PAL row, Occupy Wall Street | Inquirer Opinion

PAL row, Occupy Wall Street

Rebuild crumbling social contract
/ 11:52 PM November 12, 2011

At the core of the conflict between Philippine Airlines (PAL) and PAL Employees Association (Palea) is the effort of the airline to manage business freely with maximum flexibility, including its contested prerogative to outsource jobs done by regular and unionized workers.  PAL says outsourcing is a legitimate weapon in insuring its own business survival in the fiercely competitive deregulated aviation market.

On the other hand, Palea has raised a legal and moral issue:  Should workers who have served the airline faithfully for 10, 20 or 25 years be given the golden handshake just like that—all in the name of “management prerogative?” Must this prerogative prevail over the workers’ rights to job security, freedom of association and collective bargaining, all of which are guaranteed by the 1987 Constitution?


Eroding respect

The truth is that the PAL-Palea conflict reflects a bigger reality dividing workers and employers globally—the eroding respect accorded by industry to workers’ rights. Organizers of the “Occupy Wall Street” movement in the United States sum it up by asking: Why is their government bailing out the “too big to fail” such as the big bankers who precipitated the financial crisis and not the workers who have been displaced by the crisis?


In Europe, the question is sharper: Why are their leaders engineering an economic recovery by downsizing workers’ pensions and imposing severe social and economic austerity?  And yet, ironically, America and Europe continue to sink into the economic black hole because the disintegrating social contract means endless strikes and instabilities as illustrated by the bankrupt Greece and now Italy.

Development of industry-labor social contract  What is this social contract? A little bit of history is in order. The history of Europe and America in the 18th and 19th centuries was one of ceaseless class conflicts, fueled by the widespread exploitation of workers. Work lasting 14 to 16 hours was considered normal, while workers’ organizations were banned under “anti-combination” laws.

The convenors of the Treaty of Versailles, which ended World War I, knew that the world would neither be safe nor stable if governments would continue ignoring workers’ rights, especially in the wake of the 1917 Bolshevik Revolution in Russia.  Hence, in 1919, a tripartite International Labor Organization (ILO) was established to promote “universal and lasting peace… based upon social justice.”

Among the early policy prescriptions advanced by the ILO were the regulation of work hours, worker protection against old age and occupational injury, recognition of the principle of “equal remuneration for work of equal value” and freedom of association.

However, the foregoing ILO precepts had to be legislated on a country by country basis. In the United States, President Franklin Delano Roosevelt used the Great Depression of 1929-1933 as the opportunity to institutionalize them.  His “New Deal” program, revolving around job creation via infrastructure development, was accompanied by bold social reform measures  strengthening workers rights, e.g.  laws on minimum wage, prohibition of child labor, trade union right to bargain and federal pension system covering all American workers.

The National Labor Relations Act of 1935 forced employers to bargain in good faith with the unions. Thus, the trade union membership shot up, from 3.6 million in 1935 to 8.6 million in 1941. At the same time, the American economy recovered, spurred by Keynesian-style government spending and stabilized by the social contract forged by Roosevelt with the unions and employers.

After World War II, the leaders of Germany, France, United Kingdom, Scandinavia, Japan and Canada even went further. They built the postwar “welfare states,” which enshrined workers’ rights in their legal systems (including “codetermination” at the work place), established a universal health and social security system, and provided survival benefits for the unemployed.


Social contract in the Philippines President Manuel Quezon,  emulating Roosevelt’s New Deal developmental politics, tried to arrest the politicio-economic crisis in the red decade of the 1930s by proclaiming a “Social Justice” program.  The program included land colonization and resettlement programs for the landless peasants, the passage of the eight-hour labor law, creation of the Government Service Insurance System and, to redress workers’ grievances, the establishment of the Court of Industrial Relations.

A decade after, the US Embassy assisted the administration of President Ramon Magsaysay in augmenting these measures as part of the government’s campaign to contain communist insurgency and labor militancy. The embassy helped draft the Minimum Wage Act of 1952, the Industrial Peace Act (IPA) of 1953 and the Social Security Act of 1954.

The IPA, which recognized the right of workers to form unions for the purpose of bargaining on conditions and terms of work, was considered a landmark legislation in a relatively underdeveloped economy. A carbon copy of the US law, the IPA penalized employers’ refusal to bargain and to subvert unionism and collective bargaining as “unfair labor practices.”

All these protective labor laws helped stabilize the Philippine industrial relations system through the decades of the 1950s and 1960s, which happened to be high-growth decades in terms of industrial development and union formation.  Even the original minimum wage of P4 a day, passionately opposed by the employers then, became a nonissue as CBA wages immediately surpassed it in the fast-growing industrial sector.

