Rebalancing a ‘one-third’ society

Jobs-wise, the Philippines is a one-third society.

Or even a one-fourth society, depending on how one counts the multitude of workers who hold jobs that are uncertain and “excluded” from the coverage of protective labor laws. There are two major categories of the “excluded”: the “informals” and the “precariat.”

Informals two-thirds of labor

The informals are workers in the huge “informal sector” (IS), rebaptized by the International Labor Organization (ILO) as the “informal economy” (IE). The ILO defines the IE as the aggregate of all economic activities by workers and economic units that are—in law or in practice—“not covered or insufficiently covered by formal arrangements,” such as the absence of written job contracts and the inapplicability of labor laws.

Unable to find jobs in the narrow formal sector, informal workers engage in low-level and unregulated economic activities, such as street hawking, home-based production, unregistered repair services and gold panning just to meet the requirements of daily living, and no matter how meager the earnings and no matter how bad the working conditions are.

The Bureau of Labor and Employment Statistics reports that more than 40 percent of the employed are in “vulnerable” jobs, consisting of the nonemploying self-employed and unpaid family workers. However, the Employers Confederation of the Philippines (Ecop) has been arguing that the informals account for nearly three-fourths of the employed (See Box 1.) because those who work in the numerous informal microenterprises and those working under informal work arrangements, such as the homeworkers, and jeepney and pedicab drivers, should be counted

Rise of ‘precariat’

There are, however, “informals,” too, in the formal labor market. They are called the “precariat” by labor economists because their work is considered “precarious.” Arne Kalleberg and Kevin Hewison (American Behavioral Scientist, 2013) characterized precarious work by its “uncertainty, instability and insecurity” for “employees bear the risks of work (as opposed to businesses or the government) and receive limited social benefits and statutory entitlements.”

To Filipino trade unionists, precarity simply means the “informalization” or “contractualization” of work through short-term hiring and flexible compensation arrangements. To young casuals, precarity is “endo (end of contract),” someone whose employment contract is bound to end in a short time.

The informalization of the formal labor market is a global phenomenon. In the Philippines, this happens through the hiring of new workers as temporaries, probationaries, “project employees” and interns or trainees.

Boundary system

Other informalization arrangements work on a commission basis; “boundary” system, where transport drivers are asked to turn over a fixed daily “boundary” to the transport owner; and piece-rate system for workers paid on the basis of results. There are also seasonal workers hired only during peak demands, for example, production of house decor in the pre-Christmas period.

The “informalization” phenomenon also leads to the early exit of casual workers from the formal labor market and their early entry into the informal economy. This happens when casuals reach the “vulnerable” ages of 40 to 60 years old. As Ludy Casana of the Federation of Free Workers put it, they are “too young to resign and yet too old to be hired.”

Missing social protection

The IE workers and the precariat generally face three interrelated problems:

Low incomes/wages

Job insecurities

Lack of social protection

The low incomes/wages are associated with the low valuation of the services or products these workers deliver whatever the occupational faces they are wearing.

Job insecurities arise from the nature of their jobs—in the case of the precariat, the lack of tenure means they can be laid off anytime, while in the case of the IE workers, the lack of demand for their services or products means they have to look for another income-generating activity.

Finally, the majority of the IE workers and precariat do not enjoy any formal social insurance. Most members of the Social Security System (SSS) have regular jobs with clear employer-employee relations.

In 1997, the government amended the SSS law to allow coverage of the self-employed. And yet today, the self-employed still constitute a tiny percentage of the SSS membership. The main complaint of the self-employed is the high cost of the premium, which, in the case of the formal sector workers, is jointly shouldered by the employer and the workers.

As to the Philippine Health Insurance (PhilHealth), the government has been expanding coverage to cover the working poor. However, the major lament of IE groups is the limited range of services covered by PhilHealth, for example, outpatient consultations are not covered and the participating hospitals and clinics are also limited.

