CHAPTER l

INTRODUCTION

Background of the Study

Borongan City’s downtown area is host to many Micro, Small and Medium
Enterprises (MSMEs) that form the backbone of local economic growth and provide
employment for the residents. Nevertheless, there is a significant challenge that threatens
the existence of these businesses: a lack of competent employees. This gap has remained
as one of the major barriers to MSMEs’ sustainability and expansion making it difficult for
them to meet their operational needs, satisfy customers' demands and plunge into new
markets

The significance of labor shortage is emphasized by Shah and Burke (2003) who
point out that this happens when there is an excess of demand for workers than the supply
can accommodate in terms of qualified, available and willing individuals. This may limit
innovation, productivity and organizational performance thus adversely affecting the local
economy. Furthermore, as Barnow et al. (2013) explained, skilled labor scarcity in the city is
worsened by a gap between employers’ need for labor force and employees’ readiness to
offer their services.

Furthermore, people tend to move to other places because they are searching for
better job opportunities due to complex qualifications as well as attractive cities or overseas
life (Borongan PIO 2010). The trend if not addressed properly will continue breeding many
more attendant problems including but not limited to labor migration patterns that can have
adverse consequences on the city’s economic development.

Yet another example is whereby, frequent absenteeism among field workers is

caused by unresolved conflicts with supervisors or colleagues. Just like in any other
organizations worldwide, such cases are bound to happen thus short listing them should be
prioritized so that the few who engage in these behaviors are either sacked or warned
against getting involved again.

It can be said that all these factors contribute greatly toward employee turnover.
These relate mostly to issues related with direct pay and conditions of employment which
individually could lead to employees being unsatisfied hence preferring such a move.
 These factors have been identified in research on MSMEs sector; however, none
has established whether they exist Borongan City MSMEs. But it has also been realized that
there might be some unexplored factors contributing towards employee shortages in many
microenterprises across this town but no serious study has been done regarding those.

The global shortage of skilled workers is predicted by Dobbs et al. (2012), with more
advanced countries having a greater deficit than developing economies This prediction
implies that the need for understanding and mitigating employee shortages in MSMEs in
Borongan City is imperative for local economic resilience, as well as enhancing the
livelihoods of its residents. Consequently, this research seeks to identify the root causes and
consequences of labor shortages with a view to informing targeted interventions and
policies specific to the needs of downtown MSMEs in Borongan City.

However, according to Heathfield (2022), hiring employees is essential in order for

MSMEs to grow their business activities and realize their organizational goals. Business
success depends on employees’ contribution towards achieving an organization’s vision,
mission objectives. This is further echoed by Naidu (2021) who affirms that recognizing and
understanding what employees bring into an establishment fosters morale motivation and
organizational effectiveness. As a result, there are few skilled personnel within small
enterprises which acts as a barrier to their achievements leading to continuous changes
needed in recruitment processes as well as retention strategies oriented towards innovation.

The phenomenon of employee shortages in MSMEs has emerged as a critical issue

in contemporary labor markets, impacting business operations, productivity, and economic
growth on a global scale. As integral components of economies, MSMEs play a pivotal role
in job creation, innovation, and community development. However, these enterprises often
grapple with challenges related to recruitment and retention of employees, which can
severely constrain their growth and sustainability (OECD, 2019). In the context of Borongan
City, a burgeoning urban center in the Eastern Samar province of the Philippines, these
challenges are particularly pronounced in the downtown area where a significant
concentration of MSMEs exists.

Employee shortages in MSMEs can be attributed to a variety of factors, such as

economic, social, educational, and policy-related dimensions. Economic conditions, for
instance, directly influence labor supply and demand dynamics, wages, and employment
rates. A study by the International Labor Organization (ILO, 2020) highlights that economic
downturns exacerbate staffing difficulties in MSMEs, as these businesses often lack the
financial resilience to compete with larger firms in attracting talent. Moreover, economic
disparities and underemployment can lead to labor migration, further depleting the local
workforce available for MSMEs.

Social factors, including demographic changes and migration patterns, also play a
crucial role in shaping the labor market landscape. The aging population and declining birth
rates in many regions contribute to a shrinking workforce, thereby intensifying competition
for available labor (United Nations, 2019). In Borongan City, internal migration trends, with
workers relocating to more urbanized areas in search of better opportunities, compound the
issue of local employee shortages.

Educational factors are equally significant in understanding the employee shortage

dilemma. The alignment of education and skills training with market demands is essential
for preparing a workforce capable of meeting the needs of MSMEs. However, mismatches
between educational outcomes and job requirements often result in skill gaps, leaving
MSMEs with a limited pool of adequately trained candidates (World Bank, 2020). In
Borongan City, the availability and quality of vocational and technical training programs are
critical in equipping the local workforce with the necessary skills for MSME employment.

