Raising quality of labor-intensive jobs in services seen as key to growth, equity

THE Philippine Institute for Development Studies (PIDS) said the government needs to channel its support to raising the quality of labor-intensive service jobs in retail, transport and hospitality to spur growth and improve equity.

In a Dec. 23 report, the government think tank said services, the largest contributor to gross domestic product and employment, have expanded mainly through subsectors with low productivity and wages.

“Enhancing productivity in labor-absorbing services is an essential priority for both growth and equity,” PIDS said.

The services sector expanded by 5.5% in the third quarter, against 6.3% a year earlier, the Philippine Statistics Authority said.

Wholesale and retail trade, transport and storage, accommodation and food services, and other low-productivity industries account for 73.6% of total services employment.

These subsectors are dominated by low- to medium-skilled jobs and pay below-average wages, it added.

PIDS also noted that 68% of female workers are in services, especially in the wholesale and retail trades, accommodation and food service activities.

“Improving the productivity of these sectors while ensuring women benefit from, rather than are disadvantaged by, productivity gains is essential to closing the gender gap,” it added.

“Services that are not necessarily big employers, but have high forward linkages, especially to the manufacturing sector, should also be a focus of policy reforms, as productivity improvements in these subsectors have positive spillover effects to the rest of the economy,” PIDS said.

In addition, the think tank said companies can lift productivity by improving management practices, investing in innovation, upgrading workforce skills and adopting new technologies.

Broader structural reforms, though outside the control of individual firms, are needed to create an operating environment that supports sector-wide upgrading, it said.

“A strategic framework that integrates key policy areas — labor market, enterprise and industry development, technology, innovation, and structural reform — can help maximize the impact of public interventions towards increasing productivity in services,” it said.

To address these challenges, PIDS said the government should use a Theory of Change framework to map how labor productivity in services can be improved.

This approach would guide the design and implementation of specific interventions.

“A logic model, such as a theory of change, provides the government a strategic framework to more effectively identify pathways to connect interventions to desired outcomes, rationalize its investments to assist firms and workers, and adopt appropriate policy levers,” PIDS said.

The paper “Increasing Labor Productivity in the Services Sector: Towards a Theory of Change and Some Design Options” was written by Ramonette B. Serafica, Queen Cel A. Oren, Emmanuel F. Esguerra, and Aniceto C. Orbeta, Jr. — Aubrey Rose A. Inosante