The rapid development of new technologies has given rise to fears of institutional changes in the workplace. Automation and digitalization, through artificial intelligence (AI), robotics, drones, and the internet of things (IoT), have already had a significant impact on the workforce, whether through transformation of processes to outright obsolescence of functions.
That is further compounded by technology becoming more economical and built to a great degree of user-friendliness, all adding to the ease of market access and mass adoption. It took the telephone a half century to achieve mass adoption, the personal computer 14 years, the internet seven years, and Twitter nine months. Niantic’s Pokémon GO, a pioneer in augmented-reality gaming, took a mere 19 days to achieve the same goal – and along with it, revenue close to US$1 billion only six months after launching in 2016.
For a time, it appeared that service-providing occupations were out of harm's way. As governments saw the threat automation posed to jobs, the same number of positions or even more would be recovered by the shift to the service sector. The US Bureau of Labor Statistics projected that the service sector would grow to such a scale that it would account for 91 percent of new jobs from 2016 to 2026. Another report noted that six of the top 10 fastest-growing occupations are in healthcare.
The Philippines is an economy highly dependent on the services sector. In 2019, services contributed a staggering 58.9 percent of all jobs, followed by agriculture with 21.7 percent and industry 19.4 percent. Unskilled workers or those with only basic skills comprised 45 percent of all those employed in the service sector. A total of 41.2 percent work in transportation, hotels, food and beverage, administrative and support services, education, health and social work, entertainment and other service activities.
Unfortunately, those were the precise sectors identified as highly susceptible to automation, according to an Organisation for Economic Co-operation and Development (OECD) working paper. Food preparation workers were forecast to be the most affected (64 percent), followed by cleaners and helpers (59 percent), drivers and mobile plant operators (58 percent), elementary workers (also 58 percent), agricultural workers (57 percent), personal service workers (54 percent), building trades (52 percent), sales (also 52 percent), and customer services (49 percent). Some key sectors seemed relatively safe – health professionals (35 percent), hospitality and retail (both 34 percent), and teaching professionals (28 percent).
A similar study by the University of Oxford categorized jobs and their likelihood of automation. This showed that repetitive jobs, or those that do not require a high degree of social intelligence, are more at risk of automation, while jobs that require inter-personal skills such as empathy, creativity and negotiating, among others, are considerably safer.
Faced with this grim outlook, the future of work in the Philippines was looking grim. Then, the proverbial axe fell. As of July 22, there have been over 72,000 Covid-19 cases in the country, with about a third of the patients recovered and about 1,900 deaths. In March, the government imposed an enhanced community quarantine (ECQ) first in the key regions and provinces of main island of Luzon, where the National Capital Region is located, and then beyond. Despite strenuous government efforts to control the spread of the virus, the curve of new cases is yet to flatten – over a thousand new cases are confirmed daily. In June, social-distancing restrictions were eased.
Health quarantine measures have had a colossal impact on the economy, particularly the services sector. The tourism industry, including airlines, hotels, resorts, and casinos, ground to a halt. Retail establishments were ordered closed or chose not to operate as shoppers became scarce. Popular ride-hailing services ceased. Educational institutions shut down but moved teaching online where possible. Health professionals have continued to practice at significant personal risk.
The official GDP growth forecast for this year plummeted from 6.5 percent to minus-2.5 percent. Foreign direct investment (FDI) shrunk by 67.9 percent year on year in April, bringing the year-on-year decline of FDI for the first four months of the year to 32.1 percent. The government shifted spending from a focus on infrastructure development to health and social welfare. Legislation was quickly passed, allocating billion of pesos for economic stimulus and social amelioration.
The collapse has been significant in the tourism sector, which had been gearing up for a stellar year. In 2019, the Philippines welcomed a record high of 8.2 million international tourist arrivals, who accounted for a US$9.31 billion in receipts. In the first quarter of this year, both metrics fell by 55 percent. Last year, the tourism sector contributed 12.7 percent to GDP and engaged 13.5 percent of the workforce, compared to 5.6 percent of GDP and 9.3 percent of employment two decades earlier.
The Philippines is a major manpower exporter, with official numbers indicating that two million Filipinos work abroad, with 39.6 percent of these overseas Filipino workers (OFWs) employed in elementary occupations and 17.5 percent in service and sales. In 2019, personal remittances to the country reaching a record high of US$33.5 billion (9.3 percent of GDP). In April 2020, cash remittances dropped 16.2 percent from the same month last year. In the first four months of this year, the inflow of remittances was 2.9 percent lower than in the same period in 2019. As of July 16, over 60,000 OFWs have be repatriated due to the pandemic, with more expected to return, especially with cutbacks in employment in the oil-producing economies of the Middle East.
One bright spot in the Covid-19 storm may be business process outsourcing (BPO). The Philippines is a key BPO hub, with a global market share of up to 18 percent. It is home to more than 850 BPO companies, mainly providing call-center operations, information technology services, and medical transcription, among others. The industry is a cornerstone of the economy – the country’s second-highest foreign-exchange earner with revenue estimated to reach US$32 billion by 2022 and an annual industry growth rate of about 9 percent. The sector, which employs over a million workers, was one of the few industries allowed to operate through the pandemic lockdown. This resilience may pay off, especially in back-room services related to healthcare, though the drop-off in FDI does not bode well.