Download The Philippines: Globalization and Labor Administration

The Philippines: Globalization and
Labor Administration
Bach M. Macaraya
Paper Presented at the Asian Conference on
Globalization and Labor Administration: Cross-Border
Labor Mobility, Social Security and Regional Integration
November 19-21, 2014, Manila, Philippines
No written or electronic reproduction of this document without
the author’s permission
Introduction
• One of the issues confronting labor
administration in the Philippines today concerns
the relevance of the Labor Code in an economic
regime called “supply sidism” – the economic
paradigm of “globalization.” The labor
administration prescribed by the Labor Code is
anchored on “demand sidism.” “Demand sidism”
refers to a system in macroeconomics wherein
demands are created in the market by increasing
wages of the workers that in theory will assure
economic growth and development.
Asian Development Bank Report
• ADB in its recent report pointed-out that
“lower government spending, higher inflation,
and monetary tightening forced it to revise its
economic outlook on the Philippines from
earlier 6.4 percent growth forecast this year, it
was downgraded to 6.2 percent, and further
from 6.7 percent in 2014 to 6.4 percent.”
Continuance
• It further pointed-out that “the most pressing
national challenges are to improve infrastructure,
attract more investment to generate better jobs,
and further reduce poverty, which was at 24.9 %
in the first half of last year, down three
percentage points. It finally pointed out that “Job
generation is insufficient despite strong GDP
growth averaging 6.3 %” and
“underemployment remains high at 18.3% of
those employed because new jobs are largely
part time or informal.”
Labor Administration and Economic
System
• Labor administration is a subsystem of the
larger economic system. Its provisions must be
attuned or compatible to the prevailing
economic system. Under “demand sidism” the
Labor Code, as an economic instrument
served the objectives of a) achieving economic
growth by insuring that locally produced
goods will have competitive advantage over
imported goods in the highly tariff protected
domestic market; and
Continuance
• b) delivering “social justice” or “welfare state” for
the benefit of the Filipino working class that was
expected to translate to higher demands for
locally produced goods in the domestic market.
The important instruments of “demand sidism”
economic strategy were the protective tariff and
other regulatory laws that were used to insure
that domestic products will be cheaper and
therefore and therefore had competitive
advantage as against foreign made goods in the
domestic market.
Continuance
• This unfortunately created an undesirable
situation of domestic market dependency of
domestic entrepreneur and thus foreclosing
any efforts to move and sell their goods to the
larger international market.
Stagflation
• In the late 1970’s the world economy
experienced “stagflation.” “Stagflation” is an
economic phenomenon wherein production
of goods remain constant (stagnant) while its
prices keep on rising (inflation). This created a
problem for the world economy because any
efforts to increase wages through minimum
wage fixing and collective bargaining to create
demands only feeds on inflation.
“Demand Sidism to Supply Sidism”
• In the early 1980’s IMF-World Bank prescribed
a shift in economic paradigm from “demand
sidism” to “supply sidism.” Among the
important reforms introduced were
“privatization,” “deregulation” and “tariff
reforms.”
Privatization
• “Privatization” simply means that “the
government should get out of business as this
only create an unfair competition with the private
sector because the government corporations
were supported by tax payers money. In the
Philippine the government was able to privatize
incoming generating corporations like PNB and
PAL but continued supporting non-income
generating corporations that private sector
refused to take over.
Deregulation
• “Deregulation” simply means that government
should refrain from imposing unnecessary
regulations on private corporation and to allow
them to operate freely to achieve their objective
of profit generation. As pointed-out by IMF-WB
“the Philippines and other middle-income Asian
economies enjoy better growth prospects than
countries in other parts of the world but they
must improve government institution and
liberalized rigid labor and product market if they
wish to reach the level of developed countries.”
Tariff Reforms
• As part of the concept of “globalization” tariff
reforms was introduced by eliminating
protective tariff to enable foreign made goods
to enter freely the domestic market and thus
with competition in the domestic market
introduced it was calculated that domestic
industries will be forced to get out from
domestic market dependency and sell their
products to the larger international or global
market. Thus the term “globalization.”
Impact on Philippine Trade Unions
• The immediate impact of the change from
“demand sidism” to “supply sidism” to the
Philippine trade union movement was the
decline in membership partly because of the
high unemployment rate that followed the
shift in economic paradigm. Szal argues that
“one possible culprit of unemployment is
“globalization” (supply sidism) that included
trade liberalization among others.”
