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We need flexible labor laws

/ 12:45 AM October 17, 2013

For once the Nobel Peace Prize Committee was wrong.

Malala Yousafzai should have won. Her courage and her wonderful advocacy for the education of girls worldwide will have and are having a dramatic impact on the world and the freedom of people. Getting rid of chemical weapons is important, but not at the same widespread level.

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But I want to talk about getting, and keeping, a job today.

The President wants “inclusive growth,” wants wealth to “trickle down.” And so he should, as the situation today is appalling, and has been getting worse—yes, worse. Forget the percentages, think of the people. It’s the people who want jobs, and jobs and only jobs provide inclusive growth and trickle-down benefit, nothing else. When does this sink through to the government? Forget its words, look at the action.

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So it will sink in, let me emphasize it. When President Aquino came to power 2.8 million people were unemployed. Three years later the number of jobless Filipinos has risen to 3 million. By the way, these are the “official” figures. Social Weather Stations (who I better believe) says there were 9.9 million jobless Filipinos in November 2010 and 11.2 million as of end-June 2013. That’s 1.3 million more Filipinos without a job. Add to that the more than 10 million Filipinos that had to leave the country to find a job elsewhere, because there was none here. And the message is clear: Government strategies have not done the most important thing they must do. Mr. Aquino’s “daang matuwid” (straight path) has been quite successful (the Napoles pork barrel exposé justifies this adjective), but it is not enough in itself. A clean society will be better for the creation of jobs, but not sufficient unto itself. You need much more than that, and what you need has been enumerated endlessly, gets promised, but doesn’t get done.

Infrastructure doesn’t get built; it’s promised but has been happening much too slowly. Five percent of GDP must be spent now, not by 2016 as proposed. And the public-private partnership program better be supported. There is no certainty of policy from one administration to the next, businessmen invest for 50 or 100 years, not six. The Aquino administration must ensure that business policies are stable and not altered on a whim. Contracts entered into by the government must be inviolate. At present they are not. Power must be available 24/7, and at reasonable cost. Sensible incentives that attract investments away from elsewhere need to be in place. The judiciary needs to make judgments that understand business. Smuggling needs to be stopped, and so on.

But I want today to focus on a law that desperately needs change. That’s the Labor Code, formulated in 1974. It’s hopelessly out of date with the modern world. It will be raised in this Congress, so it’s time to review it. The one requirement I find the worst for workers is security of tenure. Yes, worst for workers. Ask anyone who gets terminated after five months, ask any company that wants to operate at maximum efficiency, ask anyone without a job who is not getting hired because it’s too high a risk to hire people who may turn out to be unable to adequately do the job.

Security of tenure is provided by giving management the flexibility to hire and fire as it sees the need. You don’t get rid of someone who’s doing a good job; you keep, even promote, them. If someone is doing a poor job, you fire them if they can’t improve. They lose their job BUT someone else gets the job. There’s been security of tenure, just change in the person. The new hire works hard to keep his job, the loser works harder in his next job to ensure that this time he keeps it.

Yes, I don’t doubt there are some lousy managers who fire people just because they don’t like them (or won’t sleep with them, or whatever), but I submit this is a very small number that doesn’t justify a law to protect them. What we need to protect are the “5-month-ers” who get no social security, healthcare (PhilHealth) and housing (Pag-Ibig) benefits. They run into the thousands, tens of thousands. This is where unscrupulous managers act. These are the people whom removal of security of tenure will protect.

The other big issue on the table is minimum wage. Labor rights groups declare that the minimum wage of P466 (US$10.80) is not sufficient to support an even halfway decent life. And it’s not. But zero is even worse. And zero is what more than 11 million Filipinos are getting. They are not getting jobs because Vietnamese ($3.16) and Cambodians ($2.03) are. And this is, in part, due to cheaper labor costs. Labor is a major fraction of most companies’ cost, and companies operate where it’s least. The Philippines lost its garment industry because of this. A competitive minimum wage is needed—if attracting basic labor industries is to be promoted. And is necessary in order to provide jobs for those with insufficient education, which there will always be.

What the government should be doing is pointing out that in wages for jobs requiring skills beyond the basic, the Philippines is very competitive. Just look at the way the call center industry has bloomed, in part because skilled labor costs are competitive.

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In several global competitiveness surveys the Philippines ranks poorly in terms of labor market efficiency, due primarily to the lack of flexibility in determining wages and rigid “hiring and firing policies.” Hiring and firing should require minimal bureaucratic procedures and no approvals. Businesses must also be given more leeway in adjusting wages and benefits during tough economic times. Businessmen have been urging lawmakers to amend the four-decade-old Labor Code, but the proposed bills have been languishing in Congress for the past 10-15 years.

Time to think of the workers. Amend the law, give them jobs.

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TAGS: Aquino administration, Malala Yousafzai, Nobel Peace Prize, Nobel Prize, Philippine economy, Philippine labor laws, Philippine Poverty
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