Filipino Youth Labor Market Experience: School-WorkTransition

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
• 2008 ADB household survey in Manila and Cebu • 500 households and over 1500 individuals (15 to 65 years) • Construct transition indicators of young persons experience from school to work
– – – – – – – Median time to find a job Time path of this transition How fast is this transition Quality of this transition Where do young find jobs Ease of mobility between formal and informal Factors that influence this transition

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
– All youth – 2 years to find any job and 3 years to find a wage job – High school or less – 3 years to find any job and 4 years to find a wage job – At least some college education – 1 year to find any job and 2 years to find a wage job – Males – 3 years to find any job and a wage job – Females – 2 years to find any job and 3 years to find a wage job – OECD median is 1.1 years to find a wage job, with Australia, US, Finland with less than 1 year and Italy, Greece and Spain recording 2.3 years or more

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 Number of years after leaving initial education All youth High school graduates College graduates 8yrs

School-to Work Transition – Speed (Ratio of adult employment to youth employment
rates, 1, 5 and 8 years since leaving school)
4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1yr All youth 5yr High school graduates 8yr 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.

10

15

20

25

30

35

0

5

15 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 51 54 57 60 63 .0 .0 .0 .0 .0 18 21 24 27 30 33 36 39 42 45 48
Female Male

Unemployment Rates By Age and Gender

Inactivity Rates by Age and Gender
70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 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 Male 2008 Female 2008

Unemployment, Education and Gender – Statistical Analysis
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 -0.2 -0.3 Males Females Elementary Some Hgh School High School Some College College

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

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

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

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

Males

Females

Jobs Found by Young Filipinos by Gender
• Unpaid Family Business
60 50 40
25

• Private households
40 35 30

30 20 10 0

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

15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63

Males

Females

Males

Females

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
– If your first job is in the formal sector, then you have a 50% chance of finding your next job in the formal sector – If you first job is in self employment, then you have a 12% chance of finding a job in the formal sector – Temporary wage contracts are a bridge to formal employment for many young persons
• 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 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59

No HS

HS

Some College

College

Earnings Differentials By Education, Age and Gender
High School Dropouts
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
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

High School Graduates

Earnings Differentials By Education, Age and Gender
Some College Education
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 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

Collage Graduates

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 (3rd 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

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