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Political and Economic Geography April 04, 2020 Joyce D. Adarlo Mr. Jumel G. Estranero ABFS201 Job Mismatch in the Philippines: A Factor for Economic Migration I. Introduction/Abstract In the current era, which includes rapid technical developments, slow economic development, and weathering populati...

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Political and Economic Geography Joyce D. Adarlo

April 04, 2020 Mr. Jumel G. Estranero

ABFS201

Job Mismatch in the Philippines: A Factor for Economic Migration

I.

Introduction/Abstract

In the current era, which includes rapid technical developments, slow economic development, and weathering populations, Job mismatch is a possible hazard. Human capital is becoming more critical than ever, particularly for high-quality talented production of human resources. In particular, provided that technical skills and information focused on innovations and imagination are recognized as a critical resource, an increasing need for highly skilled competent human resources has been met and numerous debates on therapies and conditions for highly qualified individuals have been emphasized. However, in the Philippines, highly skilled workers continually move outside, resulting in work imbalances and discontent at professional workforce ranks, as well as in reducing their work efficiency and productivity. Job mismatch is a potential threat in the new normal and fourth industrial revolution period, which is characterized by rapid technological progress, stagnant economic growth, low-fertility, and aging societies. Human capital becomes more significant than before, particularly for high-quality talented human capital development. In particular, as the accumulation and application of professional knowledge and information based on ideas and creativity are recognized as a crucial resource, there has been a growing demand for talented human capital with high capability, emphasizing various discussions on the treatments and conditions for a high-skilled workforce.Meanwhile, it is evident that the problem of mismatch in the labor market has been mainly discussed in terms of labor supplydemand mismatch at a macro level, while there are relatively few studies on job mismatch at an individual level. However, job mismatch has a significant effect on labor market performance it should not be overlooked, since job mismatch has been considered as a factor to negatively affect macroeconomic efficiency aside from individual wage level, job satisfaction, and group performance. In this context, the purpose of this study is to show how does job mismatch became a factor for Filipinos to work abroad. The purpose of this study is to analyze the different factors that influence economic migration in the Philippines considering that there are an estimated number of 2.3 million Overseas Filipino Workers (OFWs). 1 The goal of the study aside from Josie Perez, “Total Number of OFWs Estimated at 2.3 Million” Philippine Statistics Authority. 2019. https://psa.gov.ph/statistics/survey/labor-and-employment/survey-overseas-filipinos

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scrutinizing the different factors of economic migration is to prove a point that jobmismatch is one of the main reasons why a Filipino decides to work abroad and to be a way for government to strengthen existing policies and formulate new ones if needed in order to address the job mismatch in the country. Amidst the career opportunities that the government offers, there are still a lot of Filipinos that are unemployed or either stuck in a job that do not maximize their opportunity to use their skills. II.

A. Statement of the Problem

Job mismatch has been a problem in the Philippines since 2016 and in many parts of the world which has a tremendous effect to productivity. Job matching and finding the best person to the right job inside the right company has become one of the most important and actual challenges of productivity. Not only full employment but the match between the employee and the job, in terms of educational level or field of activity, qualifications and skills of workforce; all have been the new gain of work productivity.2 The goal of this research is to delve more on information about the life of an OFW and on how migration and working at the home country affects their career and life conditions. The study seeks to answer the following questions: 1. What are the factors for economic migration of OFWs? 2. Is job mismatch really a factor for OFWs to work abroad? 3. Did economic migration help the OFWs progress up their career ladder? B. Methodology The study entitled Job Mismatch in the Philippines: A Factor for Economic Migration is a combination of qualitative and quantitative research that describe and interpret data regarding of job mismatch being one of the factors for economic migration. The researcher used descriptive design in order to determine the features, patterns, tendencies, correlatedness and definitions. The researcher aims to lead to the exploration of new information and meanings. She looks for the present state of an undefined element, then routinely offers the condition information then sees subjects without any interference. The researcher gathered information from Overseas Filipino Workers from different parts of the country through her father’s friends and colleagues who is also an OFW. The researcher asked 13 questions to 30 OFWs that are college graduates with different age ranges and with different natures of work. Survey questionnaires were distributed and it became the main data gathering instrument. All the questions asked to the respondents were made by the researcher. Because of the current pandemic, the questionnaires were distributed via Facebook messenger because the respondents are from different parts of the world and also to ensure safety of everyone since there is a pandemic.

