Beginning in the 1990s, the Philippines implemented policies to liberalize trade. To a large
extent, this was motivated by a growing awareness of the economic benefits from opening the
domestic goods market to world trade.
It is widely acknowledged that globalization has stimulated economic growth and increased
welfare in many parts of the world. But it is also true that during the process of adjustment, certain
sectors gain while others lose.
Globalization can affect welfare through the workings of the labor market. In particular,
trade reforms, by increasing market access, exports and competition, may promote efficiency and
cause certain sectors to gain in terms of increased investments, employment creation, and increased
wages. On the other hand, it may also lead to job destruction and deterioration in the real wages of
other sectors in the economy particularly in the erstwhile heavily protected import-competing
sector. While anecdotal evidence abounds, there is as yet no comprehensive picture of the impact of
globalization on employment and wages.
There is also a dearth of studies documenting how firms are able to adjust to the more
competitive environment particularly in terms of how they manage their human resources to
enhance worker productivity and reduce their labor costs per unit of output. Of particular interest is
the degree of flexibility of labor markets in the country in comparison to others in terms of hiring
and firing, the availability of part-time and fixed-term contracts, working time requirements,
minimum wages, and minimum conditions of employment, among others.
Some observers have also pointed out that unskilled labor has become relatively expensive
while semi-skilled and skilled labor remains relatively cheap in the country. Consequently, jobs in
labor-intensive industries using unskilled workers are stagnating while jobs in industries using semiskilled
workers are growing. Hence, if the country were to reduce unemployment and poverty, it
will have to deepen its growing advantage in semi-skilled labor-intensive industries through
investments in the human capital of the labor force either by private firms, the government, or
both. There is a need therefore to look into the factors that facilitate or hinder investments by firms
in the human capital of their workers and to assess government’s role in this regard