Pro labor need not be anti employer

My good friend Ed Lacson, president of the Employers Confederation of the Philippines (ECOP), sent me a kilometric-long text message reacting to a previous column on labor issues and a reader’s suggestions on labor benefits. I value his views, and thus am giving him the floor. Here goes.

“I read your article today on employment, wages, and profit sharing for workers. Allow me to share with you and all opinion makers the views of employers.”

“ECOP does not advocate a “labor economic zone” to bring down labor cost to starvation level. We are merely asking policy makers for decades to stop the yearly mandated “one size fits all” minimum wage increase.”

“This takes away the prerogative and the pleasure of employers who subscribe to the tenet of giving rewards based on merit system to all excellent performers.”

“The minimum wage order equally and at the same time rewards the high performers, lazy or incompetent workers, and those placed in cold storage who cannot be dismissed at will because of the labor code provision that requires just cause for any employee termination.”

Torrens title on jobs

“And some pseudo socialist congressmen even approved a bill on 3rd reading to pass a law on security of tenure which effectively gives workers a Torrens title to their jobs.”

“A building contractor may have no more building to construct but he cannot dismiss his latero, karpintero, tubero, mason, pahinante, and any worker in his payroll until the companies are legally dead.”

“As I never tire in telling, even without this bill and under existing laws, it is easier to divorce your wife than to dismiss an employee.”

“If you lose in NLRC (National Labor Relations Commission), which is more often than not, you get a two-year jail sentence but if you lose your divorce case, you get back your wife, a pleasant defeat because as they say love is lovelier the second time around, a pa consuelo de bobo for the under the sayas.”

Highest minimum wage

“The Philippine minimum wage at $11.26 per day is the highest among all emerging economies in the region, China included. DOLE (Department of Labor and Employment) has recently recognized the destructive impact of this wage fixing mechanism under the labor code and has taken an initiative to correct the iniquities.”

“Last year, DOLE piloted a two-tiered policy in Calabarzon for five years, that is, wage increases shall be productivity-based, not mandated. If successful, this will be rolled out in all regions and will become a national policy. But this experiment will be stillborn if government continues its politically driven wage orders to raise minimum wages every labor day.”

“The minimum wage since its inception in 1989 was mainly established to protect the vulnerable new entrants to the labor market, new graduates, unskilled, and unschooled. Yearly wage increases under the code is supposedly based on peso erosion rate and capacity of employers to pay.”

Politics interfered

“But politics interfered and raised minimum wages way beyond these two conditions to approximate living wage, thus pushing the minimum wage level to become the highest in the region.”

“Tasting victory, labor will not accept decoupling the two concepts at this point. Organized labor and policymakers are unmindful of the harmful consequence that very sector it wishes to protect, the vulnerables are kept out of the labor market.”

“Thus 11 million are unemployed and underemployed. They are the nameless, faceless, and voiceless sector of society that no one champions, not even the labor leaders, probably because they will not be able to pay union dues.”

“For your information, there are now 41 million in the workforce but less than five percent stand to benefit from the yearly wage increase order, the 95 percent plus the 11 million jobless are affected by the ensuing inflation brought about by the wage order.”

Distortion effect

“The cost to enterprises from the distortion effect, computed via government-approved formulas, to adjust wages of workers above minimum level is higher than the total increase from a wage order.”

“One must remember the Philippines is still a labor surplus economy, giving employers the luxury of choosing new hires to a few deserving applicant or pirating from competitors. BPOS (business processing and outsourcing sector), a fast growing industry, experiences a manpower turnover rate of 60 percent, happily a success problem.”

Confiscatory

“A re-filed bill on profit sharing of 10 percent, now reduced to five percent by a congressman with a bleeding heart for workers and “kuno” compassionate towards employers is again being opposed by ECOP and all business organizations for being confiscatory, ‘dis-incentivizing,’ and chaotic.”

“Imagine the scenario in the workplace during corporate income tax filing where workers will question the net profit of companies for being too low and can demand the lowering of executive perks and compensation to have a bigger profit pie.”

“Also, workers will be empowered to encroach on management plans to expand, retool, reorganize, or incentivize high potentials on the ground that it might adversely impact the bottom line. These are some of the concerns of local and foreign businessmen.”

“I met the regional director of IBM who flew in just to discuss the profit sharing bill. IBM and all multinationals will flee from the Philippines if this passes into law because it will destroy their global pay scale as the Philippines will be the only country in their foreign-based subsidiaries in the planet that will give this type of workers compensation.”

“Employers, by and large, are generous but they do not want their generosity legislated.”

Non-diminution clause

“Another labor code provision that affects corporate viability is the non-diminution clause that prohibits reduction of wages and benefits irrespective of economic condition or crisis situations like the global financial meltdown of 2008 and its lingering effects.”

“Simply stated, Philippine wages defy the law of gravity: once raised, it stays up permanently.”

“There are many more egregious or extremely bad provisions in the law, and pending bills which singly or collectively can harm business. They are disguised as pro labor but in reality are simply anti employer.”

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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.