relative to population. Labor force has been increasing exponentially. Yet, the work-ready individuals cannot find jobs.

The blame is on the education system and the growth of the industry. Since the 80’s, the school progression rate is problematic. For every 100 pupils joining elementary, 57 pupils could finish elementary. Of the 57 who go to high school, only 16 can proceed to college, and most of them are females. Of the 16 who could join college, only 2 can earn their diploma.  Therefore, only 2 are professionals out of the 100 pupils who went to elementary education some years back.

But the industries are not moving in the manner by which the human capital is developed by the education sector. For the same years, service sector is given much attention with growth rate hitting 60% increase while the sector for agriculture, fishery and forestry experienced 30% shrinking. The closely-related sector which is the manufacturing cannot extend help to agriculture because it is not growing for the same years.

If only 2 out of 100 are professionals while the 98 either have HS diploma or elementary education, then surely they cannot find huge opportunities in the economy. The service sector requires diploma, requires hard competencies.

The 98 undergraduates cannot all be accommodated in the agriculture neither in manufacturing. With their size, they surely would create a sector of their own. It is halfway of the service sector and a little over the manufacturing. Their sector is called the vulnerable sector. Some of them may progress towards the services sector but can hardly enjoy the benefit of effective wage that can decent living.

For the last 30 years, education sector and the employment sector do not come together as partners. Perhaps, with the K12, they would come to their senses that not one is above the other. Industries cannot just wait for the kind of human resource that the education sector will provide, neither the education sector can do teaching delivery on their own. It is time for both to partner together.

For now, I am to park my ideas as yet. This is an installment; I am still to discuss all other macro fundamentals for us to understand why the static discourse on the macro fundamentals of country must not be taken hook and sinker. We need to understand what had happened to us; else even if there are structural changes in the government yet as a nation, individuals do not know where their feet are placed, then the benefit of the changes won’t be maximized. We are yet to enjoy the benefits of the changes.

Posted in Opinion