Later, the Department of Labor and Employment codified all these protective labor laws into the Labor Code of the Philippines and elevated tripartite (employer-union-government) consultation as the governing principle in labor policy formulation and implementation.

Crumbling social contract  But a neoliberal shift in economic governance in the 1980s began eroding the social contract in the Philippines and other capitalist countries. All of a sudden, protective labor laws such as the minimum wage, unionism and even social security were viewed as unwanted “rigidities” in a liberalized global economy. Capital started crossing national borders in search of the cheap, malleable (nonunionized) and productive labor. Countries with open economies and with lax or “flexible” labor laws were hailed as models in attracting foreign investments and creating employment.

However, what was not factored in this global race to the bottom   is the resulting global contradiction—the overproduction of goods and services and underconsumption of the same because of the reduced purchasing power of the marginalized workers and farmers who produced these goods and services for the global market. The situation is compounded by the growth of the unregulated financial markets, which spawned unproductive investments and speculations, asset bubbles and busts, right in the heart of global capitalism, at Wall Street. All these fuel social and labor conflicts in many parts of the world.

Ironically, the G20 is still unable to grapple with these realities and contradictions. Nicolas Sarkozy has declared a “Noveau Monde” movement propelled by G20, and yet his G20 has not come up with no “new ideas” except for more funding for the International Monetary Fund and new reserve requirements for the big banks. Above all, the G20 has not come up with concrete measures to end the massive inequalities and injustices under globalization that are at the roots of the Arab Spring, London riots and the Occupy Wall Street movement that has gone global. (See boxed story on this page.) Worse, some of the G20 measures such as the downsizing of employment and social security deepen these inequalities and the sense of injustice felt by many workers and citizens in developed countries.

Back to the PAL-Palea dispute  But back to the social contract in the Philippines, the PAL-Palea dispute has brought to the fore the issue of “management prerogative,” which is hotly debated today in the national industrial tripartite council and in the national legislature. As defined, management prerogative is the right of employers to manage business freely as they see fit, for after all, they are the investors-owners.

However, should the principle of management prerogative prevail when the workers’ rights are directly affected?  In the case of PAL, its outsourcing decision is premised on the need for PAL to be more competitive in an industry where competitors are allegedly maintaining only a small pool of regulars for everything else is outsourced. The problem is that the 2,600 jobs affected by the outsourcing decision (those deployed in the reservations, catering and ground crew services) are occupied by workers with regular job status and are full-pledged members of the Palea union.

Palea correctly points out that the Labor Code explicitly guarantees the rights of workers to have regular job status, to become members of the union and to be covered by the union’s CBA with the company.  And yet, the Supreme Court, in a series of decisions, has upheld the prerogative of employers to regulate “all aspects of employment” and to reorganize business as they see fit, including mergers, spin-offs, rightsizings, etc. The only limitations to the exercise of this prerogative  are existing laws, legal contracts, and observance of due process and principles of fair play, justice and good faith.

Failure of dialogue

There is no space to discuss here the legal merits and demerits of the celebrated PAL-Palea dispute, which is now pending in the Court of Appeals. The point is that this dispute illustrates the sad failure of social dialogue, which is at the heart of rule setting in modern industrial relations and in forging a mutually acceptable social contract.  After all, a labor dispute, especially in a big enterprise such as PAL, is a relationship issue, which can not be settled by merely going the legal route or worse, closure route (as what the Qantas management in Australia tried to do tactically).

The 1987 Constitution also has a wise counsel: “The State shall promote the principle of shared responsibility between workers and employers” in their relationships, especially in the use of voluntary modes of dispute settlement in order to have “industrial peace.”

How then does one promote social dialogue and the principle of shared responsibility in industrial relations when the economic rules under globalization tend to favor a global race to the bottom, that is, encouraging competing employers to seek union-free and flexible work arrangements? And yet, as history shows and what the endless social and labor conflicts in America and Europe are now revealing, such a race to the bottom is simply unsustainable.

Toward a new social contract The challenge to the Philippine and other governments today is how to persuade all industry stakeholders to sit down and forge a new social contract fit for the new millennium. Such a contract cannot be forged without addressing the inequities generated by a one-sided system of economic globalization. Hence, the need for a new global social compact addressing the issues raised by the global Occupy Wall Street movement. Without reforms in global and national economic governance, there will never be peace and development.

In the Philippines, it is time that the members of the tripartite council tackle not only the various provisions and implementing rules of the Labor Code but also the terms of Philippine incorporation in an increasingly divided and unequal global economic order.

(Rene E. Ofreneo, Ph. D., is a professor at the UP School of Labor and Industrial Relations. This article is based on a talk he delivered at a recent meeting of the Rotary Club of Pasig.)

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TAGS: labor dispute, Occupy Wall Street, PAL, palea
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