ISSUE IN BRIEF A Joint Series of the IOM Regional Office for Asia and the Pacific and the Migration Policy Institute DECEMBER 2015 ISSuE NO. 15 Shortage Amid Surplus: Emigration and Human Capital Development in the Philippines Dovelyn Rannveig Mendoza December 2015 Executive Summary The Philippines has the most sophisticated labour-exporting model in the world; 1.8 million temporary workers were deployed in 2014 alone. While Filipino migrant workers contribute significantly to the national economy with the remittances they send home (over USD 27 billion in 2014, according to the Philippine Central Bank), this reliance on exporting labour raises an important question: Has the nation’s focus on preparing workers to leave compromised human capital development at home? Focusing on sending workers overseas may result not only in the physical loss of talent—popularly known as brain drain—but also in mismatches between jobs and skills, as educational and training institutions align themselves with the needs of the international labour market rather than of local ones. Even as the Philippines sends a robust supply of workers abroad, it suffers labour shortages in key industries, such as science, technology, engineering, mathematics (STEM), medicine and aviation. On the other hand, there is broad agreement that remittances have improved access to education and reduced child labour in families that receive these funds. The effects may be even broader: the existence of opportunities overseas can inspire a greater number of people to gain additional skills and qualifications than the number who will eventually leave. While the Government of the Philippines cannot (and should not) prevent skilled workers from leaving, it would do well to invest in creating more opportunities for them to use their skills at home— especially in sectors and occupations most critical to development. Two promising sets of ideas could help to build up domestic human capital. First, policymakers could work more closely with local employers to ensure that domestic education and training systems are producing skills that businesses need. Second, the government could better support (and in some cases build) industries within the country that reflect domestic workers’ skills and training—particularly maritime shipping, medical tourism and scientific-process outsourcing. I. Introduction of “brain gain” in the domestic labour market; while some Filipino workers invest in their human capital in In 2014, 1.8 million temporary migrant workers left the hope of going abroad, many of them will actually the Philippines to work in more than 190 countries, stay, resulting in a deeper talent pool. each one bearing an employment contract issued and certified by the Government of the Philippines This issue in brief reviews the impacts of the (POEA, 2015). From factory and domestic workers Philippines’ successful labour export policy on skills to engineers and nurses, Filipinos occupy a wide development and human capital growth within the range of jobs abroad. Legal movements of temporary country. It starts with an overview of key migration workers on this scale are unparalleled elsewhere trends, followed by a discussion of domestic labour in the developing world. Those who leave to work conditions. The brief ends with recommendations on overseas join a huge Filipino diaspora, estimated workable solutions to build the local talent pool. by the Commission on Filipinos Overseas (CFO) at approximately 10.2 million people at the end of 2013, making it one of the largest emigrant populations in II. Emigration from the Philippines: the world (Office of the President of the Philippines, An overview CFO, 2013). Nearly half of the Filipinos abroad are legal temporary workers. The Philippines exports more labour emigrants than any other country in the world, and in the most Many international observers point to the Philippine organized way. Although a substantial number of system of managing migration as a model for other Filipinos abroad have settled permanently (most in developing countries hoping to access the benefits North America), nearly half are contract or temporary of global labour mobility. But while the Philippine workers, officially called Overseas Filipino Workers, migration policies receive accolades abroad, they or OFWs (Office of the President of the Philippines, attract criticism at home, including questions CFO, 2013).2 Figure 1 provides an overview of the regarding the government’s ability to protect astonishing growth of land- and sea-based OFWs from migrants’ rights while abroad. Tapping the global 1975, when the government initiated its labour export labour market seems to effectively ease immediate policy, until 2014. problems, such as unemployment and the public deficit. Yet many local observers, especially in civil society, complain