ILO proposal, Constitution

So, how can the informals and the informalized be protected?

This question is also being debated in the annual International Labor Conference (ILC) organized by the ILO. At the top of the agenda of the ILC is the proposed “transitioning” of informal workers to formality, so that they can be covered by the social and labor protection provided by the formal legal system of an ILO member state.

This ILO’s transitioning proposal is aligned with the Philippine Constitution’s command for the State to guarantee the observance of the basic rights of all workers. Section 3, Article 13, reads as follows:

“Section 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all.”

“It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with the law. They shall be entitled to security of tenure, humane conditions of work and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law.”

In brief, it is the duty of the State to protect “the rights of all workers” for these rights are universal and should be enjoyed by all workers regardless of their status as formal or informal job-holders. The reality, however, is far different.

CBAs

A clear indicator of this is the tiny number of workers covered by collective bargaining agreements (CBAs). A CBA is a contract negotiated by the union with the employer to flesh out the terms and conditions of work that are generally higher than those mandated by law. Only around 300,000 or so workers, out of the 41 million in the labor force, are covered by CBAs. This is less than 1 percent of the total working population.

Why such a low number of workers covered by the CBAs? One major reason is the absence of enabling laws and programs in support of the foregoing constitutional order on labor rights. The protective clauses of the Labor Code cover mainly workers of the formal sector, which consists of enterprises or activities that are registered with the government.

Labor Code’s 6 books

As a backgrounder, the Labor Code has six “books,” excluding the seventh book on “Transitory Provisions.” Books I and II deal with human resources development or skills upgrading and the rules governing the recruitment of workers.

Books III and IV list down the laws on labor standards relating to wages, hours of work, employee benefits, health and safety and so on, while Books V and VI contain provisions governing labor relations concerns, such as unionism, collective bargaining, dispute settlement and legal requirements on employee termination.

The various provisions of Books III up to Book VI apply largely to the formal sector workers because the enjoyment of such rights or entitlements requires proof of the existence of formal employer-employee relations.

In fact, most of the labor disputes in employment relations require a clarification of the existence of formal employer-employee relations. Unscrupulous employers try to avoid legal obligations, such as the payment of minimum wages by insisting that they are not the employers of the complaining workers.

On the other hand, workers are able to claim compensation for unpaid benefits by proving that the erring employers are indeed their employers. To guide the parties, the Supreme Court has developed the four “tests” on the existence of employer-employee relations, which entail the determination of: 1) who hires the worker; 2) who pays the worker; 3) who disciplines the worker; and 4) who controls the worker in his or her work performance.

Labor rights for all

So, how can the Philippines abide by the Constitution and the ILO’s transitioning proposal? There are several policy doables.

First, there are core labor rights guaranteed by the Constitution which can be supported by enabling laws that do not require any major budgetary allocation. Foremost among these is the democratic right of workers to form freely an association of their own choosing for the express purpose of advancing their collective interests.

Why should the right to form a union be the exclusive right of a few regular workers and why should the right to bargain be exclusive to the regulars who have succeeded in forming a union? Why should agency workers, project workers and other nonregular workers be prohibited from forming their own unions and from bargaining for their collective interests accordingly?

And why is there no government mechanism to guarantee the rights of the informals to form their own unions to advance their collective interests? As it is, various segments of the informals, such as farmers, home-based workers, fisherfolk and jeepney drivers have been forming their respective advocacy associations.

Kasambahay law

Some have succeeded in advancing their sectoral development agenda such as the homeworkers with the passage of the kasambahay law. The point, however, is that there is a need to put in black and white that the right to form associations is an inherent right of all workers and that it is the duty of the government, at the national and local levels to guarantee that these rights are respected.

Can IE workers also do collective bargaining? Why not? In India, IE organizations, such as the Self-Employed Women Association, have succeeded in getting recognition as legitimate unions and have successfully negotiated with state governments on welfare issues, such as housing, education, and varied social and economic concerns of the IS or IE workers. This is citizenship-based collective bargaining, that is, workers bargaining with an entity that cannot run away from them—the local or State government.

