Republic of the Philippines Labor Market Review

Abstract

This study analyzes labor market
 performance in the Philippines from the perspective of
 workers’ welfare. It argues that pervasive in-work poverty
 is the main challenge facing labor policy. Poverty is
 primarily due to low earning capacity of the poor and to
 their limited access to regular and productive jobs. Behind
 these are the two interrelated root causes of in-work
 poverty - low education of the poor, and the scarcity of
 productive job opportunities. The labor market is segmented
 into good and bad jobs, with the poor working in the latter.
 They hold jobs that are informal, temporary or casual, and
 low-paid. Widespread informality means that the poor neither
 benefit from the minimum wage policy nor from employment
 protection legislation. They do not benefit from wage growth
 either, because their bargaining power is weak. Good jobs
 are so few, especially in rural areas, that even better
 educated workers are often forced to take unskilled jobs and
 work as low-paid laborers. The reduction of in-work poverty
 hinges on removing constraints to gainful employment in both
 supply side (better education and skills) and demand side
 (better jobs). It is critical that the young poor have
 improved access to quality education, and be equipped with
 skills required in the modern sector of the economy. But in
 parallel, better jobs need to be created, which can be
 attained from the growth of the formal and higher value
 added sector of the economy. The process of structural
 transformation should be supported by effective labor
 policy. Labor regulations need to be made simpler and more
 flexible to facilitate the reallocation of labor from less
 to more productive activities, and from informal to formal
 sector. Targeted training programs have the potential to
 address the problem of low skills among the poor workers,
 especially the young ones. Such programs should be developed
 on a pilot basis and expanded if proven to be cost-effective.