Work environment and job satisfaction are vital considerations in employee retention
and recruitment. Poor working conditions, lack of career advancement opportunities, and
inadequate compensation can deter potential employees and contribute to high turnover
rates (Herzberg, 1966). MSMEs, due to their limited resources, may struggle to offer
competitive benefits and conducive work environments, further exacerbating employee
shortages.

Technological advancements present both challenges and opportunities for MSMEs.

While automation and digital technologies can enhance productivity and reduce dependency
on manual labor, they also necessitate a workforce with advanced technical skills. The
digital divide and varying levels of technological adoption among MSMEs can create
disparities in their ability to attract and retain skilled employees (McKinsey & Company,
2019).

Policy and regulatory frameworks significantly influence MSME operations and labor
market dynamics. Government policies related to labor laws, minimum wage regulations,
and business incentives can either facilitate or hinder the recruitment and retention of
employees. Effective policy interventions are crucial in creating an enabling environment for
MSMEs to thrive (European Commission, 2020). In the Philippine context, national and local
government initiatives aimed at supporting MSMEs and addressing labor market challenges
are pivotal in mitigating employee shortages.

The local context of Borongan City provides a unique backdrop for examining the
factors contributing to employee shortages in MSMEs. As the capital city of Eastern Samar,
Borongan serves as a commercial hub, with a diverse array of MSMEs spanning sectors
such as retail, food service, and tourism. Despite its strategic location and economic
potential, Borongan City's MSMEs face acute challenges in attracting and retaining
employees. The demographic profile of the city, characterized by a relatively young
population and significant outmigration, exacerbates these challenges (Philippine Statistics
Authority, 2020).

The specific obstacles encountered by MSMEs in Borongan City's downtown area

merit detailed investigation. Anecdotal evidence from local business owners highlights
issues such as insufficient local talent, competition from larger cities, and the allure of
overseas employment opportunities as key contributors to employee shortages.
Understanding these localized factors is essential for developing tailored strategies and
interventions to support MSMEs in Borongan City.

Comparative studies and best practices from other cities and regions offer valuable
insights into addressing employee shortages in MSMEs. For instance, initiatives such as
targeted skills training programs, community-based recruitment strategies, and enhanced
employee benefits have proven effective in similar contexts (Harvard Business Review,
2018). Adapting and implementing such strategies in Borongan City could potentially
mitigate the impact of employee shortages and foster a more robust MSME sector.

The impact of employee shortages on MSMEs extends beyond immediate

operational challenges, affecting long-term business sustainability and economic growth.
Persistent staffing issues can lead to reduced productivity, compromised service quality,
and stunted business expansion, ultimately impeding the economic development of
Borongan City (Katz & Krueger, 2019). Addressing these shortages is therefore not only a
business imperative but also a crucial element of broader economic and community
development strategies.

Despite the existing body of research, significant gaps remain in the understanding
of employee shortages in the specific context of Borongan City's MSMEs. This research
proposal aims to fill these gaps by providing an in-depth qualitative exploration of the
factors contributing to employee shortages in this setting. By leveraging interviews, focus
group discussions, and case studies, the study seeks to uncover the nuanced experiences
and perspectives of MSME owners, managers, and employees in Borongan City.

In summary, the issue of employee shortages in Borongan City's MSMEs is a

multifaceted challenge that requires a comprehensive and context-specific approach. This
research will contribute to the existing literature by unveiling the unique factors driving
employee shortages in Borongan City's downtown area and proposing actionable strategies
to address them. The findings will not only benefit local MSMEs but also offer broader
insights into managing labor market challenges in similar urban settings.

Statement of the Problem

The research aims to investigate the factors contributing to the employee shortage within
MSMEs in Borongan City. Specifically, it seeks to answer the following questions:

1. What is the profile of MSMEs in terms of:

1.1 Business Background and Policies

1.2 Recruitment and Retention Strategies

1.3 Work Environment and Employee Satisfaction

2. What are the factors affecting MSMEs in relation to employee shortage?

3. What measures are managers and business owners taking to address the issue of
employee shortage?

Significance of the Study

By delving into the intricate dynamics of employee shortage within Borongan City's
MSMEs, this study aims to unravel underlying factors contributing to the following
beneficiaries:

Academic Community. Scholars and researchers in the field of human resource

management, organizational behavior, and small business management will benefit from the
insights garnered through this study. It provides a nuanced understanding of the
complexities surrounding employee shortage in MSMEs, thus enriching academic discourse
and facilitating further research in this domain.

