EXPLAINER

How the Philippines Can Prepare Its Workers for Automation

Current trends suggest a continued demand for middle-skilled and skilled TVET graduates to support growth sectors of the Philippine economy. Photo credit: ADB.
Current trends suggest a continued demand for middle-skilled and skilled TVET graduates to support growth sectors of the Philippine economy. Photo credit: ADB.

Published: 29 June 2021

Targeted training tracks, enhanced online learning, and close collaborations with other agencies can make TVET system more responsive.

Introduction

New and emerging technologies under Industry 4.0, also known as the Fourth Industrial Revolution or 4IR, are rapidly changing the nature of work and demand for skills around the world. It is expected to bring about new job opportunities as well as job displacements.

In the Philippines, the technical and vocational education and training (TVET) system and Technical Education and Skills Development Authority (TESDA), the government agency responsible for TVET in the country, can pave the way for adapting labor skills to meet the needs of Industry 4.0, provided the necessary resources, capacity, and political will are in place.

A study by the Asian Development Bank carried out at the request of TESDA looks at the accomplishments and the challenges facing the Philippines’ skills training system in the age of Industry 4.0. The review is especially timely as the coronavirus disease (COVID-19) continues to take a heavy toll on the labor market and has widened inequalities. It has heightened the importance of adequate and timely investment in skills—involving reskilling, upskilling, and the development of strong technical and soft skills—to help transition displaced workers into new jobs.

How Industry 4.0 Changed the Demand for Labor

The potential impact of Industry 4.0 on jobs is multifaceted and far from clear cut. Building upon and combining automation (more machines) and information technology (more efficient and intelligent machines), rapidly evolving technologies could lead to job losses and displacement on an unprecedented scale.

The past decade has seen a declining share of low-skilled occupations while high-skilled ones have increased over time. There has also been considerable reshuffling of middle-skill jobs, reflecting rapid employment growth in services and construction, and restructuring from labor-intensive to capital-intensive production within and across manufacturing industries. Current trends suggest a continued demand for middle-skilled and skilled TVET graduates to support growth sectors of the Philippine economy.

Figure 1: Labor Productivity and Employment Share, 2019

Source: National Accounts and Labor Employment, Philippine Statistics Authority for 2019 figures; ADB estimates

Increasing globalization and the advent of Industry 4.0 bring added pressure to the workforce to reskill and upskill by changing the very nature of work and how specific tasks are performed in occupations. Trade and technology lead to an increased demand for high-skilled workers, while occupations with routine tasks are more likely to be automated and offshored. These trends led to rapid employment growth in the Philippines’ IT-business process outsourcing (IT-BPO) industry so far.  

Figure 2: Industries Facing Highest Risk of Job Losses due to Automation

p.p. = percentage points

Source: ADB estimates from labor force survey.

In an Industry 4.0 environment, workers must be able to move across industries and occupations and along career paths that may be nonlinear.

Impact of COVID-19 on the Labor Market

The COVID-19 pandemic has had a devastating economic and labor market impact. The country’s unemployment rate soared to 17.7% in April 2020 from 5.1% in the same period in 2019. This translated to an additional five million unemployed workers. Stringent lockdown measures to protect public health prevented labor reallocations in the first half of 2020, which typically accompany economic shocks in developing economies. It was difficult for workers to find jobs even in lower productivity sectors and seek informal employment. As lockdown measures were eased in the second half of 2020, labor could move from industry and services to agriculture (Figure 3). Furthermore, through job losses, work stoppages, and reduction of working hours, the pandemic and associated measures to contain it have pushed many Filipino workers and their families below the poverty line.

The pandemic has increased the urgency to prepare for Industry 4.0 by precipitating automation and the shift toward digital and technological solutions in many fields.

Figure 3: Estimated Change in Employment due to COVID-19 by Broad Industry Group

Source: ADB estimates.

Challenges Faced by the Philippine TVET System

TESDA has made strides over the last 25 years. It has evolved to play a multifaceted role, providing varied technical education and skills development programs and activities, including for the marginalized sector.  

As the country faces high levels of unemployment and job loss, the role of innovative and flexible learning programs, such as TESDA’s online programs, play a critical role in retooling and upskilling displaced workers.

