Press Releases Archived (November 2014)

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There`s a glimmer of hope for inclusive growth with the government taking steps particularly in the area of labor and industrial policy as well as human capital development.

PIDS President Gilberto Llanto made this assessment Tuesday (September 23, 2014) as he wrapped up the 12th Development Policy Research Month (DPRM) Seminar that tackled labor policy reforms, the revival of the manufacturing industry, and issues in the educational sector. The seminar was the highlight of the nationwide DPRM observance, spearheaded by PIDS in September every year.

Llanto cited the Industry Development Program being spearheaded by the Department of Trade and Industry (DTI), under which sectoral roadmaps were consolidated into a Manufacturing Industry Roadmap that seeks to hike manufacturing`s contribution to both value added and employment. Our neighbors have relied on labor-intensive manufacture to grow their economy and have taken advantage of regional production networks. Their economy grew and their people have gotten out of the poverty trap and have enjoyed higher standard of living, Llanto said.

Resource persons at the DPRM seminar held at NEDA sa Makati Building, titled Forum on Addressing the Jobs Challenge toward Inclusive Growth, included PIDS Senior Research Fellows Aniceto Orbeta and Rosario Manasan, PIDS Visiting Research Fellow Vicente Paqueo, Benjamin Dalumpines of the Institute for Labor Studies (ILS), Executive Director Ma. Corazon Dichosa of the DTI Investment Policy and Planning Service, and Executive Director Marissa Legaspi of the Technical Education and Skills Development Authority (TESDA).

Dichosa said some 50 separate roadmaps outlining measures to enhance competitiveness would be ready by next year, including the 30 earlier submitted to the DTI. The government is pursuing an industrial policy that promotes the resurgence of an international competitive manufacturing sector, she said. The long-term vision is to become hubs in regional and global production networks for auto, electronics, machinery, garments, food, and others.

Llanto said the consolidated roadmap, crafted by PIDS, should spur the development of small and medium enterprises (SMEs) that would help address poverty and inequality. Development of SMEs is a pillar of the envisioned ASEAN Economic Community or AEC, Llanto noted.

TESDA`s Legaspi presented the Philippine Qualifications Framework, which will facilitate mobility of labor within the region through the ASEAN mutual recognition arrangements. The framework, which aims to adopt national standards and levels of outcomes of education, is an important step toward addressing the problem of job-skills mismatch, Legaspi said.

PIDS Senior Research Fellow Rosario Manasan, for her part, called for a more efficient allocation of resources in the educational sector, pointing out that many state universities and colleges (SUCs) recorded zero board examination passing rates during the years 2005-2011, and the list of SUCs with passing rates below the national average is even longer. Fifty to 90 percent of programs offered are outside the mandates of SUCs, Manasan noted. Faculty development is key to improving quality, she said.

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The effects of labor regulations such as the minimum wage policy should be considered if government is really serious about creating jobs and pursuing inclusive growth.

This was stressed by Dr. Vicente Paqueo, visiting research fellow of state think-tank Philippine Institute for Development Studies (PIDS), in a forum at the Senate on September 18 organized by the Senate Economic Planning Office and PIDS. The forum is part of the nationwide celebration of the 12th Development Policy Research Month spearheaded by PIDS.

A study by Paqueo, PIDS Senior Research Fellow Aniceto Orbeta, and PIDS consultants Lorenzo Lanzona and Dean Dulay revealed the damaging effects of the increases in minimum wage. `It reduces the demand for workers in small firms and also results in lower household incomes"20 percent less based on our computation,` Orbeta explained.

That the study showed that small firms are hit hard by the minimum wage policy is particularly relevant for the Philippines as they comprise the bulk of registered businesses and collectively account for majority of employment. With increases in minimum wage, they are forced to cut worker hours, decrease size, or stop operating. This creates a negative multiplier effect on household incomes and thus exacerbates poverty.

Paqueo and Orbeta clarified that they are not calling for the abolition of minimum wage. `What we are saying is that we should moderate minimum wage increases because they do not necessarily mean better incomes for the poor. If labor regulations stifle the incentive of firms to be productive, to employ people, then you are shooting yourself in the foot,` Paqueo said.