Business Owners and Managers. Micro small and medium-sized enterprise (SME) owners
and managers in Borongan City will gain valuable insights into the factors influencing
employee shortage within their respective organizations. By understanding these factors,
they can devise strategic interventions to mitigate employee shortage, enhance employee
retention, and foster a more conducive work environment.

Future Researchers: This study will serve as a valuable foundation for future researchers. By
uncovering the factors contributing to workforce challenges, this study provides a
framework for further investigation into innovative solutions, policy development, and
sustainable interventions to support small businesses and promote economic growth in
similar urban areas.

Scope and Delimitation of the Study

This study will be focusing on the downtown area of Borongan City in the Eastern
Samar Province of the Philippines. The downtown area is defined as the central commercial
district where a concentration of micro, small and medium-sized enterprises (MSMEs) is
situated. The scope of the study will only tackle to understand the factors affecting
employee shortage within MSMEs located within this specific geographical area. By
narrowing the scope, this study aims to provide in-depth insights into the factors influencing
employee shortage within MSMEs in this specific geographical context, thereby contributing
to the development of targeted strategies and interventions to address this critical issue.
Additionally, the study may not be able to account for unforeseen external factors that could
impact employee shortage during the research period.

Definition of Terms

MSMEs (Micro, Small, and Medium Enterprises): MSMEs refer to businesses characterized
by their small-scale operations, typically employing fewer people and having lower revenue
and asset values compared to larger enterprises. In the context of this research proposal,
MSMEs specifically pertain to businesses operating within Borongan City's downtown area.

Labor Shortage: Labor shortage occurs when the demand for workers exceeds the available
supply of qualified and willing individuals within a specific labor market. It often results in
unfilled job vacancies, difficulties in recruiting skilled employees, and challenges in meeting
operational demands.

Migration Patterns: Migration patterns refer to the movements of people from one
geographical area to another, often driven by factors such as employment opportunities,
quality of life, economic conditions, and social or political factors. Understanding migration
patterns is essential for assessing their impact on labor supply dynamics.

Skills Mismatch: Skills mismatch occurs when there is a disparity between the skills
possessed by the workforce and those required by employers. It can lead to inefficiencies in
labor utilization, hinder productivity, and contribute to labor shortages.

Job Satisfaction: Job satisfaction reflects an employee's subjective evaluation of their work
experience, including factors such as job security, compensation, work-life balance,
interpersonal relationships, and opportunities for advancement.

Recruitment Strategies: Recruitment strategies encompass the methods and approaches

employed by organizations to attract and select qualified candidates for job vacancies.
Effective recruitment strategies aim to identify and engage potential employees who
possess the requisite skills and qualifications.

Retention Strategies: Retention strategies involve initiatives and practices implemented by

organizations to retain existing employees and minimize turnover rates. These strategies
often focus on enhancing job satisfaction, providing career development opportunities, and
fostering a positive work environment.

Economic Development: Economic development refers to the sustained, concerted efforts

aimed at improving the economic well-being and quality of life for residents within a specific
region or community. It encompasses various factors such as infrastructure development,
investment attraction, business growth, and job creation.

Government Policies: Government policies are official regulations, laws, and directives
enacted by governmental authorities to address specific societal or economic issues. In the
context of labor markets, government policies may include labor regulations, taxation
policies, workforce development programs, and initiatives to support small businesses.

Technological Advancements: Technological advancements refer to innovations and

developments in technology that lead to improved processes, products, or services. In the
labor market context, technological advancements can influence job requirements, skill
demands, and workforce composition.

Sector-Specific Challenges: Sector-specific challenges are obstacles or difficulties unique to

particular industries or sectors of the economy. These challenges may include factors such
as seasonal fluctuations in demand, regulatory constraints, technological disruptions, or
competition from other sectors
 CHAPTER II

REVIEW OF RELATED LITERATURE

Different establishments face different issues that has a significant effect on the
organization, as well as in the society. May it be on cultural differences, minimum wage,
unethical workplace, all of these leading to what we call now the employee shortage.
Employee shortage within MSMEs is a pressing issue faced by many cities around the world,
and Borongan City is no exception. As the demand for skilled and unskilled workers
continues to grow, MSMEs in Borongan City encounter a numerous factors contributing to
workforce scarcity, impacting their sustainable growth and operational efficiency. In order to
effectively address this challenge and enhance the resilience of Borongan City's MSME
sector, it is imperative to understand the underlying factors driving employee shortages
within these organizations. This research aims to identify crucial elements that primarily
contributes to employee shortage of businesses within the city and create a meaningful
interpretation to better grasp the issue.

