Labor mismatch hinders RP growth - ADB

Schools in the Philippines are producing the wrong kind of skills for its labor market needs, which is hurting economic growth, according to an Asian Development Bank (ABD) study released yesterday.

It said there were now too many highly educated people chasing too few jobs, the Manila-based lender’s report said.

The study, written by ADB economist Hyun H. Son, found per capita labor productivity plummeted between 1997 and 2003 as “those with higher education have crowded out the less educated in terms of job opportunities.”

Filipino labor productivity increased by less than seven percent between 1988 and 2000, compared with 30 to 50 percent in neighboring Asian countries like Indonesia, South Korea, Malaysia and Thailand, it said.

Foreign remittances from Filipinos working abroad have become an important source of household income, representing about 10 percent as of 2003, while the share of agricultural wage income, non-agriculture wage income, and enterprise income all declined slightly compared with 1997, it added.

The report said that with higher education being an “important determinant of employment” in the Philippine market, “low-productivity jobs are taken over by the more educated labor force,” which in turn has “lowered the price for skilled labor over the period.”

Philippine law provides free elementary and secondary schooling for all children, but offers little support for specialization beyond basic education.

Son said the findings show “that the current education sector does not supply the right kind of skills that are demanded by the labor market.”

Accelerating economic growth would require government action in addressing the labor mismatch, he added.

“From a policy perspective, going beyond universal coverage in education is imperative because what is required is an expansion of the supply of the right kind of skills.”

Meanwhile, the government is looking at solving the high unemployment and underemployment rate in Region 3 by solving the job and employment gaps in Central Luzon as some companies backed out of their investment plans because of inadequate work supply.

Ruel John Kabigting, officer in charge of the Subic Bay Metropolitan Authority (SBMA) Business and Investment Group, said poor English proficiency is one factor for the growing unemployment in the region.

 “Two call centers were supposed to open in Subic recently, but the companies have withdrawn their proposals because we lack English-proficient applicants in the area,” Kabigting said.

In a statement, the SBMA said the Subic-Clark growth corridor will be more competitive if the labor force will be strengthened.

Officials of the Labor sector, business groups and the academe met recently for the third Regional Congress on Job-Skills Mismatch in order to identify what knowledge, skills and work ethics are required by the different industries in the region.

Severo Pastor, manager of the SBMA Labor Department, noted at the outset recent developments in the Subic-Clark growth corridor. He cited the shipbuilding industry in Subic that generated thousands of jobs for workers from Central Luzon.

Unfortunately, Pastor said that most of the job applicants from the communities surrounding the Subic and Clark free ports do not have the necessary skills. He said there is a danger of not putting the right people for the job.

A steady supply of competent and efficient workers is one of the major considerations of potential investors before deciding to bring their business in a particular area.

According to Technical Education and Skills Development Agency (TESDA regional director Martha Hernandez, Central Luzon has one of the highest number of unemployed workers among the 17 regions in the country. “What is disturbing is that majority of the unemployed are ‘relatively educated,” Hernandez said.

 “There is a very high unemployment rate in the region, doubled with significantly high underemployment rate. These are being attributed to the worsening job-skill mismatch,” Hernandez said.

She said that not all companies are looking for college graduates because most of them prefer skilled workers

Based on a survey conducted by the National Statistics Office (NSO), while there are so many job opportunities that come up, “the skills that applicants obtained in college did not match the jobs offered in the area.”