A study published by state think tank Philippine Institute for Development Studies urged the Asia-Pacific Economic Cooperation (APEC) economies to use its labor market information system to help address unemployment and job mismatch in the region.
In his policy note titled “The Value of Labor Market Information Systems on International Labor Mobility”, author Leonardo Lanzona Jr. lamented the underutilization of the APEC Labor Market Portal—developed in 2014—due to the “limited data contribution from APEC economies”.
In the study, he highlighted the importance of labor market information system to create an efficient labor mobility, saying that it is “necessary for matching migrant workers to appropriate jobs”.
While promoting jobs is beneficial, failure to match quality and skills of a potential worker to current employer needs may only prolong unemployment. This, he said, may be addressed by providing full information of workers to prospective employers to facilitate their free movement.
Addressing asymmetric information
The existence of asymmetric information in the labor market has brought challenges to both workers and employers. For one, employers find it difficult to “measure the productivity of workers on which their payments are based”, Lanzona said, adding that the former may face problems in setting out proper wages whenever workers do not reveal their true productivity and their efforts are unverifiable.
Furthermore, Lanzona explained that because the potential productivity of workers is unidentifiable, they may be misallocated to task and sectors, which can lead to adverse selection “especially if the average wage rates offered drive out the more productive workers”.
According to the study, asymmetric information has also resulted to wage rigidity, with employers offering constant wages to both the productive and the less productive workers, as a result of lack of access to their information.
“Firms, in general, are wary of reducing wages because doing so can cause the more productive workers to quit, leaving the less productive workers to stay in the country,” Lanzona explained, saying that this has caused restrained access to labor.
In the Philippines, this can be addressed, the author said, by “improving the employers’ access to skills certifications”, like the ones offered by Technical Education and Skills Development Authority to trainees.
Doing so, Lanzona explained, may make it easier for employers abroad to check a worker’s “certificate on a website and even find a list of local workers who may have also earned a similar certification”.
The author also suggested making the website interactive to allow previous employers to post feedbacks so that new employers may be forewarned about former employees who are unscrupulous.
Lanzona also mentioned the importance of the national qualifications framework, which as the International Labor Organization puts it, classifies and registers qualifications according to a set of nationally agreed standards for levels of learning/skills obtained. This makes comparisons possible across all sectors of APEC member-countries. Likewise, the establishment of a regional qualifications framework may avoid “falsely comparing greatly varying qualifications” by educational and training institutions.
In addition to its recommendations, the study called on APEC member-countries to standardize their various codes and laws governing the different types of labor markets. More information should also be gathered about the other means to make labor mobility more efficient, such as looking at social networks that may be expanded to encourage labor mobility, citing as an example the expansion of the policy on three-week visa-free entries to all citizens of the Association of Southeast Asian Nations to APEC economies.
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