Apprenticeship and the skills mismatch

I SPOKE about “Skills Mismatch” at the 15th PESO National Congress at the PICC last October 27, in behalf of ECOP President Ed Lacson.

Business, industry, academe, and employer groups in the country all agree that for the Philippines to improve its global competitiveness, it has to enhance both its labor productivity and labor flexibility.

Competitiveness ranking

In the 2015-2016 WEF survey, the Philippines ranks 47th out of 140 economies, and is fifth in the ASEAN after Singapore (2), Malaysia (18), Thailand (32), and Indonesia (37); and a slot higher than Vietnam (56) in terms of global competitiveness.

Labor productivity is higher in the industrial sector, roughly 150% higher than in services and 300% higher than in agricultural sectors.  Sadly, the Philippines’ industrial sector contributes only a small portion to the GDP. We jumped, not by choice, from agriculture to services, without having fully developed the industrial sector. Now we’re limping on one foot – services. And we don’t even have an industrial policy.

Labor flexibility refers to the ability of the workforce to adapt to changing demands for skills needed by the market in the new economy. Globalization, trade liberalization, and technology have connived to render irrelevant the skills in grandpa’s economy.  The academe and public training institutions have been catching up to produce graduates with the right mix of skills. Twenty years ago, who’d predict that call center agents are going to be the most typical job today?  Some popular jobs in the past (telephone operator, full-time secretary) hardly exist today in lean organizations.

Skills mismatch

It is unfair to expect the academe to produce graduates that will hit the road running on Day One after getting hired and oriented.  The academe does not change the curriculum midstream.  The harsh reality is that half of what students learn in the first two years in college could be obsolete by the time they graduate.

The persistent skills mismatch can be corrected only if government, industry, academe, training institutions, and the jobseekers themselves can work like well-oiled machinery, constantly adjusting policies, interventions, and expectations, as the market moves in unpredictable ways.

If it’s any consolation, skills mismatch is not a problem only in the Philippines. The difference lies not in the nature of the problem, but in the way more competitive countries respond to arrest the problem.  Industry should stop blaming the inadequacy of the academe.  Academe must understand the difficulty of forecasting industry’s long-term specific skills needs. Public training must not offer only to popular courses. Parents must stop micro-managing their kids’ career choices. We have an oversupply of nurses because parents want their kids to work abroad and later petition them to join their working kids.

Thai model

In November 2014, Wall Street Journal Thailand disclosed how the country is coping with labor shortage. It reported, “Manufacturers here are taking matters into their own hands to patch up a weak spot of Thailand’s economy: its worsening shortage of skilled labor. … Now an increasing number of companies, many in the auto industry, are rolling out apprenticeship programs aimed at beefing up the workforce themselves. At the Mercedes-Benz training center near Bangkok recently, teenagers in blue jumpsuits worked at electrical training boards to learn about circuit technologies, wiring connections and electrical interfaces of different car components. The goal at the Daimler AG unit is for the students to be able to service and maintain all the models that are made in Thailand.”

“There’s a lack of manpower, adequate skills, teaching and training to prepare young people for the job market,” said Thavorn Chalassathien, a senior vice president at the Thai unit of auto-parts maker Denso Corp. of Japan. Denso’s Thai unit has started its own apprenticeship program and began training vocational instructors in the latest production technologies.

Wall Street Journal continued, “The lack of adequately trained workers is a headache for Thailand, whose economic success has depended on a supply of cheap, low-skilled labor to attract foreign investment, but which is now trying to go up the manufacturing food chain amid competition from countries such as Vietnam, Cambodia or Myanmar, where wages can be as much as two-thirds lower.”

Thai carmakers aim to increase production to 3.5 million vehicles a year by 2020 from the current 2.5 million units.  This means an additional 120,000 workers-18% more than the current industry labor force of 660,000 people.

Thai Apprenticeship

To respond to its skills mismatch, Thailand has adopted the Apprenticeship model that Germany used to spur its economic recovery after WWII – the Dualtech.

The Wall Street Journal continued, “Although university enrollment has doubled over the past decade, only one-fifth of the students are in engineering and science. Meanwhile, enrollment in the vocational high schools and colleges that historically supplied much of the manufacturing work force has fallen 5% over the past five years. Even the vocational schools aren’t giving their students the skills factory operators really need, employers say-a big reason many are sponsoring apprenticeship programs.”

“We are talking about decades to get the education system to change and we can’t wait. We are in a dynamic market,” said Matthias Pfalz, president of BMW Group Thailand, a unit of Germany’s BMW AG whose car sales have tripled over the past four years.

BMW as well as Mercedes-Benz, B. Grimm Power and three other members of the German-Thai Chamber of Commerce are in the vanguard of the apprenticeship effort. The companies are focusing on recruiting vocational college students for two-year courses split between the classroom and shop floors.

Thailand has hundreds of thousands of apprentices every year; Germany has over a million.  In stark contrast, since the creation in 1970 of the National Manpower Youth Council (now TESDA), the Philippines produced only 25,000 apprentices.

USA worker training

A recent research by the OECD shows that investments in knowledge-based capital, such as worker skills, result in a comparative advantage in international trade. Business investment in knowledge-based capital boosts average labor productivity growth by 20% to 34%.

A Georgetown University study in 2013 revealed, “U.S. companies spent $1.1 trillion on formal and informal training for their workers-greater than U.S. spending on two- and four- year colleges combined. However, while companies are spending an impressive sum on worker training, according to the 2015 Economic Report of the President, fewer and fewer workers are receiving that training.”

Research shows that with training, workers benefit from higher wages, increased employability and job-security. Companies benefit from increased productivity, longer worker retention, and reduced attrition. The economy benefits from higher labor participation rates, lower unemployment, and shorter unemployment periods.

PHL Apprenticeship

There’s a pending bill in Congress to improve existing apprenticeship policies & practices in the Philippines.  Thanks to Labor Committee Chair Rep. Karlo Nograles, the Lower House has adopted the bill sponsored by the Department of Labor (DOLE) after thorough consultation with both business/ employer & labor groups.  The bill is now pending in the Senate.

Some senators want safeguards in the bill against possible abuses of unscrupulous businessmen.  We in the TIPC (tripartite industrial peace council) composed of government, labor and employer representatives have debated to death the proposed bill and embedded ample safeguards already – from determining what jobs are covered, to ensuring and monitoring learning, to compensating apprentices, to non-discrimination in eventual hiring of apprenticeship graduates, etc.  Workers are amply represented in the development and implementation of the apprenticeship program, even if this is just a “learnership” (or education) and not an employment modality. The Joint Foreign Chambers even agree to include in the bill commitments of employers taken from the Integrity Pledge developed by Henry Schumacher.

Sadly, this bill is not priority with many lawmakers; their reelection is. This most important bill could just die a natural death. Workers and businessmen alike should not vote for those who stand in the way of the passage of the Apprenticeship Bill.

WTF, let’s use social media – Wechat, Twitter and Facebook!

(Ernie is the 2013 Executive Director and 1999 President of the People Management Association of the Philippines (PMAP); Chair of the AMCHAM Human Capital Committee; and Co-Chair of ECOP’s TWG on Labor and Social Policy Issues. He also chairs the Accreditation Council for the PMAP Society of Fellows in People Management. He is President and CEO of EC Business Solutions and Career Center. Contact him at [email protected])