Magdalena Velciu. "Job Mismatch – Effects On Work Productivity," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 15, pages 395-398, December 2017.

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III.

Review of Related Literature

This chapter compiles the different literatures written in the areas of qualification, educational and talent mismatch, talent management, performance management and other factors affecting employee performance and factors that may result to skills or job mismatch in the work place. Foreign Studies Field-of-study mismatch occurs when workers educated in a particular field work in another. It is conceptually distinct from qualifications or skills mismatch, although a part of qualifications and skills mismatch results from graduates from a particular field having to downgrade to find work in another field. Some studies have identified labour market dynamics related to field-of-study mismatch, but few (if any) have sought to directly understand the interplay between labour supply factors (the types of skills brought to the workplace) and the labour demand factors (the types of skills demanded by employers) in field-of-study mismatch. Mismatch workers do not voluntarily choose to be mismatched, but are driven to it because they cannot find work in their field or because their skills are better rewarded in other occupational groups.3 It is no secret that the unemployment rate has remained high during the recession and the recovery because of a mismatch between the jobs needed for the 21 st century and the 20th century skills currently available in the workforce. There are a variety of events occurring that are fostering change, but the change is occurring at too slow a pace. In our increasingly complex world, it’s not easy to unlock the full potential of each person. 4 The problem is, in part, the result of ineffective—or nonexistent—communications between the private sector and education authorities: there are huge gaps between the goals of education systems and the needs of business. Unless they heed the insights of the private sector, education and skills development systems will continue to prepare people whose competencies will be outdated or in oversupply by the time they graduate, broadening a “qualifications trap.” Employers will struggle to hire the talent they require. Forced to take on people whose skills and experience fall short of what’s needed, employers will have to spend money on retraining. Meanwhile, those whose skills are not in demand will take any job simply to earn a living. This problem, which we call the “skills mismatch,” is much less obvious than the skills gap, because it creates the illusion of employment and economic and social stability.5 Yet the economic and human toll of the skills mismatch is heavy. According to Organization for Economic Cooperation and Development (OECD) countries, the skills mismatch affects two out of five employees.

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Guillermo Montt, Field-of-study mismatch and overqualification: labour market correlates and their wage penalty.2017.IZA J Labor Econ 6, 2. Michael Sseaver, “The Job Skills Mismatch.” 2020. https://michaelsseaver.com/careerbusinesscoaching/the-job-skills-mismatch 4

Leila Hoteit et al., “Fixing the Global Skills Mismatch” Boston Consulting Group (BCG, January 15, 2020, https://www.bcg.com/publications/2020/fixing-global-skills-mismatch.aspx 5

The topic of educational mismatch is highly relevant for policy-makers. Such mismatches, indeed, represent an inefficient allocation of resources invested in education. Highly skilled migrants created businesses in the mainstream of their new country’s economy that equal or exceed the economic performance of their native counterparts, while low-skilled migrants create small, often unstable and less profitable businesses.6 Furthermore, highly skilled migrants ‘produce localized knowledge spillovers, positive externalities, and significant local multipliers generating additional boosts in regional economic vitality’. Host countries can benefit from these economic advantages if skilled migrants fill jobs matching their skill levels.7 Regarding the theoretical basis of job-mismatch, it was suggested that a concept of genuine matching (GM) and apparent matching (AM). The phenomenon in which respondents perceive themselves as neither overeducated nor over-skilled can be explained by genuine matching (GM). 8 On the other hand, apparent matching (AM) occurs when respondents perceive themselves to be over-skilled rather than being overeducated. Giuseppe et al. (2016) analyzed the effects of overeducation of the doctoral degree, workforce, dissatisfaction resulting from job mismatch, and over-skill at a pay level. He found that significantly lower wages have a correlation with overeducation and skill dissatisfaction, although there is no wage penalty from the overskilled. Furthermore, individuals who experience both overeducation and skill dissatisfaction are reported to have a particularly high wage penalty. It was explored on how skill supply and labor market demand dynamics influence mismatch, using the data from the OCED( Organization for Economic Cooperation and Development) Survey of Adult Skills (PIAAC). He analyzed the cross-national estimates on mismatch and mismatch wage penalty, which showed workers who are overqualified and mismatched by work fields suffer from the wage penalty and another study found that not only individual job satisfaction, but also educational mismatch and skill mismatch can subsequently influence wage level and job search activity.

