AS expected, some labor groups slammed the P12 wage hike granted by the National Capital Region-Regional Tripartite Wages and Productivity Commission, with one describing it as “nothing but alms,” and another saying it’s only good to pay for noodles and eggs. What the workers need, the militants say, is an additional P125 daily-wage increase.
And as usual, the board defended its position by saying that a P125 daily-wage raise would be disastrous to the economy. It would throw more workers off their jobs, said Labor Secretary Arturo Brion.
Expect this wage issue to metamorphose into a morality play in the next few days, with some organized groups painting employers as greedy capitalists squeezing the blood off workers. And employers, especially exporters, saying that many of them are about to close shop because of the strong peso and that a new round of wage increase, therefore, would simply doom their business.
We have been hearing these story lines in the last half century. And it’s likely that we will hear about these things again next year, unless policymakers learned to look at the issue from a broader perspective and deal with the real problem that is causing this annual exercise of a virtual class struggle.
One of the larger considerations here is the comparative wage rates in Asia. At the current wage levels, minimum pay in Metro Manila is close to $8 a day, against Thailand’s $6.35, Beijing’s $3.43, Indonesia’s $3.25 and Vietnam’s $1.27.
What these figures suggest is that an unwarranted increase in local wages would simply turn off investors some more. This consideration is important because, in reality, at the root of this incapacity of many firms to pay higher wages is the small size of the Philippine economy itself.
Despite the significant growth rates we have achieved in the last few years, the Philippine economy and its capacity to create jobs has been generally weak. More so because the new creators of jobs, specifically outsourcing, are in the services sector that needs highly skilled graduates who are normally paid rates higher than the minimum-wage rates.
It’s obvious that minimum-wage workers are probably concentrated in the industry sector, which, by some indications, are fast shedding jobs already—owing to a lot of factors, including poor infrastructure, a strong peso, strong competition from China and Vietnam, and rapid technological change.
To survive, many companies have relocated to China while others are restructuring their cost structures to stay afloat. You put a drastic wage increase in their equations and it’s likely that they are just going to fold up or simply adopt more labor-saving devices.
This is not to deny the need for decent wages in the Philippines. In fact, we need them here. But the reality is that the performance of companies and industry sectors are uneven.
Certainly, firms in electronics, mining, outsourcing, banking, and wholesale and retail are probably doing good. But other firms, especially small and medium enterprises in the manufacture and export of furniture and fixtures, as well as food, are probably ailing owing to the strong peso and other factors.
It means that while other firms could absorb the wage rates, others are not likely to do so, and go under. The ideal policy approach, therefore, is an arrangement that would consider these different business conditions.
A collective bargaining agreement is one option. But then again, only about 4 percent of the country’s work force is organized, and this is due to several factors. Our unions are either lousy organizers who are not adapting effectively to winds of change, or are crowding out each other in the same sites. These days, more than half a million workers are in the “new economy,” and yet unions have not made inroads into their ranks.
Because of this weak presence within the labor sector, labor unions are focusing their efforts on petitions for state-mandated wage hikes to project relevance. But these are measures that ultimately hurt the labor sector, mainly because of their one-size-fits-all approach.
One school of thought says, though, that besides being unable to cope with the impact of globalization in the workplace, some labor leaders have limited their ambitions to landing party-list seats in the House of Representatives.
Of course, the bulk of the labor sector is employed in the small and medium enterprises, many of which are mom-and-pop operations that are not suitable to union organizing. If that observation is true, then we know that the issue about low income for workers and the rest of us Filipinos is really all about economic growth—or lack of it.
Higher, sustained and broad-based growth is the only thing that could ultimately soak up joblessness. Hence, the government should hurry on growth-oriented strategies, which should involve reforms in policies and resource allocation in education, trade, infrastructure development and social services.
That may sound like a vague set of proposals with long- term impact. True. Most of the reforms workers want are those that actually would have an immediate impact. For instance, close to half of workers’ wages are used on food purchases. But trade reforms (say, lower tariff for rice, corn, sugar and wage goods) that would cheapen food, therefore, would go a long way in expanding workers’ purchasing power.
There are so many other policy handles that the government could use to help workers in a way that won’t destroy their jobs as a wholesale wage increase would. Creativity is the key. And the patience to help all stakeholders understand that in a fast-changing world, the usual formulas sometimes just won’t work the same way anymore. (Note: I originally prepared this as editorial for BusinessMirror, Aug 8 2007)
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