Creating a buyers’ market for labor

A buyer’s market is a situation where there appears a bountiful supply of the commodity, and as a result the price tends to become lower. When economists however start using that term, they are not referring to all the commodities in the market to acknowledge the indefeasibility of the law of supply and demand, but to a specific product that is causing the buyers to dictate the price on the basis that there are several sellers of the same commodity competing to reduce their price to be able to sell.

This observation is true not only to seasonal commodities, but to intangible items such as labor. Hence, when one hears of a buyer’s market in labor, instantly he takes the idea that there is an oversupply of workers willing to work, and as a result wages tend to be low because many compete to secure employment. However, despite the prevalence of the buyer’s market for labor, our unemployment remains high. It is this standpoint why deregulating wage has been vehemently opposed by the working class. They fear it would take us back to that period described by Charles Dickens where labor laws were inexistent, except for the payment of wage of which the capitalists dictated the amount and the period for which workers would be required to work, with no consideration to the hiring of minors, women, and for their health and safety.

In our time, those advocating for the deregulation of wage are not out to dismantle all the labor laws designed to protect the working man, but simply want to revive the true buyer’s market for labor. They do not even think of restoring the peonage system where the workers are paid by the capitalists to be assured they would still be alive to report for work. The advocates are mainly targeting to eliminate two of the workers’ worst enemies: unemployment and the contractualization of labor. This movement should not even be interpreted as the triumph of capitalism over socialism, and now perceived as the ultimate victory of the capitalists against the workers.

Rather, they are simply advocating to promote employment by recalibrating the cost of labor to a more realistic level at par to our economic development so we could fully harness our enormous surplus of idle manpower. By creating that economic climate,we would be encouraging investors to set up production plants here, while giving them the most advantageous option of restoring their right to select the most efficient workers by direct hiring at a cost that is fair and agreeable to the workers. We are saying this because the system of regulated wage did not create a seller’s market where workers could freely choose where they want to be employed.

On the other hand, neither did it produce the desired buyer’s market because the system of minimum wage created on a national scale a wage distortion of overpayment and underpayment of wages. The unskilled and the semi-skilled workers, which represent the bulk of our production force, undoubtedly are paid above the actual cost of labor in the world market, which reason why most foreign investors have consistently by-passed us as their investment destination. Even our local manufacturers have relocated their production plants to neighboring countries that have overtaken us in the competition to lower production cost.

For our mismanagement in pricing and allocating our manpower, we lost both the buyer’s market where employers are complaining of the high cost of labor, and the seller’s market where the workers grudgingly would not accept an amount below the minimum wage. While employers fear of paying below the mandated amount of daily wage, the workers would not accept an amount below because the system of minimum wage has equally increased the prices of almost all commodities; and any increase in the cost of wage automatically causes the peso to devalue to the delight of other countries competing with us on labor and exports even on agricultural products.

Those who opted to stay now rely on the labor-only contractors. Although spending slightly above the minimum wage because of the fees demanded by the suppliers of labor with a false assurance that employer-beneficiaries will not incur liability as they assume the role of misplaced employers, at least they are contented in having no troublemakers in the plants, like having a union or in making adjustments on wages which is inherent to situations where directly-hired employees have attained the status of permanent employees.

For losing both the buyer’s and seller’s market in labor, we created a unique situation where we have a high cost of labor amidst an increasing number of unemployed. Notably, in the buyer’s market for labor, the cost of wage is expected to go down, but in turn employment is expected to increase. Interestingly, that situation did not happen here in the Philippines. Among developing countries, they converted their enormous surplus of manpower to one of asset. Nonetheless, their deregulation of wage to induce a buyer’s market was accompanied by the imposition of restrictive measures on their strategic industries that supply the basic ingredients of production, like regulating the cost of electricity, fuel products, water resources, steel production, etc. They believe that wage deregulation would be of no use if the strategic and vital industries are left on their own to dictate their price which altogether could derail any blueprint for industrialization.

But once that country achieves a level of economic development, no law is necessary to create a buyer’s market for labor. That situation will come naturally because the creation of more jobs means a wider space for the workers to select employers offering higher wages, instead of the employers dictating the wages they are willing to offer. The increase in the standard of living in China, Taiwan, South Korea, Malaysia and now Vietnam did not come about by their government fixing the minimum wage, but by the inevitable factor of industrialization, and the employers’ need for labor means they simply have to spend more for wages. –Rod P. Kapunan, Manila Standard Today

rodkap@yahoo.com.ph