Inequality, Education, and Occupational Change in the Philippines

Overview & Synopsis

Despite significant progress in reducing poverty, the Philippines continues to face high inequality, which stayed elevated in the early 2000s as the economy grew. Although inequality has gradually declined since 2012, it remains among the highest in Southeast Asia. This paper examines how changes in education levels and occupational structure have shaped the wage distribution over the past two decades, particularly how changes in the relative supply of skills and the structure of employment have influenced wage gaps in recent years.Using two decades of labor force survey data, the paper examines the wage premium and the supply of skilled workers in the Philippines, finding that the slow growth in college-educated workers has sustained high wage premium for skilled workers. Unconditional quantile regressions reveal that returns to both college education and high-skill occupations increase monotonically over the wage distribution, contributing to the persistence of inequality. Changes in occupational structure have also influenced income distribution. Low- and middle-skilled jobs saw relative wage gains from 2002 to 2012, but middle-skilled occupations experienced the highest growth from 2012 to 2016—a key driver behind falling wage inequality. Employment trends followed a similar pattern, with middle-skilled job growth peaking in 2012-2016. Recent trends suggest a shift away from middle-skilled jobs, though it remains uncertain whether this reflects structural changes in the labor market or temporary disruptions.