Chapter 2. Overview of the case study areas in the Philippines

To better understand the role of the local level in contributing to job creation and productivity, this review examined employment and economic development programme activities in Taguig City, Cebu City, and Davao City. This chapter provides a labour market and economic overview of each city as well as the results from an OECD analysis which looks at place-based skills mismatches at the local level in the Philippines.

  

Overview of the case study areas

For this publication, the cities of Taguig, Cebu and Davao have been selected as case study areas. Taguig City is situated in the National Capital Region (NCR) in the northern island of Luzon. Cebu City is located in Cebu Province, Central Visayas Region while Davao City is found in Davao Region in the southern island of Mindanao. Local government units in the Philippines directly manage a suite of employment and training programmes, which operate under the umbrella of a public employment service office (PESO). The involvement of local government units (LGUs) in employment facilitation and labour market intermediation is consistent with the Local Government Code, which requires the promotion of full employment among their residents (Local Government Code, sec. 16).

A case study approach is used in this OECD project to understand the implementation of programmes, compare local approaches and gather best practices. Such an approach also aims to determine how employment and skills policies are contributing to economic development and job creation at the local level. In this chapter, background information on each case study area is provided as well as data comparing regions across the Philippines to demonstrate regional variation within the country. Lastly, analysis completed by the OECD is presented on the alignment of the supply of skills with demand for skills, and the balance between the education system and the job opportunities available at the local level.

Taguig City

Taguig City is located in the south-east of the National Capital Region. It is a densely urbanised area and an important residential, commercial and industrial area within Metro Manila. The city is bordered by Makati City, Pateros and Pasig City on the north, Pasay City on the west, Paranaque City on the southwest, Muntinlupa City on the south, Cainta and Taytay on the northeast, and Laguna de Bay on the east. In 2009, Taguig City had a total income of more than PhP 2.9 billion. In 2007, its population stood at 613 343 people. Per capita income was close to PhP 3 600. As a region, NCR is the top performer across all regions in terms of GVA.

The employment rate in the region grew from 88.5% in 2010 to 91.5% in 2015. Gross regional domestic product also increased from about PhP 2 million in 2010 to PhP 2.6 million in 2014 (in million pesos, at constant 2000 prices). The leading major industry groups in the region include wholesale and retail trade, manufacturing, and transportation and storage.

There are major universities in the City, including the publicly-managed Taguig City University (TCU), the Polytechnic University of the Philippines and the Technological University of the Philippines. As the TCU is being run by the City government, it is a perfect venue to look at courses on entrepreneurship, pilot testing, life skills subjects and integrating them into the curricula. TCU has around 12 000 students. The City government is professionalising and hiring more competent teachers. Another major university is the University of the Philippines Bonifacio Global City which opens in 2016 with course offerings from its College of Law, College of Engineering, Virata School of Business, College of Architecture, School of Labor and Industrial Relations, School of Urban and Regional Planning, School of Statistics and the UP Open University.

Cebu City

Cebu City is located in the Province of Cebu, which belongs to the country’s Central Visayas Region. From 2007 to 2009, Cebu City had an average total income of more than PhP 3 billion. Cebu City had a population of 866 171 persons in 2010 (PSA, 2013), while per capita income stood at close to PhP 3 600. As a region, Central Visayas’ strength as to GVA is in manufacturing. The employment rate in the region grew from 92.4% in 2010 to 94.1% in 2015. The gross regional domestic product also increased from PhP 340 701 in 2010 to PhP 464 746 in 2014 (in million pesos, at constant 2000 prices). The major industry groups in the region are agriculture, hunting and forestry, wholesale and retail trade, and manufacturing.

Top universities in Cebu include University of the Philippines – Cebu, University of San Jose Recoletos, University of San Carlos, University of Cebu, Cebu Normal University, Cebu Institute of Technology – University, and University of the Visayas. These universities were named centres of excellence and development by the Commission on Higher Education for the years 2016 to 2018 (Sibi, 2016).

Davao City

Davao City is located in the southeastern part of Mindanao. It is bounded on the north by Davao Province, on the east partly by Davao Province and Davao Gulf, on the south by Davao del Sur, and on the west by North Cotabato. Davao City’s average total income from 2007 to 2009 was close to PhP 3.6 billion while per capita income was about PhP 2 400. Davao Region’s best performance as regards GVA is in agriculture, hunting, forestry and fishing

Employment rate in the region grew from 93.9% in 2010 to 94.2% in 2015. Gross regional domestic product also increased from PhP 217 313 in 2010 to PhP 281 515 in 2014 (in million pesos, at constant 2000 prices). The leading major industry groups in the region are agriculture, hunting and forestry, wholesale and retail trade, and transportation and storage. Some leading universities in Davao are the University of the Philippines Mindanao, Ateneo de Davao University, University of Southeastern Philippines, University of Mindanao, and University of Immaculate Conception.

