Academic journal article Asian Development Review

Workers' Earnings in the Philippines: Comparing Self-Employment with Wage Employment

Academic journal article Asian Development Review

Workers' Earnings in the Philippines: Comparing Self-Employment with Wage Employment

Article excerpt

Analysis of labor force survey (LFS) data since the early 1990s reveals several important changes in the structure of the Philippine labor force. One is the movement from self-employment to wage employment across a wide range of production sectors. To evaluate this change in terms of workers' earnings, we combine information on household incomes from the Family Income and Expenditure Survey with information on household members' employment-related activities from the LFS. We also examine broad structural trends for employment, wages, and earnings. The findings indicate high variance in the earnings of the self-employed and their earnings and educational profiles resemble those of casual wage employees. Both are surpassed by those of permanent wage employees even when observable worker characteristics are controlled for. As self-employment gives way to wage employment, especially casual wage employment in the services sector, the key policy challenge is tackling the slow growth of wages and earnings.


Labor force survey data from the Philippines reveal at least two important changes in the structure of employment over the last 10 years. First, the share of employment accounted for by agriculture has declined considerably - almost 10 percentage points between 1994 and 2007. Second, a clear shift is taking place in the nature of employment: the share of self-employment is declining and giving way to wage or salaried employment (henceforth referred to as wage employment). While these two changes are related - self-employment is the dominant form of employment in agriculture - the decline in the importance of self-employment extends beyond the agriculture sector. Indeed, the decline in self-employment is found to be an across-the-board phenomenon.

How does one assess these changes? Both are consistent with the "stylized facts" of development suggesting that the evolution of labor market outcomes in the Philippines is progressing well. However, such a conclusion would be premature without directly assessing the implications of these changes on some specific measure of worker welfare. This paper uses individual- and householdlevel data from the Labor Force Survey (LFS) and Family Income and Expenditure Survey (FIES) to do so.

Starting with an examination of broad trends in the structure of employment and wages between 1994 and 2007, we match sample households across the LFS and FIES to shed light on whether or not the movement away from self-employment to wage employment represents an improvement in workers' welfare as captured by their earnings. While several attributes of a "job" matter for the job holder's welfare - such as work conditions and prospects for future mobility - the most important one, arguably, is the earnings it generates for the worker.

The analysis of earnings is complicated by a lack of data for the selfemployed. Obtaining reliable information on earnings of the self-employed is not easy as considerable effort needs to be made to measure own-account transactions and assumptions need to be made about issues such as the depreciation of income-generating assets.! The absence of high-quality written accounts complicates the task even more. This has led some national statistical agencies to entirely omit questions about self-employment earnings from their labor force surveys. In the Philippines, the practice has changed over time. While the selfemployed were asked about their earnings in earlier rounds of the LFS, the most recent rounds have refrained from doing so.

Fortunately, it is possible to use information from both the LFS as well as the FIES to fill this data gap. In particular, the household sample used for the FIES (carried out every three years) is identical to that used for two concurrent rounds of the LFS (carried out quarterly). Thus, it is possible to link the household income and expenditures collected by the FIES with the information on labor market activities of each sample household. …

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