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Filipino Youth Labor Market Experience: School-Work- Transition

Kelly Bird Principal Economist SEPF

The views expressed in this presentation are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. The countries listed in this paper do not imply any view on ADB's part as to sovereignty or independent status or necessarily conform to ADB's terminology

Contents

Overview of Filipino Youth School-to Work-Transition (STW)

Jobs found by Young Filipinos

Role of Labor Regulations and Policies affecting STW Transitions

Going Forward

Findings

• Philippines does have a significant employment problem

– Insufficient demand in a labor surplus economy, structural impediments (skills mismatch) and restrictive labor regulations (minimum wage, employment protection)

• At risk youth are those with high school qualifications or less and from lower economic-social groups

– School-to-work transitions are very slow

• The gender bias in the LM:

– Mainly shows up in earnings differences

• But education narrows the gap considerably

– Females may also respond differently to certain LM signals compared with males

• Returns to education, lifecycle factors etc

– Labor regulations such as employment protection legislation restricts employment opportunities

Agenda Going Forward

• Trade off between job security and employment

• Policy should focus on improving ‘lifetime employability’ of youth rather than job security

• Labor policy reform is necessary

– Less labor regulation is better to remove barriers to mobility

– Create market-based incentives to change behavior of youth and employers

• Better targeted youth employment programs

• ADB’s Support

– DOLE’s MyFirstJob initiative

School to Work Transition

School-to-work transition of a young person comprises a series of events towards finding a decent job including job search activity, spells of unemployment, short term vocational skills training, and even periods of inactivity.

The better the links between school and the labor market in preparing young persons job readiness, the faster will be the transition from school to work

Youth School-to Work-Transition

•• 20082008 ADBADB householdhousehold surveysurvey inin ManilaManila andand CebuCebu •• 500500 householdshouseholds andand overover 15001500 individualsindividuals (15(15 toto 6565 years)years) •• ConstructConstruct transitiontransition indicatorsindicators ofof youngyoung personspersons experienceexperience fromfrom schoolschool toto workwork

–– MedianMedian timetime toto findfind aa jobjob –– TimeTime pathpath ofof thisthis transitiontransition –– HowHow fastfast isis thisthis transitiontransition –– QualityQuality ofof thisthis transitiontransition –– WhereWhere dodo youngyoung findfind jobsjobs –– EaseEase ofof mobilitymobility betweenbetween formalformal andand informalinformal –– FactorsFactors thatthat influenceinfluence thisthis transitiontransition

Main Findings

• The school to work transition is characterized by a lot of uncertainty for young Filipinos

• The transition to work is particularly slow for those with high school qualifications or less

– Especially for younger females with high school education or less

• Females with college education tend to behave differently from other females in that they are less likely to be unemployed or inactive

Median Time to Find a Job

–– AllAll youthyouth –– 22 yearsyears toto findfind anyany jobjob andand 33 yearsyears toto findfind aa wagewage jobjob –– HighHigh schoolschool oror lessless –– 33 yearsyears toto findfind anyany jobjob andand 44 yearsyears toto findfind aa wagewage jobjob –– AtAt leastleast somesome collegecollege educationeducation –– 11 yearyear toto findfind anyany jobjob andand 22 yearsyears toto findfind aa wagewage jobjob –– MalesMales –– 33 yearsyears toto findfind anyany jobjob andand aa wagewage jobjob –– FemalesFemales –– 22 yearsyears toto findfind anyany jobjob andand 33 yearsyears toto findfind aa wagewage jobjob –– OECDOECD medianmedian isis 1.11.1 yearsyears toto findfind aa wagewage job,job, withwith Australia,Australia, US,US, FinlandFinland withwith lessless thanthan 11 yearyear andand Italy,Italy, GreeceGreece andand SpainSpain recordingrecording 2.32.3 yearsyears oror moremore

School-to-Work Transition – Time Path

(Youth employment rates 1, 5, and 8 years since leaving school)

120 100 80 60 40 20 0 1yr 5yrs 8yrs Number of years after leaving
120
100
80
60
40
20
0
1yr
5yrs
8yrs
Number of years after leaving initial education
All youth
High school graduates
College graduates

School-to Work Transition – Speed

(RatioRatio ofof adultadult employmentemployment toto youthyouth employmentemployment rates,rates, 1,1, 55 andand 88 yearsyears sincesince leavingleaving school)school)

4.0

3.5

3 0

3 0

.

