From the Editor's Inbox: Education and Wage Differentials in the Philippines

Education and Wage Differentials in the Philippines 

by Dr. Edgar Gabay Agustilo

In the Philippines, an important part of income inequality is associated with the wage difference between the less educated and the better educated according to a study on poverty reduction by the World Bank (2009).

The majority of the least educated are employed in low-paid services jobs and the agricultural sector.

Tertiary education is to a large extent a prerequisite for high-paid occupations.

Using the Labor Force Survey 2003–2007, disparities in human capital endowment point to education and its role in wage differentials.

This show that returns to education monotonically increase—workers with elementary education, secondary education and tertiary education earn 10 percent, 40 percent, and 100 percent more than those with no education.

This also shows that education is the single most important factor that contributes to wage differentials.

At the national level, education accounts for about 30 percent of the difference in wages.

It accounts for a higher percentage of the difference for female workers (37 percent) than male workers (24 percent).

There are also differences across regions and sectors.

As an economy develops, the demand for skills increases.

Efforts to improve education to increase the supply of highly educated people are important not only for long-term growth, but also for helping to translate growth into more equal opportunities for the children of the current generation.

Education plays an important role in wage differentials.

A large part of inequality stems from the difference in wages between the less educated and the better educated.

At the national level, education accounts for about 30 percent of the difference in wages.

It accounts for a higher percentage of the difference between female workers than between male workers.

Across regions, education accounts for 20-30 percent of the difference in wages between NCR and Visayas and between NCR and Mindanao; across sectors, it accounts for 6 percent, 14 percent, and 33 percent of the difference in wages in the agricultural, manufacturing and services sectors, respectively.

Returns to education increase with years of schooling – workers with elementary, secondary, and tertiary education earn 10 percent, 40 percent, and 100 percent, respectively, more than those with no education.

Tertiary education is often a prerequisite for high-paid jobs. The majority of the least educated clustered in low-paid services jobs and in the agricultural sector.

Efforts to improve education to increase the supply of highly educated people are important for economic efficiency enhancement and growth acceleration.

They are important not only for long term growth, but also for helping to translate growth into more equal opportunities for the children of the current generation.