More jobs=higher pays

FULL DISCLOSURE - Fidel O. Abalos (The Freeman) - January 20, 2020 - 12:00am

As always, here in Cebu, in the month of January, we brag about the successes of our tourism initiatives as it peaks (obviously referring to the Sinulog Festival).  Then, we quickly identify the other industries that are favorably affected and are cashing in as well. 

True enough, every year, in the week leading to the Mardi Gras, hotels are full and restaurants and bars are overflowing. One thing we certainly forget, however, is the fact that it only happens once a year. So that, as the windfall slowly disappears, the pain brought about by the increases in costs for doing business will be prevalently felt the rest of the year. Obviously, one of the pains that businesses will now feel shall be the new round of increases in the minimum wage. 

To recall, the Regional Tripartite Wages and Productivity Board-7 (RTWPB) on June 18, 2018 under Wage Order No. ROVII-21 approved the minimum daily wage of P386 in Central Visayas. Then, just recently, it was increased by a non-productivity-related raise of P18. As expected, the Cebu Chamber of Commerce and Industry (CCCI) President Virgilio Espeleta gave his thoughts on this round of increases.  

In stressing that the “government should not make it more difficult for the local businessmen to do business,” the president further said that “If there is a drug war, there is also a war against poverty.” That “implementing additional cost in doing business, such as taxes, minimum wage, among others are killing the economy.” That the “war against poverty can be aided by boosting local economy, by encouraging homegrown industries to thrive, thus, more businesses that will employ more people,” he added. 

We can’t help but agree to the opinion of CCCI President Espeleta. Moreover, everyone should also know that we are lagging behind in business and productivity surveys globally. For one, in the “ease of doing business surveys”, we are always in the bottom half of the economies surveyed. The same is true with productivity surveys. To put it bluntly, our competitiveness efforts leave much to be desired. Consequently, foreign direct investments (FDIs) are coming in trickles.

We must also realize that non-productivity-related wage increases had always brought about negative consequences especially to the new entrants and the unemployed in the labor market. In fact, the constant increases in the minimum wages is the main reason the unemployment rate of the young workers is very high. Logically, because when non-productivity related increases are imposed, the unskilled and inexperienced workers or new graduates will suffer the major blow. With the same amount of pay, companies will definitely go for skilled and experienced ones. 

Why? This is because the unskilled and inexperienced workers will turn out to be expensive. Therefore, the possibility they won’t get employed is imminent. As a result, some unskilled or new entrants in the labor market are not given the opportunity to work and gain experiences. These are supposed to be valuable experiences that are really necessary for them to use as bargaining chips for higher pay demands in the future. Unfortunately too, they will miss the opportunity to earn while learning skills and gaining experiences.

On the other hand, those constantly demanding for higher minimum pays might have considered largely the higher than usual wages of those in the business process outsourcing (BPO) industry. True enough, the workforce in this industry are really paid beyond the minimum wage. Yes, these BPOs are also in need of more workers. Unfortunately, however, these BPOs could hardly get from the labor market the quality and the skills they badly need. Simply put, there are more mismatches than hires. Why? This sector employs not only the well-educated but the best among them. Thus, they don’t directly give opportunities to individuals who are among the unskilled or the inadequately educated.

If there is something we should learn, this industry (BPO) reveals that wages always boil down to supply and demand. It simply means, when labor (with quality and skills) is scarce (as in the case of BPOs), the wages are high. When there is oversupply of labor (especially those not highly skilled), as in the case of the other sectors, wages are low. 

Therefore, there is a need for more investments in all sectors. When that happens, the demand for labor will absolutely increase. As these companies scramble for manpower complement, wages will likely increase.

So that, the most logical thing to do is for the labor sector to help create more jobs by encouraging more local and foreign investments in all sectors (not just BPOs).  How?  By being reasonable in their demands for wage increases.


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