5–5–5

May 1, Labor Day, is coming up and the big issue is contractualization and what the government will do about it. What will be the Kilusang Mayo Uno’s reaction? I hope it will be one of common sense. It’s a crucially important issue that is at a decision point today. So let me try to explain. If you’ll excuse me, I’ve said some of this before, but I think the message — of common sense — needs to get through.

There’s no question that “endo” (end of contract) is bad. There are heartless, greedy businessmen who hire workers for five months, then kick them out. They do so for a very simple reason: At six months the workers have to be made permanent, and all benefits paid, not just an (inadequate) salary.

There are two solutions — and I’ve raised them before (see my column “Think sensibly, amend the Labor Code,” 6/2/16)—that no one seems able to accept. The first solution is simple: Pay all benefits (SSS, PhilHealth, Home Development Mutual Fund, and the prorated 13th month pay, etc.) from Day 1. The second is less simple: Remove security of tenure. It is NOT good for workers. It is a mistaken, simplistic concept that hurts everybody—businessman, worker (yes, the worker), consumer, and the economy as a whole.

As I said in my previous columns:

“Security of tenure is reducing the number of jobs available. And I can assure all those who still want this permanent employment concept to continue that it is deterring many, many companies from investing further, or at all.

“What should happen is this: If you do a good job, you keep that job; if you do a poor job, you are replaced, after warnings, by someone else. Someone loses a job, someone gains a job. There is no job lost. That’s security of tenure. The new person works  hard to keep the job; the terminated one works harder next time so as not to lose his or her job again.

“Productivity rises, quality rises, and prices dip. Volumes increase as well. Businessmen invest. In that case, everyone wins. I know of no advanced country that doesn’t recognize that with flexibility in labor laws everyone gains. Moreover, the Philippines needs to ease its restrictive labor policies given the ongoing integration of Asean countries to accommodate the expected movement of laborers across the region.”

The businessman who uses “endo” in fact loses more than he realizes because he gets unmotivated workers with no buildup of experience and expertise if they are only there for five months. Even more so as the workers feel there is no need to be efficient as they will be removed after five months anyway. So goods and services are not produced at the least cost (through more efficient production) and in the best quality.

There are several jobs where part-time contractualization is needed. And the easiest way to distinguish them is: Are they in the plantilla as permanent positions? If yes, then they should be hired on a permanent basis. If no, then the contractual appointment should be allowed.

But the larger problem is the security-of-tenure provision in the 1987 Constitution. It needs to be removed, and replaced by a more general section on the overall protection and care of workers.

Successful countries don’t have security of tenure. They recognize that for businesses to be successful, businesses need to be flexible to adapt to changing business needs. Employees are not at risk; you don’t fire workers indiscriminately. You’d only have to go to the considerable effort of finding someone new, and then training him or her all over again. Oh, sure, there’s the occasional heartless manager who fires you because he doesn’t like you, or whatever. But that must be a very small percentage.

The Philippines is considered the worst among its neighbors in its hiring and firing practices. And if you add that it’s got the highest minimum wage ($9.60 per day versus Vietnam’s $5.20) plus other factors an investor looks at, it’s no wonder that it fares so badly. Foreign investment of $29.4 billion in 2010-2016 sounds good, but Vietnam got $67.3 billion during the period. That sounds an awful lot better.

Vietnam did because its government has established policies and procedures that encourage businesses to invest. Some 7.2 million (according to Social Weather Stations) out-of-work Filipinos would love to have a job, any job ($5.20 sounds a lot better than zero). Even a part-time job under contract sounds better than no job.

Flexibility creates jobs.

Read my previous columns: www.wallacebusinessforum.com. E-mail: wallace_likeitis@wbf.ph