Supply Response of Filipino Workers to World Demand

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2 Supply Response of Filipino Workers to World Demand

3 Supply Response of Filipino Workers to World Demand Prepared for IOM by Dr. Edita Tan, Consultant

4 The findings, interpretations and conclusions expressed herein do not necessarily reflect the views of IOM or its Member States. The designations employed and the presentation of material throughout the work do not imply the expressions of any opinion whatsoever on the part of IOM concerning the legal status of any country, territory, city or area, or of its authorities, or concerning is frontiers or boundaries. IOM is committed to the principle that humane and orderly migration benefits migrants and society. As an intergovernmental organization, IOM acts with its partners in the international community to: assist in meeting the operational challenges of migration; advance understanding of migration issues; encourage social and economic development through migration; and uphold the human dignity and well-being of migrants. Publisher: International Organization for Migration (Philippines) 25 th Floor Citibank Tower Condominium 8741 Paseo de Roxas Makati City 1226 Philippines Tel: to 65 Fax: Internet: ISBN International Organization for Migration (IOM) All rights reserved. No part of this publication may be reproduced, stored in retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher. Layout and Design Enrique C. Naval Printed in the Philippines Regan Printers Inc. 49 Daanghari, Navotas City

5 Contents Foreword Section 1 Introduction >1 Section 2 The Functioning of an Open Education-Labour Market or ELM >5 Section 3 Information on the Education-Labour Market (ELM) and Migration >11 Section 4 Migration and the Labour Force >14 Section 5 Prospective World Demand for Migrants >21 Section 6 Demand and Supply of Blue Collar Skills >26 Section 7 The Market for Seafarers >32 Section 8 Survey of Recruiters >35 Section 9 Marketing Filipino Workers >39 Section 10 The Education/Training (ET) System >41 Section 11 Growth and Structure of the Higher Educational System and Employment of those who are College-Educated >47 Section 12 Quality of Higher Education >50 Section 13 Supply Response to Migration of Nurses >57 Section 14 Institutional Innovation in the Education-Labour Market >61 Section 15 Conclusion and Recommendations >64 Annexes References

6 Foreword The global labour market provides an increasing number of employment opportunities in more geographically diverse areas and in a broader range of occupational and skills categories. Countries facilitating overseas employment of their nationals benefit from closely observing and quickly responding to this expanding and changing market demand. The Philippines current and historical experience with the facilitation of foreign employment substantiates these observations and provides many useful best practices. The Philippines began providing construction-sector workers to the market in the Middle East during the oil boom of the 1970 s, and has evolved to capture a substantive share in the global labour markets of more than 190 countries and destinations in multiple occupational categories and work settings. Among the areas of prominence of the Philippines are the seafaring industry and the health sector. The Philippines undoubtedly deserves its reputation as a leader in human resource provision for the world s seafaring industry, and has been at the same time a stable source of health workers, particularly nurses, for many of the developed nations with aging populations. Notwithstanding the prevalence of controversy and conflicting policies on immigration in some of the destination countries, more countries and regions of the world now actively compete for skilled workers to boost national productivity and fill key skills gaps in the workforce. The UK s highly skilled migrant programme, the expansion of the intake of migrants through Canada s temporary labour migration and provincial nominee programmes, and the growth in Australia s skilled permanent migration stream are among the recent approaches underpinning this general global trend.

7 The level of education, training, demonstrated skill proficiency, professional certification and experience among migrant workers and skilled immigrants has become a main determinant of their compensation packages. The Philippines has rightfully acknowledged that possession of skills is a key to protection in its Migrant Workers and Overseas Filipinos Act of Consistent with this principle was the series of reforms set in place in 2007 requiring mandatory skills and language training for domestic workers so that they can seek a higher standard of wages and benefits. Despite a strong foothold in the global labour market, the Philippines acknowledges the challenge of keeping up with the supply of skills for its domestic requirements as well as for the existing and emerging job opportunities abroad. Aside from the professional qualifications, it is important to note that so called soft skills have become compelling factor in competitiveness. Soft skills can include such competencies as a demonstrated ability to manage difficult situations in customer relations, the exhibition of appropriate leadership skills in diverse settings, and welldeveloped communication skills suitable for the particular culture and work environment. In the Philippines, it is increasingly recognized that support to overseas employment must involve the promotion of education, technical and vocational training with practical competencybased assessments of knowledge and skills. Demonstrating the appropriate technical and language proficiencies of the workforce available for overseas employment is an increasingly important factor in retaining or expanding market share of opportunities in the foreign labour marker. This is a key challenge that will be increasingly felt by labour-providing countries as they negotiate with the destination countries for labour market entry and mutual recognition of skills and qualifications. The country that advances the furthest and fastest in this area will likely gain meaningful advantages over other labour origin countries with education and training approaches that are not well articulated and tuned to the foreign labour market. This paper, commissioned under the European Commission-funded project Regional Dialogue and Facilitating Legal Migration between Asia and the European Union, provides fresh perspective, from and expert s point of view, on the complex issues confronting the Philippines education, skills training and certification system as it responds to overseas employment opportunities. It is hoped that the study will enrich the discussions among policy-makers and stakeholders, and contribute to the formulation of further appropriate responses to the pressing challenge of preparation and protection of overseas workers. CHARLES HARNS Regional Representative

