The Politics of Labor Relations

Written on Sunday, April 27th, 2008 at 10:39 am | by butch

Each year, as Labor Day approaches, Malacanang tries to put together some kind of “package”, comprised of monetary and non-monetary benefits (but usually non-monetary) for the minimum wage earner as a sop to the ordinary worker and a political concession to appease the labor unions. This is so GMA could say come May 1, with a straight face, that the Arroyo administration is looking after the interests of labor. More often than not, labor accepts whatever is thrown its way, or at least accedes to it after some grumbling: an increase in SSS or health care benefits , a small reduction in tax, an emergency cost-of-living allowance (which, theoretically, can be withdrawn once the emergency is over although there is the Labor Code provision on non-diminution of benefits ) and other less than life-changing accommodations. The thinking being that whatever was given is better than nothing.

The atmosphere is different this year, and the Palace occupants know it. With the food and oil crises, labor is in no mood to settle for the usual scraps. And with the never-ending scandals hounding the present administration, GMA is on survival mode and will do just about anything to avoid further political unrest.

Thus, President Arroyo has made a show of ordering the regional wage boards to convene and determine by how much to increase the minimum wage to help workers cope with rising fuel and food costs. She has even indicated the possible range that such an increase should take, between P80-P100 a day, an unusual pronouncement given that she has usually allowed the Regional Wage and Productivity Boards relative autonomy to decide on such increases. And the wage hikes are never that big - for example, Metro Manila workers received a P12 increase in their daily wage under the most recent wage board directive, Wage Order No. 13, bringing the daily basic pay to P362 from the previous P350.

Earlier, Arroyo announced that she is set sign an executive order granting a 10-percent wage increase to the country’s more than one million state workers.

This is all part of what BusinessWorld columnist and management guru Rene B. Azurin calls the Arroyo regime’s transactional strategy:

The one skill the President and her closest advisers appear to have mastered is pinpointing who it is they must “buy off” to solve a particular problem and then executing that buy. I believe their mastery of that skill stems from a clear commitment to one overriding objective: staying in power. A single and unambiguous objective helps immensely in clarifying thinking and building resolve.

In this case, they need to buy off the labor sector, as part of the Palace’s strategy of appeasement. Of course, this will come at a steep cost to be paid later on (guess by whom?), but GMA doesn’t care as long as it saves her sorry ass in the meantime. As pointed out by Prof. Azurin:

As an economist, the President is aware that raising minimum wages has negative effects on overall job creation and is therefore detrimental to the Filipino people as a whole. She is also aware that boosting the government payroll by 10% will enlarge the budget deficit considerably without corresponding benefit and will thus have a negative impact on the economy in general. Yet, notably, she has chosen to take these “transactional” tacks. Perhaps has been made aware that front-page photos of her visiting rice bodegas or distributing rice or surveying the rice fields or sitting beside a Customs official typing out an arrest warrant for a rice smuggler do not convince the public that she is sincerely trying to solve the rice problem. “Photo ops” have long ago stopped working for her.

Any minimum wage increase under our present state of affairs, especially if it’s fairly large (10 to 20 percent) will, at best, be a mixed blessing. It will surely be inflationary, even as it allows the lowest-paid workers some measure of relief in coping with rising prices. It will dampen investment, even as it theoretically increases the people’s purchasing power. It will slow down job creation (and even lead to lay-offs and closures) and will further lessen our labor cost competitiveness vis-à-vis our neighbors. As it is, our daily minimum wage is more than double that of Vietnam (and in some industries, four times more) and significantly higher than Indonesia and, more worrisomely, China.

But this will also force more of our skilled workers to seek jobs abroad, which will in turn increase inward remittances.

This is what happens when political expediency determines economic policy: a nation in perpetual crisis.

No tags for this post.
Add to del.icio.us | Digg this! | Yahoo MyWeb | Google Bookmark It! | Stumble It!
About The Author: butch is a lawyer by profession and blogs as The Warrior Lawyer.

Filed Under Politics, Society

Related Entries:

Comments

5 Responses to “The Politics of Labor Relations”

  1. Lester Cavestany on April 28th, 2008 10:26 am

    Many of us think that raising the minimum wage is as simple as asking the wealthy companies to share more of their profits with the workers. Your insights as to why it’s not that simple should be taught to everyone.

  2. butch on April 28th, 2008 12:49 pm

    Thanks for the comment, Lester. Raising the minimum wage is a damned-if-you-do, damned-if-you-don’t situation.

  3. Arbet on April 28th, 2008 2:31 pm

    I heard a story about an ODM/semicon company folding up four of its divisions, three of them being moved to China due to lower labor costs.

    Hay, the purchasing power of the Pinoy is diminishing. If wage increase is not the answer, then what is? It’s a vicious cycle.

  4. Anthony on April 28th, 2008 3:41 pm

    Yes, this is an excellent article and helps highlight that the issues aren’t so clear cut.

    One thing that a visitor to the Philippines will notice is the extreme inefficiencies in many businesses. Companies tend to over-employ by having lots people engaged in unnecessary tasks. This is probably caused by the large numbers of low-skilled people who need jobs.

    Relatively speaking, labour is therefore very cheap. This has encouraged bloat. However, raising the wages will only drive these inefficient companies into the ground (or away).

    I think the answer is to create new leaner companies with higher-skilled jobs. The focus should be on encouraging the environment where this can be possible and requires investment in infrastructure, education and reducing bureaucracy.

  5. Blog Carnival: The Philippine Job Market and The Filipino Worker | Filipino Voices on May 1st, 2008 1:52 pm

    […] The Politics of Labor Relations by Butch […]

Leave a Reply