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

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 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 bundles 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. Comments to this paper are welcome within 60 days from the date of posting. Email publications@pids.gov.ph