Don’t labor in vain

It’s time, actually it’s well past time, to look at the archaic and anti-worker (yes, anti-worker) labor laws.

The one that gets me the most is the “security of tenure” law. If there’s one thing it’s not it’s security of tenure. It’s insecurity of keeping a job, just ask any five-monther. It’s despicable that an employer can heartlessly hire someone for five months, then kick him out without a thought. And without a thought is what the law that encourages this action is. It’s thoughtless.

You can hardly blame a manager from formalizing a position when it’s almost impossible to remove someone once formalized. If a worker does a poor job despite efforts to improve him, then replacing him with someone who is more productive makes eminent sense. It is, in fact, essential in today’s fiercely competitive world. You just have to. Anyway, there’s no job lost, one person lost a job but another gained one. The incoming worker will work hard to keep that job, the loser will work harder in the next job so as not to lose it again. There’s no job lost, just a change of person. Companies benefit by having more productive workers (fearful of losing their jobs if they don’t work at their best) ,which means their business grows, which means they need more workers. Everyone wins.

Sadly, technology is another reason a worker may have to go. It’s not nice, but it’s an unavoidable reality. Machines more and more are replacing humans. The solution is to develop in people the skills machines can’t yet do. Walk through any manufacturing plant today and marvel at the complex machines that do it all. More and more are being automated. Yet the law makes it almost impossible to modernize. To remain competitive.

Next to address is the minimum wage. P404 (the current rate in Manila) is not enough to live on for a family of six with one bread winner (the definition used to set minimum wage). But it could be enough if the family was smaller —as it is elsewhere in Asia. Or if two family members were working as also often occurs in the countries competing against us for investment.

The Philippines has one of the highest minimum wages amongst the developing countries in Asean. Our minimum is $9.60, in Vietnam it’s $3.20, Thailand $7, China is $6.90. Because of this the Philippines, lost an estimated 500,000 jobs in the garments and textiles industry and hundreds of factories have closed because our wages are uncompetitive. Ask what those half a million ex-employees would prefer, let’s say a competitively set P200 or the zero pesos they’re getting now.

Yet Congress wants to do the reverse, to make the minimum wage even higher. To make the Philippines even less attractive than it is now—having virtually no foreign investment last year tells you that (a mere $782 million from January to November; FDIs last year might not even reach the $1 billion mark).

What also must be done is to match education to business needs, particularly for the business of the future. The BPO industry struggles to find enough qualified people, it shouldn’t have to. Mining needs engineers, so does construction. We also need more Applied Science and Math graduates who will create new technologies and transfer these to businesses, yet few schools guide into and teach these professions.

The World Bank, in its Doing Business Report, says the Philippines has one of the most rigid labor regulations in Asia. The country placed 115th out of 183 economies, while the International Institute of Management Development ranked us as the 18th least competitive nation among 59 countries surveyed in terms of hiring/firing policies. Keeping an unproductive worker is one of the factors.

World experience has shown that those countries that truly open up their economies and leave the market to set conditions thrive far better than those where politicians think they know better how to run a business. Yes, there will be abuses by heartless businessmen but if an open market can attract more massive investment, as it will, alternative jobs will be available.

According to the World Bank and other analysts, the Philippines has a convoluted bureaucracy, inconsistent policies, institutionalized corruption, and infrastructure that is woefully inadequate coupled with high electricity costs. Burden it also with high wages and unreasonable labor regulations and business, as the numbers show, doesn’t come.

The Aquino team recognizes all these and has promised to address it. They said the first 18 months were spent setting the stage to fix it all. Well, then 2012 must be the year that it happens.

I wait with bated breath. –Peter Wallace, Manila Standard Today