Paqueo added that the use of public revenues to reduce the gap between the wage generated by the market and what is considered as decent wage should be looked at.

Prof. Rene Ofreneo, former dean of the UP School of Labor and Industrial Relations, said the effects of the minimum wage for each sector should be analyzed. He lauded the initiatives of Senator Juan Edgardo `Sonny` Angara to push for the passage of the Magna Carta for Workers in the Informal economy. Laws in support of the disadvantaged are non-existent in our country. Based on DOLE figures, they comprise 45 percent of the economy. But some PIDS researchers noted that the figure is actually higher, Ofreneo said.

The former undersecretary for labor relations agreed with the recommendation of PIDS that labor regulations should not be looked at as the only options available to address the plight of workers. Increasing labor productivity is critical, through education or skills training on the job. A previous study of the authors noted the high rate of return of investment in education. Households headed by high school graduates earn more than twice those whose heads only have elementary education.

But based on the PIDS study, evidence of on-the-job training is low. Employers are reluctant to invest in on-the-job training as workers have a high probability of leaving, especially in a globalized labor market like the Philippines.

Orbeta said one option to finance on-the-job training is through co-financing by government, firms (through industry associations), and the workers themselves. Orbeta noted the government has a very big training program and this is one avenue that can be tapped. The government should be made accountable because when the numbers of unemployed and underemployed people escalate, it is also a problem of government, he said. Enhancing their skills will increase their chances of finding more productive jobs.

PIDS president Gilberto Llanto underscored the need for a labor market that is dynamic. `We are facing a different setup yet still using old policies. Maybe in the past, those policies were good. But now that the Philippines will soon join the AEC in 2015, where the skills of our workers will be pitted against those of our neighboring countries labor force, we have to re-think our institutions and policies. The PIDS study is a first attempt to do a deeper investigation of our labor regulations and policies.`

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Despite rapid economic growth in the past years, poverty still persists in the Philippines. Investing in development programs such as the Pantawid Pamilyang Pilipino Program (4Ps) is thus crucial to delivering better social outcomes. As the flagship anti-poverty program of the country, the conditional cash transfer scheme has been met with some criticisms. Some sectors see it as a dole-out that breeds mendicancy. Supporters, however, argue that the program comes with conditionalities that beneficiaries must comply with.

Results of recent evaluation studies on 4Ps reveal that it has no significant negative impact on work effort of household heads, leads to increased school participation of children, and results in increased household consumption of education-related goods.
These are the early indicators of success shared in the session on `Evaluating Pantawid Pamilyang Pilipino Program (4Ps)` of the international conference on `Making Impact Evaluation Matter: Better Evidence for Effective Policies and Program` held at the Asian Development Bank (ADB) headquarters from September 1 to 5. The conference was the first ever to tackle impact evaluation and systematic reviews in a large scale in Asia, and was organized by the International Initiative for Impact Evaluation (3ie), the ADB, and the Philippine Institute for Development Studies (PIDS). It coincided with the observance of the 12th Development Policy Research Month spearheaded by PIDS.

One stumbling block is the failure of such programs to reach the poorest of the poor. Impact evaluations use rigorous methodologies to ascertain program outcomes. Careful evaluations of social programs are necessary to gather evidence that can guide policymakers in making decisions to expand or terminate programs particularly those with big budgets.

In a study titled `Does Pantawid Foster Dependence or Encourage Work? Evidence from a Randomized Experiment,` Dr. Aniceto Orbeta, PIDS senior research fellow, said conditional cash transfers (CCT) increased the desire for work of the household head and his female spouse, all adult members 18 years and above, and middle-aged workers 35-54 years old. This was contrary to the claim of detractors that CCT breeds mendicancy. The study was conducted among the first wave 4Ps beneficiaries from November to December 2011, or two and a half years after the program was implemented.

`Parents work to compensate for loss of income from children who attend school. When people publicly recognize the importance of education, families are convinced to keep their children in school. Households also respond by exerting more effort,` Orbeta said.

In terms of child labor, the program significantly reduces the number of hours of work for pay of elementary school-aged children 6 to 11 years old, but did not significantly affect the incidence of child labor, he added.

