Disparities in Labor Market Performance in the Philippines

The Philippine economy has been growing rapidly, at an annual growth rate of 5 percent over the past five years. Such decent growth in gross domestic product, however, did not translate into an increase in household income. Wage income declined in real terms. The poverty headcount increased slightly. The fruits of economic growth were not shared equally across the country. Challenges remain to create more jobs to keep pace with the rapidly growing active population. Using the Philippines Labor Force Survey data (2003-2007), this paper reviews the disparities in labor market performance and examines the contribution of regional and individual characteristics. The results show that real wages declined and disparities widened between the National Capital Region and other islands. The youth, less educated, and women face more challenges in finding employment with a decent salary, other things being equal. Disparities in labor market performance are largely associated with the difference in regional structure and human capital endowment. Individual characteristics account for roughly one-third of the difference in wages between the National Capital Region and other regions; regional structures and other unobservable factors account for two-thirds of the difference.