Ask PNoy

Subsidies (not studies) for the skills mismatch

A national apprenticeship program that provides subsidies to both employers and employees in areas where a skills mismatch has occurred would fix the problem.

The president in answering the questions submitted and rated by viewers on Youtube reiterated many of his “talking points” during his second State of the Nation Address. This comment was raised by many viewers of the 43 minute “Ask PNoy” event co-hosted by World View and the ABS-CBN News Channel.

The very first question asked concerned the plight of millions of Filipinos who seek employment overseas because of a lack of opportunities at home. The president’s reply was to cite the same statistic he noted during his SONA with regard to the skills mismatch of about fifty to sixty thousand job openings on the government’s PhilJobs.net website that have remained unfilled (see video below–at around the 1.30 minute mark to about the 3.30 minute).

The president’s solution as he declared during his speech last July was to instruct the agencies concerned to study ways to address this imbalance through the educational system. This is well and good, but the immediate concern of filling these vacancies, plus the prevailing unemployment of close to three million Filipinos needs to be addressed soon, not down the track.

During his interview, the president spoke of various government sponsored programs: (1) to address the need for “green” energy by replacing thousands of diesel powered engines and vehicles that make up our transport infrastructure, (2) to provide thousands of housing units to soldiers and policemen to address the peace and order situation in the countryside, (3) to beef up our coastline security through a defense modernization fund, and (4) to expand social insurance through conditional cash grants to indigent families to address intergenerational poverty.

But when it comes to addressing the first imperative of any government which is to provide jobs, jobs, jobs, it seems the solutions are not as solid or programmed, as such. A very quick and do-able solution would be for the government to provide employment and training subsidies to the firms unable to fill job vacancies.

The purpose of this subsidy would be to defray part of the costs of training cadets or apprentices on the role they will fill within the firms seeking to employ them. Part of this  subsidy could go to the employer to help pay for the wages of unskilled apprentices and trainees while they undergo a period of formal schooling, on-the-job training, or a combination of both.

This could last for a period of between eighteen-to-thirty-six months. To qualify for such a subsidy, the employer would have to show that an advertised job vacancy remained unfilled by qualified workers after a period of say six-to-nine months.

Another part of the subsidy could go to the apprentice or trainee for such things as transportation, uniforms, tools (if needed for the job) and other similar work-related expenses. Formal contracts of training would stipulate the responsibilities of each party under such a scheme and reviewed periodically.

Fifty-to-sixty thousand internet job ads on the government's website are not filled according to employment officials.

Fifty-to-sixty thousand unfilled vacancies is nothing to sneeze at. It constitutes about two percent of the nearly three million unemployed members of the workforce.  It would cost around one-and-a-half billion pesos annually to provide a two-and-a-half thousand peso subsidy per trainee each month (thirty thousand a year) assuming all of these vacancies are filled via this approach. That is a rounding error in the government’s total budget of over one trillion pesos.

It would provide presumably high paying, sustainable jobs in the end–something that social insurance programs cannot boast of. Surely with the “savings” PNoy was quite happy to highlight during his interview such an “investment” in people’s human potential would be worth making. Surely a new initiative such as this with a very modest budget impact and a significant contribution to raising employment would have earned the president praise from all sides (both employers and employees included). So why shouldn’t he do it?

That question sadly remains unanswered, but if the president were to temporarily overcome his strong aversion to criticism as he expressed by way of a Christmas wish to Santa towards the end of the interview, I am sure it could be made to work real soon.