8 Supply Response of Filipino Workers to World Demand Dr. Edita Tan 1 Introduction According to studies, the Philippines has one of the highest number of emigrants in the world. About 8.3 million Filipinos, close to 10 per cent of its population, are estimated to reside abroad as permanent emigrants or as temporary (migrant) workers. Approximately 3.6 million are permanent emigrants of which 2.4 million are in the United States and the rest in other advanced economies. The migrant workers, popularly referred to as overseas Filipino workers (OFWs), have found work in various occupations in different locations worldwide. According to the latest official report, OFWs now work in 194 states and trust territories. The large numbers of migrants left through a fairly long period of increasing emigration that started with the American colonization of the country in In 1905, a few hundred farm workers were recruited to work on plantations in Hawaii and California. They were followed by US government sponsored scholars who were employed to staff the institutions it established in the colony. Not all came back. After World War II, Filipino engineers, doctors and technicians were employed in US bases. Doctors and other workers responded to vacancies for foreign workers following the liberalization of the US immigration lawin At about this time, jobs for seafarers became available. Then the Middle East job market opened and the first large batch of migrant workers, numbering 12,500, left for the region in the early 70 s. The deployment of workers for this region reached a phenomenal dimension and changed the nature of migration. Migration for temporary employment increased to hundreds of thousands, first to the Middle East and then to the Tiger Economies of Asia and other destinations. More recently, during the past five years, about a million a year left for employment abroad of which about 250,000 were new recruits, i.e. new migrants and migrants on new contracts. The rest were returning to old jobs. Those leaving as permanent emigrants to the US averaged about 50,000 per year, and for other countries about 26,000. Emigration to the US, Canada and Japan was largely on the basis of family reunification but migration to the rest of the world was essentially for employment and was, therefore, skill-based. The skill/occupational composition of the migrants changed as new

9 labour markets were sought. The skills demanded tend to be country-specific, e.g. Hong Kong Special Administrative Region recruits mainly housemaids while Taiwan province of China employs factory workers. These facts draw attention to the capacity of the country s education-labour market institutions to supply such large numbers and such variety of skilled workers. The country has developed institutions that have facilitated this scale and characteristics of migration. There is an extensive education and training (ET) system that has provided basic education and skills training for the majority of manpower, thus qualifying them for many foreign jobs. A large placement or recruitment industry, with more than 1,300 member companies, has developed to find markets and match workers to available jobs. The government has set up the Philippine Overseas Employment Administration (POEA) and the Overseas Workers Welfare Administration (OWWA) to ensure overseas worker s rights and provide recruitment and placement services. Lastly, the country s long and fairly successful experience with migration has created in the population a positive attitude to migration and enhanced its propensity to migrate. On the whole, migration has improved the wellbeing of migrants and their families. Many have been able to send their children to college, to build better houses and to invest in other capital. The migrants themselves have become a channel for further migration as they relay information about their host country, help finance the migration costs of kin and friends and help them settle in the host country. Countries that issue visas for reunifying families, such as the United States, Canada and Oceania, create an intergenerational basis for emigration. This study examines the capacity of the education and training (ET) system to supply workers of the skills demanded abroad and in the domestic economy. The paper looks at the structure of the tertiary ET system which consists of a rather large number of colleges, universities, post secondary technical-vocational schools and training centres, for the purpose of assessing its capacity to supply skills demanded in the domestic and foreign markets. Tertiary education is marketdriven and has produced ET that the market would support. The market is seen to function under an imperfect capital market and imperfect information conditions, which tend to result in supply rigidities in high-cost ET 1. The imperfections have led the ET system to develop numerous schools that produce a large poorly educated/trained manpower and a shortage of high quality workers in high-cost fields of specialization. The supply rigidity has also resulted in a brain or skill drain. It should be noted that the mere exodus of workers of a given skill category, say Information and Communications Technology (ICT) specialists or welders, does not mean brain or skill drain. It 1 Imperfect capital market means no competitive supply of credit and other forms of finance. Families are unable to borrow to finance their children s education and so must rely on their income and available assets. Poor families are constrained to invest only in educational categories that their meager budget could finance. If credit were readily available at reasonable interest rates, families may decide to borrow to invest in education categories that promise positive returns. 2 Supply Response of Filipino Workers To World Demand