This review of related literature aims to explore existing research and insights into
the multifaceted nature of employee shortages in MSMEs, providing a comprehensive
understanding of the complex dynamics at play. By examining previous studies and
theoretical frameworks, this review seeks to identify key factors influencing workforce
availability and retention in MSMEs, including economic conditions, technological
advancements, and generational preferences. Through a synthesis of relevant literature, this
review will shed light on the diverse range of challenges faced by Borongan City MSMEs in
attracting and retaining talent, setting the stage for our qualitative research proposal.

Furthermore, this review of related literature will highlight the practical implications
of understanding employee shortages for policymakers, business owners, and other
stakeholders invested in the growth and sustainability of Borongan City's MSMEs. By
drawing insights from existing research, this review will inform the development of targeted
strategies and interventions aimed at mitigating the impact of workforce scarcity and
fostering a more resilient MSME ecosystem and also This literature review aims to provide a
comprehensive analysis of the existing research on the causes and implications of
employee shortages, specifically focusing on MSMEs in Borongan City. Ultimately, the
synthesis of existing literature will provide valuable insights and directions for our qualitative
research endeavor, contributing to both academic knowledge and practical solutions for
addressing employee shortages in Borongan City MSMEs.

Medium, Small, and Micro-enterprises: Definition and Categories

Micro, Small, and Medium Enterprises (MSMEs) form the backbone of the Philippine
economy, playing a vital role in driving economic growth, fostering innovation, and promoting
inclusive development. The contributions of MSMEs to various aspects of the Philippine
economy are manifold and significant, encompassing job creation, poverty reduction,
entrepreneurship, and sectoral diversification. The Philippines are known to have many
established businesses and its common ones is the MSME ‘s. According to Philippine
Statistics Authority, there are two criteria in classifying in entity to qualify as part of the
MSME category: namely, in terms of its employment or its asset size.

According to the Philippine Statistics Authority, MSMEs comprised 99.5 percent of all
registered business establishments in 2019. They generate 62.4 percent of the country's
total employment, contribute 36 percent of gross value added, and account for 25 percent of
total exports. The Department of Trade and Industry categorizes MSMEs based on their
asset size and number of employees. Enterprises are classified as micro if they have PHP
3,000,000 or less in assets and one to nine employees, small enterprises if they have PHP
3,000,001 to PHP 15,000,000 in assets and 10 to 99 employees, and medium enterprises if
they have PHP 15,000,001 to PHP 100,000,000 in assets and 100 to 199 employees. Large
enterprises have over PHP 100,000,001 or more in assets and 200 or more employees.

Micro-enterprises represent the smallest category of businesses, characterized by

their modest levels of revenue, assets, and employment. These enterprises typically employ
fewer than a certain number of people (e.g., 10 or fewer) and operate with minimal capital
investment. Micro-enterprises often serve as the lifeblood of local economies, providing
livelihoods for individuals and contributing to community development (Smith, 2018).

Small enterprises, the next tier in the MSME hierarchy, exhibit slightly higher levels of
revenue, assets, and employment compared to micro-enterprises. While specific thresholds
for classification may vary, small businesses generally employ more people and generate
greater revenue than micro-enterprises. Despite their relatively small scale, small enterprises
often operate with more formal structures and play a vital role in driving economic growth
and innovation within their respective sectors (World Bank, 2020).

Medium enterprises represent the upper echelon of MSMEs, characterized by higher

levels of revenue, assets, and employment compared to micro and small enterprises. These
businesses typically employ a significant number of people, generate substantial revenue,
and may have more sophisticated operations and management structures. Medium
enterprises occupy a crucial middle ground between small businesses and large
corporations, contributing significantly to economic growth and job creation (Asian
Development Bank, 2019).

Almeda and Pobre (2012) revealed that most local MSMEs are managed by their
owners, especially among microenterprises, and most (63%) are led by women. Out of 1,740
respondents in the study, 30 percent started their business with a capital of less than PHP
150,000. Thus, most of them are microenterprises, such as sari-sari stores and other
businesses that offer goods and products that are readily available. MSMEs often struggle
to access affordable financing options. Financial institutions may perceive them as risky
borrowers due to their small size, lack of collateral, and limited financial track record, which
may hamper their growth and expansion. Raquiza (2022) noted that they have minimal credit
access from formal lending institutions. They seldom approach commercial banks due to
their high-interest rates, high minimum loan requirements, voluminous requirements, short
repayment periods, and difficulty in restructuring loans.