2.5

2.5

2.0

1.5

1.0

0.5

0.0

 

1yr

5yr

8yr

All youth

High school graduates

College graduates

Factors that Influence STW

Transition - Statistical analysis

Education is the most important influence on STW but differences exist between females and males

• Overall, youths with high school education or lower have slower transitions to work compared to college graduates and college dropouts

– But males with completed high school have similar paced transitions compared with male college graduates

– Whereas females with high school education have much slower transitions compared to females with college education

Factors that Influence STW Transition - Statistical results –Education

(estimated coefficients on school dummies with college grads as control group)

Males

• Some elem = +0.94*

• Elem = +0.99*

• Some HS = +0.32*

• HS = +0.11

• Some college = +0.07

Females

• Some elem = +1.03*

• Elem = +0.78*

• Some HS = +0.50*

• HS = +0.23*

• Some college = 0.23

Factors that Influence STW

Transition - Statistical results

• Some evidence that STW transition for males is slower where family incomes are higher

• Some evidence that STW transition for females is faster if the household head is self-employed

• Policy implications

– At risk youth are those with high school education or less and from less well off families

– Strengthening the links between school and labor market are critical to address the slow transition to work

• Labor market programs should target younger school leavers and drop outs with focus on improving job readiness of this group

• Should be proportionate representation of young women in the programs.

Unemployment Rates By Age and Gender

35 30 25 20 15 10 5 0 Male Female 15.0 18.0 21.0 24.0 27.0
35
30
25
20
15
10
5
0
Male
Female
15.0 18.0 21.0 24.0 27.0 30.0 33.0 36.0 39.0 42.0 45.0 48.0 51.0 54.0 57.0 60.0 63.0

Inactivity Rates by Age and Gender

70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Male 2008 Female 2008 15 17 19
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Male 2008
Female 2008
15
17
19
21
23
25
27
29
31
33
35
37
39
41
43
45
47
49
51
53
55
57
59
61
63
65

Unemployment, Education and Gender – Statistical Analysis

Estimated probabilities of unemployment by education and gender with some elementary schooling as control group
Estimated probabilities of unemployment by education and
gender with some elementary schooling as control group
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
-0.1
Elementary
Some Hgh School
High School
Some College
College
-0.2
-0.3
Males
Females

Inactivity, Education and Gender – Statistical Analysis

Estimated probabilities of inactivity by gender and education with elementary schooling as the control group
Estimated probabilities of inactivity by gender and
education with elementary schooling as the control group
1.5
1
0.5
0
Elementary
Some Hgh School
High School
Some College
College
-0.5
-1
Male
Female

Inactivity, Gender and Family Size – Statistical analysis

Estimated probabilities of inactivity by gender and number of children with being single as the control group

0.6 0.4 0.2 0 1 to 2 3 to 4 5 or more -0.2 -0.4
0.6
0.4
0.2
0
1 to 2
3 to 4
5 or more
-0.2
-0.4
-0.6
-0.8
-1
Males
Females

Jobs Found by Young Filipinos by Gender

• Wage Employment 80 70 63 60 60 57 50 54 51 40 48 45
Wage Employment
80
70
63
60
60
57
50
54
51
40
48
45
42
39
30
20
36
33
10
30
0
27
24
21
Males
Females
18
15
• Self Employment 80 70 60 50 40 30 20 10 0 Males Females 15
Self Employment
80
70
60
50
40
30
20
10
0
Males
Females
15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63

Jobs Found by Young Filipinos by Gender

• Unpaid Family Business 60 50 40 30 20 10 0 Males Females 15 18
Unpaid Family Business
60
50
40
30
20
10
0
Males
Females
15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63

Private households

40 35 30 25 20 15 10 5 0 Males Females 15 18 21 24
40
35
30
25
20
15
10
5
0
Males
Females
15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63

Factors Influencing Jobs Found

• Education

– 71% of college grads find wage employment

– 52% of high school graduates find wage employment

– 37% of high school drop outs find wage employment

• Social status of families

– Some evidence that children from better off families have wider social networks, access to job information, and better job search techniques that increases the chances of finding wage employment