Regional employment and economic development trends in the Philippines

Significant regional variations can be observed within the Philippines in terms of both economic and labour market trends. The relatively strong overall economic growth that the country has experienced in the years following the global economic crisis of 2008 has not benefited all provinces equally. The following figure shows that during the period between 2010 and 2014, the average annual GDP growth rate was highest in Caraga at 9.0%, with Central Visayas (where Cebu is located) (8.1%), Davao Region (6.7%) and the National Capital Region (where Taguig is located) (6.3%) all performing above the national average.

Figure 2.1. GDP growth rate (at constant 2000 prices), Philippines regions, 2010-14
Average annual change (%)
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Source: Philippine Statistics Authority.

The Philippines is characterised by high levels of internal migration. In 2010, 1.4 million individuals had resettled in a different province compared to 2005, with the province of Calabarzon, the National Capital Region and the province of Central Luzon seeing the highest inflows of internal migrants. There is also a significant population of people who live and work in Central Visayas and the Davao region but reside in another province.

Figure 2.2. Individuals whose place of residence was in a different province in 2010 compared to 2005 (as share of total regional population in 2010), Philippines regions
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Source: 2010 Census of Population and Housing, Philippine Statistics Authority.

A major factor influencing internal migration is the level of wages in each region. In the Philippines, the level of the minimum wage is determined at the level of the province. In 2015, it was highest in the National Capital Region and lowest in the Autonomous Region of Muslim Mindanao. This contributes to creating disparities in terms of wage levels within the country.

Variation can also be observed in terms of the performance of local labour markets in the Philippines. While the national average unemployment rate was estimated to be 6.3% in 2015, it ranged from 8.5% in the National Capital Region to 3.2% in the Cagayan Valley (Figure 2.3). Both the Central Visayas region (where Cebu is located) and Davao had an unemployment rate of 6%. As noted in the first chapter of this report, unemployment figures should be analysed with caution in the Philippines given the prevalence of underemployment and informality in the Filipino economy. In terms of the employment rate, which provides an indication of the extent to which available labour resources are being used, opposite trends can be observed: the Cagayan Valley had the highest employment rate in 2015 at 96.8%, while this figure was lowest in the National Capital Region at 91.5%.

Figure 2.3. Unemployment rate (%), the Philippines regions and national average, 2015
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Source: Labour Force Survey, Philippine Statistics Authority.

The industrial structure of the three case study areas differ significantly. While agriculture, hunting and forestry accounted for as much as one third of total employment in the Davao Region and one quarter of total employment in Central Visayas in 2015, only 0.3% of workers were employed in this sector in the National Capital Region. Wholesale and Retail Trade comprised the largest group in the National Capital Region, making up 23.6%, and the second largest group in the Davao Region and Central Visayas (see Figure 2.4).

Figure 2.4. Comparing the industrial structure across regions, 2015
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Source: Labour Force Survey, Philippine Statistics Authority.

Balance between skills supply and demand at the sub-national level

In 2014, a strong gap could be observed in terms of the share of the employed population with a college degree or higher between the NCR (27.7%) and other provinces, including Central Visayas (15.7%) and the Davao Region (14%) (Figure 2.5).

Figure 2.5. Share of employed population with a college degree or higher, The Philippines regions, 2014
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Source: Philippine Statistics Authority, Labor Force Survey.

Although the National Capital Region also had the highest proportion of occupations that require medium to high levels of skills in 2014, the gap with the following region, namely Central Luzon, was rather narrow (Figure 2.6). This proportion was 30.1% and 26.7% respectively in Central Visayas and the Davao Region.

Figure 2.6. Share of the population employed in medium-high skilled occupations, The Philippines regions, 2014
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Source: Philippine Statistics Authority, Labor Force Survey.

Data on gross value added (GVA) per worker gives an indication of the level of productivity of workers in each region. As Figure 2.7 demonstrates, GVA per worker was much higher in the NCR than in any other region of the Philippines. Central Visayas and the Davao region both fall into the top five in terms of productivity across regions in the Philippines but fall significantly below the National Capital Region.

Figure 2.7. Gross value added per employed, Philippines Regions, 2014
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Source: Philippine Statistics Authority.

The LEED Programme has developed a statistical tool to understand the relationship between skills supply and demand within local labour markets (Froy, Giguère and Meghnagi, 2012). This tool can help to provide policy makers with an understanding of subnational distribution of skills supply and demand. This, in turn, can inform the development of place-based policy approaches at the local level based on specific challenges and opportunities related to skills.

Figure 2.8. Understanding the relationship between skills supply and demand
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Source: Froy, F. and S. Giguère (2010).

In the top-right corner, both the demand for and supply and of skills are relatively high, a situation known as a “high skills equilibrium”. In the top-left corner of the figure above, there is a relatively high demand for skills, while the supply of skills is relatively low – in other words, there may be skills deficits. In such places, it can be beneficial to focus on boosting the supply of skills so that employers are able to find the highly skilled workers that they need. In the bottom-left corner the supply of and demand for low skills are both relatively low, creating a “low skills trap”. The challenge facing policy makers is to get the economy moving towards the top-right corner. Lastly, in the bottom-right corner, a relatively low demand for skills is met by a relatively high supply of skills, suggesting a need to focus on working with employers to better utilise the skills the local workforce has to offer, either through higher value added production or improved work organisation. This typology was applied to the Philippines administrative regions for 2014.

