2021Labor Market Structures, Pay Gap, and Skills in the Philippines

Abstract

The world of work is constantly evolving because jobs are created and destroyed, a process that is increasingly becoming conspicuous due to significant technological advances, notably in ICT and computing. Invariably, poor national skills profiles hurt the economy, impede the efficient and timely accumulation of advanced or highly technical skills, and potentially degrade job mobility and wage growth. Thus, understanding the structure of the labor market in the context of occupational skills is essential. This paper provides a skills-based characterization of the labor market and assesses how skills are distributed across the working population, emphasizing key gender differences, and highlighting spatial disparities. It also explains the observed gender pay gap using skills-augmented Mincerian regression models and the 2015 Labor Force Survey. Results indicate the following: 1) Six in every ten workers in the Philippines are mostly employed in elementary occupations and in the agricultural, forestry, and fishery sectors. The said workers’ occupational skill sets are mostly composed of social and basic skills. 2) Some in-demand jobs in the IT-BPM and manufacturing sectors require specific skills bundle that include analytical skills such as systems analysis, systems evaluation, operations analysis, programming, and technology and design. 3) Hard-to-fill (HTF) jobs, mostly in health and wellness, manufacturing, construction, banking and finance, and IT-BPM, require specific skills. While the average social, basic, and management skills in these jobs are like those of in-demand jobs, the analytical skills required are substantially higher than those of the in-demand jobs. 4) HTF jobs are close to very few jobs that share similar skills sets, an indication of the quality of jobs available and/or being created in the economy. 5) Tertiary education and basic skills (both endowments and returns) narrow the pay gap. 6) Highly specific basic and analytical skills narrow the pay gap as well. Highly specific basic skills include Mathematics and Science while highly specific analytical skills include systems analysis, systems evaluation, operations analysis, programming, and technology and design. Moving forward, 1) There is a need to investigate the basic education sector and the kinds of school and home environments that can foster gendered differentiated learnings. Failure to address the issues in the sector can result in the workforce missing out on reskilling and upskilling opportunities that are widely available online. 2) The importance of tertiary education cannot be overemphasized in enhancing the readiness of the country’s future workforce. 3) TVET programs can be leveraged to tackle in-demand jobs in some sectors. 4) There is a need to assess the quality of jobs being created by the expanding sectors and ensure that reskilling and upskilling programs are in place, both of which facilitate the workers’ upward occupational mobility. 5) There is a need to continue developing programs that encourage women’s labor force participation and address job intermittencies resulting from care work. 6) Leveraging women’s better educational achievements may help mitigate skills gap in highly technical occupations. 7) Best practices for collecting, analyzing, and updating labor market information should be integrated in the Philippine statistical systems.