Meanwhile, using the 2011 Annual Poverty Indicators Survey to assess the impact of the 4Ps on school participation of Filipino children, the study titled `Estimating the impact of 4Ps on school participation of Filipino children using propensity score matching,` by Dr. Celia Reyes and Christian Mina, PIDS senior research fellow and supervising research specialist, respectively, found out that the program led to an increase of 3 to 4.6 percentage points in the school participation rate of children aged 6-14. The results showed that around 96.3 percent of children of 4Ps families attend school. For the matched non-4Ps families, the rate ranges from 91.7 to 93.3 percent.

Additional findings show that 4Ps does not influence school participation of children beyond the age coverage. The difference between the school participation rate of 4Ps beneficiaries and matched non-4Ps age groups 15 to 18 turned out to be insignificant. This led to the proposal to extend support to existing 4Ps beneficiaries to allow students to graduate from high school.

According to Mina, 4Ps beneficiaries will have higher chances of securing better jobs and higher income if they graduate from high school. There is a 45-percent average wage differential between a high school graduate and an elementary undergraduate and a 32-percent average wage differential between high school and elementary graduates.

While 4Ps is primarily intended to provide cash benefits for education and health expenditures, the impact of the program on household consumption has stirred interest and is now being examined given the persistent poverty of 4Ps families and the huge amounts of public resources provided to beneficiaries.

The study titled `The impact of the Philippine conditional cash transfer program on consumption` by Melba Tutor, research associate at the Social Weather Stations, found that households increased their consumption of education-related goods, which are goods required for continued program participation. `Households have reallocated consumption to maintain their benefits, arguably because they understood the program logic and have positive expectations of its impact on future household welfare,` she said.

Moreover, Tutor found stronger impact in 4Ps households belonging to the poorest 20 percent of the population. Their total consumption increased due to higher spending on food, education, and clothing. It validates the assumption that the poorest of the poor, or those expected to gain the most from 4Ps, actually benefit. In addition, there is no observed spending for alcohol and tobacco, debunking the claim of 4Ps critics that cash assistance is not being spent properly.

Evidence from impact evaluation was crucial to the expansion of the 4Ps program, and has led to crucial changes in program coverage--expansion of eligibility to poor students at the secondary level as well as those at the primary level, and administrative changes. It is expected that evidence from further evaluation studies will shield programs like 4Ps from party politics and presidential succession.

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Economists from the Philippine Institute for Development Studies (PIDS) and the University of the Philippines (UP) took turns discussing techniques in impact evaluation at the IEmatters pre-conference workshops, providing development practitioners with the means to generate evidence that will influence policy.

PIDS Senior Research Fellow Aniceto Orbeta on Tuesday (Sept. 2, 2014) gave an overview of regression discontinuity and interrupted time series designs, which exploit the fact that development programs often use arbitrary rules (such as age of the beneficiary) for program placement or eligibility. Such interventions, he said, provide good quasi-experiments by comparing people affected by the rule and those who are not.

These designs avoid the ethical issues sometimes faced by methods involving randomized control trials, where treatment is withheld from otherwise eligible people. In regression discontinuity designs, control groups are not eligible, Orbeta said. Accuracy and precision are important to good measurement but there will be tradeoffs between the two, he added.

UP economist Joseph Capuno on Monday (Sept. 1, 2014) introduced propensity score matching, one of the common matching methods. Matching methods use a comparison group where the ideal comparison group is selected such that it matches the treatment group using either a comprehensive baseline survey or time invariant characteristics. Matches are selected on the basis of similarities in observed characteristics.

Stella Quimbo, also a UP economist, discussed the approach of instrumental variables to impact evaluation, which involves a non-experimental method using regressions to estimate program impact. The instrument, she explained, is a variable that is correlated with program placement but has no direct effect on the outcomes of interest.

More than 400 delegates are in Manila for the first-ever large-scale international conference on impact evaluation in Asia, co-organized by the Asian Development Bank, the International Initiative for Impact Evaluation or 3ie, and PIDS. Pre-conference workshops started Monday, Sept. 1 and will end Sept. 3. The conference proper will be from Sept. 3 to 5.

PIDS is co-organizing the conference in conjunction with the 12th Development Policy Research Month, a nationwide observance promoting evidence-based policymaking.

Visit the conference website: http://impactevaluation2014.org