Job Mobility

• First job matters in influencing future employment opportunities

–– IfIf youryour firstfirst jobjob isis inin thethe formalformal sector,sector, thenthen youyou havehave aa 50%50% chancechance ofof findingfinding youryour nextnext jobjob inin thethe formalformal sectorsector

–– IfIf youyou firstfirst jobjob isis inin selfself employment,employment, thenthen youyou havehave aa 12%12% chancechance ofof findingfinding aa jobjob inin thethe formalformal sectorsector

–– TemporaryTemporary wagewage contractscontracts areare aa bridgebridge toto formalformal employmentemployment forfor manymany youngyoung personspersons

• 30% of first time temporary contract workers find formal, regular employment

Earning Differentials

• There is an earnings gap between females and males

• The gap narrows considerably with post-high school education with little earnings difference observed between male and female college graduates

• Policy implications

– Education is most important for narrowing earnings differentials between females and males

– Skills development and programs to improve job readiness of less educated females are necessary

Earnings By Age and Education Level

900 800 700 600 500 400 300 200 100 0 No HS HS Some College
900
800
700
600
500
400
300
200
100
0
No HS
HS
Some College
College
15
17
19
21
23
25
27
29
31
33
35
37
39
41
43
45
47
49
51
53
55
57
59

Earnings Differentials By Education, Age and Gender

HighSchoolDropouts 250 200 150 100 50 0 15-20 21-25 26-30 31-35 36-40 41-45 46-50 51-55
HighSchoolDropouts
250
200
150
100
50
0
15-20
21-25
26-30
31-35
36-40
41-45
46-50
51-55
56-60
61-65
Male
Female
HighSchoolGraduates 300 250 200 150 100 50 0 15-20 21-25 26-30 31-35 36-40 41-45 46-50
HighSchoolGraduates
300
250
200
150
100
50
0
15-20
21-25
26-30
31-35
36-40
41-45
46-50
51-55
56-60
61-65
Male
Female

Earnings Differentials By Education, Age and Gender

SomeCollegeEducation 400 350 300 250 200 150 100 50 0 15-20 21-25 26-30 31-35 36-40
SomeCollegeEducation
400
350
300
250
200
150
100
50
0
15-20
21-25
26-30
31-35
36-40
41-45
46-50
51-55
56-60
61-65
Male
Female
CollageGraduates 700 600 500 400 300 200 100 0 15-20 21-25 26-30 31-35 36-40 41-45
CollageGraduates
700
600
500
400
300
200
100
0
15-20
21-25
26-30
31-35
36-40
41-45
46-50
51-55
56-60
61-65
Male
Female

Determinants of Earnings – Statistical Analysis

• Males earn 17% more than females after controlling for education, age, sector, occupation, worker status etc

• College graduates earn 44% and college drop outs earn 15% more than high school graduates.

• Female college graduates earn 46% and college drop outs earn 17% more than female high school graduates

Labor Policies and Regulations that Impede the STW Transition

• Minimum wages

• In the Philippines, MW are set relatively high compared to market wages with the result that:

– Enforcement becomes costly – Some evidence that MW may hurt wage employment opportunities of workers with high school education or less

Labor Policies and Regulations that Impede the STW Transition

• Employment protection legislation (EPL)

• In the Philippines, EPL is relatively restrictive with the primary goal of securing tenure;

– Limited probation period (6 months) and restrictions on tern contracts (not allowed multiple short term contracts)

– Restrictions on use of temporary work contracts and use of manpower placement agencies

– Severance payments are relatively high compared to regional neighbors (3 rd highest behind Indonesia and Thailand)

Labor Policies and Regulations that Impede the STW Transition

• EPL resulted in:

– Increased job insecurity of young persons (about 27% of workers are employed for less than one year) – Disincentives by employers and workers to invest in long term skills development

Reforms Going Forward

• Less Regulation is Better

– Allow longer probation periods

– More flexible long term contract arrangements

– Shift from severance regulations to unemployment savings accounts

• Active Labor Market Programs

– Target at risk youth such as high school leavers and dropouts from less off families and young women

Going Forward

• MyFirstJob pilot project funded by ADB and CIDA

– Pilot in 4 LGUs

– Target 1,600 at risk youth

– Provide set of services such as career development plans, vouchers for technical training and work place experience with private sector employers

– Selection of participants through a lottery to allow for a randomized impact evaluation (different pools for males and female participants)

– Intention to scale up nationally

Thank You