inSights

Policy Briefing
ISSUE 6, JULY 2009 Manila, Philippines

Delivering Skills in a Global Economy: The Demand-Led System

The Philippines is arguably the human resource capital of the world. The Philippine workforce is so vast that it has become a key backbone of the global labor market. At present, Filipino skills are in-demand in 193 destination countries, making the Philippines the top source of migrant workers, after only such labor powerhouses as India and China. The Philippines is also a premier player in the global outsourcing industry, ranking seventh among top 50 preferred outsourcing destinations worldwide, according to the 2009 Global Services Location Index of the global consulting firm A.T. Kearney. Endowed with skills of global choice, the Philippine human resources may thus be seen as competitive. The fact, however, is that forces have emerged and started to drive the global economy in unparallel ways, which therefore requires smart anticipation and response. The Skills Market: Global Drivers Global Skills Competition. People mobility and skills portability have become the primary drivers of the global economy. Labor markets are no longer confined to their insular, national contexts but have expanded to the rest of the world because of such drivers that are encouraging the movement of people and skills, including high technology and modern transport systems; demographic squeezes in, and aggressively outward migration policies of, highincome but skills-poor countries; and the rise of an economic policy architecture for bilateral, regional or multilateral mutual recognition of worker qualifications. Skills Sinks and Skills Skimming. Under long-term pressure of aging combined with open gates for skilled migration and wage and quality of life advantages, high-income countries can now be characterized as skills sinks that could skim off global talents and skills from other countries.

POLICY PRESCRIPTIONS
Skills Policy Coupling development and skills policy. To anticipate, shape and reshape skills according to demand drivers, the skills policy must not only be coherent between education and labor market policies but also be mainstreamed into the whole Philippine economic development agenda and cognizant of global drivers, including international skills benchmarks. Skills Signaling Prescription on capturing and packing demand information: Future skills forecasting and employer-led exchanges. Quantitative, research-based skills needs forecasting Employer-led exchanges in capturing demand data Overseas labor market intelligence with online and automated data flow capacities Prescription on capturing and packing supply data: Bundling of data sources in one pack of information that is accessible and automated. The Technical Education and Skills Development Authority (TESDA) Technical Vocational Education and Training Outlook to include a medium-term skills production forecast Commission on Higher Education (CHED), Professional Regulation Commission (PRC) and TESDA to harmonize their skills production reports and forecasts into one information pack available online Prescription on unpacking information for public access; Reengineer the PHILJobNet: PHILJobNet to migrate into a hub that will host less primary data but more micro-sites or links to different online job exchange platforms DOLE to focus on creating an enabling environment for these job exchanges, while enforcing standards on information accessibility, reliability, availability, on-demand features and worker protection against fraudulent recruitment schemes.

This paper was written by Mary Grace L. Riguer, research specialist at the Institute for Labor Studies. ISSUE 6 Delivering Skills in a Global Economy: The Demand-Led System

INSTITUTE FOR LABOR STUDIES

The value- added of PHILJobNet - administrative data content (e.g., OFW deployment, job orders, remittances, labor and employment statistics and skills registries from TESDA, BLE, CHED and PRC) Prescription on building the skills architecture: Coupling of existing labor market information and intermediation systems. Creation of a consultative and interagency body as a dialogue platform and recommending authority over skills policy of the Philippines. Functions: Philippine skills policy. To craft a skills policy, considering the existing policies and strategy directions of CHED, TESDA, PRC and DOLE; Philippine skills reports. Medium term skills needs and supply forecast and annual progress and performance reports; shall harmonize existing sources as well as incorporate new methods (forecasting, employer-led exchanges); Critical industries and skills. To identify industries and skills critical or vital to the Philippine economic development and competitiveness; for the alignment of aggressive interventions; Academe-industry linkage frameworks. Creation of guidelines on, and frameworks of, academe-industry linkages to encourage buyins and in aid of start-ups; and Pilot runs of curriculum innovations and co-solutions. Skills pact or agreement for collaborative engagements. National and local industrial skills councils shall also be created for each critical industry that the national Council identifies; these councils shall be tapped for the collection and convergence of data on supply and demand at the industrial and local levels through qualitative and quantitative approaches. Afuture skills council may be created with the same structure and functions as the other industrial skills councils to address future demand. Incentive-based Approaches Expand existing training-for-work scholarships and direct to critical skills, which may be identified by the proposed local and national skills council. Strengthen of the apprenticeship system by focusing on critical skills. Reinforce the college on-the-job or practicum program. Toward this, CHED may explore new guidelines on practicum, where students shall be assessed based not on the number of hours clocked in the host companies, but on output or projects accomplished and the competence developed. Coercive Approaches Deployment ban remains a legitimate measure for addressing skills mismatch and shortages. This measure, however, should be temporary and the skills shall be identified through multi-sectoral consultations (e.g., by the proposed Philippine Skills Development Council. Skills development funds. This demand-driven skills strategy achieves a dual purpose: firm-based investments in the training of their low-skilled/low paid workers are dovetailed into the overall aim of industrial or sectoral upskilling. Malaysia, Singapore and Thailand are some countries that have training levy programs. While this paper does not recommend the setting up of a Philippine training levy, its prospect and feasibility in the Philippine context may be explored through further research.

Information. Ideas. Insights. Square Pegs, Round Holes Phenomenon. The lack of fit between labor supply on one hand and job requirements or available jobs on the other is largely explained by market failure, which arises due to factors such as financial constraint, risk aversion and imperfect information. Hard-to-fill Jobs. In the Philippine context, numbers undoubtedly point to a skills mismatch problem. Based on a survey of the Bureau of Labor and Employment Statistics (BLES), despite unemployment affecting 2.5 million Filipinos, close to one of four employers (22 percent or 5,815 out of 7,630) in 2006 still had difficulty filling up their vacancies because of quality issues such as shortage of applicants with the right competencies for the job and lack of work experience of applicants. Another quality indication of the shortage is that the hard-to-fill occupations skewed toward high-end categories, including systems analysts, engineers, computer programmers as well as those in health services, such as pharmacists, medical technologists and doctors. Youth Glut. The high incidence of unemployed youth and educated signals that the problem of skills mismatch in the country is structural and not merely short-term or frictional. This means that interventions against such problems must be long-term and strategic. Linking Education Policy to Labor Market Outcomes The demand-led approach a mutually reinforcing and beneficial relationship of the education system and the labor market, where they interact with each other for a common purpose: to match skills supply with demand by producing the right skills according what is required. The demand-led system may, thus, be seen as an ecosystem that links education policy to labor market outcomes. (Fasih, 2008) There are three modes of skills delivery in a demand-led system: academe-industry partnership; intermediation measures such as labor market information and signaling and training-for-work programs; and coercive measures such as mobility restrictions and training levy. Skills relevance and worker employability are some of the positive labor market outcomes arising from the demand-led approach. These are made possible through technology transfers from industries to training institutions, relevant curriculum and competency standards, and experiential learning. (Fasih, 2008)

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ISSUE 6 Delivering Skills in a Global Economy: The Demand-Led System