Labor’s rightful share

Published by rudy Date posted on April 3, 2011

TRADE Secretary Gregory L. Domingo was quoted as expressing a willingness to persuade employers to agree to a “reasonable” wage increase following the petition of the Trade Union Congress of the Philippines (TUCP) for 75 pesos across-the-board wage increase with the National Wage and Productivity Commission (NWPC). Speaking for the Employers Confederation of the Philippines (ECOP), President Edgardo G. Lacson said, “They can talk to us and negotiate, but it will be very difficult to give any increase.”

Recalling previous discussions when I was Managing Head of the Board of Investments, business will contend that increasing labor costs will result in higher prices of their products, rendering them uncompetitive with products from abroad. This will cause their businesses to fail with the existing workforce out of jobs. Exporters already burdened with a strong peso will find it difficult to sell products in the international market. Central bankers and economists will postulate that unless the increases in wages will be accompanied by higher productivity, the inflation rate which is already forecast to go up in the coming months may even reach higher levels. Investment promotion experts will paint a dire scenario of prospective investors gravitating to other countries with low wage regimes. This dearth of funds flowing in to create new industries will mean continuing unemployment for the great majority of the workforce, who will have to find jobs abroad. All these arguments will lead to expressions of sympathy for the plight of the workers and a plea for understanding that any increases will ultimately be counterproductive to the workers’ welfare.

The current controversy led me to go over my collection of Fortune magazines dating from the 1930’s, especially the August, 1931, issue which, in order to help “define the storm center of the wage controversy, the hub of the new capitalism,” featured a series of articles on the American Workingman. It quoted the Mr. Ford as insisting that “the Doctrine of High Wages is …of economic expediency, its purpose being to increase production and, at the same time, to increase purchasing power and consumption.” The contention is that the “capitalistic class should be replaced by a capitalistic society, a society where labor by virtue of its share in the profits of industry has a stake in the existing order. And its ultimate consequence must be the joint control of industry by workman and employer.”

Interestingly, the article shatters the general assumption that American labor has shared in the new wealth created by American industry. It cites that the wage-earners ’share, though it increased by 70 percent of itself, remained steady at 35 percent of the total income. In an article my daughter, Michelle Bishop, e-mailed to me recently, Michael Lind in The Failure of Shareholder Capitalism stated that in Europe, the average CEO makes 25 times the average employee while in the United States, the ratio is 100 to 1. I wonder how the ratio is in the Philippines. My guess is that it would be a greater ratio than in Europe as we have the tendency to follow the Americans more than the Europeans.

Why not pay labor more and management less? Increasing the share of labor and decreasing the share of management should maintain the competitive position of business and industry. A highly motivated workforce may lead to higher productivity and greater competitiveness. What Mr. Ford aspired, – “I hope the day may come, when these great business organizations will truly belong to the men who are giving their lives and their efforts to them.” – will happen. –Melito Salazar Jr., Manila Bulletin

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