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Szarucki, M., Brzozowski, J., & Stankeviciene, J. (2016). Determinants of self-employment among polish and Romanian immigrants in Germany. Journal of Business Economics and Management, 17, 598-612. Doi:10.3846/16111699. 2016.1202313 [Taylor & Francis Online], [Web of Science ®], [Google Scholar] 7

Wright, R., Ellis, M., & Townley, M. (2017). The matching of STEM degree holders with STEM occupations in large metropolitan labor markets in the United States. Economic Geography, 93, 185–201. doi:10.1080/00130095.2016.1220803 [Taylor & Francis Online], [Web of Science ®], [Google Scholar] 8

Di Paolo, A.; Mañée, F. Misusing our talent? Overeducation, overskilling and skill underutilisation among Spanish Ph. D. graduates. Econ. Labour Relat. Rev. 2016, 27, 432–452. 9

Gaeta, G.L.; Lavadera, G.L.; Pastore, F. Much Ado about Nothing? The Wage Penalty of Holding a Ph.D. Degree but Not a Ph.D. Job Position; GLO Discussion Paper; Global Labor Organization: Bonn, Germany, 2016; p. 12.

Emerging literature tends to locate the impact of job mismatch on productivity through allocation effects. It mainly measures productivity as a factor of two components, namely i) the within-firm productivity and ii) the allocative efficiency. Indeed, for a single firm to hire an over-skilled worker might increase its productivity, assuming there are no adverse effects on job satisfaction or wages. On the other hand, this imposes another problem in the economy as a whole as highly skilled workers are utilized in positions with lower skill requirements and are not placed in positions where they can actually use their skills and knowledge in full extend. This results in skill shortages and firms that are relatively more productive cannot find suitable work force as the pool of knowledge available is narrow.9 Migrant workers are vulnerable to skills mismatch for several reasons. Some of the skills and knowledge of migrants may not be recognized in the host country, for example due to barriers in transferability of qualifications. Work experience acquired abroad may be discounted while limitations in language skills may hamper the full use of other skills. Discrimination may also prevent job seekers with a migrant background from obtaining appropriate employment. Furthermore, self-selection of immigrants as well as migration and integration policies affect labour market outcomes including matching of jobs and skills. Migrant workers are overrepresented in the growing groups of professionals, service workers and machine operators among the self-employed, but not in the group of craft workers. Among employees, migrant workers are overrepresented among service workers, but not in the major groups of technicians and professionals. These patterns suggest on the one hand that immigration is driven by demand for labour, as captured by relative growth in occupations, alongside other factors. On the other hand, (lack of) recognition of qualifications may play a role given the strongly divergent patterns between employees (less driven by occupational growth) and the self-employed (more driven by occupational growth). There is also a striking difference between the share of immigrants and the share of natives in elementary occupations of employees (the share of immigrants is 7 percentage points higher than the share of natives), which again may foreshadow skills mismatch. Given that migrants are not less educated than natives, skills mismatch is one explanation of such a high share of migrants in elementary occupations.10

McGowan, M. and Andrews, D. (2015), ‘Labour Market Mismatch and Labour Productivity’, OECD Economics Department Working Papers (1209). 9

