Think sensibly, amend the Labor Code

It’s easy to say, “Let’s stop contractualization.” But I wonder how many people know what that requires. It’s not the “5-5-5” arrangement of contractualization that’s the problem, it’s the abuse of it. And it’s the abuse that needs to be stopped, not contractualization.

People working for only a short time is part of many businesses. Mine is an example: I have a core of full-time staff, but when I get a research project I hire specialists for just a few months for it. The experts like it, I need it. But if there would be a blanket ban on contractualization, I couldn’t do it.

There’s a well-recognized trend worldwide of people not wanting a lifetime job, or loyalty to one company for years or even decades. It’s revolutionizing the workplace. Even now, call centers have high turnover rates. Is this to be stopped?

The problem is the bastards who hire someone for what is really a permanent job for only five months, then fire the employee—and hire another. That alone is proof of the need for permanency in the job.

Why do they do it? They do it to avoid employee regularization, which entails paying the full package of employment benefits including social security (SSS), healthcare (PhilHealth) and housing (Pag-ibig) benefits; vacation and sick leaves; overtime pay; 13th-month pay, etc. And, to avoid security of tenure, the inability to fire someone even if they’re doing a lousy job.

The solution to the first is simple. Require payment of or contribution to all of those benefits from Day 1. When the employee leaves—whether after 20 years or one week—these contributions are applied pro rata. As to security of tenure, that is equally easy: Get rid of it. It’s not good for anyone except ineffectual workers. Someone who does a good job will be kept, unless the job becomes redundant: There is no job to do, so why would you need to pay someone to do nothing? That actually happened to a client of mine in Cebu. No doubt, it happens frequently.

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. 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. Norway, for example, has a system called “flexicurity,” where the flexibility to hire and fire is there, but the workers are protected in various ways if they lose their jobs. 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.

As to minimum wage, I’m not so bothered by it. The businesses I like best and that we most need pay above minimum wage. But if we want the low-skilled manufacturing jobs that are on minimum wage to come back, we have to be competitive. It’s that simple. And if labor cost is a major component of that cost, then manufacturers will go where it’s cheapest.

It’s why the Philippines lost its textile and garments industry, which used to account for nearly 30 percent of the total employed in the manufacturing sector in the late 1980s. This dropped by half in the mid-2000s, and its value-added share in total manufacturing declined from a tenth in 1988 to a measly 3 percent in the early 2000s— almost all because of labor cost.

The daily minimum wage of P444 in Metro Manila may seem too low—and it is for a decent life—but it’s the highest among Asean economies (excluding Singapore). Vietnam, where much of the garment industry went, pays the equivalent of P170 as daily minimum wage. Surely P170 is better than nothing.

You can’t survive on zero. And zero is what some 9.1 million potential workers earn (the figure is from a survey conducted by the Social Weather Stations last December). Or, if they’re fortunate, about P45 per day from the conditional cash transfer program.

So what are we trying to do? Create a society of mendicants on P45 per day or, instead, have a competitive minimum wage that attracts job-creating businesses? And isn’t it time we stopped splitting families by sending the bread (or is it rice) winner overseas to seek a job, and leave loved ones behind, at huge social cost? Job flexibility and competitive wage levels will attract businessmen and jobs will be created. From 2011 to 2014, some 1.8 million Filipinos left their families to work abroad because there were no jobs here.

Competition is the key word in today’s world. If you want to succeed, you must be competitive. With its present labor laws, the Philippines is not competitive. Its Labor Code, which is more than 40 years old,  needs to be revised.

Rodrigo Duterte’s economic team will need to work with Congress on new labor laws to bring us into the 21st century, into the modern, highly competitive world in which we now live. They need to think job creation, not individual job protection.

It’s time to think carefully, comprehensively and sensibly.

A thought for the President-elect: The bureaucracy is a challenge to be conquered with a righteous attitude, an intolerance for stupidity, and a bulldozer when necessary.

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E-mail: [email protected]. Read my previous columns: www.wallacebusinessforum.com.