Although they are considered the backbone of the economy, MSMEs do not appear
to survive once they engage in foreign trade. Bautista and Manzano (2018) found that only
six in every ten exporting Philippine MSMEs survive after their first year of operation. This
figure drops to less than four in every ten by the end of their fourth year. Thus, the authors
urged the government to support exporting MSMEs. The focus, they emphasized, should be
directed toward increasing the capability of the firms, targeted appropriately so they may
reach larger orders, either through financing or consolidation with other similar firms that
have successfully complied with the product standards required by foreign buyers. Gender
gaps were observed in small and medium enterprises (SMEs). Daño and Caliso (2019) found
that women-led SMEs are more likely to be smaller than men-led SMEs and have fewer
employees. They also found that women are more likely to start a business out of necessity
and have lower technology usage than their male counterparts. E-commerce presents a
great opportunity for MSMEs to expand their market reach, boost revenues, and optimize
their operations. However, Quimba et al. (2021) discovered that local MSMEs have low e-
commerce adoption, with reported rates of only 6.2 percent (for micro), 14.6 percent (for
small), and 13.4 percent (for medium enterprises) in 2015. This may be attributed to their
preference to maintain their current business model, security and privacy concerns, and
unreliable internet connection.

MSMEs are the primary engines of job creation in the Philippines, providing
employment opportunities to millions of Filipinos across diverse sectors of the economy.
These enterprises play a vital role in reducing unemployment and underemployment,
particularly in rural areas where formal job opportunities may be scarce. Moreover, MSMEs
empower individuals and communities by offering livelihood opportunities and promoting
economic self-sufficiency.

Employee Shortage

With the increasing demands for Filipino workers in the Philippine industry, but due
to its minimum wage or salaries that are insufficient to allocate for daily expenses, many are
left to choose for a better option rather than staying in the country. As they say that there is
no foreseeable future here, thus, this mindset left establishments lacking for employees to
fill the needed duties and responsibilities. The shortage has been a persistent issue, delaying
key infrastructure projects and affecting housing prices. President Rodrigo Duterte had
pointed out in 2019 that many skilled workers, including those in construction, were leaving
the country for better-paying jobs overseas. Currently, the administration of President
Ferdinand Marcos Jr. is overseeing 197 projects worth P9 trillion under its flagship
infrastructure program, expected to drive economic growth significantly (Junnel G., 2023).

At the heart of the employee shortage crisis lie several interconnected factors. One
prominent contributor is migration, as millions of Filipinos seek employment opportunities
abroad, resulting in a phenomenon often termed as "brain drain." This outflow of skilled
professionals depletes the local labor pool, particularly in critical sectors such as healthcare,
information technology, and engineering (Dumagan, 2019). Additionally, a mismatch
between the skills possessed by the workforce and those demanded by industries
exacerbates the problem. Rapid technological advancements necessitate upskilling and
reskilling, which many workers struggle to acquire, leading to a shortage of qualified
candidates (World Bank, 2020). Moreover, the Philippine education system faces challenges
such as outdated curriculum, inadequate infrastructure, and limited access to quality
education, hindering the development of a skilled workforce capable of meeting modern
economic demands (Asian Development Bank, 2018). Demographic trends, including an
aging population and a declining birth rate, further compound the issue, as a smaller working
-age population struggles to meet the demands of a growing economy (Philippine Statistics
Authority, 2021).

The disadvantages of the employee shortage crisis extend beyond economic

ramifications. A lopsided labor market emerges, with certain industries facing acute
shortages while others experience high unemployment rates, exacerbating socio-economic
inequalities (International Labour Organization, 2019). The escalation of brain drain further
depletes valuable human capital, hindering long-term development efforts and perpetuating
dependency on remittances. Investment deterrence looms as businesses hesitate to invest
in the Philippines due to concerns about the availability of skilled labor, stifling economic
growth and job creation. Social implications, including heightened income inequality and
reduced access to essential services, underscore the broader ramifications of this crisis on
society.

Moreover, Borongan City's education system faces challenges such as outdated

curriculum, inadequate infrastructure, and limited access to quality education, further
exacerbating the employee shortage crisis. These systemic issues hinder the development
of a skilled workforce capable of meeting the demands of a modern economy. Furthermore,
demographic trends, including an aging population and a declining birth rate, compound the
issue, as a smaller working-age population struggles to sustain local industries and services.

The overall employee shortage, whether at a national level or within specific regions
such as Borongan City in the Philippines, presents a multifaceted challenge with far-reaching
implications. At its core, the employee shortage reflects a mismatch between the skills
possessed by the workforce and those demanded by industries, exacerbated by factors
such as migration, educational deficiencies, and demographic shifts. This shortage hampers
economic growth by limiting productivity, innovation, and competitiveness. Businesses
struggle to fill vacancies, hindering their ability to meet market demands and seize growth
opportunities. As a result, industries may experience stagnation or decline, impeding overall
GDP growth and deterring investment.

