Last week, May 1, was Labor Day here in the Philippines. Labor groups protested, marched in the streets. Laborers around the country called for wage increases. Others just took the day off and had an enjoyable holiday with their families. In general, though, I think that all Filipino workers spent at least part of the day thinking about improvements that need to be made for the Filipino workforce.
For me, there are two areas where improvements are drastically needed for Filipino workers:
- Better Wages
- More jobs
The two areas really play hand in hand into each other. Let’s look at each individually first:
Better wages. Well, there can be no doubt that wages are very low here in the Philippines. The minimum wage is between P200 to P350 per day or so. You see, the minimum wage here is set by region, it is not a national standard. So, minimum wages in Davao are not the same as the minimum wages in Cebu or Manila. Minimum wages are set based on the cost of living in the place in question. So, if you live in a very low cost of living part of the Philippines (i.e. – the ARMM), the minimum wage will be much lower. If you live in Metro Manila, the minimum wage is the highest in the Philippines, because it costs more to live there.
You know what, though? The minimum wage is not really all that important of a number. Why? Well, many employers don’t follow the minimum wage. As a matter of fact, under the law, not all employers even have to follow it. For any company with less than ten employees, they are not subject to the labor laws that impose a minimum wage. Thus, even though the minimum wage in Davao is in the range of P240/day, there are lots of people in Davao earning P100 or P150 per day. That is very common. Some even earn less, particularly the casual workforce employed on farms and such. They may, in fact, earn much less than the minimum wage.
Did you know that competitively, the cost of Philippine labor is actually quite high? Yes, if you compare the Philippines with it’s neighbors like Thailand, Vietnam, Indonesia and Malaysia, the cost of labor in the Philippines is the most expensive? It’s true. However, there are still ways that the Philippines can pay better wages while still remaining competitive. How? Productivity. If the Philippine workforce were to increase it’s productivity level, salaries could increase and the country could still be competitive in the labor market of the world. Look at the wages that US earners can garner. It is huge compared to what is paid in the Philippines. One of the reasons, though, is that the US workforce is the most productive in the world. The Philippines needs to move toward productivity gains if it wants to improve the lives of it’s workers and also be competitive on the world market. That is the only way to do it.
When I say “productivity” that doesn’t necessarily mean that the people need to do everything themselves to be more productive. While that is needed, there are also other ways to increase the productivity per worker. Technology is one key factor in this. By introducing improved technology, the amount of product produced per worker can increase, and in many cases the work done by the individual can actually decrease in the process. In addition to technology, things like improved work processes, better equipment and such can also help increase productivity. Yes, it requires investment, but if such investment is not forthcoming, the Philippines will never reach the world stage in terms of the economy.
More jobs. Well, the best way to add more jobs is by improving the economy and making Philippine products more attractive to consumers. The higher the demand for products, the more employees will be needed to produce those products.
One key problem in the Philippine labor market, in my opinion, is that way too many employees are hired on a contract basis. Under Philippine Labor Law, if a worker is contracted for a period of less than 6 months, many of the labor laws do not apply to the employer. Because of this, a huge number of workers are hired on contracts that last less than 6 months – 5 months, or 5 months and 20 days or something like that. When the employer does a contract like this, it makes it where he can pay a lower wage, pay few (if any) benefits, and can also fire the employee at any time. If the employee becomes “regular” then it can be difficult to even fire him. All of this is seen as beneficial for the employer.
I would argue that by contracting such short term employees almost exclusively, the employer suffers. It means that a whole new workforce comes in every six months. The people must be trained. They have to learn to do the job that they will have for the next six months. Who suffers under this system? For one, the customers suffer. The quality of the product suffers. The employees themselves suffer. The employer (the company) suffers. How does the company suffer? Because the quality of the merchandise can only go down when new employees who don’t know what they are doing come on board. Let’s look at salespeople at the mall. A new person who is learning how to serve customers certainly is slower, and less customer service oriented. Frankly, if you were only going to work somewhere for 6 months, how much effort would you put in to making customers really happy?
If a salesgirl is hired in a department store, and it is a regular position (not a 6 month contract), and she has opportunity to advance to a higher position, don’t you think she would be more likely to make a real effort to help the customer, provide the best of service, etc? I know that I would. However, in the Philippines, when an employee is hired, he basically has no prospect of being able to advance to a higher position in the company, as a matter of fact he really doesn’t even have any prospect of having a job after six months. So, why work hard? Why innovate? Why try?
Really, the Philippines must make improvements for the workers if it wants to move forward on the stage of the world economy. Improvements for the labor force will translate to improvements for the employers too, and eventually improvements for the country as a whole.
It’s the only way ahead for the Philippines, in my opinion.