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.
Hi Bob, excellent points.
One area that needs huge investment where the government has been successful albeit still lacking are the physical infrastructures specifically: roads.
The country is predominantly agricultural in economic activities. Roads are very important to transport farm products. I will say that the present government has done a lot compared to previous ones.
The Wall Street Journal today presents as one of its major articles the rehabilitation of the Banaue Rice Terraces in the Mountain Province made true because of the high price of rice. Ifugaos instead of descending to the cities to find work are now tending the rice fields and monitoring the levies being devastated by giant earthworms.
If not of better roads the difficulty in the transport of rice from these far away places would have robbed these Ifugao's the benefit of the high price of rice.
I have no doubt the Philippines has the potential of raking it in because of the rise of the price of farm products throughout the world….if only Filipinos eat more camote, gabe, ube, bayabas, saging, etc…instead of more rice…. There are plenty of farm produce rich in carbohydrates other than rice that are plentiful in the country.
In the same token, I wonder if there is a reverse migration of Filipinos from the big cities back to the countryside? It will be interesting to know.
Hi Dr. Long – Yes, I agree with you on everything you say. One thing that the country is working hard on is farm to market roads, which take into account both the agricultural sector and the infrastructure problems into one project. This is very important. It will not only keep Filipinos working, but keep them fed too. So, this is a real priority.
I doubt that you'll ever see a reverse migration back to the countryside. At least, I doubt it would happen within our lifetimes.
Hi Bob, Your views about this subject are excellent. However, if these strategies will be pushed through the system of governance should also be changed so that people in all walks of life can feel and see the progress of the country as a whole. Based on the Philippines history of authority the Democratic Republic system of governance has made it difficult for citizens to see transparency. As a result, plans for innovation and projects take ages to accomplish a task/job or a mission; needless to say but a lot of times are wasted, and therefore development is protracted. A Federal Republic system of government is I think a better option wherein central government has limited power and each province preserves a level of self-governance. In this manner, it is easier to determine who are really corrupt officials and the ones who are not doing their job properly. It’s only my opinion.
Hi Teng – Thanks for sharing your comments. As a guest in the country, I don't generally write about Politics here, it just is not my place to do so. I do appreciate hearing your thoughts, though.
good article,
I believe strongly things can only improve by government reduction in corruption levels. There is a multiple layered problem with this at the moment which stops foreign investments, reduces peoples belief in the government and the "why bother" ethic because any good idea or business is likely to be robbed from under you.
Foreign companies are unlikely to invest and very wary to deal with countries such as the Philippines not only for the reasons of losing money, business etc. But more recently human rights issues are starting to materialise which makes companies think twice about who they deal with. Because they may find the new found friend gets them plastered all over tomorrows headlines.
Salary doesnt seem to be as important in the Philippines as family loyalty which is a completely opposite ethic to im used too. Ive lived most of my life working long hours and often not returning home for months. Its a complex environment with no quick fix.
Regarding farming I think with the big shuffle in world economics regarding bio fuels etc.. There is a greater demand than ever and an ideal time to develop the Philippines farming and fishery industries but will it happen? Im not so sure. I think there should be brought into play if the land isnt growing and due for construction a scheme should be introduced that "neighbouring" farmers can utilise the land on a % return scheme. I find it very strange finding a country that needs so many imports just to stay alive yet is full of empty lots and farms.
Very Insightful Bob. If only there are jobs there, people wouldn't leave the Phil. When I was there, I experienced how difficult it is to find a job. Up until the time I left, I held a job that only pays for my daily expenses. Nothing like what I had here w/c is the little hours I allot for work pays for the rent & few bills.
I have friends who do not stand a chance of getting a gainful employment there unless by some miracle a factory is built & ready to hire all of them. When they ask for help, I understood why they needed it.
I do have a question abt "productivity", do I understand fr you that if you increase productivity, you will also increase ..what? Yes, the Phil has one of the most expensive labor in the region. Investors would rather go to China, Vietnam, Thai, Indo than here bec labor costs in the Phil is expensive. I think the govt just tries to peg the living wage accdg to inflation. The root of all these is the high prices of commodities, house rent, electricity, water–everything!–that's why labor costs is expensivie but still never enough for ordinary workers. Hay…… 😥
Hi Bob, My wife and I have been enjoying your blog for the last month or so. I must commend you on your efforts on giving interesting and up-to-date commentary on Davao and Mindanao. I'm an English-Canadian from Toronto, Canada and my wife of 18 years comes from Mainit, Surigao del Norte province.
Today I received a textbook in the mail ( from McCoy, Virginia ! ) called "Agricultural Marketing in the Philippines" published by the University of the Philippines. As is my habit I opened the book to a random page and read the first paragraph I saw. I quote it as it seems to tie in with today's topic.
" The population has exerted considerable pressure on the food supply for years. The rising population brings a real challenge to agriculture to increase production, to the marketing system to distribute the farm output as efficiently as possible and to the entire economy to increase employment opportunities and incomes. However, history has shown that countries with limited resources and high birth rates find it difficult to provide everyone with more than a minimum education, to create productive activities for all workers and to make rapid economic progress"
That pretty much sums up the situation that the Philippines faces today and explains why so many Filipinos are OFWs.
Except that this textbook was published in 1969…almost 40 years ago!!!
Makes you wonder if things will ever really change.
Hi Matt Wilkie – Well said!
Hi Roy – If you increase productivity, then the salaries of the workers can also be increased, because they are able to product more goods/services in a shorter time, and thus earn more money for their employer. Given that, they are more valuable, and can be paid more! 😀
Hi Randall Jessup – Are you sure that Copyright date isn't a typo? 😆
Everything said there is still very true today!