Wage Levels and Cost of Living

Economic literature consistently highlights the relationship between wage levels

and labor supply. According to the International Labor Organization (ILO, 2019), competitive
wages are essential for attracting and retaining employees, particularly in urban centers
where the cost of living is higher. Research by Gerhart and Rynes (2020) indicates that
employees are more likely to leave low-paying jobs in search of better compensation,
contributing to labor shortages. For MSMEs in Borongan City, analyzing the balance between
wage levels and local living costs can provide insights into how financial compensation
influences employee retention and attraction.

Employment Opportunities and Market Dynamics

The availability of alternative employment opportunities significantly affects labor

supply. Smith and Watkins (2020) found that regions with a diverse range of job
opportunities tend to experience fewer labor shortages, as workers have more choices that
match their skills and career goals. In Borongan City, the extent to which MSMEs compete
with other sectors for labor is a crucial factor. Understanding the local job market dynamics,
including the demand for specific skills and the presence of competing employers, is vital
for comprehending the labor supply challenges faced by MSMEs.

Migration and Demographic Trends

Migration patterns and demographic changes are critical factors influencing labor
supply. Research by Jones et al. (2018) suggests that high emigration rates, particularly
among young and skilled workers, can lead to significant labor shortages in their regions of
origin. This trend is often exacerbated by rural-to-urban migration within countries. In the
context of Borongan City, examining local migration patterns and demographic shifts can
help identify how these factors contribute to employee shortages in MSMEs.

Educational Attainment and Skills Mismatch

The alignment between educational attainment and job market needs is a well-
documented factor affecting labor availability. Brown and Lauder (2021) argue that a
mismatch between the skills acquired through education and those demanded by employers
leads to labor shortages. For MSMEs in Borongan City, it is essential to understand the
educational background of the local workforce and whether it aligns with the skills required
by these enterprises. This includes evaluating the availability and quality of vocational and
technical training programs in the area.

Job Satisfaction and Workplace Environment

Job satisfaction and the quality of the workplace environment play significant
roles in employee retention. Herzberg's Two-Factor Theory (Herzberg, 1959) emphasizes
that both intrinsic factors (e.g., job satisfaction, recognition) and extrinsic factors (e.g.,
salary, work conditions) are crucial for retaining employees. Studies have shown that poor
work environments and low job satisfaction contribute to high employee turnover (Davis &
Newstrom, 2018). For MSMEs in Borongan City, assessing the work environment and job
satisfaction levels can provide insights into the factors driving employee shortages.

Recruitment and Retention Strategies

Effective recruitment and retention strategies are essential for maintaining a

stable workforce. According to the Society for Human Resource Management (SHRM, 2020),
organizations with robust recruitment processes and continuous employee development
programs are better equipped to address labor shortages. For MSMEs in Borongan City,
evaluating current recruitment and retention practices can highlight areas for improvement
and potential strategies to mitigate labor shortages.

Economic Development and Regional Investment

 The level of economic development and investment in a region significantly
influences its labor market dynamics. The World Bank (2021) notes that areas with higher
economic activity and investment tend to attract more workers. For Borongan City,
understanding how recent economic developments and investments impact the local labor
market is crucial. This includes assessing the role of infrastructure development, business
incentives, and regional economic policies in shaping labor supply.

Government Policies and Support Programs

Government policies and support programs play a vital role in shaping labor
markets. The Asian Development Bank (ADB, 2019) highlights that supportive labor policies
and social welfare programs can mitigate labor shortages by creating favorable conditions
for both employers and employees. In Borongan City, examining local and national
government initiatives aimed at supporting MSMEs and addressing employment issues can
provide valuable insights into how policy interventions influence labor availability.

Technological Advancements and Automation

Technological advancements and the increasing automation of certain tasks can

influence labor demand and supply. According to Autor (2019), while automation can reduce
the need for certain types of labor, it can also create new job opportunities that require
different skills. For MSMEs in Borongan City, understanding how technological changes are
affecting labor requirements and whether there is a shift in the skills needed can provide
insights into the labor shortage issue.

Sector-Specific Challenges

Different sectors face unique challenges that influence labor availability. For
instance, the retail and hospitality sectors, which are common among MSMEs, often
struggle with high turnover rates and seasonal fluctuations in labor demand (Lucas & Hines,
2020). In Borongan City, identifying the specific sectors in which MSMEs operate and the
unique challenges they face can help tailor strategies to address labor shortages effectively.

The employee shortage among MSMEs in Borongan City's downtown area is

influenced by a complex interplay of economic, social, organizational, and contextual factors.
Wage levels, employment opportunities, migration patterns, educational alignment, job
satisfaction, recruitment practices, economic development, government policies,
technological advancements, and sector-specific challenges all contribute to shaping the
local labor market. By understanding these factors through a qualitative research approach,
stakeholders can develop targeted strategies to address the employee shortage and support
the growth and sustainability of MSMEs in Borongan City.
Hypothesis

H1: There is no significant relationship between the Wage levels and Cost of living to
Employee Shortage in Borongan City.