10 occurs only when the ET system is unable to increase the supply to replace the departing workers. There is evident drain of high quality nurses, ICT specialists, teachers, welders, metal workers and pipe-fitters because only a few institutions offer high quality ET in these skills. The paper uses some quality indicators of the country s tertiary system. The Commission on Higher Education (CHED) gives official recognition to high quality programs offered in particular colleges/universities and awards them with the status of Centre of Excellence or Centre of Development. It also supervises the accreditation of academic programs offered in colleges/universities. The Professional Regulatory Commission (PRC) administers licensure examinations to 43 professions. Passing the examination for an occupation has been widely accepted in both domestic and foreign markets as an indicator of competence to practice it. The pass rate in PRC examinations of graduates of a Higher Education Institution (HEI) is taken to be an indicator of its quality. The Technical Education and Skills Development Authority (TESDA) accredits Technical and Vocation Education and Training (TVET) schools and training centres and undertakes certification of blue-collar skills. The Maritime Industry Authority (MARINA) together with the Maritime Training Council (MTC) implements the International Standard for Training, Certification and Watchkeeping (STCW) which they adopted as early as Currently CHED accredits maritime ET institutions that have met these standards. The survey of recruitment companies that was conducted for this study shows that foreign employers have come to recognise these indicators as prerequisite qualifications for foreign jobs. Moreover there is widespread recognition, here and abroad, of the country s prestigious universities. There is exchange of information between academic institutions, multinational companies and other institutions that have dealings with students and employment about quality of HEIs. An open education-labour market (ELM) framework is presented to guide the reader in relating the various sections of the paper to each other. Figure 1 describes the functioning of this market. It has three principal participants: households with their manpower (population of working age) who decide on labour supply and the human development of their children; employers consisting of producers of goods and services and traders including government; and ET institutions which produce skilled workers. Note that skills are acquired not just in ET institutions but also in firms through on-the-job training (OJT). Firms are at the same time employers and producers of skilled workers. Information about demand for workers of specific skills is relayed to households and their children and to ET institutions through formal and informal channels. Households decide the level of their labour supply and the ET of their children. Two other participants interact and influence the ELM, namely the government and placement or recruitment agents. The government employs labour and influences all three principal participants through its policies on economic development, ET and migration, among other aspects of life. It also undertakes and supports research to add knowledge, and collects and disseminates information that is useful to the ELM participants. Recruitment agents also collect labour market information. Migration impacts the ELM by increasing Introduction 3

11 aggregate demand for labour and the demand for the migrating skill, directly reducing its domestic supply and changing the relative rates of return on investment in the various ET categories. Human capital theory is used to explain the response of households/students to employment opportunities. The market determines domestic employment and migration of various skills in various sectors and their wage rates. The human capital labour market framework is given in the next section (2). Section 3 gives a short history of ET policy and describes the statistical system. This is followed in Section 4 by a trend analysis of the labour force and migration. It considers migration in the context of an open labour market. Section 5 discusses prospective demand for migrant labour worldwide. Sections 6 and 7 analyse the market for blue-collar workers and seafarers. The findings of the survey of recruiters conducted by the study are presented in Section 8. Section 9 describes marketing institutions and strategies. The next three, sections 10-12, discuss the ET system focusing on quality indicators of HEI. Section 13 focused on the supply response to the migration of nurses. Section 14 describes complementary institutions in the education-labour market that have evolved to improve its functioning or to engage in its related businesses. Review centres and education insurance are briefly described. Section 15 concludes the study. 4 Supply Response of Filipino Workers To World Demand

12 2 The Functioning of an Open Education-Labour Market or ELM Basic labour market and human capital theory is presented to guide the reader in the analysis of how the country s labour market works in light of the relatively large scale migration of its workers. The market is large and complex and various segments and features are discussed in several sections. Figure 1 shows in a general way the interactions of the principal players of the educationlabour market or ELM. There is a demand and a supply function for labour, in the aggregate and for labour of particular skill. Labour is a production input which firms or producing units employ. Box 3 of Figure 1 is the producers or employers, which include the government and foreign employers. Also included are self-employed workers. Box 1 has the households with adult and young members Figure 1: The Education Labour Market Government Policies BOX 1 Supply of Labour BOX 3 Households Manpower Children Characterized Characterised by their Income and Wealth Education and Taste Demand for Education Training BOX 2 Education / Training Institution Characterized Characterised by Level and Level Fields and of Specialization Fields of Specialisation Information Employers Foreign Firms Domestic Firms Government Self-Employed Firms Information BOX 4 Philanthropic Organizations Organisations BOX 5 Recruitment Agents The Functioning of an Open Education-Labour Market 5