However, TESDA faces the following challenges:

  • There is the unsettled issue of devolution of the agency’s direct training function.
  • Resource constraints impact capital outlay, reducing its ability to provide up-to-date facilities, as well as trained staff.
  • Shortages of technology competency assessors and lengthy processes for developing standards and assessment tools undermine TESDA’s ability to upgrade services.
  • Insufficient industry engagement hinders the agency’s capacity to respond to changing private sector demand for skills.

TESDA needs to redefine its role as the authority of TVET in the context of fast-changing environments and the realities of its own organizational resources.

Moreover, with the new demands of emerging technologies, the agency needs to move beyond the confines of bureaucratic space and set the tone for a learning organization that models the 21st century skills of creativity, critical thinking, communication, and collaboration. TESDA’s most-availed courses in recent years, particularly among female enrollees, include many that lead to low-productivity, low-pay occupations, often involving nonroutine manual tasks. Other popular courses in recent years include those geared toward the IT and BPO industries. These high-growth sectors, however, have also been identified as likely to be disproportionately affected by Industry 4.0, with the share of jobs at risk of automation estimated at 86% for construction, 68% for hospitality, 89% for BPO, and 81% for the electrical and electronics sector.

Mismatches exist between available courses and skills needed by employers, hindering employability. TESDA’s scholarships are most effective for achieving higher completion and assessment rates for scholars. However, they are less effective at improving certification, employment, and productivity.

Figure 4: Share of Trainees Matched, Underqualified, or Overqualified, 2013, 2014, and 2017

Source: ADB estimates.

There is high awareness of Industry 4.0 in the Philippines, and some innovative policies are already in place, but an apparent gap in terms of implementation underscores the need to enhance and support technical–vocational and livelihood preparedness.

How to Retool the TVET system and TESDA

There is a need for TVET systems to reform and redefine their roles to equip various target groups with skills that meet the rapidly evolving needs of the labor market.

  • Adequate funding is needed for TESDA to fulfill its dual objective of a competitive workforce and social equity.
  • Settling the debate around devolving TESDA’s training function, improving financial management, and optimizing use of funds would improve its organizational capacity.

Close collaboration between TESDA, the Department of Education, and the Commission on Higher Education for the following:  

  • strengthening institutional mechanisms for coordination and policy setting, particularly in the aftermath of the shift to K to 12 basic education program;
  • expanding TESDA’s role in the senior high school technical–vocational and livelihood track;
  • developing and strengthening pathways between various education levels, including lifelong learning, by fast-tracking the formulation of an action plan to operationalize the Philippine Qualifications Framework; and
  • imparting transferable/transversal/21st century skills/soft skills throughout the learning process.
  • Priority sectors should include high-productivity services and higher value-added manufacturing industries, ensuring an adequate supply of skills as the Philippines moves up global and regional value-added chains.
  • While wholesale and retail trade and tourism have greater capacity to absorb labor, these involve mainly low-productivity, nonroutine manual jobs.
  • Enrollment in agriculture courses, which remains very low, should be increased, as this may increase the productivity of agricultural regions.
  • Anticipate skills demand, ensure better targeting of TVET programs and greater efficiency of skills supply, limit mismatches, and improve labor market outcomes.
  • Standardize and improve workshops, equipment, and digital solutions to meet international norms and improve quality.
  • Support technical–vocational institutions in imparting technical and soft skills complementary to technology.
  • Make use of vocational streams and clusters to impart transferable skills for flexible workers and improved career options.
  • Enhance online training, while keeping in mind equity considerations in terms of access and infrastructure.
  • Promote TVET as a crucial component of active labor market policies throughout the recovery and beyond.

Resource

Asian Development Bank. 2021. Technical and Vocational Education and Training in the Philippines in the Age of Industry 4.0. Manila.

 

Ask the Experts

  • Sameer Khatiwada
    Technology and Innovation Specialist, Southeast Asia Department, ADB

    Sameer works on managing and providing ADB support in the areas of education, skills development, social protection, and training. Prior to ADB, he worked at the International Labor Organization. He holds a PhD in Economics from the Graduate Institute of International and Development Studies (IHEID) in Geneva and has a master’s degree in public policy from Harvard.

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  • Asian Development Bank (ADB)

    The Asian Development Bank is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.

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