H2: There is no significant relationship between the Educational Attainment and skills to
Employee Shortage in Borongan City.

H3: There is no significant relationship between the Government Policies and Support
Programs to Employee Shortage in Borongan City.

H4: There is no significant relationship between Technological Advancements and

Automation to Employee Shortage in Borongan City.

H5: There is no significant relationship between Migration and Demographic Trends to

Employee Shortage in Borongan City.
 Conceptual Framework

Dependent Variable Inependent Variables

Wage Levels and Cost of

Living

Educational Attainment and

Skills

Government Policies and

Employee Shortage
Support

Technological
Advancements and
Automation

Migration and Demographic

Trends
 CHAPTER III

METHODOLOGY

This qualitative research proposal investigates factors influencing employee

shortage in Borongan City's MSMEs. Employing an descriptive-qualitative approach, the
study aims to gain insights into the phenomenon through semi-structured interviews and
focus group discussions with MSME stakeholders. Ethical considerations ensure informed
consent, confidentiality, and voluntary participation. This section provides a concise
overview of the research design, research locale, research participants, sampling method,
research instrument, data gathering procedure, data analysis and ethical protocols, setting
this study for a thorough investigation into the issue.

Research Design

The research design for this study will be descriptive-qualitative research to

provide a comprehensive and detailed description of the factors contributing to employee
shortages in MSMEs. This approach is appropriate for exploring complex phenomena within
their real-life context.

Research Locale

The research will be conducted in the downtown area of Borongan City, Eastern
Samar, Philippines. This area is chosen due to its concentration of MSMEs and its
significance as an economic hub within the city. By focusing on the downtown area, as the
research locale, the researcher will gain valuable insights into the unique dynamics and
challenges facing MSMEs in a bustling urban environment. This localized approach allows
for a deeper understanding of the interplay within the context of Borongan City's MSME
landscape, providing valuable implications for strategic decision-making and policy
formulation aimed at addressing employee shortages and fostering sustainable economic
development.
Research Participants

The respondents will include various stakeholders within the MSME sector in
Borongan City. These will include MSME owners and managers because these individuals
have firsthand experience with the challenges of recruiting and retaining employees. They
can provide valuable insights into the specific obstacles faced by their businesses and the
strategies they employ to mitigate these challenges.

Sampling Method

In Borongan City, according to Business Permit and Licensing Office, there are 1,796
registered businesses. Our sampling focus on the availability of businesses in the downtown
area. Convenience sampling would be applied in this study, prioritizing accessibility and
practical considerations. This method involves selecting participants based on their
accessibility and willingness to participate, rather through random selection or specific
criteria. Convenience sampling will provide valuable insights into the research topic by
facilitating efficient data collection from accessible MSME’s stakeholders in Borongan City.

Research Instrument

Semi-structured interviews and focus group discussions (FGDs) will serve as the
primary research instruments. Interview guides and FGD protocols will be developed to
facilitate discussions on topics such as the causes and implications of employee shortage,
organizational practices, workforce dynamics, and potential solutions. These instruments
will be designed to capture qualitative data and allow for in-depth exploration of participants'
perspectives and experiences.

Figure 1. Semi-structured interview guide and questions

Topic area aim Sample questions

Background and Context (participants to  Can you provide an overview of your

gain an understanding of the current role and experience in the SME
employment landscape in Borongan City sector in Borongan City?
MSMEs, setting the stage for discussing
 How would you describe the current
the issue of employee shortage from a
contextual perspective) employment situation in Borongan
City MSMEs?

 Can you share any observations or

experiences regarding employee
shortages in these MSMEs?

Recruitment and Retention Strategies  What strategies do MSMEs in

(participants to share their experiences and Borongan City currently employ to
perspectives on the recruitment and recruit new employees?
retention tactics employed by MSMEs in
 How effective do you think these
Borongan City, evaluating their
strategies are in addressing the
effectiveness and exploring potential areas
employee shortage issue?
for improvement)
 Are there any innovative or unique
approaches that some MSMEs have
adopted to attract and retain
employees?

Work Environment and Employee  How would you describe the work
Satisfaction (participants to describe the environment within Borongan City
work environment and conditions within MSMEs?
Borongan City MSMEs, as well as how
 In your opinion, how does employee
these factors influence employee
satisfaction and morale impact the
satisfaction and retention, fostering a
likelihood of employee turnover?
deeper understanding of organizational
dynamics)  Are there any specific aspects of the
work environment that you believe
contribute to employee retention or
turnover?