13 who decide on employment or labour supply, migration as well as education and training of the children. In Box 2 are the ET institutions which provide ET for the production of skills (skilled workers). Firms also produce skills through OJT. Information about demand for skills and terms of employment is relayed to households and ET institutions formally and informally. Information helps households to make decisions on employment and ET. In the short term, the supply of any skill comes from the existing manpower (population of the available workforce of working age) with that skill. In the long term, its supply comes from the existing manpower and also would-be entrants to the labour force who have decided to invest in the skill. The long-term supply of a skill results from decisions made by individuals or household to invest in it. Human capital theory applies to decisions relating to investment in ET. Human capital consists of a level of general formal education, specialised work skill obtained formally and informally (especially through OJT), communications and social skills and desirable personal traits such as honesty, loyalty and discipline. Our analysis considers the limited form of human capital, i.e. occupational skills. Some skills require relatively long and expensive formal education programmes, while others only basic education and OJT. (For ease of discussion we interchangeably refer to demand for or supply of labour of a given skill category as demand and supply of that skill). The relative importance of formal education and informal sources of training (OJT) differs between skills with most professional and scientific occupations requiring a university degree and related credentials like a license to practice a profession, while blue-collar skills require relatively more OJT than formal ET. Theory assumes that a firm s demand for a unit of skilled labour is derived from the market value of its product or its contribution to production. Under the assumption of diminishing marginal productivity of labour, the demand curve for any skill is downward sloping or negatively related to the wage rate. The market value of a unit of labour varies widely across skills and their demand curves differ in size, position and elasticity between skills, e.g. demand for scientists or corporate Chief Executive Officer (CEO) versus demand for carpenters. On the other hand, the supply curve for any skill is assumed to be positively correlated with wage but with the supply size, position and elasticity also varying significantly across skills. Different skills are employed in producing different goods and services using different technologies. The heterogeneity of the goods market contributes to the heterogeneity of demand for skills. There is also considerable heterogeneity of human capital as a result of the variation in inherent abilities and social environment. A few characteristics of human capital are briefly described below as they influence the parameters of supply of skills and ease or difficulty of supply adjustments. 1. Skills differ according to requirements on innate ability and special talent. We assume a hierarchy of occupations that require differing levels of aptitude. Academic and research occupations usually require higher aptitude while most blue collar skills require an average level. Ability is assumed to have an approximately normal distribution with a small percentage of very high and very low level of ability. The supply of high ability labour will tend to be relatively small and to have low elasticity. 6 Supply Response of Filipino Workers To World Demand

14 2. Contents of many first-degree curricula have an emphasis on general education courses, which allow further training of the work force and labour market flexibility. A new graduate can be honed through OJT for various positions within a firm or elsewhere. Those who majored in accounting, economics, liberal arts, engineering, etc. have filled management and office positions in government, banks, business, and their own enterprises. High school education is required in most skilled blue-collar occupations. Mastery of a skill through OJT takes months or years depending on the complexity of the skill. Occupational flexibility facilitates adjustments of supply to deal with changes in demand. 3. Higher skill levels have more specific or specialised professional or scientific education/training requirements. A second degree and/or professional license are required for professions such as civil engineers, accountant/auditors, nurses and doctors. A graduate degree is generally required for academic appointments. However, a specialist may still decide to work outside his profession. For example university professors and research scientists do get appointed to administrative jobs, doctors sometimes manage hospitals, and lawyers do become politicians or administrators. 4. There is large variation in the cost of education. Generally, cost rises as level and quality increase. Academic programs that require laboratory work tend to be more costly than book-based programmes. Variation in cost works the same way as variation in ability requirement when the capital market is imperfect. The higher the cost, the smaller and less elastic the supply. 5. Human capital includes desirable traits such as honesty, discipline, reliability, friendliness and helpfulness, which all have market value. But it is only in recent years that the labour market literature began to analyse them. The paper does not address this component of human capital. We analyse the implications of differences in required ability and investment cost on the supply of three skill-groups: scientists/artists (sa); professionals (p); and sub-professional/blue collar (l). Drawn in Figure 2 are the potential and effective (or realised) supply curves of each group. The potential supply consists of the population that has the ability to acquire each skill. The height of the supply curve reflects the cost of skill acquisition or ET. The potential supply of scientists/ artists is relatively small and their ET has the highest cost. Their wage must be high enough to cover the cost. Thus, the supply curve is small, high and steeply sloped at WsoSoSo as drawn in Figure 2, to reflect the small fraction of the population with high ability and the high cost of its ET. In contrast, the great majority of the population has the ability for sub-professional occupations like clerical and retail trade and most blue-collar work so the supply is large, very elastic and at a low wage or W LOL OL O. The supply of professional skill is drawn between the two other categories, WpoPSp, WpoPoPo (Figure 2). The supply of each skill is flat up to a point to account for the number of people who have the ability to meet the requirement of the skill. Beyond this number the supply curve may rise as people of lesser ability may acquire the skill with additional investment of time and other resources. The Functioning of an Open Education-Labour Market 7

