It needs some deep thinking

Every time there is a world situation that threatens oil supply, it triggers knee jerk reactions that are instantaneous and most of the time pre-emptive in nature. Prices start to shoot up even before the oil companies have placed their replenishment orders. They are quick to assuage fears about a possible shortage, announcing that they have enough buffer stocks but are quicker on the draw in implementing the new prices, even as they have not touched a drop of their buffer stocks.

The current turmoil in the Middle East is not confined to the Arab world, and we’re not talking of OFWs alone. The cost of evacuation is tremendous, squeezing out our lean national budget, but it has to be done. Here at home, merchants have started to raise prices slowly in the face of unprecedented revolts in the heretofore placid political landscape of the general Middle East. Who would have thought that cosmopolitan Bahrain would get agitated, or that the wealthy state of Saudi Arabia would clamor for change? And who would have thought that the repressed and muzzled citizenry ruled by Khadafi would break free of their shackles and challenge his rule?

And then of course, there is always the clamor for higher wages. When oil prices are certain to go up in the world market, this possibility cannot be far behind. Since as early as 1989, and virtually every year since then, militant groups have been clamoring for a P125/day rise in the minimum wage. Recently, House Bill No. 375, “An Act providing for a P125 daily across-the-board increase in the salary rates of employees and workers in the private sector and for other purposes” was filed. The bill was introduced by Anakpawis Party List Rep. Rafael “ka Paeng” V. Mariano, Bayan Muna Party List Representatives Teodoro A. Casino, Neri Javier Colmenares, Gabriela Women’s Party List Representatives Luzviminda C. Ilagan, Emeranciana A de Jesus, Kabataan Party List Rep. Raymund V. Palatino and ACT Teachers’ Party Rep. Antonio L. Tinio.

There are of course always two sides to this issue. Foremost among the reasons given by the party list proponents is that with the current minimum wage, families can no longer cope with the rising prices of commodities — the daily wage is not enough to cover their basic daily expenses needed for bare survival. I hope to get them to expound on their position more extensively, but for now, I only have the position paper of the Employers Confederation of the Philippines (ECOP) on the issue. ECOP president Ed Lacson defended their position.

The salient features of Bill No. 375 are:

1. All employers in the private sector, whether agricultural or non-agricultural, regardless of capitalization and number of employees shall pay their workers an across-the board wage increase of P125 a day upon effectivity of the Act.

2. No wage increase shall be credited as compliance with the prescribed wage increase unless expressly provided under collective bargaining agreements; provided that

a ) such wage increase was granted in anticipation of the legislated across-the-board wage increase under the Act;

b ) where such increase is less than the prescribed increase under the Act, the employer shall pay the difference;

c) such increase shall not include anniversary wage increases, merit wage increases and those resulting from regularization or promotion of employees.

ECOP’s stand is this: “the market simply cannot absorb this wage increase”. 

Ed Lacson says, “No government in the region, including China and Vietnam whose economies are the fastest growing, would allow such a law to be adopted in their countries where all enterprises, regardless of size, will be compelled to implement huge across-the-board wage increases. This means that the P125/day will be given to all employees, from the janitor to the president of the company. Our labor costs are also the highest in the region.”

The Act provides that DOLE may inspect company payroll records to ensure compliance. If unionized, the DOLE inspectors will be accompanied by Union officers; if not unionized, the inspection will be witnessed by the workers’ representatives (not the company representatives) “who can contest findings of the labor inspector”. Companies found in violation will be fined not less than P25,000 nor more than P100,000, or the employer imprisoned not less than two years nor more than four years or both at the discretion of the court. Further, the employer found violating any of the provisions of the Act will be ordered to pay the amount equivalent to double the unpaid benefits due to the employees. The Act also specifies that payment of indemnity shall not absolve the employer from criminal liability, and any person convicted under the Act shall not be entitled to benefits under the Probation Law.

ECOP specifically challenges the arbitrariness of the ACT in compelling all establishments to implement the wage increase as well as the fine/imprisonment features and the double indemnity provision of the Act. Their position is that the bill “affects only establishments operating in the formal sector which employs only 15 percent of the labor force. Its adverse impact on the economy is far-reaching, considering that the formal sector is estimated to produce about 60 percent of gross value added…A striking characteristic of the formal sector is that it is mostly constituted of micro and small enterprises numbering 774,418 or 99.21 percent out of a total 780,505…. The micro and small establishments employ 3,181,114 wage and salary workers or 56 percent of the total number of 5,691,110 wage employment in the formal sector.”

ECOP further adds that the formal sector has shrunk so much that from 1989 to 2009, “the formal sector lost more than 46,000 enterprises and over 300,000 jobs.” The micro and small enterprises bore the brunt of the losses with 535,350 jobs wiped out while the large enterprises gained 235,966 jobs. They estimate that the formal sector would have to spend over P298 billion a year if these enterprises will be forced to comply with the new Act, most of it borne by the micro and small establishments. The large enterprises’ additional cost of labor is significantly less.

Ed says that if this bill passes Congress and Senate, the formal sector will surely shrink even more and the informal sector will expand, a scenario that has been happening all too clearly here, based on studies made by the UNDP, the Asian Development Bank and the World Bank. This means that there will be more unlicensed businesses that do not pay taxes and permits and are largely unregulated by government. The Act is also expected to “result in a job loss of 700,000 between 2011 and 2012 and and 2012” if passed this year.

ECOP says that instead of mandating excessive and unsustainable wage increases, the government should instead focus on generating jobs for the three million unemployed Filipinos and the seven million under-employed. Per their statistics, the country needs to generate about one million jobs/year, but this is not happening. The solution, they say, is not to legislate more wage increases but to attract more investments into the country in order to create these jobs.

The bill is now at the committee level, and public hearings are being conducted.

If this bill, in its present form and substance would really mean the negative impact on local business and even labor as ECOP says it would, then I implore our legislators to do some real hard and deep thinking as they deliberate on it. 

Mabuhay!!! Be proud to be a Filipino.

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