Factors Contributing to Employee Shortage  What do you perceive as the primary

(participants to reflect on and articulate the reasons for the shortage of
underlying reasons and challenges employees in Borongan City
contributing to the shortage of employees MSMEs?
within Borongan City MSMEs, providing
 Have you noticed any specific
insights into the complexities of the issue)
challenges or obstacles that
contribute to the difficulty in
 attracting and retaining employees?

 Are there any external factors, such

as economic conditions or
demographic changes, that you
believe impact employee availability
in MSMEs?

Potential Solutions and Recommendations  Based on your insights and

(participants to offer innovative ideas and experiences, what do you think
practical proposals for addressing the issue could be done to address the issue
of employee shortage in Borongan City of employee shortage in Borongan
MSMEs, drawing on their expertise and City MSMEs?
insights to generate actionable
 Are there any policy changes or
recommendations)
support mechanisms that you
believe would be beneficial for
MSMEs in addressing this issue?

 What role do you think collaboration

between MSMEs and local
government agencies could play in
alleviating employee shortage?

The research instrument was adapted from Australian Health Review

www.publish.csiro.au/journals/ahr

Data Gathering Procedure

The researchers' work in finding them around the area of Borongan City will help to
find ways to access the respondents. A formal letter of consent will be sent to the
owners/managers of the business for their approval. The respondents will be given
information about the flow of data collection before the actual answering of the questions.
During the interview, the respondents will be advised that if they would like to withdraw from
participating, they should inform the researchers. Thereafter, a collection of questions in a
Semi-structured interview guide will immediately be provided once approval is given.
Respondents will be provided ample time to think and recollect experiences upon answering
the questions. During the interview process, the researchers will aid respondents with their
questions or any type of inquiry regarding the interview. After gathering all answered
interview questions, the data will be compiled. Reported data will be interpreted with much
care to clarify and gain essential points from the respondents' perspective. Interviews will be
held privately to ensure the confidentiality process.

Data Analysis

The data collected will undergo thematic analysis, a method commonly employed
in qualitative research to identify, analyze, and report patterns within the data (Braun &
Clarke, 2006). The analysis process involves several key steps:

First, the recorded interviews will be transcribed verbatim, ensuring accuracy and
completeness. Researchers will then immerse themselves in the data by repeatedly
reviewing the transcripts to identify initial ideas and patterns. Initial codes will be generated
by systematically tagging segments of data relevant to the research questions, which may
be deductive or inductive.

These codes will be organized into broader themes representing patterns or

recurring topics across the data set, developed through comparison and contrast. Themes
will be refined through ongoing analysis and discussion among the research team, ensuring
accuracy and comprehensiveness. The final set of themes will be interpreted in relation to
the research questions and relevant conceptual frameworks, aiming to uncover underlying
factors contributing to employee shortage explore their interrelationships.

Findings from the thematic analysis will be integrated with contextual information
and insights from the literature review and conceptual frameworks, providing a
comprehensive understanding of the factors influencing employee shortage. The results will
be reported clearly and concisely, supported by illustrative quotes, and organized
thematically, highlighting key patterns, insights, and implications for practice and future
research.

Through this rigorous analysis, the study aims to provide actionable insights for
addressing the pressing issue of employee shortage in downtown of Borongan City's
MSMEs.
Ethical Considerations

The researchers will adhere to strict ethical considerations throughout the study
process. Firstly, consent forms will be given to all participants before the conduct of the
study and will receive detailed information about the research, ensuring their understanding
and providing informed consent prior to their involvement. Secondly, measures will be
implemented to guarantee the confidentiality and anonymity of participants, including the
utilization of nicknames and secure data storage protocols. Thirdly, participation in the study
will be entirely voluntary, with participants having the right to withdraw at any stage without
facing any repercussions. Additionally, respectful and non-coercive methods will be
employed to engage participants, ensuring their perspectives are valued and respected
throughout the research process. Finally, the research protocol will undergo review and
approval by the appropriate faculties or committees to ensure full compliance with ethical
standards and guidelines.
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Understanding the Factors Affecting Employee Shortage of MSMEs in Borongan City

A Research Proposal Presented to the

College of Business Management and Accountancy

Eastern Samar State University

In Partial Fulfillment of the Requirements for Business Research

Beros, Jade Loraine

Cabus, Dave Anthony

Caspe, Mika

Eballar, Angelica

Gagala, Daniela

Lacutab, Isabelle

Magro, Chrizelda

Mecono, Malene

Navarro, Kruzanelle

HRM 3A

Ms. Jude Picardal

Instructor