15 The very able are included in the potential supply of the market for labour requiring lower ability, as they may decide to be employed in jobs requiring lower ability. The effective supply may be smaller than the potential supply if not all the qualified people are either not informed about the returns to the skill or are unable to afford its investment. Figure 2 Financial constraints would impinge more significantly on the high-cost skills than on the low-cost skills. In the case of the scientists/artists, the effective supply may be much smaller than the potential, say WsoS S (Figure 2) because fewer than the potential can afford to pursue the skill. Consider a demand curve D s D s (Figure 2). It intersects the effective supply at point s instead of at the potential supply point a. This means a shortage. A shift in demand from foreign employers would worsen the problem. Let demand shift to D sd s which interests the supply curve at c. The foreign demand drains the domestic economy of bc scientists/artists. If supply were not financially constrained, D sd s would intersect the potential supply curve to the right of a at a and there would be no brain drain. There would be no wage increase and supply will be large at WsaOa, Wsoa. Consider that in the low skill market the demand curve intersects the effective supply curve at its horizontal portion, say point u. If foreign demand materialises and shifts the demand curve to say D LD L, the new equilibrium is at u. There is no drain. Wage rate remains the same but unemployment falls from ul to u L. 8 Supply Response of Filipino Workers To World Demand

16 This simple ELM framework appears to apply to the brain drain of high quality labour and the continuing unemployment of low quality workers. The average wage rate for most workers has not risen. High quality workers have small, high and inelastic supply not unlike that of the high ability, high cost scientists/artists. Financial constraints would result in a shortage of high quality engineers and migration would worsen the shortage and cause a brain drain. There are varied skills within each broad grouping, e.g. doctors, nurses, teachers, engineers and accountants within the professional category, or physicists, chemists, pianists and violinists within the (sa) group. There are myriad skills in the sub-professional group such as construction workers, hotel and restaurant service workers, janitors, caregivers. The young adults who are preparing to enter the labour force must choose to invest in any of the skills for which they are qualified and have the resources to pay for their ET. It is assumed that they will choose the skill that gives the highest returns. Returns on investment in a skill are the sum of expected future income net of all cost. Returns on alternative skills (Annex 1) are compared and the one with the highest return is chosen. This optimising behaviour determines a positive relation between returns and supply of skills. Figures 3a and 3b illustrate labour market adjustments of two skills under competitive conditions, i.e., full information and no financial constraints. Long-run supply and demand curves for skill 1 and skill 2 have reservation wage W on the vertical axis and number of labour units on the horizontal axis. Reservation wage or the acceptable nominal wage is the wage which compensates for the cost of education/training, work hazards and terms of employment, the cost of investment and the foregone returns from alternative skills. For migrants, the reservation wage takes account of the psychological cost of separation from family and community and any adjustment difficulty in an alien environment. In the equation for return on investment in one skill, it is the discounted income that makes the return on investment in one skill equal zero. Figure 3a Figure 3b Wage 1 1 D Wage S 1 D 2 S 2 D 1 b S 1 S 2 a W 1 o W 2 o S 2 S 1 D 1 S 2 S 1 D 1 D 2 Skill 1 Labor Units 1 1 Skill 2 Labor Units 1 2 The Functioning of an Open Education-Labour Market 9

