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  • Employment Impact of Business-to-Consumer E-commerce on Philippine Workers

    Roberto E. de Vera

    PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES Surian sa mga Pag-aaral Pangkaunlaran ng Pilipinas

    RESEARCH PAPER

    SERIES No. 2004-02

    PHILIPPINE APEC STUDY CENTER NETWORKPASCN

  • The author, Roberto E. de Vera, is a Professor at the School of Economics, University of Asia and the Pacific.

  • Roberto E. de Vera

    RESEARCH PAPER SERIES NO. 2004-02

    PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES Surian sa mga Pag-aaral Pangkaunlaran ng Pilipinas

    Employment Impact of Business-to-Consumer E-commerce on Philippine Workers

    PHILIPPINE APEC STUDY CENTER NETWORKPASCN

  • Copyright 2006 Philippine Institute for Development Studies

    Printed in the Philippines. All rights reserved.

    The views expressed in this paper are those of the author and do not necessarily reflect the views of any other individual or organization. Please do not quote without permission from the author or PIDS.

    Please address all inquiries to:

    Philippine Institute for Development Studies NEDA sa Makati Building, 106 Amorsolo Street Legaspi Village, 1229 Makati City, Philippines Tel: (63-2) 893-5705 / 894-2584 Fax: (63-2) 893-9589 / 816-1091 E-mail: publications@pidsnet.pids.gov.ph Website: http://www.pids.gov.ph

    ISBN 971-564-080-X RP 07-06-500

  • Table of Contents

    List of Tables, Figures, and Appendices ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ iv I. Introduction ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 1 II. Review of Related Literature ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 2 III. Conceptual Framework ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 14 IV. Methodology ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 28 V. Results ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 37 VI. Conclusions ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 53 VII. Recommendations for Future Research ○ ○ ○ ○ ○ ○ ○ ○ ○ 57 Appendices ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 59 References ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 71

    iii

  • List of Tables, Figures, and Appendices

    Tables 1 Description of industries ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 32 2 Share of major industry groups to total employment ○ ○ ○ 32 3 Share of selected industries to total employment ○ ○ ○ ○ ○ 33 4 Projected increase in revenues from 1995 to 2000 ○ ○ ○ ○ ○ ○ 37 5 Projected increase in average total employment

    per sector (1995-2000) ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 38 6 Employment generated for the whole economy

    (1995-2000) ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 39 7 Projected revenues from 2000 to 2005 ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 40 8 Total projected revenues attributed to e-commerce ○ ○ ○ ○ 41 9 Comparison of projected e-commerce revenues

    of the Philippines with e-commerce revenues of Asia and the US ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 41

    10 Ratio of e-commerce-related revenues to GDP and percentage contribution to GDP growth (under scenario 2) ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 41

    11 Ratio of e-commerce-related revenues to GDP and percentage contribution to GDP growth (under scenario 3) ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 42

    12 Percentage of e-commerce-related revenues as of 2005 ○ ○ ○ 42 13 Projected increase in average total employment

    (2000-2005) ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 43 14 Breakdown of increase in average total employment

    under scenario 3 (2000-2005) ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 44 15 Percentage of increase in average total employment

    (ATE) by period or year as against total increase in ATE from 2000-2005 ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 45

    16 Growth rate of increase in average total employment ○ ○ ○ ○ 45 17 Percentage of e-commerce-related employment as of 2005 ○ ○ ○ 46 18 Employment generated for the whole economy

    under scenario 3 (2000-2005) ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 47 19 Projected average total employment with partial

    substitution (2000-2005) ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 48

    iv

  • 20 Differences in employment generated for the whole economy with partial substitution (2000-2005) ○ ○ ○ ○ ○ ○ ○ 49

    21 Projected average total employment with adjusted coefficients (2000-2005) ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 50

    22 Projected employment generated for the whole economy with adjusted coefficients (2000-2005) ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 50

    23 Projected average total employment assuming partial substitution with adjusted coefficients (2000-2005) ○ ○ ○ ○ 51

    24 Estimated number of jobs affected assuming partial substitution with adjusted coefficients (2000-2005) ○ ○ ○ ○ 52

    Figures 1 Rebuilding the value chain ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 15 2 Determinants of employment changes ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 17 3 Multiple channels in the purchase process ○ ○ ○ ○ ○ ○ ○ ○ ○ 18 4 Purchase process in the Philippines ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 23 5 Purchase process under scenario 1 ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 24 6 Purchase process under scenario 2 ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 25 7 Purchase process under scenario 3 ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 26

    Appendices A Overview of e-commerce ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 59 B Input-output methodology ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 61 C Sampling procedures of 1995 ASE and definition

    of variables ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 64 D Methodology for revenue and employment projections ○ ○ ○ 67

    v

  • I

    ��

    Introduction

    Why are Philippine firms still far from being truly competitive players in domestic and global markets? One major reason: They have yet to fully tap the vast business potential offered by electronic commerce (or simply e-commerce).

    That, of course, is easier said than done. Getting fully into e- commerce means changing the way Philippine firms do business. It will also have a significant impact on the welfare of Filipino workers.

    To date, most efforts to measure the economic effects of e- commerce—including those on workers’ welfare—focused on the US and Europe, the considered leaders in e-commerce. The Philippines’ public policy and private decisionmakers who promote e-commerce still need a study that measures the economic effects of e-commerce in the country, particularly on employment growth and changes in the nature of jobs in the future.

    This study thus seeks to: (1) formulate different scenarios describing how business-to-consumer (B-to-C) e-commerce will influence purchase processes; (2) estimate the effect of B-to-C e- commerce on employment levels for selected industries; and (3) assess the changes in the nature of future jobs with the coming of e-commerce. Inherent with the advent of any new technology—as was in the case of telephones, computers, and automated teller machines—are the overly optimistic and pessimistic projections about employment. This study, which is a preliminary attempt to quantify the impact of e-commerce on employment, could provide the needed benchmarks with which to evaluate these various employment projections. It also provides a framework—albeit rendered in broad strokes—that could aid policymakers to formulate programs that will prepare Philippine workers for the changes brought by e-commerce.

  • Employment Impact of Business-to-Consumer E-commerce

    2

    II

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    Review of Related Literature

    This paper adopts the definition of e-commerce to consist of “transactions where the internet is used to gather information, to order goods or services, and to make payments” (World Bank 2000). Here, transactions refer to “all activity that generates value both within a firm (internally) and with suppliers and customers (externally)” (OECD 1998a). The latter transactions are called business-to-business (B-to-B) and business-to-consumer (B-to-C) e- commerce, respectively. The internet is a network supported by nonproprietary communication and information technologies with open standards that support universal con