World Trade Organization (WTO)
• As Director General Pascual Lami of the WTO
puts it “Globalization (or supply sidism) is
multi-layered and complex phenomenon
involving intensive political, social and
economic interaction nationally and
internationally.” The Philippine trade unions’
membership declined in 1986 when the
economic paradigm was changed from
“demand sidism” to “supply sidism.”
Union Registered (Table 1)
• Trade Unions registered declined from 371 in
2006 to 260 and 159 in the years 2007 and 2008
respectively. The membership of the newly
registered union also declined from 31,777 in
2006 to 24,076 and 14,806 in the years 2007 and
2008 respectively. “During the transition
“demand side” to “supply side” economic
paradigm, the Philippine economy was actually
already in difficulty as can be seen by its
devaluating currency, inability of the government
to modernize agriculture, inability of industries to
create jobs.”
Decline of the no. of CBA registered
and of workers covered
• The number of collective bargaining registered
and the workers covered also declined
immediately following the shift from “demand
sidism” to “supply sidism.” The number of CBA
registered from 536 in 2006 to 318 and 154
for the years 2007 and 2008 respectively. The
number of workers covered by the new CBA
declined from 60,790 in 2006 to 44,374 and
37,333 in the years 2007 and 2008
respectively.
Continuance
• The number of workers covered by existing
CBA also declined from 236,000 in 2006 to
218,000 and 226,000 in the years 2007 and
2008 respectively.
Year 2012 Situation
• After the initial decline of trade unions’
membership when “supply sidism” was
introduced, later statistics show a slight
increase in membership partly because of the
uncertainties of their employment status
caused by the shift in economic paradigm. But
what was more revealing was the rapid
increase of workers associations that are
focused not on CBA but on mutual aid and
comfort.
Existing Workers’ Organization and
CBA up to 2012
• Workers covered by new CBA declined from,
87,442 in the year 2010 to 77,944 and 58,138
for the years 2011 and 2012 respectively. The
no of existing CBA likewise declined from
1,413 in 2010 to 1,389 and 1,327 for the years
2011 and 2012 respectively. Workers covered
by the total existing CBA however registered
an increase from 212,000 in 2010 to 228,000
and 220,000 in the years 2011 and 2012
respectively.
Membership in registered workers
association
• In contrast, membership of newly registered
workers association that do not negotiate CBA
with their employer but solely organized for
mutual aid and protection increased from
116,708 in 2010 to 157,03 and 160,000 for the
years 2011 and 2012 respectively.
Economic growth coupled with high
unemployment and underemployment
• The other important concerns that must be
dealt with are the employment less economic
growth and the request of IMF-(World Bank)
to amend the Constitution by “relaxing
ownership to improve business climate” and
“also the Labor Code.” For the year 2012 the
Philippine economy grew by 6.6%.
Unemployment remains high at 7.2% in
January 2012 although it slightly declined to
7.1% in January 2013.
Continuance
• Underemployed persons defined as “those
employed who want additional hours of work
“increased by 919,000 or 13.4% from 7,018
million on January 2012 to 7,934 million a
year earlier. The National Statistics
Coordinating Board “recorded poverty
incidence for the first half of 2012 at 27.9%.
Continuance
• ADB contended that the Philippine economy
grew by 6.2% and is expected to grow by 6.4%
in 2014; and that “job generation is
insufficient despite strong gross domestic
product (GDP) growth averaging 6.3%” and
“underemployment remains high at 18.3% of
those employed because new jobs are largely
part time or informal.”
IMF-World Bank Concern
• Lastly and most important for this paper is the
concern of the International Monetary Fund
and the World Bank on the need to
“liberalized rigid Labor and product market”
that would support our thesis for the
timeliness to amend our Labor Code to adjust
to the larger new economic system called
“supply sidism” of “globalization.”
Constinuance
• Thus we reiterate IMF-World Bank conclusion
that “the Philippines and other middleincome Asian economies enjoy better growth
prospects than countries in other parts of the
world but they must improve government
institution, and liberalized rigid labor and
product markets if they wish to reach the
level of developed countries.”
Postscript
• When this paper was originally written the
efficacy of the IMF-World Bank as
administrator of the world economy has not
yet been put on issue. This year 2014 a split in
the World Bank occurred when World Bank’s
former Sr. Counsellor, an American Dr. Karen
Hudes pointed out that “the continued
printing of US currency without sufficient gold
backing in conspiracy with large American
Continuance
• Corporations will eventually result to a
worthless paper currency” and that “a new
organization similar to the IMF-World Bank
called the BRICS had recently appeared
composed of Brazil, Russia, India, China and
South Africa.” How this event will impact on
the proposal to amend the Philippine Labor
Code to attune its provisions to IMF-World
prescription of “globalization” remains at this
time speculations.