17 The market is in equilibrium at full employment and equal wage rates at W 1 o and W 2 o. Consider that foreign demand occurs for skill 1. This shifts its demand curve to D 1D 1. Temporarily, the wage rate in market 1 increases. Individuals in skill 2 will be attracted to change jobs to skill 1. The supply of labour in skill 2 falls to S 2S 2 leading to a rise in its wage rate. The supply of labour in 1 increases to S 1S 1, thus pulling down its wage rate. Shifts in supply will continue until wage rates equal. The new equilibrium wage is higher than before because of the overall increase in demand. When supply adjustments are constrained by limited investment resources and/or poor information, a shortage in the migrating skill will emerge. In the above figure, there would be minimal or no shifts in supply from 2 to 1. The outflow of labour from 1 would not be replenished by labour from skill 2. Labour shortage of skill 1 results as labour flows out without replenishment. The shortage may be manifested by persistently higher wage and/ job vacancy. A brain or skills drain results because the system is unable to increase the supply of the skill that experienced increased demand. For the market to function well, employers must have good information about the skill of the workers looking for work and where they are. The workers, on the other hand, must know about the demand for skills, their wage offers and where the jobs are located. The youth who are preparing to enter the labour force and choosing which skill to acquire must have good information regarding demand and enough resources to invest in the skill that is expected to give the highest returns. The reality in most economies, especially developing countries like the Philippines and India, is a virtual absence of capital market for education/training and inadequate information about available jobs. The imperfections would obstruct supply adjustments, especially for skills that are more costly to acquire or that are unfamiliar in the job market. Skills that rely on lengthy and costly formal schooling, such as PhD in genetics or space science, would be more strongly constrained than skills that require mainly high school education and experience. The intensity of these imperfections is expected to diminish as economic development proceeds and reduces poverty and income constraint on ET choices. As per capita income increases, both families and government would have more resources to invest in education/training and in infrastructures that improve the collection and dissemination of information. Migration has increased investment in education. There is evidence to show that young adults of migrant parents have a higher probability of going to college (Tan, 2003). The main hypothesis is that changes in demand will elicit changes in supply in a significant and positive manner but with the response varying across skills depending on market conditions and character of the skill. The supply of a skill that entails high cost ET and high ability is expected to be very small and less elastic than the supply of skills that entail low-cost ET and less ability. Additionally, there is likely to be a lag in supply response with the lag varying across skill types and depending on duration of skill acquisition. 10 Supply Response of Filipino Workers To World Demand

18 3 Information on the Education- Labour Market (ELM) and Migration Empirical information on many aspects of the ELM market and migration is collected regularly by different government agencies. The paper has made references to data used in the paper but the readers may find it useful to refer to a list of the major sources of ELM and migration statistics. 1. The Philippine Statistical Yearbook puts together key information from various sources that include the national income accounts, public finance, monetary aggregates and interest rates, international trade, labour force, population, education, transportation and tourist arrivals. 2. The National Statistics Office (NSO) and the National Statistics Coordinating Board (NSCB) produce the following: Quarterly labour force survey that gives labour force status by education, and employment by sector, education and occupation, hours worked and earnings. 3. The NSO undertakes the Family Income and Expenditure Surveys (FIES) every three years. The labour force survey is integrated with the FIES. Detailed sources of income as well as details of expenditure are collected and integrated into the labour force information. 4. The NSO has a rider survey on families with overseas workers. It asks for information on remittances and family expenditures. The survey does not add much to the FIES which contains sources of income including remittances. 5. The NSO undertook the Annual Poverty Indicators Survey in 1998, 1999, 2003 and It gives very detailed information on the activities and status of individual members of households (such as whether he/she is enrolled or not in school and labour force status). The survey allows analysis of socio-economic determinants of schooling, employment and other labour force status. 6. The POEA keeps a record of all OFWs whose contracts it has processed for approval. It gives separate counts of processed and deployed OFWs, rehires and new hires. The POEA s published reports contain cross tabulations, mainly sex and destination, sex and occupation. It does not publish data on foreign wage and recruitment fees. Information on foreign wage may however be culled from the employment contracts that recruitment agents submit to POEA for approval. Information on the Education-Labour Market and Migration 11

