Accountancy, Business, and Management

Supplementary Learning Materials

in
APPLIED ECONOMICS
Module 4: Contemporary Issues Affecting Filipino Entrepreneurs

Learning Objectives

At the end of this module, the learners should be able to

1. relate population growth with the country’s labor supply and apply the law of
demand and supply in the determination of wages of labor;
2. deduce how the excess supply of labor has led to the phenomenon of the Overseas Filipino
Worker;

3. explain the concept of minimum wage; and

4. discuss why it is necessary for the government to impose taxes.

Did you know?

▪ The current population of the Philippines is 110,483,925 as of Sunday, February 14,
2021, based on Worldometer elaboration of the latest United Nations data.

▪ The Philippinesaccording to UN 2020data. population is estimated at 109,581,078

people at mid-year ▪ The Philippines population is equivalent to 1.41% of the total

world population.

Source: Worldometer. https://www.worldometers.info/world-population/philippines-population

Oriental Mindoro National High School Page

J. P. Rizal St., San Vicente East, Calapan City/ (043) 288-8811/ ormdonhs@gmail.com
ormdonhs@gmail.com
Activity 1: Vocabulary Development

Directions: Identify the word or idea being defined in each given statement. Pick your answer from the pool
of words/phrases inside the box.

Savings tax minimum wage

Income tax unemployment investment

______________1. It is the common tax filed by employed and self-employed individuals.

______________2. It is the compulsory contribution to state revenue, levied by the government on worker’s
income and business profits.
______________3. It refers to the lowest wage per hour that the worker may be paid as mandated by the
law.
______________4. It is a persistent problem or situation where someone of working age is not able to get
a job but would like to be in full-time employment.
______________5. It refers to the postponed consumption at present.

Study Guide
Contemporary Issues Facing Filipino Entrepreneurs Labor, Supply, Population Growth,
and Wages
The people of a country are very important as a resource used in the production if goods and
services. Population is the source of labor supply although not all of a country’s population are
part of the labor supply. In the Philippines, the labor supply, also known as the labor force, refers
to the portion of the population, 15 years old and over who are willing and able to work, including
those who are actively seeking work but have not found work and those who are employed. There
are likewise other people who are excluded from the labor force such as the fulltime housewives
or househusbands, full-time students, those who are physically and mentally disabled and
therefore cannot work, as well as those who do not wish to work and are not actively seeking for
work.

The country’s labor supply is vital to the economy, since their contribution to production of goods
and services determines the value of the country’s Gross Domestic Product. In 2014, as of April,
Philippine labor force was reported at 41.6 million, with an estimated 38.7 million total employed
persons in July 2014, translating into an employment rate of 93.0%. Of this number of employed
people, 60% were males and the largest number of employed persons consisted of age group 25
to 34 years with 26.4% of the total employed. Fifty percent of employed persons were in the
services sector. Laborers and unskilled workers comprised of one-third of the employed persons.
Wage and salary workers were registered at 57.5%
Full-time workers are those who work for 40 hours or more while part-time workers work for less
than 40 hours.
In April 2014, full-time workers comprised 59.3 percent of the total employed.
Employment growth in large enterprises in Metro Manila continued to be positive at 1.02% during
the fourth quarter of 2014 but this reflected a marked slowdown compared with the same quarter
of the previous year at 3.22%. The country’s labor force grew by an average of 2.5% or an addition
of 962,000 persons in 2014. This placed the total working labor force participation rate (LFPR) of
64 .4% than 63.9% in 2013.
The 2014 average annual employment data showed a positive note, employment level grew by
2.8% compared to 2013- a net gain or employment generation that exceeded one million.
Employment was boosted by robust growth in industry (4.1%) together with a sustained growth

Oriental Mindoro National High School

J. P. Rizal St., San Vicente East, Calapan City/ (043) 288-8811/ ormdonhs@gmail.com Page
ormdonhs@gmail.com
services (3.1%) and modest recovery in agriculture (1.7%). Both the rates of unemployment and
underemployment eased slightly from the previous year. Employment growth in 2014 was largely
driven by the rise in part-time employment (9.1%) alongside the increase in the number of
selfemployed persons and unpaid family workers. The country’s labor force grew by an average
of 2.5% or an addition of 962,000 persons in 2014. This placed the total working population in the
active workforce at 40.1 million. The figure corresponds to a higher labor force participation rate
(LBPR) of 64.4% than last year’s 63.9%.
Source: Labor Force Survey- NSO (2015)
Philippine Population
Let us now take a look at the Philippine
population statistics in order to relate population FIGURE 2.10. DISTRIBUTION OF
growth of our labor supply and to the demand for PHILIPPINE POPULATION (2013)
goods and services. This will also help us (SOURCE: NATIONAL STATISTICS
analyze why the prices of basic commodities
OFFICE)
have been increasing.
The Philippine census is an official count of the
population of a certain local administrative unit in Visayas
the Philippines. The population is enumerated Mindanao
20%
24%
every 5 years.
The population of the Republic of the Philippines
reached more than 100 million people in 2014,
registering an increase of 2.0% versus the
previous year. The population of the Philippines Luzon
represents 1.38% of the world’s total population. 56%
The distribution of the Philippine population
among the 3 biggest regions is shown in Figure
2.10.

