Philippine Building Construction Industry: Profiting More, Hiring Less


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In my last post, I presented the proof of my thesis that the building construction industry in the Philippines doesn’t create a significant number of jobs relative to their expansion and growth rate.  I have the same observation in this post, but it’s about profit, profit growth, and profit growth rate this time.   “Profit” in this post is “Total Profit”.

Although I use the 2008 and the 2010 data results of the National Statistics Office’s Annual Survey of Philippine Business and Industry, I believe they are still applicable today.  Let’s not forget the GDP growth in 2010 was 7.63%, and the average exchange rate of a dollar to pesos was 45.11–no wonder OFW’s were buying condos.

Since my interest in analyzing all these data is about job creation and employment, let’s start with the job growths and the job growth rates in the two industries in 2010, and let’s go further by firm.

                            2010

                          Per Industry                                         Per Firm

                               Job Growth     Job Growth Rate             Job Growth     Job Growth Rate

Construction               9,035                  26.956%                        -28                 – 10.181%

Manufacturing             9,131                   1.058%                            1                     0.535%

Now here’s the dough:

                             2008                                                   2010

                           Revenue              Cost                     Revenue               Cost

Construction                  38.391 B            31.298 B                 66.958 B             54.471 B

Manufacturing                  3.161 T              2.532 T                    3.547 T              2.902 T

Here are the profits, the profit growths, and the profit growth rates in both industries

                                  2008                                                      2010

                            Profit                     Profit         Profit Growth        Profit Growth Rate

Construction            7.093 B               12.487 B           5.394 B                  76.047%

Manufacturing             629 B                    645 B                16 B                    2.544%

Let’s equally divide the profits and the profit growths among firms in both industries. The profits in manufacturing are high because petroleum products are included.  You know oil companies are greedy too.  They deserve a separate post.  Still the profit growth and the profit growth rate of a building construction firm in 2010 were way higher.  That means  quick, easy money for a building construction investor that year.

                                   2008                                                      2010

                                 Per Firm                                              Per Firm

                               Profit                      Pofit         Profit Growth        Profit  Growth Rate

Construction           58.139 M                72.599 M         14.460  M                   24.871%

Manufacturing       136.650 M              138.919 M           2.269  M                     1.660%

A company can profit a lot in the manufacturing industry, but why is the flow of investment in that industry is slow?  I wonder if there were greedy investors in 2010 who owned multiple building construction companies.  They only needed to own two companies to surpass what a manufacturing company profited in the same year.

Now let’s put profit growth and profit growth rate and job growth and job growth rate side by side and by industry.

                            2010

Profit Growth    Profit Growth Rate      Job Growth    Job Growth Rate

Construction Firm          5.394 B               76.047%                    9,035              26.956%

Manufacturing Firm             16  B                2.544%                    9,131                1.058%

Since it’s not the industry that hires employees, let’s see how it goes if we put profit growth per firm next to job growth per firm.

         2010

                    Profit Growth Per Firm             Job Growth Per Firm

Construction Firm                   14.460 million                                 – 27

Manufacturing Firm                   2.269 million                                     1

Scandalous!  Profiting more, hiring less–quod erat demonstrandum.  I hate greed, and I equally hate greedy people.  Where’s your corporate social responsibility, blood-sucking leeches?

Greed in the Philippine Building Construction Industry


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Yes, I’m stubborn.  I don’t stop until I find proofs that support my ideas.  When ideas have proofs and bases, they cease to be mere opinions.  If we want solid results, we need solid inputs.  This post attempts just that.

Among all economic sectors in the country, the industrial sector had the highest growth rate of 10.9% last quarter.  Among all industries, construction had 32.5%, and manufacturing had 9.7%.  It’s no rocket science; significant job creation should happen in the construction industry because of its expansion and high growth rate.

Using the 2008 and the 2010 data results of the Annual Survey of Philippine Business and Industry conducted by the National Statistics Office, we can check if the construction industry created a significant number of jobs in 2010 considering its expansion and growth rate that year.  I know the data are not recent, but I believe they still apply today because the construction industry is still booming like in 2010.

First, let’s define terms here.  “Construction” is an industry, and under that industry are sub-sectors: building construction, road construction, construction installation, etc.  Since I’m interested to know if those building construction companies of the Ayalas and the Sys are significantly creating new jobs, my use of “construction” here pertains only to building construction–residential and non-residential.  The data I use that are related to “construction” are limited to building construction only.  “Manufacturing” is also an industry with many subsectors under it. I use all the data related to that industry since there is no particular sub-sector that has an impressive high growth.  For both “manufacturing” and “construction”, the data only consider companies with twenty or more employees.

The following is a simple set of data, but we can create many economic stories out of these numbers:

                       2008                                               2010

                         No. of Firm     No. of Employee       No. of Firm     No. of Employee

Construction                   122                 33,518                     172                  42,553

Manufacturing              4,603               862,665                  4,643                871,796

Let’s distribute employees equally to all firms and find out which of the two industries hired more employees per firm in 2010.

   2008                                                        2010

                              Employee / Firm                  Employee / firm       Job Growth Rate / firm

Construction                   275                                      247                           – 10.18%

Manufacturing                187                                      188                               0.53%

Let’s consider the job growth in 2010 was due to newly created firms and see which new industrial firms hired more new employees.

               2010

                     New Firm         New Employee         New Employee / New Firm

Construction                  50                      9,035                                 181

Manufacturing                40                      9,131                                 228

Let’s now put the growth rates of firms vis-à-vis the industrial job growth rates to see if the building construction industry in 2010 hired according to their growth rate and expansion.

                          Firm Growth Rate By Industry       Job Growth Rate By Industry

Construction                              40.98%                                            26.96%

Manufacturing                             0.87%                                               1.06%

Let’s use ratio and proportion for kids to project the numbers of jobs needed for both industries since the numbers of firms in the  same industries increased in 2010.  Simple equation:  a / b = c / d.  Let’s find c.

                   2008                                            2010

                          Employee (a)     Firm (b)          Projected Employee (c)     Firm (d)

Construction                33,518               122                         47,255                          172

Manufacturing           862,665             4,603                       870,162                       4,643

Let’s find out the projected numbers of jobs that should have been created in 2010 considering the numbers of additional firms in both industries.

                                  2008                                                 2010

                         Employee (E)        Projected Employees (P)    Employees Needed (P–E)

Construction           33,518                           47,255                                  13,737

Manufacturing       862,665                         870,162                                    7,497

Let’s check which industry hired more employees and filled the projected available jobs in 2010.

                   Projected Employees Needed         Employees Actually Hired

Construction                          13,737                                           9,035

Manufacturing                          7497                                            9,131

It’s clear from any angle that the building construction industry in 2010 “underhired”.  It did not also create a number of jobs that corresponded to its growth rate and expansion.  Did the building construction companies lower their labor cost even though they were raking in huge profits?

That, my friends, is greed in the form of numbers.