19 7. The POEA Market Updates are accessible on the web and hard copies are posted in the POEA office; they contain among others reports on employment prospects for aspirant and qualified migrants. The POEA keeps on file all the bilateral agreements on foreign employment. The data collected are fairly comprehensive but there are a few gaps of information. There is no information on returning migrants which very much weakens the stock estimate. A survey on foreign income and remittances can be easily done when processing the papers of rehires, but this has not been done. There is no study or survey on placement fees or migration costs. More information is being collected than is published. Its dissemination is very restricted. The POEA has a rich data file on approved job orders which contain data on foreign wage and terms of employment by destination and occupation. The file could show which recruitment companies deal with foreign employers that offer better employment terms. It also collects information on contract violations and different forms of maltreatment including physical violence. These are reported by destination, but not by type of recruitment agents. Agents significantly differ in the safeguards they provide their recruited workers in screening criteria, terms of employment, recruitment fees and foreign wage. Recruitment fees vary from zero to thousands of US dollars. 8. The Commission on Filipinos Overseas collects data on emigrants or those who leave on emigrant visas for employment, family reunification, marriage to citizens and other reasons. Their raw file includes demographics, education and occupation in the Philippines. The emigrants should be added to the deployed OFW to obtain total outflow. Additionally, the Commission makes estimates of Filipinos abroad who are both emigrants and OFWs. The estimate is based on destination s census data, Philippine embassy and consular offices records and the POEA data. Its report does not discuss how the stock of OFW is derived, considering that information on returning OFWs is not collected. 9. The Philippine Overseas Labour Offices (POLOs) provide the POEA with market reports on prospective demand for workers and changes in policies and laws affecting migrant labour. The POLO report on Saudi Arabia is very telling of sad employment cases. It gives detailed accounts of cases of complaints it has handled, how they were settled satisfactorily or unhappily, how many are in its half-way house taking refuge from violent experiences and waiting repatriation, how many were repatriated, how many died. The POLO reports would be a good source for a study on work hazards and other risks that migrant workers encounter. The POEA includes in its annual report complaints by nature and destination. 10. Responsibility for education/training is given to three separate agencies The Commission on Higher Education (CHED), The Technical Education and Skill Development Administration (TESDA) and the Department of Education (DepED) for primary and secondary schools. CHED reports on number of schools and ownership type (public, private-non-sectarian and sectarian), enrolment and graduates by discipline and performance in each professional licensure examination and school 12 Supply Response of Filipino Workers To World Demand

20 fees. It has individual school data, their accredited programs, performance in each professional examination and school fees. However, these are not published. There is greater willingness to put information on the web than on paper and neither of the information is constantly updated. Other than those from the affluent class, a very small percentage of the population has access to the internet. CHED s data on Professional Regulation Commission (PRC) performance by individual schools are extremely useful to students when they are choosing the school to enrol in. The information could be disseminated by CHED S regional offices and state universities and colleges or service offices. However these information outlets are not utilized. The hesitation of CHED to publish the information may be explained by the composition of its Board of Commissioners. The Board is represented by officials/owners of groups of colleges and universities including those of poor quality. The commissioners representing poor quality universities and colleges would hesitate to have their poor quality rating publicised. At the same time government agencies tend to publish mainly in the format of cross tabulation only. Analytical work would help stake holders understand the implications of the data but there is a dearth of research in most government bureaus. 11. TESDA states that there are 4,000 TVET schools and training centres of which only 120 have been accredited. Unlike CHED, it has no report on TVET centres and their enrolment or graduates. It reports on the number of individuals who applied for certification and the number who got certified in blue-collar skills, and lists accredited TVET schools. 12. The Bureau of Local Employment (BLE) of the Department of Labour and Employment (DOLE) operates the Phil-job net to which employers and job seekers can register their needs. The job net is an immediate registry of vacancies for specific jobs with corresponding qualification standards defined by the hiring firms and of job seekers with their preferred jobs, positions and qualifications. The net has a job matching computer program to facilitate the hiring process and job search. BLE says that 50,000-60,000 job applicants make use of the net every month. It also operates city/ municipal employment service offices for job exchange at the local level. DOLE undertakes a regular survey of establishments that gives earnings by fairly detailed occupational breakdown. A registration form for jobseekers is also accessible in the web. However, it does not publish the information collected from the registry. It is not clear how the collected forms are processed and whether the data are published. Information on the Education-Labour Market and Migration 13

21 4 Migration and the Labour Force It is meaningful to place migration in the context of the labour force because its economic implications very much depend on the flexibility of the labour market. If the labour market is at full employment, migration would result in increased wage rate and lower domestic employment as shown in Figures 3a and 3b. If there is unemployment, the outflow may be replenished from the rank of the unemployed and have the wage rate unchanged. The labour force is large and has been increasing rapidly at about 2.5 per cent per year over the last three decades (Table 1). The persistently high population growth of per cent and the rising participation rate of women explain the strong growth of the labour force. It has reached 35.5 million in It is a well schooled workforce with 27.2 per cent having achieved college education, 38.4 per cent high school and 32.8 per cent primary schooling. Only 2 per cent have not gone to school, whereas as much as 14.2 per cent have completed a degree at college. Economic development, though slow and with boom-bust occurrences mainly due to political upheavals, has brought about significant shifts in the sector and occupational distribution of employment (Table 2). 2 The sector shifts followed most other emerging countries pattern where the relative importance of agriculture gradually fell and that of services rose. The industrial sector at first increased in relative importance but its share in total employment stagnated at about 20 per cent since the 1990s. Services absorbed the outflow from the agricultural sector and most of the new entrants to the labour force. The outflow is juxtaposed against the total employed or against changes in employed in major occupations/skills to see the likely impact of migration in the domestic market. The ideal comparison would have been with total manpower and changes in manpower, but the occupational breakdown is available only for employed labour. We focus on three occupations where there is substantial migration - professional, administrative and executive group. The professional group, which employs collegeeducated labour, had an increasing share from 7.1 per cent in 1995 to 18.7 per cent in The share of production workers and labourers also rose rapidly, from 22.3 per cent to 39.1 per cent in the same period. Starting in 2001, this grouping was disaggregated into plant machine operators and assemblers, and labourers and unskilled workers. The former employed 7.8 per cent of the total in 2001 and 7.6 per cent in The outflow of service occupations attained equal importance with production workers. 2 There was a deep recession with per capita income decreasing by 15 per cent in , a few months prior to the People Power Revolution that toppled the Marcos dictatorship. Short and shallower recessions occurred in when a coup was attempted against Aquino in December, The Asian financial crisis also brought down GNP growth to zero. 14 Supply Response of Filipino Workers To World Demand

