It will be difficult to hire a temporary worker. And workers no matter how incompetent, unproductive, and corrupt will be very difficult to fire.
Under such a situation, you might as well not hire people at all. Buy or lease a machine. Or install a robot. According to studies, the more liberal or flexible a government is as regards employment rules, the higher employment is, and the greater is the manufacturing and business activity.
To be fair, labor is about 15 percent of production cost. Energy eats up a much higher ratio, 20 percent. Followed by high cost of capital. So if government really wants to help workers, it can do better by lowering electricity prices (the second highest in the world) and lowering the cost of capital (Manila interest rates are the highest in ASEAN).
The Senate approved 15-0 last May 22, Senate Bill 1826, “An Act Strengthening Workers’ Right to Security of Tenure,” by amending the present Labor Code and banning oppressive forms of contractualization. The House has adopted SB 1826 as its own.
SB 1826 could be bad for workers, bad for business, and bad for the economy.
Endo is what industry calls 5-5-5. You hire temporary workers up to five months and rehire them for another five months after that, and so on until eternity, to avoid hiring them permanently. Under the Labor Code, a worker who has been with you for six months must be made permanent. Permanent means the worker will be entitled to minimum wage, overtime pay, and holiday pay. Plus SSS and PhilHealth.
The Philippines has the most number of holidays in the world—more than 34 days in my count. That is equivalent to giving more than a month’s worth of salary, free cash, to a worker not working and simply enjoying his/her holiday while you scrounge for cash to pay him/her for not doing anything.
SB 1826 reiterates President Duterte’s ban on labor-only contracting and seeks to plug loopholes or uncertainties in existing laws and EO 51 that seem to allow employers to engage in labor subcontracting that circumvents the prohibition.
The unanimous vote of 15 senators present on the day of the SB 1826’s approval means no senator wants to be perceived as anti-labor. Also, I suspect none of the senators employ people using the senators’ own (not pork barrel or taxpayers’) money (except perhaps for property tycoon Cynthia Villar whose family has built more than 300,000 homes).
“We longed for this day to come, especially our workers who have suffered because of the evils of endo, a practice which corrupts the dignity of labor. We want to give all workers peace of mind when it comes to their employment status, that no worker can be dismissed without just or authorized cause, and due process,” exults Senator Joel Villanueva, SB 1826’s author.
Under SB 1826, most workers will practically become regular or permanent. They can be removed only for a just cause.
Project and seasonal workers have the same rights as regular employees. These benefits include the payment of minimum wage and social protection benefits.
The Philippines has the highest unemployment rate in ASEAN. One reason for this perhaps is that the country does not have a manufacturing industry to speak of. It only produces babies to the tune of 1.8-million a year, meaning 1.8 million Filipinos join the labor force a year.
According to the Philippine Statistics Authority, the Philippines had a labor force of 71.339 million as of 2018, the number of Filipinos above 15. Of that number, 60.9 percent is the so-called labor force participation rate or seeking work—60.9 percent of 71.339 million, or 43.445 million. Of the 43.445 million, 94.7 percent or 41.14 million are employed leaving 5.3 percent or 2.3 million who are unemployed or jobless.
Filipinos who are underemployed—those who work part time or have work but are overqualified for their kind of work—constitute 16.4 percent or 7.124 million of the labor force.
Add the 2.3-million unemployed and you have 9.42 million who are either unemployed or jobless or who are working only part time or doing work for which they are overqualified. Like a law graduate or a doctorate degree holder doing messengerial work or waiting in restaurants. This is a problem that senators do not encounter in the Senate. Some of the senators are college dropouts or have skills or other occupation not fit for legislative work.
How can you legislate permanent work when there are ten million Filipinos who are either unemployed or are employed only part time?
Employers have denounced the no-endo measure. They think it will lead to more, not reduce, unemployment.
“Employers might result to laying off workers outright or shift to mechanization or employ robots,” warns Sergio R. Ortiz-Luis Jr., president of the Employers Confederation of the Philippines.
“It [the measure] could make labor costs prohibitive,” argues Rizalina Mantaring of the Management Association of the Philippines. “Security of tenure is a double-edged sword. While it gives good employees security from being laid off without cause, it shields the bad and unproductive ones to the detriment of the employer and employees,” said the president of MAP which has 1,036 CEOs as members.
Mantaring warned of a “culture of mediocrity,” whereas, “a competitive job market and meritocracy foster higher professionalism, competence, and productivity.”
Jun Ortiz-Luis fears the inroads of the so-called Fourth Industrial Revolution in the Philippine labor market.
The four industrial revolutions are:1) steam-powered factories; 2) application of science to mass production and manufacturing; 3) start into digitization; and 4) technologies such as artificial intelligence, genome editing, augmented reality, robotics, and 3-D printing.
The Fourth Industrial Revolution technologies, according to World Economic Forum founder Charles Schwab, are rapidly changing the way humans create, exchange, and distribute value. As in the previous revolutions, this will profoundly transform institutions, industries, and individuals.
Schwab says IR4 “heralds a series of social, political, cultural, and economic upheavals that will unfold over the 21st century. Building on the widespread availability of digital technologies that were the result of the Third Industrial, or Digital, Revolution, the Fourth Industrial Revolution will be driven largely by the convergence of digital, biological, and physical innovations.”