It’s working, so why change

Getting its fair share of news coverage these days is “endo,” a shortened term for “end of contract,” which is a contractual labor employment scheme that popularly arose from the infamous threat of labor employees of a department store chain in the early ‘60s to regularize sales staff.

At that time too, as the freshly minted Martial Law regime was flexing its muscles, similar labor issues were sprouting in the new export processing zones, largely egged by a then militant labor movement.

Labor groups were then asking for the regularization of workers that had been working for more than six months, and rightly so, since Philippine labor laws clearly spelled out that any newly hired worker who stays on the job for more than six months has to be regularized by its employer.

The problem, in the view of the employer, was that regularization meant higher costs that would have killed the business – not immediately perhaps, but in the long term.

Regularization was also viewed as a sure way of increasing the number of unionized workers, and strengthening unions and the overall labor movement, which would have also meant more costs and even uncertainties in future operations if the unions decided to be hostile and demand for unreasonable additional wages and benefits.

Those who still remember the ‘60s and the ’70s will agree it was a time of chaos, when rising militancy in the labor sector was a state concern that would, if left unchecked, lead to a breakdown in law and order, and investors pulling away from the country. In the end, the economy would just collapse.

Survival impetus

To survive during that unstable period, big employers introduced a modified contractual employment scheme that would allow them to continue receiving the services of contract workers – even if the jobs were clearly fixed positions in the business.

Using service providers, or smaller companies that hire the contract workers required by the bigger companies, the government and businesses were able to go around the law. To a certain extent, it saved the day; companies appreciated the calm that followed in the labor sector.

But the problem was that these contract companies, because of loopholes in the law, did not all give the correct benefits to their workers.

Still, it is difficult to say if labor was totally at the losing end with endo. With less and less threats of strikes, blue-collar workers were getting comfortable with the tentative assurance of continued employment, even without the benefits stipulated by law: 13th month, separation and retirement pay, leave credits, and other benefits.

And if acquiescence could be considered an indicator, then perhaps endo was an acceptable compromise for workers “trapped” in the system. It was a good entry point for high school graduates who boasted of just their youth, or those who just needed to do “mindless” work.

Contractual labor

For a country that dumps more and more people every year into the labor sector, small jobs even on endo terms seemingly are welcome. Those who want improved incomes just search for better jobs, often abroad, that will provide better pay, even if still on a contractual basis.

This is the same reality for most of our overseas workers. They work based on contracts, often on a year-to-year basis, without the assurance of retirement benefits – but with better salaries, perhaps even with extra benefits like for health.

To belabor the point (no pun intended), contractual labor schemes are practice all over the world – and there is a big market for it. Employment contracts also come in various forms, from the simple daily wage (no work, no pay) basis, to the lucrative consultancies of specialized professionals.

To all the 420,000 registered endo workers in the Philippines, there are better job opportunities for those who choose to upgrade their skills and put in extra effort to gain more experience and knowledge.

‘Win-win solution’

Dialogues with the labor sector and business groups have been ongoing for sometime now searching for a win-win solution to resolve the sticky issue.

Business groups say there is a price to pay for stopping endo since ensuring the proper benefits for contract workers, including SSS and PhilHealth coverages, will mean higher costs that contracting companies will have to pass on to them. That’s just to be expected.

But perhaps, this is something that can be absorbed by business and passed on to consumers via higher-priced goods without unduly stoking inflation. After all, the economy is on a roll, and the spending power of more Filipinos has never been stronger.

There are already contracting and sub-contracting firms, among them security companies, that provide the legally mandated benefits to workers. Salaries of security guards are higher than, say, sales ladies or janitors because of the higher skills required for the job.

Still, eventually, contract jobs like endo on this level will end because market forces will allow this to happen. Business will find other ways of surviving, and if it cannot, it will just have to close.

Other more serious problems

The Philippine labor market has other problems, perhaps even bigger, than endo. While unemployment has steadily been dropping in the last few years, in absolute terms, there are still more underemployed than an emerging economy like ours should have.

Underemployment is a serious concern, with millions of Filipinos receiving compensation below the mandated minimum wage level, especially in the rural areas. Children and women are especially vulnerable to this.

Likewise, labor productivity of Filipinos needs to be improved so that they are eligible for better jobs and better pay. This is more a function of the kind of education that our youth get, and the opportunities for advancement that are available for them.

This is one of the areas that government must work on if the more oppressive lower end of contractual jobs are to be eliminated, and if other bigger labor problems like unemployment and underemployment are to be solved. 

Government will have to review an order issued in 1997 that relaxed the rules on contracting and subcontracting. More than this, the overall structure of labor laws have to be updated to make them responsive to the needs of a growing economy, which is what the Philippines is now.

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