Flexibility

Now is the time to change the rules.

The Philippines has some of the most rigorous, limiting rules on work of any country. The Philippines gets the lowest level of new foreign investment of any of its comparable neighbors. From 2016 to 2018, data from the World Bank showed that the Philippines attracted $28 billion in foreign direct investments (FDI) compared to Vietnam’s $42 billion, Indonesia’s $44 billion, and Singapore’s $260 billion.

Global competitiveness surveys show that the Philippines is a laggard in terms of labor market flexibility. There’s a causal link.

Businessmen don’t go where they can’t adjust their labor force as the business requires. They won’t go where mediocre performance, or worse, is protected. They won’t go where a legal case can be brought against them at the drop of a hat by a disgruntled employee. COVID-19 has put more than 2 million people out of a job. It is estimated that more than half won’t get that job back — especially those from the most affected segments such as travel, tourism, restaurants, and retail sales. Added to them will be thousands of OFWs returning home jobless. They’ll be desperate for a job, any job. And they should have one. Nothing is worse than being jobless.

As I’ve argued endlessly, and with no success to date, the security of tenure is the worst thing you can impose on business and on a worker. Security of tenure doesn’t protect workers; it prevents Filipinos from becoming workers.

As I stressed in my July 4, 2019 column, “We know what to do”: “Worldwide, it’s been shown that successful countries provide labor flexibility. Managers don’t fire someone for no reason; they have to hire someone else if they do, and that’s a pain in the neck. If someone loses a job over poor performance, someone who will work harder gets hired. Why would even the most heartless of managers want to fire someone who’s doing a good job? No job is lost, productivity goes up and more investors will be enticed to do business here.

“As I have previously pointed out, 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.”

Tied to security of tenure is the six-month probationary period and contractualization.

Both become non-issues  — if there’s no security of tenure. There’s no advantage to either, providing there’s one major change: portability of benefits, similar to the United States’ 401(k) retirement savings plan that starts on the first day you enter the workforce and go with you as you move from one job to the next. The employer pays retirement benefits into a fund, much like SSS. But it can be private sector firms that manage these funds under strict government oversight. Once the worker retires or is incapacitated, he gets the money he’s accumulated over his work life.

It’s the same with SSS. It starts on Day 1, and remains with the employee as he goes from job to job, so it serves no advantage to an unscrupulous businessman to use a “5-5-5” contractual arrangement. He saves nothing. Demand-based hiring has to be allowed and there should be flexibility. When there’s a demand spike, you need workers. Once things settle down, you don’t. If you have to maintain those workers when there’s no work, your costs go up. You can’t compete with imports from countries that have flexible labor laws and where costs are lower. So you have no sales, your workers lose their jobs.

Abusive employers will take advantage of anything you do. But what advantage can they take? They don’t save anything by firing a worker. They can’t fire someone just before retirement so they don’t have to pay that retirement—it’s already been accumulated and managed by an outside fund manager.

During this lockdown, there has been a noticeable improvement in the performance of workers—undoubtedly because of the fear of joining the additional 2 million others without a job. They’re working harder to prove the necessity of keeping them. Productivity is up. They are keeping their jobs.

Are we going to continue to penalize honest business with below-potential performance just to try to catch a few bastards? Let’s devise other ways to catch those few, and give 99 percent of honest businessmen a chance to be truly competitive.

Give businessmen flexibility and jobs will be created.

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