Table 2.4. Summary of Projected Population, by Five-Year Interval

Philippines: 2000-2040 (Medium Assumption)
Year Both Sexes Male Female
2000 76, 946,500 38,748,500 38,198,000
2005 85,262,000 42,887,300 42,373,700
2010 94,013,200 47,262,600 46,749,600
2015 102,965,300 51,733,400 51,231,900
2020 111,784,6001 56,123,600 55,661,000
2025 120,224,500 60,203,600 59,912,800
2030 128,110,0001 64,203,600 63,906,400
2035 135,301,1001 67,741,300 67,559,800
2040 41,669,900 70,871,100 70,798,800
Source: Philippine Statistics Authority, National Statistical Coordination Board
Let us now look at the population statistics and see how our population growth over the years had
affected the Filipino’s quality of life. We can see that from 2000 to 2005, which are the census
years, population increased by approximately 8 million Filipinos. In 2005 to 2010, the increase
was approximately 9 million Filipinos. From 2010 to 2015, it is estimated that close to 9 million
Filipinos will be added to the total population. It is logical to say that more Filipinos mean more
mouths to feed; thus, demand for products and services will naturally increase. If the supply of
these goods does not increase as fast as the demand, their prices will naturally increase. Housing,
school buildings, health care, and food may no longer be sufficient to meet the needs of the growing
population. In the table 2.5, we see that while population has been increasing, the rate of growth

Oriental Mindoro National High School

J. P. Rizal St., San Vicente East, Calapan City/ (043) 288-8811/ ormdonhs@gmail.com Page
ormdonhs@gmail.com
 of population has however been declining, and is expected to decline further over the next 25
years.
Table 2.5. Average Annual Growth Rates, Philippines: 2000-2040
Year Growth Rate
200-2005 2.05

2005-2010 1.95
2010-2015 1.82
2015-2020 1.64
2020-2025 1.46
2025-2030 1.27
2030-2035 1.09
2035-2040 0.92
Source: Philippine Statistics Authority, National Statistical Coordination Board

The Philippine Wage Situation

Usually, when the labor Day is celebrated in the Philippines on May 1, labor unions and organizations
clamor for wage increases. The government protects the workers through the imposition of minimum
wages. But workers always claim that these minimum wages are not enough for their subsistence.

Minimum Wages in Philippines remained unchanged at 537 PHP/day

in 2019 from 537 PHP/day in 2018.

The above minimum gages in

Philippines refer to daily minimum wages
in nonagriculture sector in the National
Capital Region. Minimum wages in the
other regions in the Philippines are lower
depending on the cost of living in the
specific region or sector.

The setting of minimum wages by the

government assures protection for
workers that they are not underpaid by
employers, and gives the guarantee of a
sufficient income to meet their basic
needs.
Source: Department of Labor and Employment
https://tradingeconomics.com/philippines/minimum-wages

Labor Migration and the Overseas Filipino Workers

Another distinct feature of Philippine labor is the growth of laborers whom we call the OFWs or the
Overseas Filipino Workers. Primarily because of a high unemployment rate in the country, currently at
6.4%, Filipinos have started to find work in other countries. Because wages are higher in the United States
and other more developed economies, Filipino teachers, engineers, doctors, nurses and other health
professionals and technical workers have opted to migrate. So, even if the supply of doctors prefers to
migrate and work in foreign countries.

Scattered all over the world, our overseas Filipino workers have been hailed as our modern-day heroes,
contributing to the growth of the economy and sending millions of dollars to their families back home in the
Philippines. The lack of jobs in their native land, and the low wages for whatever jobs are available are the
main reasons Filipinos, both male and female, try to find work in foreign countries. Over supply of workers

Oriental Mindoro National High School

J. P. Rizal St., San Vicente East, Calapan City/ (043) 288-8811/ ormdonhs@gmail.com Page
ormdonhs@gmail.com
 has resulted in low-wage levels since workers compete among each other for these limited job openings.
Those unwilling to work at these low-wage levels look for greener pastures, which they find in foreign
countries. They do a wide variety of jobs: professionals, health workers, caregivers, engineers and
construction workers, entertainers, and teachers.

The Philippine Peso and Foreign Currencies

Trading with other countries is also an important economic activity that impacts on the economy. Selling
locally made products, called exports, means we earn dollars as payment for these goods bought by buyers.
In the same manner, we buy goods from other countries, and these are our imports. When we trade with
other countries, we need a common currency to use to pay for goods we buy from them and for them to
pay us for goods we sell to them. When we travel to foreign countries, we may bring peso or the US dollar,
then convert them into the local currency of the country which we visit. For example, we convert our dollars
into baht when we go spending in Thailand, to rupees in India, euros in Spain and other European countries,
and yen in Japan. This is why we need conversion rates and these are based on the existing foreign
exchange rates.