22 The deployment of new hires is juxtaposed against the labour force and the employed by occupation (Tables 2 and 3). The deployed new hires comprised a fairly small proportion of the labour force or less than 1.0 per cent. The number of deployed professionals was less than 3 per cent of the total employed in this occupation. In 2005, the 103,584 deployed production workers were only about 3 per cent of the domestically employed. There was a very rapid increase in deployment of these skilled workers in perhaps due to the oil boom in the Middle East and the development of petrochemical industry in Central Asia and Africa. Service workers comprise the largest group of deployed new hires, 47 per cent of the total in This skill group consists of several skill categories housemaids, caregivers, and hotel and restaurant workers. On the whole, the number leaving comprises a small fraction of the labour force in each occupation. At the aggregate level, there appears to be no supply problem. The succeeding sections will show that there is a shortage of the better qualified in several occupations. We turn to the permanent emigrants to the US, Canada, Oceania and other advanced economies (Table 4). There has been an upward trend in the number of emigrants to all destinations since 2000 reaching 82,967 in The US has remained the largest destination, next was Canada and then Japan. The European countries admitted a few hundred each year. A large proportion of emigrants were admitted on social basis such as family reunification and marriage to citizens. It is reported that as much as 72 per cent of emigrants to the US were admitted on the basis of family reunification (Iredale and Appleyard, 2001). In fact the table shows that housewives, children and retirees formed the largest group of emigrants, 46.2 per cent of the total from Students also formed a large group comprising 24.2 per cent of the total. The emigrants who were previously employed in the Philippines comprised only 21.7 per cent, half of which were professionals. Table 5 gives a breakdown of the emigrants by their occupation prior to emigration. During the period, nurses were the largest professional emigrant group, numbering 23,303. Close to 95 per cent were bound for the US. Engineers and teachers also left in relatively large numbers, 10,717 and 10,781, respectively. About 69 per cent of the teachers were bound for the US, 16.6 per cent for Canada and 7.4 per cent for Oceania. Canada took in more than half of the engineers and the US, 35.6 per cent. Virtually all the emigrant professionals went to the US, Canada and Oceania. Note that several thousand nurses also left for the UK but on temporary employment contracts, not emigrant visas. The figures reflect the selective immigration policy in developed economies. For many would-be migrant Filipinos, these are the most desirable destinations. Yet less than 100,000 were admitted each year to all the countries. This kind of migration will, however, continue given the social basis for admission and labour shortage in some occupations. Migration and the Labour Force 15

23 Table 1: Labor Force by Highest Educational Attainment (000), Jan 2005 * Apr 2005 * July 2005 * Oct 2005 * No Grade Completed Elementary Undegraduate Graduate High School Undergraduate Graduate College Undergraduate Graduate and Higher Not Reported ~ ~ - ~ ~ ~ ~ Total * average for 2005 cannot be computed due to the adoption of the revised unemployment definition ~ Less than 500 Source: Yearbook of Labor Statistics Supply Response of Filipino Workers To World Demand

24 Table 2: Distribution of Employed Persons by Major Occupation Group, Major Occupation Group Professional, Technical and Related Workers Administrative, Executive, and Managerial Workers Clerical and Related Workers Sales Workers Service Workers Agricultural, Animal Husbandry and Forestry Workers, Fishermen and Hunters Production and Related Workers, Transport Equipment Operators and Laborers Workers not elsewhere classified Major Occupation Group Officials of Governmenr and Special- Interest Organizations, Corporate Executives, Managers, Managing Proprietors and Supervisors Professionals Technicians and Associate Professionals Clerks Service Workers and Shop and Market Sales Workers Farmers, Forestry Workers and Fishermen Trades and Related Workers Plant Machine Operators and Assemblers Laborers and Unskilled Workers Special Occupations Source: Yearbook of Labor Statistics Migration and the Labour Force 17