Magna Carta for informals

The foregoing is the reason why there is urgency in enacting into law the proposed Magna Carta for Workers in the Informal Economy (MCWIE), as contained in House Bill No. 2295.

MCWIE seeks the creation in every local government unit (LGU) of an office dubbed “Workers in Informal Economy Local Development Office” (Wieldo). Its role is to give legal recognition to IE organizations, arrange dialogues between the IE organizations and the government, and assist in the formulation of a development agenda for the informals through the proposed “Informal Economy Development Council.”

The bill also provides for the representation of the informals in tripartite and other bodies at the LGU and national levels.

Sadly, however, the MCWIE bill has not moved after it has been lodged with the “technical working group” of both houses of Congress in 2014. MCWIE was originally filed in the 12th Congress and has been languishing in the legislature for over 10 years.

Strengthening protection

Of course, there are basic needs of the working poor that the State should cover, costly though they maybe. This is the rationale behind the conditional cash transfer (CCT) program. But more should be done.

Per ILO study in 2008, governments of developing countries can achieve universal social protection if social spending is increased to at least 5 to 6 percent of the gross domestic product (GDP). In developed welfare states, social spending is over 20 percent. In contrast, Philippine spending is still around 3 percent of GDP.

Also, a bolder redesign of the social protection programs is in order. To enroll more self-employed informals in the SSS, the government should come in as co-payors of the premiums and should cover everything if the indigent workers are financially incapable.

Floating population

As to the CCT program, this should not be treated as a stand-alone program to help the poorest of the poor. In the first place, the program tends to miss the “floating population”—the landless rural poor and the jobless urban poor who have been moving from one place to another in search of jobs.

Many of these poor have no school-going children and, therefore, are excluded from the CCT program, which requires attendance of children in schools. Secondly, the CCT monthly allocation of P1,400 is not and will not be enough to liberate poor people from the quagmire of poverty.

In Brazil, the Bolsa de Familia or CCT was able to lift many out of poverty during the time of President Inácio Lula da Silva because the Bolsa was part of a broader antipoverty program, which includes land reform and rural industrialization.

On PhilHealth, universalization should move from full coverage of the population to full coverage of a whole range of health and medical services, including out-patient services and spending on basic medicines. The “capitation” program should be improved to increase the focus on preventive health practices at the community level.

Ultimately, a comprehensive social protection program should cover other basic needs of the working population, such as affordable housing, education of children and, yes, jobs. On the CCT program, it should be expanded to give equal weight to cash-for-work arrangements, especially in the development of homes and community infrastructure.

Transformation

Finally, the task of the government is to address the root causes of poverty, informality and exclusion in society and economy. Hence, the demand of IE advocates for social and labor protection, taken from a rights-based approach (as the inherent right of informals as citizens), has evolved into a broader demand for development programs that promote a more balanced and equitable economy.

It is in this context that the Homenet Philippines and the University of the Philippines Center for Labor Justice forged unity with other IE advocates in the crafting in 2010 of the People’s Social Protection Agenda (PSPA), whose contents are virtually self-explanatory: Jobs for All, Social Security for All, Health Care for All, Education and Skills for All, Basic Services for All, Social Assistance to All in Need, Justice for All and Voice for All. The list of rights and entitlements due each informal worker, as a citizen and as a human being, are itemized in the PSPA.

The PSPA calls for urgent job creation, such as labor-intensive infrastructure development side by side with the demand for the full implementation of asset and other social reforms to help empower the landless, homeless and asset-less informals.

Overall, it is abundantly clear that a holistic transformation program is needed to rebalance a one-third society and make all jobs in the economy decent and protected.

(Rene Ofreneo, PhD, is a professor and former dean of the UP School of Labor and Industrial Relations. This article is an abridged version of a research article submitted to the UP Center for Integrative Development Studies.)