The Philippine Institute for Development Studies (PIDS) said the government needs to increase its support to raise the quality of labor-intensive service jobs in retail, transportation and hospitality to boost growth and improve equity.
In a December 23 report, the government think tank said services, the largest contributor to GDP and employment, have expanded primarily through low-productivity and wage subsectors.
“Increasing productivity in labor-absorbing services is an essential priority for both growth and equity,” PIDS said.
The Philippine Statistics Authority said the services sector grew 5.5% in the third quarter, compared with 6.3% a year earlier.
Wholesale and retail trade, transportation and storage, accommodation and food services, and other low-productivity industries account for 73.6% of total service employment.
It says these subsectors are dominated by low- to medium-skilled jobs and pay below average.
PIDS also noted that 68% of female workers are in services, particularly wholesale and retail trade, accommodation and food service activities.
“Improving the productivity of these sectors while ensuring that women benefit, not lose, from productivity gains is essential to closing the gender gap,” it says.
“Services which are not necessarily large employers but have high forward linkages, particularly the manufacturing sector, should also be the focus of policy reforms, as improvements in productivity in these subsectors have a positive impact.FThis has implications for the rest of the economy,” PIDS said.
Furthermore, the think tank said companies can increase productivity by improving management practices, investing in innovation, upgrading workforce skills and adopting new technologies.
Broader structural reforms, although beyond the control of individual firms, are necessary to create an operating environment that supports sector-wide upgrading, it said.
It says, “A strategic framework that integrates key policy areas – labor markets, enterprise and industry development, technology, innovation and structural reforms – can help maximize the impact of public interventions towards increasing productivity in services.”
To address these challenges, PIDS said the government should use the theory of change framework to explore how labor productivity in services can be improved.
This approach will guide the design and implementation of specific interventions.
“A logic model, such as theory of change, provides a strategic framework for governments to link interventions to desired outcomes, rationalize their investments to assist firms and workers, and identify pathways to more effectively adopt appropriate policy levers,” PIDS said.
Paper “Increasing Labor Productivity in the Service Sector: Toward a Theory of Change and Some Design Options” Ramonte B. Seraphica, Queen Cell A. Oren, Emmanuel F. Esguerra, and was written by Aniceto C. Orbeta, Jr. – Aubrey Rose A. innocente