Philippine Firms Struggle With Upskilling Challenges

Over two-thirds of companies in the Philippines say skill gaps in the labor market are a top barrier holding back their business transformation, according to the World Economic Forum’s Future of Jobs Report 2025. With 6.5 million Filipinos underemployed as of January 2025 and only 9 percent of technical-vocational students enrolled in enterprise-based training programs, the gap between what workers can do and what industries need is widening faster than training systems can keep up. The mismatch isn’t just a hiring problem — it directly affects productivity, competitiveness, and the country’s ability to attract investment.

The timing compounds the problem. Automation, artificial intelligence, and digital manufacturing are reshaping industries at a pace that existing training infrastructure in the Philippines was never designed to match. Immigration policies are tightening globally, meaning the country cannot rely on importing talent to fill gaps — it has to build its own. That makes the upskilling challenge not just a human resources issue but a structural economic one.

Three Root Causes Behind the Skills Mismatch

The EdCom II findings narrowed the problem to three connected issues: foundational learning deficits that begin in basic education, a persistent misalignment between what technical education delivers and what industry requires, and the fact that employers themselves have been minimally involved in training design. The Philippine manufacturing sector, which employed 1.2 million workers in 2022, is a clear example — the innovation and productivity gains that automation should bring are blunted when the workforce lacks the skills to operate new systems.

What Changed and Why It Matters More Now

The COVID-19 pandemic made a bad situation worse. The Philippine economy contracted by 9.5 percent in 2020, and investment plummeted by 34 percent from 2019 levels. Those numbers are not just historical — they created lasting damage. Potential growth declined by an average of 1.69 percentage points between 2022 and 2024, with roughly two-thirds of that decline tied to slower physical capital growth and the remainder to weaker productivity and reduced human capital formation. Prolonged school closures caused high learning losses, and the returns on education have dropped as a result.

At the same time, the demand for analytical and technical skills is rising sharply in key sectors like information technology-business process management and manufacturing. The Department of Labor and Employment reports 200,000 hard-to-fill roles in IT-BPM alone, particularly in data science and software development. Yet STEM enrollments at the higher education level are declining. The structural difficulty of starting and scaling a business in this environment is compounded when the talent pool needed to grow simply does not exist in the form companies need.

Where the System Breaks Down

Engineers Who Are Not Job-Ready

The research consistently points to a gap between academic output and industry readiness. Engineering graduates frequently require up to one year of additional training before they can perform at the level employers expect. This is not a case of underqualified individuals — it is a systemic misalignment between curricula and the actual technical demands of the workplace. The PIDS study on labor market structures found that while specific skills often yield higher pay, they can also limit job transitions compared to the more general skills gained through formal education — a trade-off that training programs rarely account for.

Hard-to-Fill Roles Despite High Unemployment

The 200,000 hard-to-fill roles in IT-BPM exist alongside millions of underemployed workers. The bottleneck is not a shortage of people but a shortage of people with the right skills. DOLE’s Jumpstart program tries to bridge this by involving both academe and the private sector, but the scale of the mismatch means isolated programs cannot fix it alone. The compliance costs and regulatory burden that companies already face can discourage them from investing in the kind of long-term training programs that would address this directly.

Self-Employment as a Dead End for Skills

With over 30 percent of workers in self-employment or unpaid family work, a large portion of the labor force operates outside the formal training ecosystem. These workers rarely have access to enterprise-based upskilling, and their productivity is constrained by the same foundational gaps that affect the broader workforce. The talent development challenges across Philippine industries are not limited to large corporations — they are most acute in the informal and semi-formal segments where most new jobs are created.

What Can Be Done

Leveraging the EBET Framework Act

The Enterprise-Based Education and Training (EBET) Framework Act is the most direct policy response to the upskilling crisis. It grants tax incentives and subsidies to companies that invest in training, and it strengthens apprenticeships and dual training systems that combine classroom learning with practical workplace experience. The implementing rules and regulations are already in place. For companies that have not yet taken advantage of the program, the key is to understand which training activities qualify and how to structure programs that meet the government’s requirements. The high costs already limiting business growth make it essential to tap every available fiscal incentive just to keep training budgets sustainable.

Updating TESDA Curricula Regularly

The Technical Education and Skills Development Authority is the primary vehicle for vocational training, but its curricula too often lag behind industry needs. The recommendation is clear: update TESDA programs every two to three years to keep pace with technological change. Companies that participate in curriculum design and share proprietary training materials — as some firms like EMS Group already do — can help ensure that graduates arrive with relevant skills. The shift toward microcredentials and shorter, more targeted training modules is one way to accelerate this cycle.

Strengthening Industry-Academia Partnerships

The PIDS research and the EdCom II findings both point to the same solution: closer collaboration between educational institutions and employers. Internship programs, company visits, and shared curriculum design are relatively low-cost interventions that can significantly improve alignment. The SEIPI (Semiconductor and Electronics Industries in the Philippines Foundation) encourages its member firms to engage directly with academic institutions. Companies like RELX fill 30 percent of their tech roles internally by reskilling existing employees rather than hiring externally, a model that reduces the pressure on the external talent pipeline while building internal capability.

Frequently Asked Questions

Moving Forward

The upskilling challenge in the Philippines is not a problem with a single fix. It spans basic education, vocational training, university curricula, corporate investment, and government policy. The EBET Framework Act provides a foundation, but its impact depends on how many companies actually use it and how effectively TESDA and educational institutions respond to industry signals. For business owners and HR leaders, the immediate step is to evaluate whether current training programs qualify for the incentives available and to push for stronger partnerships with schools and training centers. For policymakers, the priority is streamlining the regulations that slow down private-sector participation and ensuring that the CREATE law’s training incentives are actually accessible. If this was useful, you might also want to read why customer acquisition remains a major hurdle for Philippine businesses.

Sources

Weak controls threaten Philippine investments — Explores how governance gaps affect the investment climate, a parallel challenge to the skills shortage.

Rising compliance costs challenge Philippine businesses — Examines the regulatory burden that can discourage companies from investing in training programs.

Enhancing manufacturing with skilled workers. Philippine Daily Inquirer, 2025.

Strengthening investment and upskilling workforce for the Philippines’ long-term growth. BusinessWorld, 2025.

PIDS: Skills mismatch hinders economic growth. The Philippine Star, 2024.

Talent Development Philippines 2025. John Clements Consultants, 2025.