Organized labor, social movements, and the employment of the poor

Nearly one-fourth of the nation’s labor force of 58.8 million workers (the estimate of the National Statistics Office, 2008) suffers the fate of the unemployed and underemployed. Those who are caught in this condition are found in the urban slums and in the poor provinces. These people live in uncertainty about what to feed the family. Some are homeless. Many of them are perennial wards of state charity.

Those who fail in their endeavor to find gainful and respectable income suffer further in their social well-being. They fall to a life of crime, mendicancy, or in the case of the most desperate, prostitution and other uncalled for misfortunes that the poor are always exposed to.

To lick the problem of unemployment and underemployment, the government must bring about effective economic policies that enlarge the economy. Not dole-outs. Not just jobs. Not just economic growth. The quality of the growth must be so designed as to give the poor employment while taking the whole economy upward.

We need to eradicate the sight of beggars lurking at street corners. We need to give more productive jobs to vendors who sell us food and wares who roam the in the city’s dangerous road traffic jams. We need to put children who sell us sampaguita garlands or begging for alms out of the night and into schools during the day.

Such are the essentials behind the proposal to have special economic labor employment zones to give jobs to the family providers. There are groups that will oppose this proposal.

Based on their past actions, the first ones to raise objections will be organized labor and those groups who think they have better ideas. They are groups who keep supporting high legislated labor standards. They say they want the state to support a “living” minimum wage. They want to protect labor from exploitation, abuse, and arbitrary judgments about their employment status. Good causes of course! Yet in their world, the ideal is often far from the reality of pragmatic market solutions to solve the problems of the poor.

There are also groups from all shades of ideology. They speak about social programs affecting the poor, the rights of man, and the idea of fairness and equity. Then there are causes with labels: socialism, communism, peasant movements, human rights and dignity, land reform – it is possible to list many such programs of action.

The greatest turnaround of ideas took place in the 1990s. That was when the centrally planned economies of the Soviet Union and its Eastern European communist allies totally collapsed. Ever since, these countries have had to reinvent themselves. China of course – and now Vietnam – have been reinventing themselves through concessions toward market realism that have created prosperity in these countries.

Organized labor has its reasons. For decades it has fought to raise work standards in the nation, especially when those standards were below those in the world. It has been in the forefront to make upward revisions of the regional wage patterns.

So long as labor is abundant, labor suffers a handicap. When labor got its wishes to have higher wage and labor standards enacted into policy, business found ways to respond appropriately. Business substituted machines for labor and those that still found the domestic costs too high migrated to other countries where wages were much lower and government regulations more permissive in welcoming business. Thus, it became much harder to attract capital to move into the country.

Labor union advocates often say that minimum wages and labor costs are only a small part of the cost of production. They say that electricity costs, corruption and other factors are as important in these costs. Of course! The nation needs to bring these costs down when possible. Labor costs are still uniquely important for the decisions of companies to stay or to leave the country.

Their reasoning fails to say that those who respond in this way are companies that continue to thrive under higher wage situations. The companies that consider labor costs to be important to their operations are no longer part of the domestic scene. They have already left the country.

The companies that use labor heavily are gone or going – textiles, garments, shoes, furniture, as typical examples have not made as big a dent on the economy as they have on the growth of other East Asian countries. The country’s high labor surplus continues to be all the more obvious as jobs get decimated by these company departures. The government must recognize that it is part of a competitive situation among countries as far as labor costs are concerned.

On the other hand, the country continues to grow with the hiring of labor in skill intensive jobs –electronics, back office work, call centers, and in traditional industries that require them. In these jobs the minimum wage is irrelevant. The wage level is conditioned by market scarcity arising from the volume of demand and the training costs for labor embedded in educational investment.

But unrealistic rises in the minimum wage exclude the poor with common skills from getting employed in highly productive activities. The special labor employment zones will channel new enterprises into labor using industries that need to be attracted back into the country. Companies that suffer the strain of high labor costs still in the country can adjust their situations by moving into the special labor zones rather than close shop totally and move to other countries.

The exemption of these large labor using industries from the regional minimum wage setting process will provide an assurance that the country will have opened another legitimate class of wage setting process as part of labor regulation.

Finally, let us pose this question. Does organized labor penalize their own memberships who all have families? When they object to measures that definitely improve the prospects of the poor to earn good jobs in industry and agriculture, don’t they hurt the future of their own children and as a consequence their own well-being?

The children of laborers are part of the younger labor force of the nation that is ever-growing. These young laborers are found at the low end of skills since they are only beginning their life as workers. They represent those who are most vulnerable to the minimum wage policy. If jobs fail to grow enough because enterprises find Philippine labor too costly, the whole family suffers.

Unemployment not only hurts the future prospects of younger people. It hampers their opportunity to grow in the job. It could deny them productive membership in society. The Filipino laborer’s family is denied the higher level of prosperity that successful countries have achieved. It is poor employment opportunities at home that has driven a lot of Filipinos to leave their own country and become overseas workers.

Thus, Philippine policy makers need to strengthen the employment opportunities for the poor. This is the path and not that of continued dole-outs and charity. The surest way that the poor and unemployed can find jobs in their own country is to set up special labor employment zones as proposed. These zones are to be located in places where there exists a large amount of unemployed and underemployed labor.

Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/faculty/gpsicat/ –Gerardo P. Sicat (The Philippine Star)