Academic journal article Journal of Southeast Asian Economies

Rethinking Vocational Education in the Philippines: Does It Really Lead to Higher Wages?

Academic journal article Journal of Southeast Asian Economies

Rethinking Vocational Education in the Philippines: Does It Really Lead to Higher Wages?

Article excerpt

1. Introduction

Many economists believe that the accumulation of human capital--in the form of education--increases wages because workers acquire skills and knowledge while in school, which increase their productivity (Schultz 1961; Becker 1962; Mincer 1974). Many empirical studies have pointed out the superiority of education over other determinants of earning differentials (e.g., Psacharopoulos 1972, 1985, 1994; Psacharopoulos and Patrinos 2004; Peet, Fink and Fawzi 2015). Education also serves as a signal of workers' innate abilities as well as other unobservable productivity-related characteristics (Phelps 1972; Arrow 1973; Spence 1973). While these studies typically refer to general formal education, there is mixed evidence regarding the role of vocational education in enhancing the earning prospects of workers.

In most countries, vocational education forms an integral part of the education system as a supplier of job-specific skills. It aims to link workers to available jobs by providing them the skills that employers seek but are unable to find. Vocational education is also viewed as a means of improving the earning prospects of workers with low levels of general formal education. By providing them the specific skills that are needed in the labour market, either as self-employed or wage workers, vocational education serves as a social intervention to facilitate the labour market inclusion of vulnerable workers (Psacharopoulos 1997). In recent years, governments around the world have renewed their interest in investing in vocational education in light of rapid technological changes, which demand specific types of technical skills that may not be readily provided by the general education system (UNESCO 2012; World Bank 2012).

A number of empirical studies have shown favourable results, indicating that vocational education yields higher wages than obtaining general education alone (Moenjak and Worswick 2003; Sakellariou 2003; Bishop and Mane 2004; El-Hamidi 2006; Meer 2007; Almeida et al. 2015). Other studies have qualified these positive wage effects, as they depend on the types of vocational courses obtained (Neuman and Ziderman 1991) or the level of general education already attained by the workers (Kahyarara and Teal 2008). Some studies have shown mixed results, suggesting that the wage effects of vocational education are comparable to those of general education (Lechner 2000; Riboud, Savchenko and Tan 2007; Malamud and Pop-Eleches 2010; Newhouse and Suryadarma 2011; Tripney and Hombrados 2013). The variation in results reflect, for the most part, differences in: specifications; quality of data; and institutional structures underlying the vocational education system in the countries under study (for review, see Bennel 1996; World Bank 2012).

Some researchers, however, are less enthusiastic about vocational education (Bennel 1996; Psacharopoulos 1987, 1997; Psacharopoulos and Patrinos 1993; Horowitz and Schenzler 1999). They argue that private returns to the general education track are higher than the vocational education track. In addition, although vocational education may increase wages, this effect does not last over time (Hawley 2003; Hanushek et al. 2016). The concept-based, rather than skill-based, knowledge makes workers more adaptable and capable of acquiring new skills to meet changing labour market needs. Not only are these effects less desirable at the worker level, they also make the country's labour force less flexible--which may lead to slower economic growth (Krueger and Kumar 2004).

Thus far, the claim that vocational education leads to higher wages remains an empirical question. Country studies are important inputs in the debate, as they provide better understanding of specific contexts at which vocational education leads to better labour market outcomes. The Philippines is an interesting case for analysing the wage effects of vocational education for the following reasons:

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