Closing the jobs-skills gap

“THERE ARE potentially serious gaps in the supply of workers with the skills needed to drive 21st-century economies, and a growing surplus of workers with more limited skills,” warns the McKinsey Global Institute in a 2012 global labor market study.

The Philippines, where there are signs that a belated industrialization may finally be happening, is already feeling this growing imbalance in the supply and demand of worker skills. Unless addressed fast, the imbalance threatens the momentum of the current resurgence of manufacturing in the country.

Remarkable growth in new manufacturing investments has pushed that sector to grow faster than the overall Philippine economy in recent years. After growing at an annual average rate of only 3.0 percent in the last decade, manufacturing has averaged a yearly growth of 8.2 percent since 2010, against an overall GDP growth of 6.4 percent.

Manufacturing is thus now literally helping pull up the entire economy. More significantly, manufacturing jobs tend to be superior in quality to those generated in the country’s agriculture and services sectors. Historically, jobs in the latter have for the most part not been wage-paying jobs, but fall under the category of “self-employed” (likely to be in the informal or underground economy) or “unpaid family labor”—hence, usually insecure and/or nonremunerative work.

Manufacturing jobs, on the other hand, fall mostly under the “wage and salary labor” category, and come with attendant benefits such as paid leaves, social security, health and accident insurance, etc.

Manufacturing growth, then, promotes better quality employment and more inclusive growth. It’s noteworthy that based on Forbes Asia reports, the country’s top billionaires derive their wealth dominantly from services, particularly finance and real estate, and more recently, private health and educational services as well. In light of the above, our big business titans would do well to get more into manufacturing as a deliberate contribution to more inclusive growth.

This is why I worry about our nascent resurgence in manufacturing in the face of the growing jobs-skills mismatch already being felt by many firms. Based on data I’ve seen, less than one in 10 applicants to job fairs organized by the Department of Labor and Employment ends up finding a job, even as the number of applicants well exceeds the jobs offered. Firms I have interviewed, especially those located in the provinces, report difficulty in finding eligible skilled workers locally, hence seek recruits in Metro Manila, where trained graduates are often reluctant to relocate outside of the capital region.

The key obviously lies in getting industries and higher education institutions (HEIs) to talk and work more closely with each other. The latter would be reckless to offer courses and programs based on general impressions, instincts or, worse, ivory tower projections of skills requirements. One still encounters academics who actually think they know best on the matter of designing course and curricular offerings of their schools. The skills market is very dynamic, especially in this age of rapid economic change in the global economy. Academic and training institutions must be strategic, proactive and nimble enough to adjust to fast-changing market requirements. Our experience with nursing schools should be illustrative enough.

There are several modes by which industries and HEIs can work with each other and systematically exchange information on developments in the supply and demand for skills in the economy. Schools work with industries in implementing on-the-job training programs that are a necessary part of various technical courses. I’ve seen how these have often not been optimally designed or executed (including simple scheduling), resulting in foregone opportunities for much greater benefits to both student trainees and host companies than actually achieved. There’s also scope for much better coordination in course and curriculum design to allow industries to get HEIs to better anticipate forthcoming (not just current) skills demands based on business outlooks that firms themselves can best foresee. Given the four-year time lag from the time students make their career choice to graduation, planning on the basis of current skill demands can end up being misguided, as we have seen with nurses. Also, HEIs can better serve the research needs of industry (for whom in-house research and development would be costly) by directing faculty research toward areas that fill actual needs of industry.

Many companies already offer scholarships in coordination with chosen HEIs to help increase the pool of skilled recruitables for their work force. Some are also known to donate equipment to schools, including those specifically used in their companies, to minimize needed hands-on training once the company employs their graduates. Quality of instruction in technical courses targeted for industrial employment could be enhanced through faculty enrichment through industrial immersion, i.e., have teachers spend paid time working in industrial firms to gain real (vs. theoretical) experience. At the same time, HEIs could engage guest lecturers from industry practitioners through arrangements with their firms.

The McKinsey report sees the need for “an unprecedented commitment to education and training in both advanced and developing economies.” This must be coupled with mechanisms for regular interaction and coordination between industry and academe if we are to close supply and demand gaps at both aggregate and specific skill levels.

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