(DP 2005-03) The Wage Structure of Overseas Filipino Workers

Edita A. Tan


Labor-importing countries adopt differing immigration policy on foreign workers. They all restrict the number allowed entry and many set wage ceilings at levels below the wage paid the native workers. The differing restrictive immigration policies result in the segmentation of the world labor market and large inequality in wage rates for any one occupation or skill. The paper presents a simple model of wage and employment determination for observable variants of immigration policy followed by the major destinations of OFWs, in particular North America, Asian tiger economies and the Middle East. It estimated wage functions by regression using individual overseas workers data with human capital (schooling and experience), sex, occupation and destination as arguments. Excepting for completed college, schooling is found not to be a significant explanatory variable. The other variables exerts their expected influence in a significant way but destination proves to have the strongest influence on foreign wage. The paper concludes that would-be OFWs are unable to choose the best destination partly because of immigration restrictions and partly because they do not meet the qualifications required. Examples are ICT and nursing occupations. There is a proliferation of academic programs for these occupations but their generally poor quality disables the country from responding to the foreign demand for these skills.

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