Box 2.1. Explaining the diagnostic tool

The analysis is carried out at the administrative regions. The supply of skills was measured by the percentage of the population with a college degree or higher. The demand for skills was approximated using a composite index: percentage of the population employed in medium-high skilled occupations0 and GVA per worker (weighted at .25 and .75 respectively). The indices are standardised using the inter-decile method and are compared with the national median. Further explanations on the methodology can be found in Froy, Giguère and Meghnagi, 2012.

For the Philippines, the following occupations are considered as medium-high skilled: Managing Proprietors and Supervisors; Professionals; Technicians and Associate Professionals; Trades and Related Workers.

Source: Froy, F., S. Giguère and M. Meghnagi (2012).

Using the diagnostic analysis, which compares how the supply of supply (e.g. educational qualifications) aligns with skills demand (e.g. the level of wages and productivity), the OECD has mapped regions in the Philippines to classify them into a high-skills equilibrium, skills shortage, skills surplus, and low skills equilibrium. As shown in Figures 2.9and 2.10, six regions were in a high-skills equilibrium in 2014, including the National Capital Region, of which the Taguig city is part, and the Central Visayas Region, which includes the city of Cebu. Six regions were in a low skills trap. Two regions were in a situation of skills deficit, including the Davao Region. Finally, three regions were in a situation of skills surplus.

Figure 2.9. Skills Supply and Demand: Administrative Regions in the Philippines; chart (2014)
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Source: OECD calculations based on data from the Philippine Statistics Authority.

Figure 2.10. Skills Supply and Demand: Administrative Regions in the Philippines; map (2014)
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Source: OECD calculations based on data from the Philippine Statistics Authority.

Looking further at the case study areas, the high level of skills and good quality jobs found in the Metro Manila area (and in particular Taguig City) provide a basis upon which to attract further investments and jobs. While Cebu City falls into a high-skills equilibrium, more effort needs to be focused on how to foster skills development opportunities as well as high quality jobs. For Davao, this analysis points to a need to focus on supply side policies, such as investments in education and skills, which build the attraction of the local area and workforce. The quality and productivity of jobs appears to be similar in Cebu City but Davao falls behind when looking at the percentage of the population with tertiary educational attainment. Boosting opportunity for the development of skills through training would enable the region to move into a more competitive position, relative to other regions in the Philippines.

Complementing the OECD analysis of place-based skills mismatches

Data from a number of sources can be used to complement the OECD analysis of place-based skills mismatches so that policymakers have a more comprehensive picture of employment and skills in the provinces of the Philippines. These include Talentmap, a joint-initiative of the Department of Labor and Employment, SFI Group of Companies and HireLabs. As part of this initiative, a tool has been developed to assess and evaluate the core skills and competencies of the workforce, including mathematics and English as well as planning and organising, decision-making, critical thinking, innovation, teamwork, multi-tasking and problem solving. Table 2.1 shows the average score obtained in the country’s provinces. Central Visayas and the Davao Region show relatively poor performance compared to the Cordillera Administrative Region, Calabarzon and the National Capital Region.

Within the National Capital Region, Taguig shows a relatively low score at 55%, with only Mandaluyong scoring lower (52%). Makati (67%), Pasig (66%) and San Juan (64%) have the highest scores in this province. This means that workforce in the city of Taguig may not be equipped to take advantage of job opportunities requiring high levels of skills, whether in the city itself or in the broader region.

Table 2.1. Average Talentmap scores by provinces

Cordillera Administrative Region

68%

CALABARZON

67%

Ilocos Region

63%

Central Luzon

63%

National Capital Region

62%

MIMAROPA

60%

Central Visayas

57%

Davao Region

56%

Negros Island Region

56%

Northern Mindanao

49%

Note: Scores for the following provinces due to insufficient number of respondents: Cagayan Valley, Bicol Region, Western Visayas, Eastern Visayas, Zamboanga Peninsula, SOCCSKSARGEN, Caraga, Autonomous Region in Muslim Mindanao.

Source: The Workforce Profile of your Province, Philippine Talentmap initiative.

References

Froy, F., S. Giguère and M. Meghnagi (2012), “Skills for competitiveness: A synthesis report”, OECD Local Economic and Employment Development (LEED) Working Papers, No. 2012/09, OECD Publishing, Paris, http://dx.doi.org/10.1787/5k98xwskmvr6-en.

Froy, F. and S. Giguère (2010), “Putting in Place Jobs that Last: A Guide to Rebuilding Quality Employment at Local Level”, OECD Local Economic and Employment Development (LEED) Working Papers, No. 2010/13, OECD Publishing, Paris, http://dx.doi.org/10.1787/5km7jf7qtk9p-en.

PSA (2013), Population of Cebu City Increased by Almost 150 Thousand (Results from the 2010 Census of Population and Housing), Philippine Statistics Authority, https://psa.gov.ph/content/population-cebu-city-increased-almost-150-thousand-results-2010-census-population-and.

Philippine Talentmap initiative (n.d.), The Workforce Profile of your Province, http://talentmap.ph/.