We need foreign currencies to trade with other countries. When we buy more imported brands like Nestle
chocolates, Prada bags, or Nike shoes, the importers pay for these in the currency of the country from which
we buy these goods.

Rent and Price Structure

The layman’s concept of rent is payment for the use of the land or buildings belonging to others. It is
the compensation made to the owner of such land or building. From the point of view of economics, rent
refers to a payment made to or for factor of production over and above the amount expected by its owner.
Economic rent is the positive difference between the actual payment made for a factor of production (such
as land, labor or capital) to its owner and the payment level expected by the owner, due to its exclusivity or
scarcity. Economic rent exists due to market imperfections. Without market imperfections, there would no
need for payment of rent.

Savings and Investment

Savings and investment are necessary to build the future. Savings is to investment as food is to the body
nourishment process. Savings and investment are not only the concern of business but also of households
and government.

Investment is defined as building up the capital stock for more future production and consumption. But the
cost of investment is savings defined as postponed consumption at present. Behind the use of money as
exchange medium are the real activities of savings and investment, which are clearly seen in households
that produce for their own consumption (e.g. subsistence farmer).

Minimum Wage

The problem of inadequate wage is intertwined with the problem of unemployment. Both problems stem
from the lack of jobs for our large labor force. Wage is more inadequate and unemployment rate is higher
as more and more people cannot find jobs that have become scarcer.

But the relatively few employers can exploit many who badly need jobs all the more. For this reason, the
government mandates a minimum wage to protect workers. Employers are banned from paying wages
below the minimum standard set by the government. Yet, most wages are still below the minimum standard
due to lack of enforcement. On the other hand, total enforcement may not be possible with the millions of
employers the government has to watch for violations.

In the long run, it is creating more jobs that will empower workers to readily find employment and demand
higher wages.

Taxes

Oriental Mindoro National High School

J. P. Rizal St., San Vicente East, Calapan City/ (043) 288-8811/ ormdonhs@gmail.com Page
ormdonhs@gmail.com
 We pay taxes for government to provide public goods and services that empower and enable individuals
and institutions alike (e.g. school, business corporation) to pursue their dreams. One example of a public
good is a farm access road to farmers to transport their produce to the cities for the needed cash income.
Another example is the public school system to educate children to poor families out of poverty. On the
other hand, an example of public service is restoring peace and order in war-torn areas in Mindanao by the
armed forces and police that all can resume normal life. Another example is the regulation of business
permits by the City Hall to prevent industrial overcrowding, which can dampen the incentive to do business.
In other words, we pay taxes for government to provide a better place where we can exercise out freedom
securely, fairly and progressively.

But taxes are yet to burden even as we ultimately benefit from the public goods and services we get in
return. Taxes can dampen the incentive to do business for the benefit of society as they can eat up profit.
An example is the usual profit tax that diverts investment from new and vital products (e.g. cancer drugs) to
those we need less of (restaurants). Pioneering business need some tax reliefs in the early stage of market
exposure when profit is still lean. Taxes can also distort savings, investment, and consumption as income
earners shift to substitutes to avoid the tax burden. An example is the high tax on interest income, which
drives income earners to put their savings instead in individually lucrative but socially unproductive real
assets like jewelries, idle lands, and the like.

To the Learners: Please detach this part together with the Performance Task/ Application sheet (Pages
7-11) Use this in writing your answers and submit it to your subject teacher during the retrieval of outputs.
Remember to write your complete name, grade level, and section.
APPLIED ECONOMICS

Name: __________________________________ Year/Section: _________________

Week: ________________________ Date of Submission: ____________

Assessment

Directions: Identify the word or ideas described in each statement. Pick your answer from the pool of words
and write your best choice on the space before each number.

A. economic rent B. investment C. savings D. census

E. minimum F. wage G. tax H. unemployment

I. labor supply J. population K. rent L. gross income

_________1. It refers to the lowest wage per hour that the worker may be paid as mandated by the law.
_________2. It is the source of labor supply although not all of a country’s population are part of the labor
supply.
_________3. It refers to the postponed consumption at present.
_________4. It refers to the building up the capital stock for more future production and consumption.
_________5. It is the positive difference between the actual payment made for a factor of production (such
as land, labor or capital) to its owner and the payment level expected by the owner, due
to its exclusivity or scarcity.
_________6. It is another word for labor force in the country.
_________7. It is the compulsory contribution to state revenue, levied by the government on worker’s
income and business profits.
_________8. It is a payment made to or for factor of production over and above the amount expected by
its owner.
_________9. It is an official count of the population of a certain local administrative unit in the Philippines.
_________10. It is a persistent problem or situation where someone of working age is not able to get a job
but would like to be in full-time employment.

Oriental Mindoro National High School

J. P. Rizal St., San Vicente East, Calapan City/ (043) 288-8811/ ormdonhs@gmail.com Page
ormdonhs@gmail.com
Oriental Mindoro National High School

J. P. Rizal St., San Vicente East, Calapan City/ (043) 288-8811/ ormdonhs@gmail.com Page
ormdonhs@gmail.com
2