Boll, C., Leppin, J., Rossen, A., & Wolf, A. (2016). “Overeducation - New Evidence for 25 European Countries”. HWWI Research Paper 173, Hamburg Institute of International Economics,http://www.hwwi.org/fileadmin/hwwi/Publikationen/Publikationen_PDFs_2016/Resea rch_Paper_173.pdf 10

Job mismatch has been a problem in different parts of the world wherein In the most recent Chartered Institute of Personnel and Development (CIPD) report on untapped skills and the skills mismatch in the UK, it was found that nearly half of workers feel mismatched in their roles, with 37 percent being deemed over-skilled and 12 percent under-skilled. Outlining the fears of ‘over skilled workers’, the reports found that they are “less satisfied and nearly twice as likely to want to quit than those in well-matched roles and more likely to say their job offers poor prospects for career advancement, training and skills development.” Obtaining consistent estimates of the incidence of educational mismatches is necessary for being able to examine their determinants and impacts as well as for informing policy makers on how to deal with the mismatches problem. Nevertheless, this is difficult for a number of reasons. The main difficulty is the fact that mismatches, in particular the required schooling for a job, can be determined from different angles. For instance, a graduate who works in a managerial position may perceive he is overeducated if he feels that his occupation does not require his tertiary qualification, while from a normative angle, he would be classified as a matched worker within this job position. Consequently, various approaches exist to measure educational mismatches, yet results are often poorly correlated and substantially vary depending on the measure used.11 In Greece and South Africa, more than half of young people are unemployed. Across the Middle East, one in four is jobless—in the US, about one in seven. At the same time, however, businesses complain that they cannot find the workers they need. There is, in short, a serious mismatch between what many young people have to offer and what business needs—and this problem is not going away.12 The economic costs of skill mismatch and skill shortages affect individuals, firms and the overall economy. Individual costs include lower wages and poorer skill development, and can partly turn from temporary to permanent. The costs faced by firms comprise lower productivity and the hiring and training costs associated to increasing job turnover. Aggregate costs include the efficiency losses – in terms of lower average productivity and higher unemployment - associated with the sub-optimal allocation of resources. Mismatch can negatively impact on earnings if individuals accept a less desirable job because of the higher competition they face (the sullying effect), and can turn at least in part from temporary to permanent if it produces a scarring effect, for instance because of human capital depreciation.

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Seamus McGuinness., Konstantinos Pouliakas., & Paul Redmond. How Useful is the Concept of Skills Mismatch? 12

S4YE (2015) Toward Solutions for Youth Employment. A 2015 Baseline Report, as found on: http://www.ilo.org/wcmsp5/groups/public/--ed_emp/documents/publication/wcms_413826.pdfch? (Tech. Rep.)

While there is plenty of research concerned with the identification and analysis of instances of skill mismatches, literature on policy responses and their effect is scarce. Cedefop points out that approaches to transferring policies or measures across countries are rarely useful, because of the specifics of different labour markets, educational systems and institutional frameworks. This is also one of the conclusions of the 2016 Skills Summit97 in Bergen, Norway under the chair of the country’s Minister of Education and Research. They argue for the need of a “whole-of-government” approach which includes both national and regional authorities, supported by social partners, employers and other stakeholders. At present there are a number of existing national and EU-wide policies that seek to alleviate the negative effects of skill mismatches. The EURES network is a good example of a functional intra-EU tool for addressing one of the main causes of skills mismatches – the information barriers to intra-EU labour mobility. In addition, labour market transparency is supported by monitoring tools such as the European Vacancy Monitor (EVM) and the EU Skills Panorama, while most active labour market policies are being supported by the European Social Fund (ESF) and the European Globalization Adjustment Fund (EGAF), as well as initiatives such as the European Youth Guarantee. It is of vital importance that policymakers in EU countries successfully determine the factors that impose frictions on the efficient functioning of labour markets. A regulatory environment that supports the effective allocation of labour resources and thus facilitates the skill demand and supply matching process is an important prerequisite ...