that the government has yet to Figure 1: Number of Overseas Filipino Workers, 1975– deliver on the kind of development that benefits all 2014 households, not just those of emigrants and their immediate families. Of particular concern is the potentially negative impact of the Philippine labour-exporting model on the country’s skills pool. Sceptics warn that the departure of migrants has resulted in “brain drain”, particularly in priority sectors, such as health, tourism, business-process outsourcing and education.1 The national focus on preparing youth to work overseas may have contributed to mismatches between skills and local jobs, as students take courses that are demanded abroad but not at home. Optimists, on the other hand argue that emigration, even of the highly skilled, may positively affect the Note: Figures for 1975 to 1981 refer to number of contracts country of origin. In this view, a migration regime processed; figures from 1984 to 2014 refer to number of optimized for development could actually enable workers deployed abroad. migrants—both the educated and those with few Source: Asis, 2006; Republic of the Philippines, POEA, 2007, 2013, formal skills—to gain skills relevant to local markets. 2015. As migrants return home, they can facilitate the Most OFWs go to the Middle East (see Figure 2). transfer of the critical human capital needed by Other top destinations include Hong Kong, China and the developing world. Indeed, the increasing use Singapore. A significant proportion of OFWs are on sea of concepts, such as “brain bank”, “brain trust” and vessels—400,000 in 2014—comprising roughly 35 to “brain circulation” highlights a growing interest in 40 per cent of all seafarers in the world (see Table 1) migrants’ skills and experiences and how countries (SunStar Cebu, 2014; Mejia, 2014). of origin can tap them. There is also the possibility 2 Issue in Brief Table 1: Number of deployed Overseas Filipino Workers, by type, 2008–2014 Type 2008 2009 2010 2011 2012 2013 2014 Total 1,236,013 1,422,586 1,470,826 1,687,831 1,802,031 1,836,345 1,832,668 Land-based workers 974,399 1,092,162 1,123,676 1,318,727 1,435,166 1,469,179 1,430,842 New hires 376,973 349,715 341,966 437,720 458,575 464,888 487,176 Rehires 597,426 742,447 781,710 881,007 976,591 1,004,291 943,666 Sea-based workers 261,614 330,424 347,150 369,104 366,865 367,166 401,826 Note: New hires refer to workers leaving for the first time or returning to a different employer. Rehires refer to workers returning to the same employer. Source: POEA, 2013, 2015. Figure 2: Top destinations of Overseas Filipino Although government policy focused initially on Workers, 2010–2014 exporting professionals, OFW occupations have diversified since the 1970s to include factory, construction and service workers (in-home caregivers and domestic helpers are included in this last category). Chronic under- and unemployment at home, coupled with increasing job opportunities abroad, continue to prompt qualified workers to emigrate. Today, professionals—a category that includes nurses and engineers—remain the third- largest group of OFWs. In the seven-year period (2008–2014), almost 540,000 workers left to take new jobs in professional, technical, managerial, administrative, clerical and sales-related occupations, (see Table 2). These jobs typically require workers with degrees from higher education institutions. Another 950,000 workers took jobs in production-related Source: Republic of the Philippines, POEA, 2015. occupations such as plumbing and machine operation, which typically require vocational training. Table 2: Number of deployed land-based Overseas Filipino Workers, new hires by major occupational group, 2008–2014 Type 2008 2009 2010 2011 2012 2013 2014 Total 376,973 349,715 341,966 437,720 458,575 464,888 487,176 Professional, technical and related 49,649 47,886 41,835 61,598 54,617 53,840 53,296 Administrative and managerial 1,516 1,290 1,439 4,950 3,241 1,947 1,909 Clerical 18,101 15,403 10,706 14,115 13,960 12,893 11,579 Sales 11,525 8,348 7,242 8,932 9,346 9,220 8,402 Service 123,332 138,222 154,535 201,512 222,260 230,030 251,747 Agriculture 1,354 1,349 1,122 1,757 1,563 2,233 2,452 Production 132,295 117,609 120,647 141,215 146,448 147,776 149,008 Others 39,201 19,608 4,440 3,641 7,140 6,949 8,783 Source: POEA, 2013, 2015. Celebrated nationally as “modern-day heroes”, According to the Central Bank of the Philippines, diaspora members send back a significant volume remittances exceeded USD 27 billion in 2014, the of remittances, which averaged 8.9 per cent of gross third-highest in the world that year, trailing only India national product (GNP) over the past five years and and China (Mendoza, 2015). over 23 per cent of export earnings (Mendoza, 2015). SHORTAGE AMID SURPLUS: EMIGRATION AND HUMAN CAPITAL DEVELOPMENT IN THE PHILIPPINES 3 III.