Development or low-wage economy

In reality, the argument about the Philippine Airlines (PAL) pilots is about a lot more than that.

After 25 pilots and first officers resigned, with the intention of taking up better-paid options with foreign airlines, PAL threatened them with administrative, civil and criminal charges for breaching their contracts. (Criminal charges? What kind of labor relations regime exists at PAL?) With flights canceled, the government stepped in, warning both pilots and airlines about the damage to the tourist industry.

Even before this column gets to its main point there is more to this than meets the eye, as it is alleged that some pilots had been forced to transfer to Air Philippines, PAL’s low-cost subsidiary, at reduced wages. (What was that about breach of contract?) Some of the resigned pilots were, reportedly, directly affected by this, while others feared that before too long they would meet the same fate. Furthermore, the Manila Times reports allegations by the Flight Attendants and Stewards Association of the Philippines that, due to cutbacks, PAL flights have been understaffed during recent times.

At one level, then, this story is about a race to the bottom, with airlines cutting wages and conditions in order to offer the public cheap seats and still make a profit. The situation is not peculiar to the Philippines, as some airline pilots in the USA earn so little that they qualify for welfare payments (a case of the taxpayer subsidizing the employers).

As a labor union official in London, I was involved in a similar situation after London Buses split its bus operations into separate subsidiaries prior to privatization. At the same time, a regime of tendering was in place, whereby all and sundry were invited to bid for routes operated by the incumbent publicly-owned operator. Needless to say, this was a recipe for low wages, poor conditions, violation of the legal regulations on drivers’ hours, with a blind eye being sometimes turned to safety questions.

After a round of tendering in 1991, one of the subsidiaries, London Forest Travel (LFT), advised its staff, and our union, that the routes at its Walthamstow garage had all been retained after a successful bid. It later transpired that it had bid on the basis of extended working hours and an average wage-cut of around 20 percent. We addressed this situation by simply turning the tables on LFT.

Having ascertained that the company which had come second in the bidding process was prepared to pay more than LFT was proposing, our members were balloted for industrial action and commenced the longest bus strike in London since 1957. Throughout the dispute, negotiations were held with LFT but, while it reduced the original cuts, it could not match the package offered by the competition. The strike therefore continued until the regulatory authority withdrew the routes in question from LFT and awarded them to the competitor. In effect, the workers had retendered the routes — and LFT had lost.

In a sense, although without taking industrial action or even coordinating their activity, the PAL pilots have been doing something similar. According to the Manila Times report, PAL pilots earn between $2,000 and $3,000 per month, while foreign airlines pay between $8,000 and $12,000. It could be argued, therefore, that the market dictates that the pilots will gravitate to the highest bidder. In my experience, employers who delight in lecturing their staff about “the market” when they’re attempting to hold down wages and conditions often become cry-babies when the tables are turned.

The PAL episode rams home the point that the low-wage economy, which is what the Philippines has got, has drawbacks for workers, employers, and the country as a whole. During the last administration, the Fair Trade Alliance (FTA) warned the Department of Labor and Employment that some airlines, factories, power companies and telecommunications outfits faced the danger of collapse due to the recruitment of their skilled staff by overseas employers. The FTA identified nurses, doctors, teachers, various kinds of engineers and airline pilots and mechanics, etc. Some of those on the list imply that the health and safety of many citizens and residents could be adversely affected by this low-wage economy.

But all the current administration seems to be worried about is the tourist industry. Why do tourists come to the Philippines? Because it has sun and sand — and because it’s cheap. Policy-makers should wake up to the fact that cheapness is not a virtue. Workers on low wages are not going to fuel the demand necessary for the development of the domestic market — and they’re not going to stick around if they’re can get a more realistic package elsewhere.

But this outsider is a dreamer. Back in the 1990s, I dreamed that London busworkers would campaign for a common set of wages and conditions, regardless of employer, restoring things to what they were before the days of privatization and tendering. Well, in recent years they have done so, although they haven’t quite achieved it yet. These days I dream that, even if only regionally, the low-wage economies will band together and tell the World Bank, the IMF and the World Trade Organization that they’re no longer prepared to engage in races to the bottom, that they intend to develop for the benefit of their peoples.

Before that can happen, however, Philippine-makers have to decide that they’re serious about development. Because you can’t have it both ways — it’s either development or the low-wage economy, and anybody who’s not serious about the former has no right to complain when the latter throws up a new problem. –Ken Fuller, Daily Tribune

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